<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 4, 1999
REGISTRATION NO. 333-74353
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
MAIL.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7310 13-3787073
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
11 BROADWAY, 6(TH) FLOOR
NEW YORK, NY 10004
(212) 425-4200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
GARY MILLIN
PRESIDENT
MAIL.COM, INC.
11 BROADWAY
NEW YORK, NY 10004
(212) 425-4200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
DAVID W. AMBROSIA, ESQ. MARC S. ROSENBERG, ESQ.
WINTHROP, STIMSON, PUTNAM & ROBERTS CRAVATH, SWAINE & MOORE
ONE BATTERY PARK PLAZA WORLDWIDE PLAZA
24 WHITEHALL STREET 825 EIGHTH AVENUE
NEW YORK, NY 10004-1490 NEW YORK, NY 10019-7575
(212) 858-1000 (212) 474-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
AGGREGATE OFFERING REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1)(2) FEE(2)(3)
<S> <C> <C>
Class A Common Stock, par value $0.01 per share................................... $86,652,500 $24,090
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase from
Mail.com solely to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the registration
fee.
(3) $15,985 has been previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 4, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
[LOGO]
6,850,000 SHARES
MAIL.COM, INC.
CLASS A COMMON STOCK
$ PER SHARE
---------
We are selling 6,850,000 shares of Class A common stock. The underwriters
named in this prospectus may purchase up to 1,027,500 additional shares of our
Class A common stock to cover over-allotments.
This is an initial public offering of Class A common stock. Mail.com
currently expects the initial public offering price to be between $10.00 and
$12.00 per share, and has applied to have the Class A common stock included for
quotation on the Nasdaq National Market under the symbol "MAIL".
--------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 10.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------- --------------
<S> <C> <C>
Initial Public Offering Price $ $
Underwriting Discount $ $
Proceeds to Mail.com (before expenses) $ $
</TABLE>
The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about ,
1999.
--------------
SALOMON SMITH BARNEY
PAINEWEBBER INCORPORATED
SG COWEN
THE UNDERSIGNED ARE FACILITATING INTERNET DISTRIBUTION.
WIT CAPITAL CORPORATION DLJDIRECT INC.
AS E-MANAGER-TM-
, 1999
<PAGE>
Description of graphics on inside front, gatefold and back inside cover pages of
prospectus:
Inside Front Cover:
The caption above the Mail.com logo reads:
"Powered by" underlined by an
arrow pointing to the left sidebar.
[Mail.com Logo]
The caption underneath Mail.com Logo in the middle right side of the page reads:
"The Internet Messaging Company"
The left sidebar of the page depicts the logos of 24 Mail.com partners within a
vertical rectangular box.
Gatefold:
The background of these pages is dark and contains a muted listing of Mail.com's
domain names listed in a linear fashion across the page. Certain domain names
are highlighted. The pictures on these pages depict a Mail.com or email.com
user's inbox as it appears when accessed through the CNN Interactive, Snap and
Prodigy Internet Web sites. Across the top of the screens are ad banners for e
card and Bell Atlantic. There is text in boxes that points to either the CNN
Interactive, Snap or Prodigy Internet pages describing different aspects of
Mail.com's services.
I. A screenshot of Mail.com's email service for CNN is located on the left side
of the gatefold.
Below the CNN Interactive screenshot are three boxes containing text which
reads:
Top Box:
"Mail.com offers advertising opportunities across our network of partner sites,
including sites in news, business, sports, entertainment, teens and technology.
We can target advertising to our members based on the demographic information
that our members provide."
Center Box:
"Members can choose our free email service or can upgrade to one of our premium
services for a fee" (referring to MailPRO).
Bottom Box:
"Members can read and write emails, set-up their own address book, and
change their personal email settings."
II. A screenshot of Mail.com's email service for Snap which is branded
"email.com" is located in the middle of the gatefold.
Above the screenshot of the email service for Snap is a box containing text that
reads:
"Web sites such as CBS SportsLine, CNET, CNN, GTE, NHL, Prodigy, and Snap offer
their users a free email service provided by Mail.com."
Inside the screenshot of the email service for Snap is an email from one member
to another that reads:
"Steve,
Do you have another email address?
Check this out. . . . I'm not tied to my company's email system. I've got a
Webmail account from Snap that I can access from any computer with a web
browser. (and it's free!)
Hey, are we still getting together with the gang from Nashville tonight?
Email me back with the time and the place.
- --Jill
[email protected]"
<PAGE>
Below the Snap screenshot is a box containing text that reads:
"Members can send and receive email from any computer with an Internet
connection and a Web browser."
III. Screenshot of Mail.com's email service for Prodigy is located on the right
side of the gatefold.
Below the Prodigy Internet screenshot is a box containing text which reads:
"Members who opt-in to the Bargain Hunter program identify areas of interest
from categories that include entertainment, finance and technology and receive
special offers and information from Mail.com advertisers" (referring to Bargain
Hunter service).
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
MAIL.COM HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
MAIL.COM IS NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER
IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary......................................................................................... 4
Risk Factors............................................................................................... 10
Use of Proceeds............................................................................................ 26
Dividend Policy............................................................................................ 26
Capitalization............................................................................................. 27
Dilution................................................................................................... 29
Selected Financial Data.................................................................................... 30
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 32
Business................................................................................................... 42
Management................................................................................................. 59
Certain Transactions....................................................................................... 69
Principal Stockholders..................................................................................... 73
Description of Capital Stock............................................................................... 75
Shares Eligible For Future Sale............................................................................ 80
Underwriting............................................................................................... 82
Legal Matters.............................................................................................. 84
Experts.................................................................................................... 84
Where You Can Find More Information........................................................................ 84
Index to Financial Statements.............................................................................. F-1
</TABLE>
------------------------
Until , 1999, all dealers that buy, sell or trade the Class A
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
OUR COMPANY
Mail.com is a global provider of email services. At the end of 1998, we were
the sixth largest provider of emailboxes in the world, according to numbers
compiled by ELECTRONIC MAIL & MESSAGING SYSTEMS for its quarterly emailbox
census. Our basic email services are free to our members. Anyone can become a
member of Mail.com by signing up for our email service at any of our partners'
Web sites or our own Web sites. We generate revenues primarily from advertising
related sales, including direct marketing and e-commerce promotion. We also
generate revenue from subscription services, such as premium email addresses and
increased storage capacity, and from email service outsourcing fees. In March
1999, we processed approximately 120 million email messages and delivered
approximately 190 million advertisements.
In addition to traditional email service, we offer our members Web-based
email, also known as Webmail. The majority of our members choose our Webmail
service. Webmail has several benefits when compared to traditional email.
Traditional email users generally access their email only through their own
individual computer. Webmail allows users to access their email through any
computer or other device that has a Web browser with access to the Internet.
Webmail users do not need to install or set up email software. Members obtain a
permanent email address that they can keep even if they switch jobs, change
their Internet service provider (commonly referred to as an ISP) or graduate
from school. We offer a large selection of easy-to-remember, personalized email
addresses such as @mail.com, @email.com, @doctor.com, @lawyer.com, @USA.com and
@Asia.com from our portfolio of approximately 1,200 domain names. The domain
name is the part of an email address that comes after the @ symbol.
OUR PARTNERS
We have grown our member base by signing up members in partnership with
third party Web sites and at our own Web sites. We offer our email service at 43
Web sites under our partners' and our own brand names, including Web sites owned
by CBS SportsLine, CNET, CNN, InfoSpace.com, Lexis-Nexis, Paramount, Snap,
Standard & Poor's and Time Warner. By offering email services to their visitors,
our Web site partners seek to increase their number of users, increase traffic,
build user loyalty, collect user demographic information and generate
incremental revenues. We recently launched an initiative which gives members
access to their existing ISP email accounts through their ISP's Web site. We
launched this service in February 1999 with Prodigy and have entered into
contracts with GTE and Cable & Wireless. By offering our service to their
customers, our ISP partners seek to increase user satisfaction, reduce
telecommunications and customer support costs and generate a new revenue stream.
OUR OPPORTUNITY
Email is becoming an increasingly important means of communication, with
both the number of email users and usage levels per individual projected to
increase significantly. According to ELECTRONIC MAIL & MESSAGING SYSTEMS, the
total number of emailboxes increased from approximately 198 million at the end
of 1997 to approximately 325 million at the end of 1998. We believe Webmail
accounts are a rapidly growing category of emailboxes. Forrester Research
projects that daily global Internet email traffic will increase from 100 million
email messages per day in 1996 to 1.5 billion per day in 2002. We believe that
as the complexity and usage of email increases, there will be an increasing
desire on the part of Web sites, ISPs, small businesses and educational
institutions to outsource their email to third parties.
We believe that email has several benefits as an advertising, direct
marketing and e-commerce medium. While members are using our email service on
one of our partner's Web sites or one of our own Web sites, we can display
advertising and make offers to them. Our members identify themselves
4
<PAGE>
every time they sign in to use their email. Therefore, we can direct specific
advertisements to our members based on the demographic information they supply
when they establish their emailboxes. Since July 1, 1998, approximately 100
companies have advertised on our email network. Jupiter Communication projects
that Internet advertising expenditures will grow from $1.9 billion in 1998 to
$7.7 billion in 2002.
OUR STRATEGY
We seek to strengthen our position as a global provider of email services.
In particular, we plan to:
- build our member base
- increase member usage
- increase our advertising related revenue opportunities, including direct
marketing and e-commerce promotion
- expand subscription, outsourcing and other revenue opportunities
- enter additional market segments
We are exploring possible acquisitions and other strategic relationships and
expect to do so on an ongoing basis. At any given time, we may be in discussions
or negotiations regarding these opportunities. We may acquire technology or
other assets to enhance our email services or acquire additional domain names to
supplement our existing portfolio.
RISK FACTORS
We operate in a new industry and our business involves a high degree of
risk. The principal risks are described under "Risk Factors." Among these are
the following:
- we have only a limited operating history
- we have incurred losses since inception and expect to continue to incur
substantial losses
- we must substantially increase the number of our members, which will be
difficult to accomplish
- Webmail, email outsourcing and email advertising may not prove to be
viable businesses
- several of our competitors have substantially greater resources, longer
operating histories, larger customer bases and broader product offerings
OUR BACKGROUND
We incorporated in Delaware on August 1, 1994. We commenced operations in
1996 and launched our first commercial email service in November 1996 under the
name iName, Inc. We changed our name in January 1999 and began branding our
services as Mail.com, Inc. at our partners' and our own Web sites. In May 1999
we will commence our email service at www.mail.com. Our principal offices are
located at 11 Broadway, New York, New York 10004 and our phone number is (212)
425-4200. INFORMATION CONTAINED ON OUR WEB SITES DOES NOT CONSTITUTE PART OF
THIS PROSPECTUS.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Class A common stock offered.... 6,850,000 shares
Common stock to be outstanding
after the offering
Class A..................... 32,039,224 shares
Class B..................... 10,000,000 shares
Total..................... 42,039,224 shares
Use of Proceeds................. Expand our computer systems, develop Web
site and ISP partnerships, expand sales
and marketing programs, hire personnel,
finance potential acquisitions and fund
other general corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market
Symbol......................... "MAIL"
</TABLE>
Each share of our Class B common stock is entitled to 10 votes per share.
After the offering, Gerald Gorman, our Chairman and Chief Executive Officer,
will retain control of Mail.com through beneficial ownership of approximately
77.1% of the total voting power of our outstanding common stock. See "Principal
Stockholders" and "Description of Capital Stock."
SHARES ISSUABLE AFTER THE OFFERING
You should be aware that we are permitted, and in some cases obligated, to
issue shares of common stock in addition to the common stock expected to be
outstanding after the offering. Also, we expect that we will continue to issue
shares of capital stock when we enter into strategic and commercial
relationships or when we acquire technology or other assets. If and when we
issue these shares, the percentage of common stock you own will be diluted.
The following is a summary of additional shares of common stock that are
issuable upon the exercise of options and warrants or to commercial partners
after the offering:
- under two of our partner contracts, we will issue shares of Class A common
stock to our partners upon achievement of specified milestones or for
member registrations. See "Risk Factors--Our contracts with our Web site
partners require us to incur substantial expenses;"
- approximately 7.6 million shares are issuable upon the exercise of
outstanding options at a weighted average exercise price of $2.34 per
share and 2.5 million options are available for future awards; and
- 209,539 shares are issuable upon the exercise of outstanding warrants at a
weighted average exercise price of $3.36 per share.
6
<PAGE>
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS:
(1) REFLECTS THE AUTOMATIC CONVERSION UPON THE CLOSING OF THIS OFFERING OF
ALL OUTSTANDING SHARES OF CONVERTIBLE PREFERRED STOCK, ON A ONE-FOR-ONE
BASIS, INTO 13,161,558 SHARES OF OUR CLASS A COMMON STOCK;
(2) REFLECTS THE ISSUANCE UPON THE CLOSING OF THIS OFFERING OF AN AGGREGATE
OF 2,081,977 SHARES OF OUR CLASS A COMMON STOCK IN FULL SETTLEMENT OF OUR
CONTINGENT OBLIGATIONS TO ISSUE ADDITIONAL EQUITY TO PREFERRED
STOCKHOLDERS;
(3) REFLECTS THE ISSUANCE UPON THE CLOSING OF THIS OFFERING OF AN AGGREGATE
OF 1,500,000 SHARES OF OUR CLASS A COMMON STOCK TO CNET AND NBC
MULTIMEDIA UPON THE EXERCISE OF WARRANTS AT AN ASSUMED EXERCISE PRICE
EQUAL TO $5.00 PER SHARE FOR PROCEEDS OF $7.5 MILLION;
(4) REFLECTS THE ISSUANCE UPON THE CLOSING OF THIS OFFERING OF AN AGGREGATE
OF 2,368,907 SHARES OF OUR CLASS A COMMON STOCK TO CNET AND SNAP AND
210,000 SHARES OF OUR CLASS A COMMON STOCK TO NBC MULTIMEDIA IN FULL
SETTLEMENT OF OUR CONTINGENT OBLIGATIONS TO ISSUE ADDITIONAL SHARES OF
CLASS A COMMON STOCK TO THEM;
(5) REFLECTS THE RETURN OF 1,000,000 SHARES OF OUR CLASS A COMMON STOCK
ISSUED AT $3.50 PER SHARE FROM GEOCITIES AND THE WRITE-OFF OF A $500,000
NON-REFUNDABLE FEE PAID TO GEOCITIES. THESE TRANSACTIONS RELATE TO THE
CANCELLATION AND RESCISSION OF OUR ORIGINAL CONTRACT AND THE ENTRY INTO A
NEW ADVERTISING AGREEMENT; AND
(6) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
7
<PAGE>
SUMMARY FINANCIAL DATA
The following table presents our summary financial data. You should read
this information together with our financial statements, the notes to those
statements beginning on page F-1 of this prospectus, the information under
"Selected Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The following data is presented:
- - on an actual basis;
- - on a pro forma basis to give effect to:
- the automatic conversion upon the closing of this offering of all
outstanding shares of convertible preferred stock, on a one-for-one basis,
into 13,161,558 shares of our Class A common stock;
- the issuance upon the closing of this offering of an aggregate of
2,081,977 shares of our Class A common stock in full settlement of our
contingent obligations to issue additional equity to preferred
stockholders. We will account for the issuance of these additional Class A
common shares as a non-cash dividend to our preferred stockholders. For
purposes of the pro forma data, we have calculated the amount of the
dividend based on an assumed initial public offering price of $11.00 per
share. The actual amount of the dividend will be determined using the
actual initial public offering price;
- the issuance upon the closing of this offering of an aggregate of
1,500,000 shares of our Class A common stock to CNET and NBC Multimedia
upon the exercise of warrants at an assumed exercise price equal to $5.00
per share for proceeds of $7.5 million;
- the issuance upon the closing of this offering of an aggregate of
2,368,907 shares of our Class A common stock to CNET and Snap and 210,000
shares of our Class A common stock to NBC Multimedia in full settlement of
our contingent obligations to issue additional Class A common stock to
them. We will capitalize the issuance of those shares and ratably amortize
the amount over the period from the date of the offering through September
2001. For purposes of the pro forma data, we have calculated the amount of
the settlement based on an assumed initial public offering price of $11.00
per share. The actual amount of the settlement will be determined using
the actual initial public offering price; and
- the return of 1,000,000 shares of our Class A common stock issued at $3.50
per share from GeoCities and the write-off of a $500,000 non-refundable
fee paid to GeoCities. These transactions relate to the cancellation and
rescission of our original contract and the entry into a new advertising
agreement.
- - on a pro forma as adjusted basis to give effect to the sale of, and the
application of the net proceeds from, 6,850,000 shares of Class A common stock
in this offering, assuming an initial offering price of $11.00 per share.
8
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
------------- ------------- -------------- ------------- --------------
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 19,015 $ 173,234 $ 1,494,762 $ 80,413 $ 1,185,939
Operating expenses:
Cost of revenues................. 187,890 1,081,848 2,890,582 351,665 1,477,690
Sales and marketing.............. 65,096 930,420 6,679,478 272,650 3,590,636
General and administrative....... 221,932 862,028 3,482,097 275,206 1,364,898
Product development.............. 93,698 296,140 1,573,465 218,292 1,176,959
------------- ------------- -------------- ------------- --------------
Total operating expenses..... 568,616 3,170,436 14,625,622 1,117,813 7,610,183
------------- ------------- -------------- ------------- --------------
Loss from operations............... (549,601) (2,997,202) (13,130,860) (1,037,400) (6,424,244)
Other income (expense):
Gain on sale of investment....... -- -- 438,000 -- --
Interest income.................. 6,869 36,264 277,164 6,905 114,904
Interest expense................. (1,980) (34,815) (109,187) (13,368) (98,723)
------------- ------------- -------------- ------------- --------------
Total other income (expense),
net........................ 4,889 1,449 605,977 (6,463) 16,181
------------- ------------- -------------- ------------- --------------
Net loss........................... $ (544,712) $ (2,995,753) $ (12,524,883) $ (1,043,863) $ (6,408,063)
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Basic and diluted net loss per
common share..................... $ (0.04) $ (0.21) $ (0.86) $ (0.07) $ (0.39)
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Weighted average basic and diluted
shares outstanding............... 13,725,278 14,097,500 14,607,915 14,100,244 16,468,221
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Pro forma:
Pro forma net loss................. $ (6,908,063)
Cumulative dividends on settlement
of contingent obligations to
preferred shareholders........... (22,901,749)
Net loss attributable to common
stockholders..................... $ (29,809,812)
--------------
--------------
Basic and diluted net loss per
common share..................... $ (0.86)
--------------
--------------
Shares used in pro forma basic and
diluted net loss per common share
calculation...................... 34,790,662
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
--------------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------- ------------- --------------
BALANCE SHEET DATA:
Cash and cash equivalents.......................................... $ 20,136,543 $ 27,636,543 $ 96,612,043
Working capital.................................................... 14,621,821 22,121,821 91,097,321
Total assets....................................................... 37,111,583 68,979,549 137,955,049
Domain asset purchase obligations, less current portion............ 190,355 190,355 190,355
Deferred revenue, current and long-term portion.................... 2,496,750 2,496,750 2,496,750
Capital lease obligations, less current portion.................... 2,506,645 2,506,645 2,506,645
Redeemable convertible preferred stock............................. 13,047,650 -- --
Total stockholders' equity......................................... 12,282,531 57,198,147 126,173,647
</TABLE>
9
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. The principal risks are
described below. You should carefully consider these risks before deciding to
invest in our Class A common stock. Our business, operating results and
financial condition could be adversely affected by any of the following risks.
The trading price of our Class A common stock could decline due to any of these
risks, and you could lose all or part of your investment. You should also refer
to the other information set forth in this prospectus, including our financial
statements and the related notes.
WE HAVE ONLY A LIMITED OPERATING HISTORY, AND WE ARE INVOLVED IN A NEW AND
UNPROVEN INDUSTRY.
We have only a limited operating history upon which you can evaluate our
business and our prospects. We have offered a commercial email service since
November 1996 under the name iName. We changed our company name to Mail.com,
Inc. in January 1999. Our success will depend first upon the development of a
viable market for email advertising, and then upon our ability to compete
successfully in that market. For the reasons discussed in more detail below,
there are substantial obstacles to our achieving and sustaining profitability.
WE HAVE INCURRED LOSSES SINCE INCEPTION AND EXPECT TO INCUR SUBSTANTIAL LOSSES
IN THE FUTURE.
We have generated only limited revenues to date. We have not achieved
profitability in any period, and we may not be able to achieve or sustain
profitability. We incurred a net loss of approximately $12.5 million for the
year ended December 31, 1998 and $6.4 million for the three months ended March
31, 1999. We also had negative cash flow from operations of approximately $4.8
million for 1998 and $1.8 million for the three months ended March 31, 1999. We
had an accumulated deficit of approximately $22.5 million as of March 31, 1999.
We expect to continue to incur substantial net losses and negative operating
cash flow for the foreseeable future. We have begun and will continue to
significantly increase our operating expenses in anticipation of future growth.
We intend to expand our sales and marketing operations, upgrade and enhance our
technology, continue our international expansion, and improve and expand our
management information and other internal systems. We are making these
expenditures in anticipation of higher revenues, but there will be a delay in
realizing higher revenues even if we are successful. If we do not succeed in
substantially increasing our revenues, our losses will continue indefinitely and
will increase.
WE WILL HAVE TO SUBSTANTIALLY INCREASE THE NUMBER OF OUR MEMBERS, WHICH WILL BE
DIFFICULT TO ACCOMPLISH.
To achieve our objective of generating advertising related revenues and
subscription revenues, we will have to retain our existing members and acquire a
large number of new members.
We have relied upon strategic alliances with third party Web sites to
attract the majority of our current members. We believe that our success will
partially depend on our ability to maintain our current alliances and to enter
into new ones with Web sites and ISPs on acceptable terms. We believe, however,
that the opportunity to form alliances with third party Web sites that are
capable of producing a substantial number of new members is diminishing. Many
third party Web sites that we have identified as potential sources for
significant quantities of new members already offer their visitors an email
service similar to ours. We cannot assure you that we will be able to enter into
successful alliances with third party Web sites or ISPs on acceptable terms or
at all.
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OUR CONTRACTS WITH OUR WEB SITE PARTNERS REQUIRE US TO INCUR SUBSTANTIAL
EXPENSES.
In nearly all cases our Web site partners do not pay us to provide our
services. We bear the costs of providing our services. We generate revenues by
selling advertising space to advertisers who want to target our members and by
selling subscription services to our members. We pay the partner a share of the
revenues we generate. In addition, a number of our contracts require us to pay
significant fees or to make minimum payments to the partner without regard to
the revenues we realize. If we are unable to generate sufficient revenues at our
partner sites, these fees and minimum payments can cause the partner's effective
share of our revenues to approach or exceed 100%. In some cases we pay our
partners in shares of our Class A common stock. We will have to account for
these stock issuances at the fair market value on the date of issuance, which
may result in substantial sales and marketing charges in particular quarters.
The following contracts involve minimum payments or payments in the form of
stock.
- CBS SportsLine has the option of receiving its revenue share or $4.00 for
each confirmed signup at its Web site. In addition, we must pay
sponsorship fees totaling $450,000, $100,000 of which we paid when we
signed the contract. We are paying the remaining $350,000 in quarterly
installments of $50,000 and have paid $50,000 through March 31, 1999.
- We issued an aggregate of 253,532 shares of our Class A common stock to
CNN Interactive and CNN/SI when we executed our contract. In addition, we
pay them the greater of their revenue share or $4.00 for each confirmed
signup at their Web sites. We must also pay quarterly sponsorship fees up
to a maximum of $2,000,000 during the term of the contract of which we
have paid $240,000 through March 31, 1999.
- AltaVista has the option to receive its revenue share or $1.00 in cash
plus 0.25 shares of our Class A common stock for each confirmed member
registration through June 30, 1999.
- After we executed our contract with RemarQ in October 1998, we made a cash
payment of $75,000 and issued to RemarQ 30,000 shares of our Class A
common stock as an initial payment. We also have a contingent obligation
to make additional cash payments up to a maximum of $400,000 and to issue
up to a maximum of 160,000 additional shares of our Class A common stock
based upon the number of active members that they generate. The initial
term of this agreement expires in August 1999. As of March 31, 1999, we
have not paid any cash and have not issued any shares of our Class A
common stock under this contingent obligation.
- We have guaranteed NHL Interactive CyberEnterprises (NHL.com) a minimum
revenue share of $50,000 per year. Our current agreement expires in May
2000.
- Our original agreements with CNET, Snap and NBC Multimedia obligated us to
issue shares of our Class A common stock on a quarterly basis contingent
upon the number of member registrations at their Web sites. Upon the
closing of this offering, we will issue an aggregate of 2,578,907 shares
of our Class A common stock to CNET, Snap and NBC Multimedia in full
settlement of our contingent obligation to issue additional shares.
- We made a $500,000 non-refundable payment to GeoCities in connection with
a contract to offer our email service to GeoCities' Web site. As a result
of the cancellation and rescission of this contract, in the second quarter
of 1999 we will reverse the issuance of 1,000,000 shares of our Class A
common stock issued at $3.50 per share that were returned to us and we
will write off this $500,000.
We cannot predict whether future relationships, or renewals of existing
relationships, will be more expensive than the arrangements we have entered into
to date.
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OUR PARTNER CONTRACTS HAVE ONLY LIMITED TERMS, AND THE FAILURE TO RENEW A
CONTRACT CAN BE VERY COSTLY FOR US.
Our partner contracts generally have one or two year terms. A partner can
decide not to renew at the end of the term for a variety of reasons, including
dissatisfaction with our service, a desire to switch to one of our outsourcing
competitors, or a decision to provide email service themselves. Partners can
also choose not to renew our contract because they have entered into a merger or
other strategic relationship with another company that can provide email
service. This last factor is becoming increasingly common in light of the
consolidation taking place among Web sites, ISPs and other Internet-related
businesses. The loss of a partner can be very disruptive for us for a number of
reasons:
WE WILL LOSE A SUBSTANTIAL NUMBER OF MEMBERS. When members register for our
service at a partner's Web site, the default domain name members use for their
email address is typically a domain name that is owned by the partner. We
estimate that approximately 23% of the members who have registered for our
service have email addresses at partner-owned domain names. Upon expiration,
most partners can require us to relinquish existing members with addresses at
partner-owned domain names. Moreover, even those members who have selected
addresses using our domain names may find it more convenient to switch to
whatever replacement email service may be available at the partner's site. The
loss of members due to expiration or non-renewal of partner contracts may
materially reduce our revenues.
LOSING RELATIONSHIPS WITH PROMINENT PARTNERS CAN IMPAIR OUR CREDIBILITY WITH
ADVERTISERS AND OTHER PARTNERS. We believe that partnerships with Web sites
that have prominent brand names help give us credibility with other partners and
with advertisers. The loss of our better-known Web site partners could damage to
our reputation and adversely affect the advertising, direct marketing,
e-commerce and subscription rates we charge.
SEVERAL OF OUR MOST SIGNIFICANT PARTNER CONTRACTS HAVE EXPIRED OR WILL SOON
TERMINATE.
Two of our most important Web site partnerships have been with Lycos and
AltaVista, which collectively have accounted for approximately 25% of the
emailboxes established through March 31, 1999, and for approximately 31% of the
total page views we delivered in March 1999. Our agreement with Lycos expired on
October 8, 1998, shortly after Lycos acquired WhoWhere, a competitor that
provides personal homepage and Webmail services. Compaq, which owns the
AltaVista Web site, recently entered into a strategic relationship with
Microsoft. As part of that relationship, AltaVista agreed to offer Microsoft's
Hotmail Webmail service starting in July 1999, when our contract with AltaVista
expires. While we will continue to own the right to serve the majority of the
affected members after the expiration of these contracts, we cannot be sure that
these members will continue to use our service as actively as they have in the
past, if at all.
On September 10, 1998, we entered into a contract with GeoCities to offer
our email services on GeoCities' Web site. Our service has not been launched on
this Web site. Yahoo! recently announced its agreement to acquire GeoCities. The
acquisition is expected to close in May 1999. Yahoo! has its own email service
called Yahoo! Mail. Following the announcement of the acquisition of GeoCities
by Yahoo!, we entered into an agreement with GeoCities to cancel and rescind our
existing contract. Prior to cancellation and rescission of the contract, we
incurred significant development and launch costs to meet our commitments under
the contract.
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WE ARE DEPENDENT ON A SMALL NUMBER OF CONTRACTS FOR A SUBSTANTIAL PERCENTAGE OF
OUR ANTICIPATED NEW MEMBERS.
Our three largest partners accounted for 46% of our new members in March
1999. If any of the Web sites operated by these parties were to experience lower
than anticipated traffic, or if our relationships with any of these parties were
disrupted for any reason, our revenues could decrease and the growth of our
business would be impeded.
OUR RECENT SUBSCRIPTION RATE INCREASES AND NEW BILLING SYSTEM ARE LIKELY TO
RESULT IN THE LOSS OF PREMIUM MEMBERS.
On March 10, 1999, we increased our subscription rates for our premium email
services. As a result of these rate increases, we anticipate that some of our
existing premium members may not renew their subscriptions and that a lower
percentage of new members will register for our premium services. We are also in
the process of installing a new billing system designed to collect and verify
credit card information from premium users at the time they register for our
services. In the past we did not seek this information until after a 30-day
trial period had expired, and in most instances did not terminate services to
premium members who did not pay for our services. With the introduction of our
new billing system, we intend to terminate premium services to members who do
not pay for these services. This will not reduce our subscription revenues, but
it will reduce usage by those members and thereby reduce our potential
advertising revenues.
WE HAVE ONLY LIMITED INFORMATION ABOUT OUR MEMBERS AND THEIR USAGE, WHICH MAY
REDUCE OUR POTENTIAL REVENUES.
Our ability to generate advertising and direct marketing revenue is directly
related to our members' activity levels and the quality of our demographic data.
To be successful, we will have to increase members' usage of our service. We are
subject to several constraints that will limit our ability to maximize the value
of our member base:
WE BELIEVE THAT MOST OF OUR MEMBERS DO NOT USE THEIR EMAILBOXES REGULARLY,
AND MANY DO NOT USE THEM AT ALL. We do not have the computer systems necessary
to regularly monitor emailbox usage. Our most recent information is for selected
Web sites for the two weeks ended January 24, 1999, and excludes members who
automatically forward their email from their emailbox provided by Mail.com to
another emailbox and members that subscribe for our upgrade "POP3" access.
During that period, no more than 30% of the emailboxes in the sample were
accessed by members. Moreover, approximately one-third of those emailboxes that
were accessed were first established during the two week period. We expect our
proportion of active members to decrease as our total number of established
emailboxes increases. On an ongoing basis, we believe that a significant number
of members will cease using our service each month. We cannot assure you that we
will be able to add enough new members to compensate for this anticipated loss
of usage.
WE HAVE ONLY A LIMITED ABILITY TO GENERATE ADVERTISING REVENUES FROM
FORWARDING AND POP3 ACCOUNTS, WHICH REPRESENT A SIGNIFICANT PERCENTAGE OF OUR
EMAILBOXES. Members who choose our forwarding service or subscribe to our POP3
service do not need to come to our partners' or our Web sites to access their
email. Therefore, we do not deliver Web-based advertisements to these members.
Forwarding and POP3 accounts represented approximately 48% of our total
emailboxes as of March 31, 1999, and 24% of the emailboxes that were established
during March 1999. If a disproportionate percentage of members choose either of
these options, it will adversely affect our ability to generate advertising
related revenues.
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OUR DATABASE CONTAINS INACCURACIES THAT COULD REDUCE THE VALUE OF OUR
INFORMATION. Although we attempt to collect basic demographic information about
members at the time they establish their accounts, we do not verify the accuracy
of this information. Moreover, even if the information is correct when we
receive it, members may move, change jobs or die without our knowledge. As a
result, our database contains inaccuracies that could make our information less
appealing to advertisers.
WE DO NOT KNOW HOW MANY MEMBERS HAVE ESTABLISHED MULTIPLE EMAILBOXES.
Because we do not charge for our basic service, individuals can easily establish
multiple emailboxes. This makes it impossible for us to determine the number of
separate individuals registering for our service, which may reduce the
advertising rates we can command.
WEBMAIL, EMAIL OUTSOURCING AND EMAIL ADVERTISING MAY NOT PROVE TO BE VIABLE
BUSINESSES.
We intend to operate in an industry that is only beginning to develop. Our
success will require the widespread acceptance by consumers of Webmail. We are
also dependent on the development of viable markets for outsourcing email and
email advertising. For a number of reasons, each of these developments is
somewhat speculative:
CONSUMERS MAY NOT BE WILLING TO USE WEBMAIL IN LARGE NUMBERS. As a Web-based
messaging service, Webmail is subject to the same concerns and shortcomings as
the Internet itself. Concerns about the security of information carried over the
Internet and stored on central computer systems could inhibit consumer
acceptance of Webmail. Moreover, Webmail can only function as effectively as the
Web itself. If traffic on the Web does not move quickly or Internet access is
impeded, consumers are less likely to use Webmail. Consumers may also react
negatively to the relatively new concept of advertising being included in their
email service. Our business will suffer if public perception of our service or
of Webmail in general is unfavorable. Articles and reviews published in popular
publications relating to computers and the Internet have a great deal of impact
on public opinion within our markets, and an article or review unfavorable to
Webmail or to our service specifically could slow or prevent broad market
acceptance. Similarly, if employers in large numbers implement policies or
software designed to restrict access to Webmail, Webmail is much less likely to
gain popular acceptance.
There are even greater uncertainties about our ability to successfully
market premium Webmail services. Consumers have generally been very reluctant to
pay for services provided over the Internet. Moreover, if our competitors choose
to provide POP3 access, premium names or other services without charge or as
part of a bundled offering, we may be forced to do the same.
THERE ARE SIGNIFICANT OBSTACLES TO THE DEVELOPMENT OF A SIZABLE MARKET FOR
EMAIL OUTSOURCING. Outsourcing is one of the principal methods by which we will
attempt to reach the size we believe is necessary to be successful. Security and
the reliability of the Internet, however, are likely to be of concern to Web
sites, ISPs, schools and businesses deciding whether to outsource their email or
to continue to provide it themselves. These concerns are likely to be
particularly strong at larger businesses, which are better able to afford the
costs of maintaining their own systems.
THE MARKET FOR EMAIL ADVERTISING IS ONLY BEGINNING TO DEVELOP AND THE
EFFECTIVENESS OF THIS FORM OF ADVERTISING IS UNPROVEN. Even if Webmail proves to
be popular with consumers and outsourcing customers, we will still need large
numbers of advertisers to purchase space on our Webmail service. Because we, and
our competitors, have only recently begun to offer email advertising, our
potential advertising customers have little or no experience with this medium.
We do not yet have enough experience to demonstrate the effectiveness of this
form of advertising. As a result, those customers willing to try email
advertising are likely to allocate only a limited portion of their advertising
budgets. If early customers do not find email advertising to be effective for
promoting their products and services, the market for our products will be
unlikely to develop. Recent reports have indicated that prices for banner
advertisements on the Internet have begun to fall, in part because of
diminishing "click" or response rates. Advertisers have also begun to request
fewer "cost per thousand
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advertisements" pricing arrangements and more "cost per click" pricing, which
effectively lowers advertising rates.
THERE ARE CURRENTLY NO STANDARDS FOR MEASURING THE EFFECTIVENESS OF WEBMAIL
ADVERTISING. Standard measurements may need to be developed to support and
promote Webmail advertising as a significant advertising medium. Our advertising
customers may refuse to accept our own measurements or third-party measurements
of advertisement delivery, which would adversely affect our ability to generate
advertising related revenues.
FILTERING SOFTWARE COULD PREVENT US FROM DELIVERING ADVERTISING. Inexpensive
software programs are available which limit or prevent the delivery of
advertising to a user's computer. The widespread adoption of this software would
seriously threaten the commercial viability of email advertising and our ability
to generate advertising revenues.
THERE ARE SIGNIFICANT OBSTACLES TO OUR ABILITY TO INCREASE ADVERTISING REVENUES.
Our success will largely depend on our ability to substantially increase our
advertising related revenues. Several factors will make it very difficult for us
to achieve this objective:
A LIMITED NUMBER OF ADVERTISERS ACCOUNT FOR A HIGH PERCENTAGE OF OUR
REVENUES. We are dependent on a limited number of advertisers to derive a
substantial portion of our revenues. In 1998 and for the three month period
ended March 31, 1999, approximately 31% and 32%, respectively, of our revenues
were attributable to N2K/Music Boulevard, and revenues from our five largest
advertisers accounted for an aggregate of 44% and 51%, respectively, of our
revenues. Our future success will depend upon our ability to retain these
advertisers, to generate significant revenues from new advertisers and to reduce
our reliance on any single advertiser. Our existing contracts with advertisers
generally have terms of only one or two months, and we may be unable to renew
them. The loss of one of our major advertisers or our inability to attract new
advertisers would cause our revenues to decline.
ADVERTISEMENTS DELIVERED ON OUR WEBMAIL SERVICE HAVE LOW "CLICK RATES",
WHICH COULD ADVERSELY AFFECT OUR REVENUES. Only a small percentage of our
members "click" on the advertisements we deliver with their Webmail. Because we
do not control the creative elements of the advertisements, we have very little
ability to increase our click rate. Continued low click rates could reduce the
amounts advertisers will be willing to pay us.
WE MAY NOT BE ABLE TO GENERATE AS MUCH REVENUE ON A "COST PER THOUSAND"
BASIS. To date, we have generated a significant portion of our advertising
revenues on a "cost per thousand" basis. These agreements require the advertiser
to pay us a fixed fee for every 1,000 advertisements that we deliver to our
members. We believe that this type of agreement is the most effective for us,
but we may not be able to charge as much for these agreements, or to continue to
sell as much advertising on this basis, in the future.
WE FACE GREATER RISKS WHEN SELLING ADVERTISING ON A "COST PER ACTION" BASIS.
The two types of "cost per action" contracts are "cost per click" and "cost per
conversion." In cost per click contracts, an advertiser agrees to pay us a fee
for each occasion on which a member "clicks" on the advertisement. Cost per
conversion contracts provide that we receive a fee only when a member both
"clicks" on the advertisement and proceeds to purchase an item, order a catalog
or take some other step specified by the advertiser. In general, these
arrangements do not yield as much revenue for us for each advertisement that we
deliver to our members. Moreover, cost per conversion contracts present
additional risks for us because we have no control over the advertiser's ability
to convert a "click" into a sale or other action. We also must rely on the
advertiser to report to us the number of conversions. These reports may not be
accurate, and they may not be timely, both of which can adversely affect our
revenues. Notwithstanding these risks, we may have to sell more of our
advertising on a cost per click or cost per conversion basis in the future.
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WE MAY FAIL TO MEET MARKET EXPECTATIONS BECAUSE OF FLUCTUATIONS IN OUR QUARTERLY
OPERATING RESULTS, WHICH WOULD CAUSE OUR STOCK PRICE TO DECLINE.
Although we intend to steadily increase our spending and investment to
support our planned growth, our revenues (and some of our costs) will be much
less predictable. This is likely to result in significant fluctuations in our
quarterly results, and to limit the value of quarter-to-quarter comparisons.
Because of our limited operating history and the emerging nature of our
industry, we anticipate that securities analysts will have difficulty in
accurately forecasting our results. It is likely that our operating results in
some quarters will be below market expectations. In this event, the price of our
Class A common stock is likely to decline.
The following are among the factors that could cause significant
fluctuations in our operating results:
- payments to our Web site partners in the form of stock that we will be
required to value at then-current market prices;
- delay or cancellation of even a small number of advertising contracts;
- expiration or termination of partnerships with Web sites or ISPs, which
can result from mergers or other strategic combinations as Internet
businesses continue to consolidate;
- system outages, delays in obtaining new equipment or problems with planned
upgrades;
- disruption or impairment of the Internet;
- introduction of new or enhanced services by us or our competitors;
- changes in our pricing policy or that of our competitors;
- seasonality in the demand for advertising, or changes in our own
advertising rates or advertising rates in general, both on and off the
Internet;
- changes in governmental regulation of the Internet and email in
particular; and
- general economic and market conditions, and particularly those affecting
email advertising.
SEVERAL OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER RESOURCES, LONGER
OPERATING HISTORIES, LARGER CUSTOMER BASES AND BROADER PRODUCT OFFERINGS.
Our business is, and we believe will continue to be, intensely competitive.
Our competitors with respect to email services include such large and
established companies as Microsoft, America Online, @Home, Yahoo!, Excite,
Disney (which owns the GO Network) and Lycos. Microsoft offers free Webmail
through its Hotmail Web site, and has dominant market share with 40 million
emailboxes according to Microsoft. In addition, we compete for advertisers with
DoubleClick, 24/7 Media, and other Internet advertising networks. We also
compete for advertisers with other Internet publishers as well as traditional
media such as television, radio, print and outdoor advertising.
Some of our competitors provide a variety of Web-based services such as
Internet access, browser software, homepage design, hosting and calendars, in
addition to email. The ability of these competitors to offer a broader suite of
complementary services may give them a considerable advantage over us. In
addition, some competitors who have other sources of revenue do not, or in the
future may not, place advertising on their Webmail pages. Consumers may prefer a
service that does not include advertisements.
The level of competition is likely to increase as current competitors
increase the sophistication of their offerings and as new participants enter the
market. In the future, as we expand our service offerings, we expect to
encounter increased competition in the development and delivery of these
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services. Further, some of our competitors may offer services for which we now
charge our members at or below cost or for free. If our competitors choose to
offer premium or other services at or below cost or for free, we may be forced
to do the same for our comparable services. If this occurs, our ability to
generate revenues from our subscription services would be materially impaired.
Some of our competitors may offer advertisement-free email on a subscription
basis or for free, which could adversely affect our ability to attract and
retain members unless we do the same. In addition, new technologies and the
expansion of existing technologies may increase competitive pressures on us. We
may not be able to compete successfully against our current or future
competitors.
For more information, please see "Business--Competition."
OUR RAPID EXPANSION IS STRAINING OUR EXISTING RESOURCES, AND WE MAY NOT BE ABLE
TO MANAGE OUR GROWTH EFFECTIVELY.
We have begun aggressively expanding our operations in anticipation of an
increasing number of strategic alliances and a corresponding increase in the
number of members. The number of our employees increased from 29 on December 31,
1997 to 103 on March 31, 1999. This expansion has placed, and we expect it to
continue to place, a significant strain on our managerial, operational and
financial resources. If we cannot manage our growth effectively, our business
and operating results will suffer.
WE MUST IMPROVE OUR BILLING, MANAGEMENT INFORMATION AND OTHER SYSTEMS.
We need to improve or replace our existing operational, customer service and
financial systems, procedures and controls.
WE DO NOT HAVE THE NECESSARY SYSTEMS TO REGULARLY MONITOR OUR MEMBERS'
ACTIVITY LEVELS. We cannot regularly generate statistics such as the number of
emailboxes that our members access, and the pages they view, on a daily, weekly
and monthly basis. Data of this nature is of significant value to potential
advertisers, and our inability to provide this information reduces the
effectiveness of our marketing efforts.
OUR SUBSCRIPTION BILLING SYSTEM IS INADEQUATE. Until March 1999, we did not
request credit card information from new premium service members at the time
they registered, but sought instead to obtain billing information upon
expiration of a 30-day free trial period. This proved to be unsuccessful, and
consequently approximately 94% of our premium members received subscription
services for which they did not pay. Our new billing system has been designed to
require a member to supply credit card information at the time of registration
for subscription services, but we are still in the process of installing the
system. If our new billing system does not significantly improve our ability to
collect payments for subscription services, the development of our subscription
services as a source of revenue will be materially compromised.
OUR MERCHANT BANK OR CREDIT CARD SERVICE PROVIDERS MAY CANCEL OUR RIGHTS TO
ACCEPT ON-LINE CREDIT CARD PAYMENTS. Because of the anonymity the Internet
affords its users, there are a large number of fraudulent credit card
transactions passed through Internet billing systems. We have exceeded the level
of credit card chargebacks usually accepted by our merchant banks and credit
card service providers-- VISA, Mastercard and American Express. We had to change
merchant banks once during the last 18 months as a result of this. Our new
billing system is designed to reduce fraud and the resulting chargebacks.
Because the new billing software is tightly integrated with a different merchant
bank, we are also in the process of changing our merchant bank. Initially, this
new bank will require us to maintain a reserve account equal to 5% of the
monthly bank card sales drafts we submit. We cannot be sure that our new billing
system and the reserve account will fully address the concerns of our merchant
bank and credit card service providers. If any of our credit card service
providers cancelled
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our account we would expect a significant reduction in subscription revenues. If
our merchant bank cancelled our account and we could not find a replacement
merchant bank, it would be difficult if not impossible to charge our users for
subscription services.
WE WILL NEED TO RETAIN OUR EXISTING KEY PERSONNEL AND ATTRACT ADDITIONAL
QUALIFIED EMPLOYEES.
Our future success depends to a significant extent on the continued service
of our key technical, sales and senior management personnel, but they have no
contractual obligation to remain with us. In particular, our success depends on
the continued service of Gerald Gorman, our Chairman and Chief Executive
Officer, Gary Millin, our President, Lon Otremba, our Chief Operating Officer,
Debra McClister, our Chief Financial Officer, and Charles Walden, our Executive
Vice President, Technology. The loss of the services of Messrs. Gorman, Millin,
Otremba or Walden, or of Ms. McClister, or several other key employees, would
impede the operation and growth of our business.
To manage our existing business and handle any future growth, we will have
to attract, retain and motivate additional highly skilled employees. In
particular, we will need to hire and retain qualified salespeople if we are to
meet our sales goals. Competition for employees in Internet-related businesses
is intense. We have in the past experienced, and expect to continue to
experience, difficulty in hiring and retaining employees with appropriate
qualifications. If we are unable to do so, our management may not be able to
effectively manage our business, exploit opportunities and respond to
competitive challenges.
OUR BUSINESS IS HEAVILY DEPENDENT ON TECHNOLOGY, INCLUDING TECHNOLOGY THAT HAS
NOT YET BEEN PROVEN RELIABLE AT HIGH TRAFFIC LEVELS AND TECHNOLOGY THAT WE DO
NOT CONTROL.
The performance of our computer systems is critical to the quality of
service we are able to provide to our members. If our service is unavailable or
fails to perform to our members' satisfaction, they may cease using our service.
Reduced use of our service decreases our revenues by decreasing the advertising
space that we have available to sell. In addition, our agreements with some of
our partners establish minimum performance standards. If we fail to meet these
standards, our partners could terminate their relationships with us and assert
claims for monetary damages.
WE NEED TO UPGRADE OUR COMPUTER SYSTEMS TO ACCOMMODATE INCREASES IN EMAIL
TRAFFIC, BUT WE MAY NOT BE ABLE TO DO SO WHILE MAINTAINING OUR CURRENT LEVEL OF
SERVICE, OR AT ALL.
We must continue to expand and adapt our computer systems as the number of
members and the amount of information they wish to transmit increases, and as
their requirements change. Because we have only been providing our services for
a limited time, and because our computer systems have not been tested at greater
capacities, we cannot guarantee the ability of our computer systems to connect
and manage a substantially larger number of members at high transmission speeds.
If we cannot provide the necessary service while maintaining expected
performance, our business would suffer and our ability to generate revenues
through our services would be impaired.
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The expansion and adaptation of our computer systems will require
substantial financial, operational and managerial resources. We may not be able
to accurately project the timing of increases in email traffic or other customer
requirements. In addition, the very process of upgrading our computer systems is
likely to cause service disruptions. This is because we will have to take
various elements of the network out of service in order to install some
upgrades.
OUR COMPUTER SYSTEMS MAY FAIL AND INTERRUPT OUR SERVICE.
Our members have in the past experienced interruptions in our email service.
We believe that these interruptions will continue to occur from time to time.
These interruptions are due to hardware failures, unsolicited bulk emails that
overload our system and other computer systems failures. These failures have
resulted and may continue to result in significant disruptions to our service.
During the two week period from March 23, 1999 through April 5, 1999, for
example, we experienced a series of service outages that affected a significant
number of our members. Two of these outages, the longest of which was
approximately 13 hours, were attributable to computer equipment failures in our
member database system and our email storage system. Although we plan to install
backup computers and implement procedures to reduce the impact of future
malfunctions in these systems, the presence of these and other single points of
failure in our network increases the risk of service interruptions. Some aspects
of our computer systems are not redundant. These include our member database
system and our email storage system, which stores emails and other data for our
members. In addition, substantially all of our computer and communications
systems are currently located in our primary data center in lower Manhattan. We
currently do not have an alternate site from which we could conduct operations
in the event of a disaster. Our computer and communications hardware is
vulnerable to damage or interruption from fire, flood, earthquake, power loss,
telecommunications failure and similar events. Our services would be suspended
for a significant period of time if our primary data center was severely damaged
or destroyed. We might also lose stored emails and other member files, causing
significant member dissatisfaction and possibly giving rise to claims for
monetary damages. Although we plan to build a secondary data center outside New
York City to address this contingency, that facility will not be operational in
the near future and may never be successfully deployed as a fully redundant
facility.
OUR SERVICES WILL BECOME LESS DESIRABLE OR OBSOLETE IF WE ARE UNABLE TO KEEP UP
WITH THE RAPID CHANGES CHARACTERISTIC OF OUR BUSINESS.
Our success will depend on our ability to enhance our existing services and
to introduce new services in order to adapt to rapidly changing technologies,
industry standards and customer demands. To compete successfully, we will have
to accurately anticipate changes in consumer demand and add new features to our
services very rapidly. We also have to regularly upgrade our software to ensure
that it remains compatible with the wide and changing variety of Web browsers
and other software used by our members. For example, our system currently cannot
properly receive files sent using some third party email programs. We may not be
able to integrate the necessary technology into our computer systems on a timely
basis or without degrading the performance of our existing services. We cannot
be sure that, once integrated, new technology will function as expected. Delays
in introducing effective new products and services could cause existing and
potential members to forego use of our services and to use instead those of our
competitors.
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO PROVIDE ADEQUATE SECURITY FOR OUR
SERVICE, OR IF OUR SERVICE IS IMPAIRED BY SECURITY MEASURES IMPOSED BY THIRD
PARTIES.
Security is a critical issue for any online service, and presents a number
of challenges for us.
19
<PAGE>
WE MAY BE UNABLE TO MAINTAIN THE SECURITY OF OUR SERVICE. Third parties may
attempt to breach our security or that of our members. If they are successful,
they could obtain our members' confidential information, including our members'
profiles, passwords, financial account information, credit card numbers, stored
email or other personal information. Our members may assert claims for money
damages for any breach in our security and any breach could harm our reputation.
Our computers are vulnerable to computer viruses, physical or electronic
break-ins and similar incursions, which could lead to interruptions, delays or
loss of data. We expect to expend significant capital and other resources to
license or create encryption and other technologies to protect against security
breaches or to alleviate problems caused by any breach. Nevertheless, these
measures may prove ineffective. Our failure to prevent security breaches may
expose us to liability and may adversely affect our ability to attract and
retain members.
SECURITY MEASURES TAKEN BY OTHERS MAY INTERFERE WITH THE EFFICIENT OPERATION
OF OUR SERVICE. "Firewalls" and similar network security software employed by
many ISPs, employers and schools can interfere with the operation of our Webmail
service, including denying our members access to their email accounts.
Similarly, in their efforts to filter out unsolicited bulk emails, ISPs and
other organizations may block email from all or some of our members.
WE ARE DEPENDENT ON LICENSED TECHNOLOGY.
We license a significant amount of technology from third parties, including
our Web server and encryption technology. We anticipate that we will need to
license additional technology to remain competitive. We may not be able to
license these technologies on commercially reasonable terms or at all.
Third-party licenses expose us to increased risks, including risks relating to
the integration of new technology, the diversion of resources from the
development of our own proprietary technology, and a greater need to generate
revenues sufficient to offset associated license costs.
OUR BUSINESS DEPENDS ON THE EFFICIENCY OF THE INTERNET AND OTHER THIRD PARTY
NETWORKS.
Our business depends on the effectiveness of the Internet as a means of
transmitting data. The recent growth in the use of the Internet has caused
frequent interruptions and delays in accessing and transmitting data over the
Internet. Any deterioration in the performance of the Internet as a whole could
undermine the benefits of our services. Therefore, our success depends on
improvements being made to the entire Internet infrastructure to alleviate
overloading and congestion. We also depend on telecommunications network
suppliers such as MFS, BBN Planet and UUNET to transmit and receive email
messages on behalf of our members.
WE ARE DEPENDENT UPON A THIRD PARTY FOR THE ACTUAL DELIVERY OF THE
ADVERTISEMENTS WE SELL.
We contract with DoubleClick, Inc. to deliver the advertisements that we
sell and that appear on our Web pages and on the Web pages of our partners. If
DoubleClick experiences technical difficulties or otherwise fails to perform,
our revenues from advertising may be adversely affected. Furthermore,
DoubleClick may not have the same priorities for technology development as we do
and this may limit our ability to improve our delivery of advertising for our
specific needs. We are investigating delivering advertisements ourselves using
software licensed from a third party. We do not currently know whether we will
switch our advertising delivery process. If we switch, we may experience
problems in making the transition and the new software may not function as we
expect.
20
<PAGE>
OUR SYSTEMS, AND THE SYSTEMS OF OTHERS THAT WE DEPEND ON, MAY NOT OPERATE
PROPERLY BECAUSE OF
THE YEAR 2000 PROBLEM.
We may have substantial exposure to the Year 2000 problem, both with our own
systems and with systems we do not control. The Year 2000 problem could
adversely affect our business and financial results. Many currently installed
computer systems and software products have been coded to accept or recognize
only two digit entries to define the applicable year. These systems may
erroneously recognize the year 2000 as the year 1900. This could result in major
failures or malfunctions.
This risk is particularly significant for our business. In addition to
relying on our internal computer equipment and software, we depend upon the
continued viability of many external systems, most importantly the Internet, in
order to make our services available to our members. We use the Internet to
deliver all of our services to our members and to transmit and receive their
email. Because no single entity or organization manages or controls the
Internet, we have no way to determine how many of the devices or systems that
contribute to the efficient transmission of data over the Internet may be prone
to the Year 2000 risk. If the performance or the availability of the Internet as
a data communications medium is compromised because of the Year 2000 problem,
our ability to deliver our services and to generate revenues would be adversely
affected even if our own internal systems are fully operational.
In addition, many of our members are dependent upon the availability of our
partners' Web sites in order to gain access to our services. While we are in the
process of identifying any potential Year 2000 problems at our partners' sites,
we cannot be sure that Year 2000 problems will not materialize at these sites.
Moreover, our members rely on a wide variety of hardware and software, as well
as numerous ISPs, in order to reach the Internet and our Web-based services. If
our members are unable to access our services because of Year 2000 problems
associated with their own computers or their ISPs, our ability to deliver our
services and to generate revenues would be adversely affected.
With respect to our internal systems, we are working with our hardware and
software vendors to identify any exposure to the Year 2000 problem. Although we
are seeking to identify and remediate all Year 2000 problems in our internal
systems by the end of this year, we cannot ensure that we will be successful in
this effort. Any significant Year 2000 problems in our internal systems will
harm our operations and increase our losses. Please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
GERALD GORMAN WILL CONTINUE TO CONTROL MAIL.COM AFTER THIS OFFERING AND WILL BE
ABLE TO PREVENT A CHANGE OF CONTROL.
After this offering, Gerald Gorman, our Chairman and Chief Executive
Officer, will beneficially own Class A and Class B common stock representing
approximately 77.1% of the voting power of our outstanding common stock. Each
share of Class B common stock entitles the holder to 10 votes on any matter
submitted to the stockholders. As a result of his share ownership, Mr. Gorman
will be able to determine the outcome of all matters requiring stockholder
approval, including the election of directors, amendment of our charter and
approval of significant corporate transactions. Mr. Gorman will be in a position
to prevent a change in control of Mail.com even if the other stockholders were
in favor of the transaction.
Mail.com and Mr. Gorman have agreed to permit our stockholders who formerly
held our preferred stock to designate a total of three members of our board of
directors.
Our charter contains provisions that could deter or make more expensive a
takeover of Mail.com. These provisions include the ability to issue "blank
check" preferred stock without stockholder approval.
For more information on these matters, please see "Certain Transactions,"
"Principal Stockholders" and "Description of Capital Stock".
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<PAGE>
IT IS OUR INTENTION TO ACQUIRE OR MAKE STRATEGIC INVESTMENTS IN OTHER BUSINESSES
AND TO ACQUIRE OR LICENSE TECHNOLOGY AND OTHER ASSETS, AND WE MAY HAVE
DIFFICULTY INTEGRATING SUCH BUSINESSES OR GENERATING AN ACCEPTABLE RETURN FROM
SUCH ACQUISITIONS.
We will attempt to acquire or make strategic investments in businesses and
to acquire or license technology and other assets. We cannot assure you that
acquisition or licensing opportunities will continue to be available on terms
acceptable to us or at all. Such acquisitions will involve risks, including:
- inability to raise the required capital;
- difficulty in assimilating the acquired operations and personnel;
- inability to retain any acquired member accounts;
- disruption of our ongoing business;
- inability to successfully incorporate acquired technology and rights into
our service offerings and maintain uniform standards, controls,
procedures, and policies; and
- lack of the necessary experience to enter new markets.
We may not successfully overcome problems encountered in connection with
potential acquisitions. In addition, an acquisition could materially impair our
operating results by diluting our shareholders' equity, causing us to incur
additional debt, or requiring us to amortize acquisition expenses and acquired
assets.
OUR GOAL OF BUILDING BRAND IDENTITY IS LIKELY TO BE DIFFICULT AND EXPENSIVE.
We believe that a quality brand identity will be essential if we are to
increase membership, traffic on our sites and revenues. We intend to use a
portion of the proceeds of the offering to substantially increase our marketing
budget as part of our efforts to build the Mail.com brand. We do not have
experience with some of the types of marketing that we are contemplating. If our
marketing efforts cost more than anticipated or if we cannot increase our brand
awareness, our losses will increase and our ability to succeed will be seriously
impeded. Please see "Use of Proceeds."
EXPANDING IN INTERNATIONAL MARKETS WILL BE EXPENSIVE AND SUBJECT TO SIGNIFICANT
RISKS.
We intend to continue to expand into international markets and to spend
significant financial and managerial resources to do so. We have limited
experience in international operations and may not be able to compete
effectively in international markets. If our revenues from international
operations do not exceed the expense of establishing and maintaining these
operations, our losses will increase and our operating results will suffer. We
face significant risks inherent in conducting business internationally, such as:
- uncertain demand in foreign markets for Webmail advertising, direct
marketing and e-commerce;
- difficulties and costs of staffing and managing international operations;
- differing technology standards;
- difficulties in collecting accounts receivable and longer collection
periods;
- economic instability and fluctuations in currency exchange rates and
imposition of currency exchange controls;
- potentially adverse tax consequences; and
22
<PAGE>
- political instability, unexpected changes in regulatory requirements, and
reduced protection for intellectual property rights in some countries.
WE WILL HAVE BROAD DISCRETION WITH RESPECT TO THE USE OF THE PROCEEDS FROM THIS
OFFERING.
As of the date of this prospectus, we cannot specify the particular uses for
the net proceeds we will receive from the offering. If our management does not
apply these funds effectively, our revenues could decrease and our stock price
could fall. Please see "Use of Proceeds".
WE MAY NOT BE ABLE TO RAISE NECESSARY CAPITAL IN THE FUTURE.
We anticipate the need to raise additional capital in the future. However,
we may not be able to raise on terms favorable to us, or at all, amounts
necessary to fund our planned expansion, develop new or enhanced services,
respond to competitive pressures, promote our brand name or acquire
complementary businesses, technologies or services. Some of our shareholders
have registration rights that could interfere with our ability to raise needed
capital.
If we raise additional funds by issuing equity securities, stockholders may
experience dilution of their ownership interest. Moreover, we could issue
preferred stock that has rights senior to those of the Class A common stock. If
we raise funds by issuing debt, our lenders may place limitations on our
operations, including our ability to pay dividends.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Certain Transactions--Registration Rights."
REGULATION OF EMAIL AND INTERNET USE IS EVOLVING AND MAY ADVERSELY IMPACT OUR
BUSINESS.
There are currently few laws or regulations that specifically regulate
activity on the Internet. However, laws and regulations may be adopted in the
future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act of 1996 restricts the types of information and content
transmitted over the Internet. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate ISPs and online
service providers in a manner similar to long distance telephone carriers and to
impose access fees on these companies. This could increase the cost of
transmitting data over the Internet. Any new laws or regulations relating to the
Internet could adversely affect our business.
Moreover, the extent to which existing laws relating to issues such as
property ownership, pornography, libel and personal privacy are applicable to
the Internet is uncertain. We could face liability for defamation, copyright,
patent or trademark infringement and other claims based on the content of the
email transmitted over our system. We do not and cannot screen all the content
generated and received by our members. Some foreign governments, such as
Germany, have enforced laws and regulations related to content distributed over
the Internet that are more strict than those currently in place in the United
States. We may be subject to legal proceedings and damage claims if we are found
to have violated laws relating to email content.
OUR INTELLECTUAL PROPERTY RIGHTS ARE CRITICAL TO OUR SUCCESS, BUT MAY BE
DIFFICULT TO PROTECT.
We regard our copyrights, service marks, trademarks, trade secrets, domain
names and similar intellectual property as critical to our success. We rely on
trademark and copyright law, trade secret protection and confidentiality and/or
license agreements with our employees, members, strategic partners and others to
protect our proprietary rights. Despite our precautions, unauthorized third
parties may improperly obtain and use information that we regard as proprietary.
Third parties may submit false registration data attempting to transfer key
domain names to their control. Our failure to pay annual registration fees for
key domain names may result in the loss of these domains to third parties.
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<PAGE>
Third parties have challenged our rights to use some of our domain names, and we
expect that they will continue to do so.
The status of United States patent protection for software products is not
well defined and will evolve as additional patents are granted. We do not know
if our current or future patent applications will be issued with the scope of
the claims we seek, if at all. Current United States law does not adequately
protect our database of member contact and demographic information. In addition,
the laws of some foreign countries do not protect proprietary rights to the same
extent as do the laws of the United States. Our means of protecting our
proprietary rights in the United States or abroad may not be adequate and
competitors may independently develop similar technology.
Third parties may infringe or misappropriate our copyrights, trademarks and
similar proprietary rights. In addition, other parties may assert infringement
claims against us. Although we have not received notice of any alleged
infringement, we cannot be certain that our services do not infringe issued
patents. Because patent applications in the United States are not publicly
disclosed until the patent is issued, applications may have been filed which
relate to our services. We have been and may continue to be subject to legal
proceedings and claims from time to time in the ordinary course of our business,
including claims related to the use of our domain names and claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties. Intellectual property litigation is expensive and time-consuming and
could divert management's attention away from running our business.
A SUBSTANTIAL AMOUNT OF COMMON STOCK MAY COME ONTO THE MARKET IN THE FUTURE,
WHICH COULD DEPRESS OUR STOCK PRICE.
Sales of a substantial number of shares of common stock in the public market
following this offering could cause the market price of our Class A common stock
to decline. After this offering, we will have an aggregate of 42,039,224 shares
of Class A and Class B common stock and 7,593,815 options and 209,539 warrants
to purchase an aggregate of 7,803,354 shares of Class A common stock
outstanding. Except for up to 685,000 shares to be sold through our directed
share program, all the shares sold in this offering will be freely tradable
immediately after this offering. A substantial majority of the remaining
41,354,224 shares of Class A and Class B common stock outstanding after this
offering are subject to lock-up agreements that prohibit the sale of the shares
for 180 days after the date of this prospectus. In addition, all shares sold
under the directed share program will be subject to lock-up agreements that
prohibit the sale of the shares for 30 days after the date of this prospectus.
On , 1999 (31 days after the date of this prospectus), shares
will become available for sale, and beginning, , 1999 (181 days after the
date of this prospectus), shares will become available for sale. The
remaining shares will become available at various later dates upon
the expiration of one-year holding periods. We are likely to issue large amounts
of additional Class A common stock, which may also be sold and which could
adversely affect the price of our stock. See "--Our contracts with our Web site
partners require us to incur substantial expenses" and "--Investors in this
offering will suffer immediate and substantial dilution, and they will
experience more dilution in the future because of additional stock issuances."
The holders of approximately 16,018,535 shares of Class A common stock have
the right, subject to conditions, to require us to file registration statements
covering their shares, or to include their shares in registration statements
that we may file for ourselves or for other stockholders. By exercising their
registration rights and selling a large number of shares, these holders could
cause the price of the Class A common stock to fall. For more information on
these registration rights, please see "Description of Capital
Stock--Registration Rights."
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<PAGE>
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION, AND
THEY WILL EXPERIENCE MORE DILUTION IN THE FUTURE BECAUSE OF ADDITIONAL STOCK
ISSUANCES.
We expect the initial public offering price to be substantially higher than
the pro forma net tangible book value per share of our Class A common stock.
Purchasers in this offering will experience immediate dilution of $8.03
(assuming a public offering price of $11.00 per share). For more information,
please see "Dilution."
Several of our existing agreements with Web site partners provide for the
issuance of substantial numbers of additional shares. We also have 7,593,815
outstanding vested and unvested employee stock options and 209,539 warrants to
purchase an aggregate of 7,803,354 shares of Class A common stock. We have made
a number of Internet-related asset acquisitions using stock and options to pay
part or all of the purchase price. In the future, we expect to continue to issue
shares and options, particularly in connection with our efforts to attract,
retain and motivate qualified personnel and in connection with acquisitions and
the establishment of commercial and strategic relationships. We may also issue
additional shares or options to attract or retain Web site or ISP partners. We
anticipate that the number of shares involved in these arrangements will be
substantial.
For more information about our existing commitments to issue Class A common
stock, please see "Risk Factors--Our contracts with our Web site partners
require us to incur substantial expenses" and "Management--Compensation."
BECAUSE WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS ON OUR CLASS A COMMON STOCK,
HOLDERS OF OUR CLASS A SHARES WILL NOT BE ABLE TO RECEIVE A RETURN ON THEIR
SHARES UNLESS THEY SELL THEM.
We have never paid or declared any cash dividends on our Class A common
stock or other securities and intend to retain any future earnings to finance
the development and expansion of our business. We do not anticipate paying any
cash dividends on our Class A common stock in the foreseeable future. Unless we
pay dividends, our shareholders will not be able to receive a return on their
shares unless they sell them. See "Dividend Policy."
IT IS DIFFICULT TO PREDICT THE DEVELOPMENT OF THE MARKET FOR OUR STOCK, BUT OUR
STOCK PRICE IS LIKELY TO BE VOLATILE.
We cannot predict the extent to which investor interest in Mail.com will
lead to the development of a trading market or how liquid that market might
become. As discussed above, our financial results are difficult to predict and
could fluctuate significantly. In addition, the market prices of securities of
Internet-related companies have been highly volatile. A stock's price is often
influenced by rapidly changing perceptions about the future of the Internet or
the results of other Internet or technology companies, rather than specific
developments relating to the issuer of that particular stock. If our stock price
is volatile, a securities class action may be brought against us. Class-action
litigation could result in substantial costs and divert our management's
attention and resources.
FORWARD-LOOKING STATEMENTS
This prospectus also contains forward-looking statements that involve risks
and uncertainties. These statements relate to our future plans, objectives,
expectations and intentions. These statements may be identified by the use of
words such as "expects," "anticipates," "intends," "plans" and similar
expressions. Our actual results could differ materially from those discussed in
these statements. Factors that could contribute to such differences include, but
are not limited to, those discussed above and elsewhere in this prospectus.
25
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 6,850,000 shares of
Class A common stock in the offering will be approximately $69.0 million,
assuming an initial public offering price of $11.00 per share and after
deducting the estimated underwriting discounts and estimated offering expenses.
If the underwriters' over-allotment option is exercised in full, we estimate
that our net proceeds will be approximately $79.5 million. The principal
purposes of the offering are to obtain additional capital, create a public
market for our Class A common stock and facilitate our future access to the
public capital markets.
We intend to use the net proceeds to:
- expand our computer systems;
- develop Web site and ISP partnerships;
- expand sales and marketing activities;
- hire personnel;
- finance potential acquisitions; and
- fund other general corporate purposes.
In addition, we may use a portion of the net proceeds to acquire or invest
in complementary businesses, domain names, technologies or services.
As of the date of this prospectus, we cannot specify with certainty the
particular uses for the net proceeds to be received upon completion of the
offering, nor can we specify the amount of proceeds to be used for each stated
use. Accordingly, we will have broad discretion in the application of the net
proceeds. Pending these uses, we will invest the net proceeds of this offering
in short-term, interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. We currently intend to retain future earnings, if any, to
finance the expansion of our business.
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<PAGE>
CAPITALIZATION
The following table presents the capitalization of Mail.com as of March 31,
1999:
- - on an actual basis;
- - on a pro forma basis to give effect to:
- the automatic conversion upon the closing of this offering of all
outstanding shares of convertible preferred stock, on a one-for-one basis,
into 13,161,558 shares of our Class A common stock;
- the issuance upon the closing of this offering of an aggregate of
2,081,977 shares of our Class A common stock in full settlement of our
contingent obligations to issue additional equity to preferred
stockholders. We will account for the issuance of these additional Class A
common shares as a non-cash dividend to our preferred stockholders. For
purposes of the pro forma data, we have calculated the amount of the
dividend based on a value of $11.00 per common share, which is the assumed
initial public offering price. The actual amount of the dividend will be
determined using the actual initial public offering price;
- the issuance upon the closing of this offering of an aggregate of
1,500,000 shares of our Class A common stock to CNET and NBC Multimedia
upon the exercise of warrants at an assumed exercise price equal to $5.00
per share for proceeds of $7.5 million;
- the issuance upon the closing of this offering of an aggregate of
2,368,907 shares of our Class A common stock to CNET and Snap and 210,000
our shares of Class A common stock to NBC Multimedia in full settlement of
our contingent obligations to issue additional Class A common stock to
them. We will capitalize the issuance of those shares and ratably amortize
the amount over the period from the date of the offering through September
2001. For purposes of the pro forma data, we have calculated the amount of
the settlement based on an assumed initial public offering price of $11.00
per share. The actual amount of the settlement will be determined using
the actual initial public offering price; and
- reflects the return of 1,000,000 shares of our Class A common stock issued
at $3.50 per share from GeoCities and the write-off of a $500,000
non-refundable fee paid to GeoCities. These transactions relate to the
cancellation and rescission of our original contract and the entry into a
new advertising agreement.
- - on a pro forma as adjusted basis to give effect to the sale of, and the
application of the net proceeds from, 6,850,000 shares of Class A common stock
in this offering, assuming an initial offering price of $11.00 per share.
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<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1999
-------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
Cash and cash equivalents................................................ $20,136,543 $27,636,543 $96,612,043
----------- ----------- -----------
----------- ----------- -----------
Domain asset purchase obligations, excluding current portion............. $ 190,355 $ 190,355 $ 190,355
Obligations under capital leases, excluding current portion.............. 2,506,645 2,506,645 2,506,645
Redeemable convertible preferred stock, Class C, $0.01 par value;
12,000,000 shares authorized, 3,776,558 shares issued and outstanding
actual, no shares issued and outstanding pro forma and pro forma as
adjusted............................................................... 13,047,650 -- --
Stockholders' equity:
Convertible preferred stock, Class A, D, and E, $0.01 par value;
48,000,000 shares authorized, 9,385,000 shares issued and outstanding
actual; no shares issued and outstanding, pro forma and pro forma as
adjusted............................................................... 93,850 -- --
Common stock, Class A and B, $0.01 par value; 130,000,000 shares
authorized, 16,682,481 shares issued and outstanding actual; 35,004,922
shares issued and outstanding pro forma; and 41,854,922 shares issued
and outstanding pro forma as adjusted.................................. 166,825 350,051 418,551
Additional paid in capital............................................... 35,640,616 103,868,605 172,775,605
Subscription receivable.................................................. (210,950) (210,950) (210,950)
Deferred compensation.................................................... (934,399) (934,399) (934,399)
Accumulated deficit...................................................... (22,473,411) (45,875,160) (45,875,160)
----------- ----------- -----------
Total stockholders' equity............................................... 12,282,531 57,198,147 126,173,647
----------- ----------- -----------
Total capitalization..................................................... $28,027,181 $59,895,147 $128,870,647
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The foregoing table assumes no exercise of any stock options and warrants
outstanding as of March 31, 1999 (except the pro forma data, which assumes the
exercise of the warrants held by CNET and NBC Multimedia). Mail.com expects that
there will be 32,039,224 shares of Class A common stock and 10,000,000 shares of
Class B common stock outstanding after the offering. The foregoing number of
shares of Class A common stock includes, in addition to the adjustments
described above, shares issued upon option and warrant exercises that occurred
after March 31, 1999. After the closing of this offering, no shares of
convertible preferred stock will be issued and outstanding. As of March 31,
1999, there were options outstanding to purchase a total of 7.5 million shares
of Class A common stock with a weighted average exercise price of $2.29 per
share and 209,539 shares of common stock reserved for issuance upon exercise of
outstanding warrants (including the CNET and NBC Multimedia warrants) at a
weighted average exercise price of $3.36 per share. To the extent that any of
these options are exercised, there will be further dilution to new investors.
See "The Offering--Shares Issuable After The Offering" and Notes to Financial
Statements.
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<PAGE>
DILUTION
Our pro forma net tangible book value as of March 31, 1999 was approximately
$55,165,972, or $1.58 per share of common stock. Pro forma net tangible book
value per share is determined by dividing the amount of our pro forma total
tangible assets less total liabilities by the pro forma number of shares of
common stock outstanding at that date. Dilution in net tangible book value per
share represents the difference between the amount per share paid by purchasers
of shares of Class A common stock in this offering and the pro forma net
tangible book value per share of common stock immediately after the completion
of this offering. After giving effect to the issuance and sale of the 6,850,00
shares of Class A common stock in this offering (at an assumed initial public
offering price of $11.00 per share and after deducting estimated underwriting
discounts and estimated offering expenses), our pro forma net tangible book
value as of March 31, 1999 would have been $124,141,472, or $2.97 per share.
This represents an immediate increase in pro forma net tangible book value of
$1.39 per share to existing stockholders and an immediate dilution of $8.03 per
share to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......................... $ 11.00
Pro forma net tangible book value per share at March 31, 1999 $ 1.58
Increase in pro forma net tangible book value per share attributable
to new investors.................................................. 1.39
---------
Pro forma net tangible book value per share after offering 2.97
---------
Dilution per share to new investors..................................... $ 8.03
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis, as of March 31, 1999,
the differences between the total number of shares of Class A and Class B common
stock purchased from Mail.com and the total consideration paid and the average
price per share paid by existing stockholders and new investors purchasing
shares of Class A common stock in this offering based upon an assumed initial
public offering price of $11.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE
PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------- ----------- -------------- ----------- ------------
Existing stockholders........................... 35,004,922 78.5% $ 37,515,000 33.2% $ 1.07
New investors................................... 6,850,000 21.5 75,350,000 66.8 11.00
- ------------------------------------------------ ------------- ----- --------------
Total..................................... 41,854,922 100.0% $ 112,865,000 100.0% $ 2.70
------------- ----- -------------- ----- ------------
------------- ----- -------------- ----- ------------
</TABLE>
The foregoing discussion and tables assume no exercise of any stock options
outstanding as of March 31, 1999 (except the pro forma data, which assumes the
exercise of the warrants held by CNET and NBC Multimedia). As of March 31, 1999,
there were options outstanding to purchase a total of 7.5 million shares of
Class A common stock with a weighted average exercise price of $2.29 per share
and 209,539 shares of common stock reserved for issuance upon exercise of
outstanding warrants (including the CNET and NBC Multimedia warrants) at a
weighted average exercise price of $3.36 per share. To the extent that any of
these options are exercised, there will be further dilution to new investors.
See "The Offering--Shares Issuable After The Offering" and Notes to Financial
Statements.
29
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth our selected financial data. You should read
this information together with our financial statements and the notes to those
statements beginning on page F-1 of this prospectus and the information under
"Summary Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The following data is presented:
- - on an actual basis;
- - on a pro forma basis to give effect to:
- the automatic conversion of all outstanding shares of convertible
preferred stock, on a one-for-one basis, into 13,161,558 shares of our
Class A common stock upon the closing of this offering;
- the issuance upon the closing of this offering of an aggregate of
2,081,977 shares of our Class A common stock in the aggregate in full
settlement of our contingent obligations to issue additional equity to
preferred stockholders. We will account for the issuance of these
additional Class A common shares as a non-cash dividend to our preferred
stockholders. For purposes of the pro forma data, we have calculated the
amount of the dividend based on a value of $11.00 per common share, which
is the assumed initial public offering price. The actual amount of the
dividend will be determined using the actual initial public offering
price;
- the issuance upon the closing of this offering of an aggregate of
1,500,000 shares of our Class A common stock to CNET and NBC Multimedia
upon the exercise of warrants at an assumed exercise price equal to $5.00
per share for proceeds of approximately $7.5 million;
- the issuance upon the closing of this offering of an aggregate of
2,368,907 shares of our Class A common stock to CNET and Snap and 210,000
shares of our Class A common stock to NBC Multimedia in full settlement of
our contingent obligations to issue additional Class A common stock to
them. We will capitalize the issuance of those shares and ratably amortize
the amount over the period from the date of the offering through September
2001. For purposes of the pro forma data, we have calculated the amount of
the settlement based on an assumed initial public offering price of $11.00
per share. The actual amount of the settlement will be determined using
the actual initial public offering price; and
- the return of 1,000,000 shares of our Class A common stock issued at $3.50
per share from GeoCities and the write-off of a $500,000 non-refundable
fee paid to GeoCities. These transactions relate to the cancellation and
rescission of our original contract and the entry into a new advertising
agreement;
- - on a pro forma as adjusted basis to give effect to the sale of, and the
application of the net proceeds from, 6,850,000 shares of Class A common stock
in this offering, assuming an initial offering price of $11.00 per share.
30
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
------------- ------------- -------------- ------------- --------------
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 19,015 $ 173,234 $ 1,494,762 $ 80,413 $ 1,185,939
Operating expenses:
Cost of revenues................. 187,890 1,081,848 2,890,582 351,665 1,477,690
Sales and marketing.............. 65,096 930,420 6,679,478 272,650 3,590,636
General and administrative....... 221,932 862,028 3,482,097 275,206 1,364,898
Product development.............. 93,698 296,140 1,573,465 218,292 1,176,959
------------- ------------- -------------- ------------- --------------
Total operating expenses..... 568,616 3,170,436 14,625,622 1,117,813 7,610,183
------------- ------------- -------------- ------------- --------------
Loss from operations............... (549,601) (2,997,202) (13,130,860) (1,037,400) (6,424,244)
Other income (expense):
Gain on sale of investment....... -- -- 438,000 -- --
Interest income.................. 6,869 36,264 277,164 6,905 114,904
Interest expense................. (1,980) (34,815) (109,187) (13,368) (98,723)
------------- ------------- -------------- ------------- --------------
Total other income (expense),
net........................ 4,889 1,449 605,977 (6,463) 16,181
------------- ------------- -------------- ------------- --------------
Net loss........................... $ (544,712) $ (2,995,753) $ (12,524,883) $ (1,043,863) $ (6,408,063)
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Basic and diluted net loss per
common share..................... $ (0.04) $ (0.21) $ (0.86) $ (0.07) $ (0.39)
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Weighted average basic and diluted
shares outstanding............... 13,725,278 14,097,500 14,607,915 14,100,244 16,468,221
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Pro forma:
Pro forma net loss................. $ (6,908,063)
Cumulative dividends on settlement
of contingent obligations to
preferred shareholders........... (22,901,749)
Net loss attributable to common
stockholders..................... $ (29,809,812)
--------------
--------------
Basic and diluted net loss per
common share..................... $ (0.86)
--------------
--------------
Shares used in pro forma basic and
diluted net loss per common share
calculation...................... 34,790,662
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AS OF MARCH 31, 1999
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA
1996 1997 1998 ACTUAL PRO FORMA AS ADJUSTED
---------- ---------- ----------- ---------- ---------- -----------
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 128,277 $ 909,718 $ 8,414,352 $20,136,543 $27,636,543 $96,612,043
Working capital (deficiency)....... 37,743 (190,963) 5,075,870 14,621,821 22,121,821 91,097,321
Total assets....................... 665,855 2,645,854 20,344,488 37,111,583 68,979,549 137,955,049
Domain asset purchase obligations,
less current portion............. -- 150,155 216,886 190,355 190,355 190,355
Deferred revenue, current and long-
term portion..................... 6,289 329,187 1,904,645 2,496,750 2,496,750 2,496,750
Capital lease obligations, less
current portion.................. 146,186 568,728 1,437,731 2,506,645 2,506,645 2,506,645
Redeemable convertible preferred
stock............................ -- -- 13,047,650 13,047,650 -- --
Total stockholders' equity
(deficit)........................ 370,288 566,915 (332,643) 12,282,531 57,198,147 126,173,647
</TABLE>
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH OUR
FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW
Mail.com is a global provider of email services. Our basic email services
are free to our members. We generate revenues primarily from advertising related
sales, including direct marketing and e-commerce promotion. We also generate
revenues from subscription services, such as premium email addresses and
increased storage capacity, and from email service outsourcing fees. In March
1999, we processed approximately 120 million email messages and delivered
approximately 190 million advertisements.
Prior to 1998, we generated most of our revenues from subscription services
and trading of domain names. We collect subscriptions by charging members'
credit cards in advance, usually after a 30-day trial period. Until recently, we
offered one-year, two-year, five-year and lifetime subscription periods. During
March 1999, we increased our subscription rates and began offering only monthly
and annual subscriptions. We record subscriptions as deferred revenues and
recognize the revenues ratably over the term of the subscription. We use an
eight year amortization period for lifetime subscriptions. We recognize revenues
from the sale of domain names at the time of sale.
During 1998, our member base became large enough to provide a platform for
advertising related sales. We expect that most of our revenues will be derived
from these sources in the future. We price advertisements based on a variety of
factors, including whether the advertising is targeted to a specific category of
members or whether it is run across our entire network. We attempt to sell all
of our available advertising space, or inventory, through a combination of
advertisements that we sell on either a "cost per thousand" or "CPM" basis, or a
"cost per action" basis. Advertising sales billed on a CPM basis require that
the advertiser pay us an agreed amount for each 1,000 advertisements delivered.
We do not generate income from advertising sales billed on a "cost per action"
basis unless the member responds to the advertisement with an action, such as by
"clicking" on the advertisement or purchasing the product advertised. In a
CPM-based advertising contract, we recognize revenues from advertising sales
ratably as we deliver individual advertisements or impressions. In a cost per
action contract, we recognize revenues as members "click" or otherwise respond
to the advertisement. In the case of contracts requiring actual sales of
advertised items, we may experience delays in recognizing revenues pending
receipt of data from the advertiser.
On some occasions, we have also received upfront "placement" fees from
advertising related to direct marketing and e-commerce promotion. These
arrangements give the customer the exclusive right to use our network to promote
goods or services within their category. These exclusive arrangements generally
last one year. We record placement fees as deferred revenues, and we recognize
the revenues ratably over the term of the agreement.
We also engage in barter transactions. Under these arrangements, we deliver
advertisements promoting a third party's goods and services in exchange for
their agreement to run advertisements promoting our Webmail service. The number
of advertisements that each party agrees to deliver, and hence the effective
CPM, may not be equal. We recognize barter revenues ratably as the third party's
advertisements are delivered to our members. We record cost of revenues ratably
as our advertisements are delivered by the third party. Although our revenues
and related costs of revenues will be equal at the conclusion of the barter
transaction, the amounts may not be equal in any particular quarter. We record
barter revenues and expenses at the fair market value of either the services we
provide or of those we receive, whichever is more readily determinable in the
circumstances. Barter revenues were 14% of revenues for the year ended December
31, 1998, approximately 10% of revenues in the fourth quarter of 1998 and
approximately 12% of revenues for the first quarter of 1999. On an annual basis,
32
<PAGE>
we anticipate that barter revenues will remain below 10%, although the actual
percentage may fluctuate in any given quarter.
In most of our contracts with our partners we provide the Webmail service at
no cost to the partner. In addition to assuming the costs to provide service, we
also pay out a percentage (generally up to 50%) of any advertising and
subscription revenues attributable to our Webmail service at the partner's site.
While most of our partners share in advertising and subscription revenues on a
quarterly basis during the contract term, some of our partners are compensated
or have the option to be compensated based on the number of member
registrations. These contracts call for us to pay an amount in cash and/or
shares of our Class A common stock for each member registration or confirmed
member registration at the partner's site. In addition, under some of our
contracts we pay our partners guaranteed minimum amounts and/or upfront or
scheduled payments, usually in the form of sponsorship or license fees. Because
we expect to retain at contract termination most of the members that establish
emailboxes, we account for both revenue sharing and per-member costs as customer
acquisition costs. We record these costs as sales and marketing expenses as we
incur them.
Because some of our contracts require us to issue shares of Class A common
stock on a contingent basis, we could experience substantial fluctuations in our
quarterly earnings. The amount of stock we are required to issue is usually
based upon the number of member registrations during the preceding quarter or
upon the achievement of performance targets. We record the non-cash expense as
of the date we issue the stock or as of the date the targets are achieved, at
the then fair market value of our stock. These expenses aggregated approximately
$3,017,000 and $2,358,000 for the year ended December 31, 1998 and for the three
months ended March 31, 1999, respectively. On April 30, 1999, we entered into an
agreement to settle in full a contingent obligation to issue shares of Class A
common stock to CNET, Snap and NBC Multimedia. Under this settlement, we will
issue upon the closing of this offering an aggregate of 2,368,907 shares of
Class A common stock to CNET and Snap and 210,000 shares of Class A common stock
to NBC Multimedia. As required by our contract with AltaVista, we expect to
issue additional shares of our Class A common stock during the second quarter of
1999. In addition, we have a contingent obligation to issue additional shares to
RemarQ during 1999. See "Risk Factors--Our contracts with our Web site partners
require us to incur substantial expenses" and "--We may fail to meet market
expectations because of fluctuations in our quarterly operating results, which
would cause our stock price to decline."
Under an agreement with CNN we issued shares of our Class A common stock
upon execution of the contract. We agreed to issue the shares in anticipation of
CNN's fulfillment of promotional obligations under the contract. We capitalized
as a partner advance the market value of the stock we issued and then amortize
that amount over the length of the contract. We recorded approximately $173,000
and $111,000 of amortization expense for this agreement in 1998 and for the
three months ended March 31, 1999, respectively. This amortization is included
in sales and marketing expenses.
Under our agreement with GeoCities entered into in September 1998, GeoCities
received 1,000,000 shares of Class A common stock upon the commencement of the
contract in consideration of the advertising, subscription and customer
acquisition opportunities. In addition to our obligation to share revenue
generated from the partnership with GeoCities, we were required to pay GeoCities
$1.5 million in three installments, the first of which was paid in December
1998. On May 1, 1999, GeoCities and Mail.com agreed to cancel and rescind the
contract and, as a result, we will not be providing email services to GeoCities.
Under this agreement, GeoCities will retain the non-refundable fee that we made
to it under the agreement and we will not be required to pay the remaining $1
million. In addition, GeoCities will return to us the 1,000,000 shares of Class
A common stock issued to them. We have also agreed to deliver advertisements
over our network on behalf of GeoCities for the sixteen month period commencing
May 1999. The total payments by GeoCities for this advertising will be $125,000
per month or $2,000,000 in the aggregate over the sixteen month period. In the
second quarter of 1999, we will reverse the issuance of shares and expense the
non-refundable fee previously paid to GeoCities.
33
<PAGE>
In 1998, we entered into a partner agreement with CNET which was amended
shortly thereafter to include Snap, a newly formed entity. Under the agreement,
we were obligated to issue warrants for a total of 1.5 million shares of our
Class A common stock upon achievement of a member registration target. The
warrants were divided between CNET and Snap and Snap subsequently assigned its
portion to NBC Multimedia. On November 6, 1998, our partners achieved their
target and became entitled to the warrants. The warrants have an exercise price
of the lower of $5.00 or the per share price in an initial public offering of
our stock. CNET and NBC Multimedia have exercised their warrants, and funds for
the payment of the exercise price have been deposited into escrow. Upon
consummation of this offering, funds sufficient to pay the exercise price will
be released to us, and we will issue the shares to CNET and NBC Multimedia.
Although we have experienced substantial growth in revenues in recent
periods, we have incurred substantial operating losses since our inception and
we expect to incur substantial operating losses for the foreseeable future. As
of December 31, 1998 and March 31, 1999, we had an accumulated deficit of
approximately $16.1 million and $22.5 million, respectively. We intend to invest
heavily in sales and marketing and continued development and enhancements to our
computer systems and service offerings. Our prospects should be considered in
light of risks, expenses and difficulties encountered by companies in the early
stages of development, particularly companies in the rapidly evolving Internet
market. See "Risk Factors."
We have recorded deferred compensation of approximately $1.0 million and
$0.9 million for the year ended December 31, 1998 and for the three months ended
March 31, 1999, respectively, in connection with the grant of stock options to
one of our officers. This deferral represents the difference between the deemed
value of our common stock for accounting purposes and the exercise price of the
options at the date of grant. This amount is represented as a reduction of
stockholders' equity and amortized over the three year vesting period of the
applicable options. Amortization of deferred stock compensation is charged to
sales and marketing expense on the statement of operations. Amortization of the
deferred compensation was approximately $71,000 and $91,000 for the year ended
December 31, 1998 and the three months ended March 31, 1999, respectively. We
will amortize the remaining deferred compensation of approximately $934,000 as
of March 31, 1999 over the remaining vesting period.
In light of the evolving nature of our business and our limited operating
history, we believe that period-to-period comparisons of our revenues and
operating results are not meaningful and should not be relied upon as
indications of future performance. We believe that advertising sales in
traditional media, such as television and radio, generally are lower in the
first calendar quarter. Our revenues are also affected by seasonal patterns in
advertising, which would become more noticeable if our revenue growth does not
continue at its recent rate. We do not believe that our historical growth rates
are indicative of future results.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
REVENUES
Revenues increased approximately $1.1 million, from approximately $80,000
for the three months ended March 31, 1998 to approximately $1.2 million for the
three months ended March 31, 1999. The increase was due primarily to our
commencing advertising sales in July 1998. These sales became possible because
of the growth in our number of emailboxes. Our members established approximately
0.5 million emailboxes from January 1, 1998 through March 31, 1998 and
approximately 1 million emailboxes during the three months ended March 31, 1999.
This brings us to a cumulative total of 5 million emailboxes. See "Risk
Factors--We have only limited information about our members and their usage,
which may reduce our potential revenues." Revenues for the three months ended
March 31, 1998 and 1999 included approximately $10,000 and $1.0 million of
advertising revenues, respectively. For the three months ended March 31, 1999,
approximately $376,000 was attributable to one customer,
34
<PAGE>
N2K/Music Boulevard, of which approximately $103,000 was barter revenue. Total
barter revenues for the three months ended March 31, 1999 approximate $143,000.
Our revenues from subscriptions increased $87,000, from approximately $41,000
for the three months ended March 31, 1998 to approximately $128,000 for the
three months ended March 31, 1999. Other revenue, primarily the sale of domain
names, increased $22,000, from approximately $29,000 for the three months ended
March 31, 1998 to approximately $51,000 for the three months ended March 31,
1999.
In the three months ended March 31, 1999, revenues from members acquired
through the Lycos and Alta Vista Web sites accounted for approximately 29% of
our revenue. Our agreement with Lycos expired on October 8, 1998, and our
agreement with Alta Vista expires in July 1999. As of February 1999, we no
longer register new members through the Lycos Web site. However, we retain the
members who have previously signed up at this site under our domain names. Upon
termination of the Alta Vista agreement, we will retain all the members
registered at that site. While these contracts either have or will soon expire,
we expect that we will continue to serve the majority of the affected members.
See "Risk Factors--Several of our most significant partner contracts have
expired or will soon terminate."
OPERATING EXPENSES
COST OF REVENUES
Cost of revenues increased $1.1 million, from approximately $352,000 for the
three months ended March 31, 1998 to approximately $1.5 million for the three
months ended March 31, 1999. Cost of revenues consists primarily of costs
incurred in the delivery and support of our email service, including
depreciation of equipment used in our computer systems, the cost of
telecommunications service, and personnel costs associated with our systems,
databases and graphics. Cost of revenues also includes costs associated with
licensing third party network software. In addition, we report the cost of
barter trades, amortization of domain assets, and the cost of domain names that
have been sold in cost of revenues. During the three months ended March 31,
1999, we purchased significant amounts of capital equipment for our computer
systems to accommodate the growth in the number of emailboxes. As a result,
depreciation expense increased significantly during this period. Also, we
substantially increased headcount in the above groups during this period. We
anticipate continuing to purchase significant amounts of hardware and software
and to continue to hire technical personnel.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased $3.3 million, from approximately
$273,000 for the three months ended March 31, 1998 to approximately $3.6 million
for the three months ended March 31, 1999. The increase was due primarily to the
expansion of our sales and marketing efforts and the establishment of partner
agreements with third party Web sites. The primary component of sales and
marketing expenses is customer acquisition costs. The costs related to customer
acquisitions paid in cash were approximately $407,000 for the three months ended
March 31, 1999 and approximately $123,000 for the three months ended March 31,
1998. The costs related to customer acquisitions through the issuance of Class A
common stock were approximately $2,247,000 for the three months ended March 31,
1999 and zero for the three months ended March 31, 1998. We also recorded
approximately $111,000 in amortization of partner advances for the three months
ended March 31, 1999 and zero for the three months ended March 31, 1998. The
remainder of the costs in this category relate to salaries and commissions for
sales, marketing, and business development personnel, as well as marketing
promotions and advertising. We continued to increased our sales and marketing
efforts through 1998 and for the three months ended March 31, 1999. We expect
sales and marketing expenses to increase as we continue to invest in sales and
marketing personnel, expand our partner network, and build our brand name.
35
<PAGE>
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased $1.1 million, from
approximately $275,000 for the three months ended March 31, 1998 to
approximately $1.4 million for the three months ended March 31, 1999. The
increase was primarily due to increases in the number of personnel to support
and grow our business, increasing customer service coverage to 24 hours per day,
7 days per week and increased facilities space. General and administrative
expenses consist primarily of compensation and other employee costs not included
in other line items, as well as overhead expenses, customer support and bad debt
expense. We expect these expenses to continue to grow as necessary to support
the growth of our business and to operate as a public company.
PRODUCT DEVELOPMENT
Product development costs increased $1.0 million, from approximately
$218,000 for the three months ended March 31, 1998 to approximately $1.2 million
for the three months ended March 31, 1999. The increase in expenses was due to
increased staffing, the costs of adding new features to our services, designing
new services and redesigning products. Product development expenses consists
primarily of salaries and consulting expenses. During the three months ended
March 31, 1999, a portion of consulting expenses was paid through the issuance
of 55,000 shares of our Class A common stock, the cost of which was expensed.
These expenses relate to the development of new services and the enhancement of
existing ones. To date, we have expensed all of our product development costs as
incurred. We need to continue to invest in product development to attain our
goals, and as a result we expect product development expenses to increase
significantly.
INTEREST INCOME (EXPENSE)
Interest income increased $108,000, from approximately $7,000 for the three
months ended March 31, 1998 to approximately $115,000 for the three months ended
March 31, 1999. The increase was due to higher cash balances as a result of
completing private placements of preferred stock in July and August of 1998 and
March of 1999. Interest expense increased $86,000, from approximately $13,000
for the three months ended March 31, 1998 to approximately $99,000 for the three
months ended March 31, 1999. The increase was due to interest recorded on our
capital lease obligations, as we continue to finance our computer equipment
purchases.
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Our financial statements as of December 31, 1994 and 1995 and for the period
from August 1, 1994 through December 31, 1995 reflect only immaterial
transactions. These activities have been included in the 1996 financial
statements to facilitate presentation.
REVENUES
Revenues increased $1.3 million, from approximately $173,000 in 1997 to
approximately $1.5 million in 1998. The increase was primarily due to
advertising sales which we initiated in July 1998. These sales became possible
because of the growth in our number of emailboxes. This represents an increase
of approximately 3 million emailboxes during 1998 to an aggregate of
approximately 4 million. See "Risk Factors--We have only limited information
about our members and their usage, which may reduce our potential revenues."
Revenues for 1998 included approximately $1.1 million of advertising revenue. Of
this revenue, approximately $461,000 was attributable to one customer, N2K/Music
Boulevard. This amount included barter revenues of approximately $162,000,
representing all of our barter revenues for the year. Our revenues from
subscriptions increased $225,000, from approximately $61,000 in 1997 to
approximately $285,000 in 1998. Other revenue, primarily the sale of domain
names, decreased $20,000, from approximately $112,000 in 1997 to approximately
$93,000 in 1998.
We launched our commercial email service in 1996 and had only $19,000 in
revenues in this period. These consisted of $2,000 from subscription services
and $17,000 from the sale of domain names.
36
<PAGE>
OPERATING EXPENSES
COST OF REVENUES
Cost of revenues increased $1.8 million, from approximately $1.1 million in
1997 to approximately $2.9 million in 1998. Depreciation expense increased
significantly during the second half of the year due to increased capital
expenditures. At the same time, we substantially increased headcount in the
relevant groups in the second half of the year.
Cost of revenues increased $912,000, from approximately $188,000 in 1996 to
approximately $1.1 million in 1997. The increase was due primarily to increased
depreciation expense, personnel costs and amortization of domain names.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased $5.8 million, from approximately
$930,000 in 1997 to approximately $6.7 million in 1998. We increased our sales
and marketing efforts in the latter part of 1997 and continued to increase these
efforts through 1998. The costs related to customer acquisitions paid in cash
increased $1.1 million, from approximately $631,000 in 1997 to approximately
$1.7 million in 1998. The costs related to customer acquisitions through the
issuance of Class A common stock were approximately $3.0 million in 1998. We did
not issue shares related to customer acquisitions before 1998. We also recorded
$173,000 in amortization of partner advances in 1998. There were no partner
advances before 1998.
In 1997, sales and marketing expenses increased $865,000, from approximately
$65,000 in 1996 when we started conducting business to approximately $930,000.
During 1997, we entered into several partner relationships and began incurring
customer acquisition costs.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased $2.6 million, from
approximately $862,000 in 1997 to approximately $3.5 million in 1998. The
increase was primarily due to increases in the number of personnel and personnel
related costs, increasing customer service coverage to 24 hours per day, 7 days
per week and expansion of facilities.
General and administrative expenses increased $640,000, from approximately
$222,000 in 1996 to approximately $862,000 in 1997 as our business started to
grow. The increase was due primarily to increases in personnel, recruiting and
consulting expenses.
PRODUCT DEVELOPMENT
These costs increased $1.3 million, from approximately $296,000 in 1997 to
approximately $1.6 million in 1998. The increase in expenses was due to
increased staffing, the costs of adding new features to our services, designing
new services and redesigning existing services.
Product development costs increased $202,000, from approximately $94,000 in
1996 to approximately $296,000 in 1997. This increase was also due to increased
staffing and consulting expenses and depreciation.
OTHER INCOME (EXPENSE)
Interest income increased $241,000, from approximately $36,000 in 1997 to
approximately $277,000 in 1998. The increase was due to higher cash balances
after we completed private placements of preferred stock in May and December of
1997 and January, July and August of 1998. In 1998, we
37
<PAGE>
realized a gain of approximately $438,000 when we sold shares of Lycos common
stock. We received the Lycos stock as consideration in March 1998 when Lycos
exercised an option to acquire preferred stock. We had granted Lycos the option
when we entered into a partner contract with them in October 1997. Interest
expense of approximately $109,000 in 1998 consists of interest recorded on our
capital lease obligations.
Interest income increased $29,000, from $7,000 in 1996 to $36,000 in 1997.
The increase was due primarily to higher cash balances after we completed
private placements of preferred stock in May and December of 1997. Interest
expense on capital leases increased $33,000, from $2,000 in 1996 to $35,000 in
1997, as we continued to finance our computer equipment purchases.
QUARTERLY RESULTS OF OPERATIONS DATA
The following table presents unaudited quarterly statements of operations
for each of the four quarters in 1998 and for the quarter ended March 31, 1999.
We have prepared this data on substantially the same basis as the audited
financial statements appearing elsewhere in this prospectus. We believe this
data includes all necessary adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation. You should read the quarterly
data together with the financial statements and the notes to those statements
appearing elsewhere in this prospectus. The results of operations for any
quarter are not necessarily indicative of the results of operations for any
future period. We expect that our quarterly revenues may fluctuate
significantly. See "Risk Factors--We may fail to meet market expectations
because of fluctuations in our quarterly operating results, which would cause
our stock price to decline." We believe that advertising sales in traditional
media, such as television and radio, generally are lower in the first calendar
quarter. Our revenues are also affected by seasonal patterns in advertising,
which will become more noticeable if our revenue growth does not continue at its
recent rate.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------
MARCH 31, 1998 JUNE 30, 1998 SEPTEMBER 30, 1998 DECEMBER 31, 1998 MARCH 31, 1999
-------------- ------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................. $ 80,413 $ 139,094 $ 272,636 $ 1,002,619 $ 1,185,939
Operating expenses:
Cost of revenues.......... 351,665 592,677 800,728 1,145,512 1,477,690
Sales and marketing....... 272,650 520,139 1,347,342 4,539,347 3,590,636
General and
administrative.......... 275,206 489,082 960,093 1,757,716 1,364,898
Product development....... 218,292 277,750 489,723 587,700 1,176,959
-------------- ------------- ------------------ ----------------- --------------
Total operating
expenses............ 1,117,813 1,879,648 3,597,886 8,030,275 7,610,183
-------------- ------------- ------------------ ----------------- --------------
Loss from operations...... (1,037,400) (1,740,554) (3,325,250) (7,027,656) (6,424,244)
Other income (expense):
Gain on sale of
investment.............. -- 438,000 -- -- --
Interest income........... 6,905 26,475 107,437 136,347 114,904
Interest expense.......... (13,368) (20,265) (29,199) (46,355) (98,723)
-------------- ------------- ------------------ ----------------- --------------
Total other income
(expense), net.......... (6,463) 444,210 78,238 89,992 16,181
-------------- ------------- ------------------ ----------------- --------------
Net loss.................. $ (1,043,863) $ (1,296,344) $ (3,247,012) $ (6,937,664) $ (6,408,063)
-------------- ------------- ------------------ ----------------- --------------
-------------- ------------- ------------------ ----------------- --------------
</TABLE>
38
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have obtained financing through private placements
of equity securities and through equipment leases. To date, we have raised
approximately $37.5 million through the sale of common and preferred stock,
including the most recent sale of Class E convertible preferred stock for $16
million in March 1999. This amount also includes $4.4 million received from the
sale of Lycos common stock that we received in exhange for the issuance of our
Class A preferred stock. Upon completion of this offering we will receive $7.5
million from CNET and NBC Multimedia in payment for the exercise of their
warrants to purchase Class A common stock. As of March 31, 1999, we had
approximately $20.1 million in cash and cash equivalents. We have had
significant negative cash flows from operating activities for each fiscal and
quarterly period to date. Net cash used in operating activities was
approximately $439,000 for 1996, approximately $1.8 million for 1997,
approximately $4.8 million for 1998 and approximately $676,000 and $1.8 million
for the three months ended March 31, 1998 and 1999, respectively. Cash used in
operating activities consisted mostly of net operating losses, decreased by
issuances of stock for member acquisitions, non-cash compensation and
depreciation and amortization.
Net cash used in investing activities was approximately $135,000, $489,000
and $3.9 million for the years ended December 31, 1996, 1997, and 1998,
respectively, and approximately $125,000 and $1.4 million for the three months
ended March 31, 1998 and 1999, respectively. Net cash used in investing
activities consisted primarily of purchases of computer equipment and domain
name assets. Net cash provided by investing activities resulted from the sale
leaseback of computer equipment. We expect that net cash used in investing
activities will increase as we acquire significant new hardware and software in
the future.
We have entered into various capital leases for computer equipment. These
capital lease obligations resulted in non-cash financing activities aggregating
approximately $211,000, $750,000 and $1.4 million in 1996, 1997, and 1998,
respectively, and approximately $146,000 and $1.5 million for the three months
ended March 31, 1998 and 1999, respectively. The capital leases are with various
institutions and have terms ranging from three to five years. The weighted
average interest rate under the leases was approximately 11.5% in 1998.
We have entered into various arrangements in connection with our domain name
assets. The obligations resulted in non-cash financing activities aggregating
approximately $227,000 and $169,000 in 1997 and 1998, respectively and
approximately $0 for the first quarter of 1999. These agreements have terms
ranging from two to seven years.
Our net cash provided by financing activities was approximately $700,000,
$3.0 million and $16.2 million during 1996, 1997 and 1998, respectively, and
$14.9 million for the first quarter of 1999. The principal component in 1996 was
the net proceeds from the issuance of Class A and B common stock to our
founders. The main component in 1997 was the proceeds from Class A preferred
stock. In 1998 the main components were the proceeds from Class A and C
preferred stock. In the first quarter of 1999, the main component was the
proceeds from the Class E preferred stock.
In April 1999, we purchased domain names which required cash payments of
$680,000. Of this amount, we paid $530,000 in May 1999 and we will pay the
remaining balance over the next 9 months. We also issued 130,000 shares of our
Class A common stock as consideration for these purchases.
We believe that the net proceeds from the offering, the recent private
placements and the exercise of the warrants held by CNET and NBC Multimedia,
together with our existing cash and cash equivalents, will be sufficient to meet
our working capital and capital expenditure requirements for at least the next
12 months. Our operating and investing activities may require us to obtain
additional equity or debt financing. In addition, we continue to evaluate
potential acquisitions of other businesses, products, and technologies on an
ongoing basis. In order to complete these potential acquisitions, we may need
39
<PAGE>
additional equity or debt financing in the future. Sales of additional equity
securities could result in additional dilution to our stockholders.
YEAR 2000 COMPLIANCE
Our business could suffer if the systems on which we are dependent to
conduct our operations are not Year 2000 compliant.
Our potential areas of exposure include:
- internal information technology, including computers and software;
- non-information technology, including telephone systems and other
equipment that we use internally; and
- external, third party systems, particularly the systems that comprise the
Internet and those products and services that allow our members to access
the Internet.
We have completed our initial assessment of current Year 2000 compliance for
both our information and non-information technology. Based on our initial
assessment, we believe all non-information technology, including security and
phone systems, upon which we are materially dependent, is Year 2000 compliant.
We expect to resolve any Year 2000 compliance issues relating to information
technology that we use internally primarily through normal upgrades or, when
necessary, through replacement of existing software with Year 2000 compliant
products. We do not expect the cost of these upgrades or replacements to be
material to our financial position or results of operations. If our production
and operational facilities that support our own Web sites are not Year 2000
compliant, portions of our services may become unavailable. Our review of our
systems has shown that there is no single component that would make our services
totally unavailable. We intend to complete the testing of our technologies,
replacement or correction of our non-compliant technologies and testing of any
replacement or corrected technologies by October 1, 1999.
We estimate that our total cost to become Year 2000 compliant will not
exceed $200,000. We have allocated this amount as follows:
- $100,000 for a testing system that is independent of our main production
system;
- $50,000 for unplanned hardware and software upgrades; and
- $50,000 for unplanned consulting and software development resources.
We have not incurred any capital costs for Year 2000 compliance to date. Our
work has focused on research and planning. As such, our $200,000 budget, which
has been allocated from existing funds, is still fully available. The Year 2000
budget constitutes less than 2% of our overall information technology budget.
Our Year 2000 efforts have not had a material impact on other information
technology projects. We do not expect the financial or resource requirements
necessary to achieve compliance to have a material impact on our financial
condition or results of operations. However, necessary upgrades and replacements
may not be completed on schedule or within estimated costs or may not
successfully address our Year 2000 compliance issues. We have not engaged any
third parties to verify the results of our assessments or our cost estimates.
We are unable to determine the extent to which the external, third-party
systems on which our business depends may be prone to Year 2000 risks. In the
event that the Internet or widespread access to the Internet is compromised
because of Year 2000 problems, our services may not be available to or
accessible by our members. See "Risk Factors--Our systems, and the systems of
others that we depend on, may not operate properly because of the Year 2000
problem." We are in the process of seeking verification from our key Web site
and ISP partners, manufacturers and suppliers that they have either achieved or
expect to achieve Year 2000 compliance. As of April 30, 1999, we have received
notification from over 90% of our manufacturers and suppliers and approximately
10% of our partners that
40
<PAGE>
they are either Year 2000 compliant or are taking necessary steps to become Year
2000 compliant. We expect to receive certifications from the remaining
manufacturers, suppliers and partners by June 30, 1999. To the extent that
vendors fail to provide certification that they are Year 2000 compliant by July
31, 1999, we will reevaluate our relationships. We have not engaged any
independent services to verify and validate representations made by key Web
sites and partners, manufacturers and suppliers. We plan to monitor progress of
these entities by requesting periodic updates as they prepare for Year 2000
compliance.
In the event that any of our partner sites are unable to operate due to Year
2000 difficulties, we could with our partner's consent offer most of the
affected members the ability to bypass the partner site and access their
emailbox through one of our own sites.
We do not currently have a contingency plan to deal with the worst-case
scenario that technologies on which we are dependent fail to operate. We intend
to develop a plan for this scenario by October 1, 1999. Our contingency plan
will outline our plans and procedures for dealing with unanticipated
difficulties resulting from the Year 2000 problem. Potential Year 2000 problems
will vary in significance, ranging from minor software bugs to network failure.
Our services would not be available under our worst case scenario, potentially
resulting in loss of revenues and a decrease in the number of new members.
Although we do not anticipate the occurence of this worst case scenario, our
contingency plan will include procedures to follow if it occurs.
If our present efforts to address the Year 2000 compliance issues are not
successful, or if partners, manufacturers, suppliers and other third parties do
not successfully address these issues, our business, operating results and
financial position could be materially and adversely affected.
RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accounts issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". SOP 98-1 provides guidance for
determining whether computer software is internal-use software and on accounting
for the proceeds of computer software originally developed or obtained for
internal use and then subsequently sold to the public. It also provides guidance
on capitalization of the costs incurred for computer software developed or
obtained for internal use. We adopted SOP 98-1 in 1999 and its effect is not
significant.
We adopted the provisions of Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" in 1998. SFAS No. 130 requires us to
report in our financial statements, in addition to our net income (loss),
comprehensive income (loss). Comprehensive income or loss includes all changes
in equity during a period from non-owner sources, including foreign currency
items, minimum pension liability adjustments and unrealized gains and losses on
investments in debt and equity securities. There were no differences between our
comprehensive loss and net loss as reported.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." SFAS No.
131 establishes standards for the way that public enterprises report information
about operating segments. It also establishes standards for related disclosures
about products and services, geographic area and major customers. We have
determined that we do not have any separately reportable segments.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts, and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. We do not expect this statement to affect us, as
we do not have any derivative instruments or hedging activities.
41
<PAGE>
BUSINESS
Mail.com is a global provider of email services. At the end of 1998, we were
the sixth largest provider of emailboxes in the world, according to numbers
compiled by ELECTRONIC MAIL & MESSAGING SYSTEMS for its quarterly emailbox
census. Our basic email services are free to our members. We generate revenues
primarily from advertising related sales, including direct marketing and
e-commerce promotion. We also generate revenue from subscription services, such
as premium email addresses and increased storage capacity, and from email
service outsourcing fees. In March 1999, we processed approximately 120 million
email messages and delivered approximately 190 million advertisements.
INDUSTRY BACKGROUND
Use of the Internet and Internet related applications is growing rapidly.
The International Data Corporation (IDC) projects that the number of Web users
will increase from 142 million worldwide at the end of 1998 to 502 million by
the end of 2003.
GROWTH OF EMAIL
Email is becoming an increasingly important means of communication, with
both the number of email users and usage levels per individual projected to
increase significantly. Email has the highest usage of any service on the
Internet. In an October 1998 Jupiter Communications/NFO Interactive survey,
approximately 93% of respondents reported using email regularly. According to
the Jupiter/ NFO survey, there are over three times as many online users who
regularly use email as there are viewing or creating a personal homepage,
visiting a sports, music or games related site, or participating in online chat.
At the end of 1998, there were approximately 325 million emailboxes worldwide,
an increase of 64% from a year before according to a study by ELECTRONIC MAIL &
MESSAGING SYSTEMS. Forrester Research projects that daily global Internet email
traffic will increase from 100 million messages per day in 1996 to 1.5 billion
messages per day in 2002.
We believe the growth in email usage reflects several advantages over
traditional methods of communication. An email is easier to send than printed
correspondence and typically arrives in minutes. Email is easily distributed and
forwarded to many recipients or distributed to mailing lists. The electronic
format of email offers electronic filing, searching and editing capabilities not
generally available for faxes, voicemail and other forms of communications.
Email also allows for computer file attachments, permitting the recipient to
open and use files if they have the appropriate application software. In
addition, email can be integrated with other applications such as automated
scheduling, document sharing, and messaging applications such as email-to-fax
and email-to-pager.
We believe that Webmail accounts are a rapidly growing category of
emailboxes. According to ELECTRONIC MAIL & MESSAGING SYSTEMS, the number of
Webmail accounts increased from 2.4 million at the end of 1996 to 82.7 million
at the end of 1998. Webmail allows users to access their email through any
computer or other device that has a Web browser and access to the Internet. The
feature email users request most is universal access to their email services,
according to a survey conducted by Jupiter Communications/NFO Interactive.
EMERGENCE OF THIRD PARTY EMAIL SERVICE PROVIDERS
The email industry is highly fragmented with large numbers of ISPs,
businesses and schools maintaining their own systems. We believe that as the
complexity and usage of email increases there will be an increasing desire on
the part of Web sites, ISPs, small businesses and educational institutions to
outsource their email to third parties. We believe our economies of scale,
flexible technology platform and email focus will enable us to offer these
market segments an attractive outsourcing alternative, both domestically and
internationally.
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<PAGE>
Prior to 1996, nearly all email services were provided directly by users'
employers, schools or ISPs. The emergence of Webmail has given third party
providers the ability to provide email services to any user with access to the
Web. This permits the development of large third-party email providers that
often have economy of scale advantages over traditional email providers,
including:
- the ability to spread costs of developing specialized email products and
services over large numbers of users;
- the ability to service many customer locations from one or more large
centralized data centers;
- sufficient global traffic to warrant 24 hour customer support and system
maintenance staff;
- volume purchasing of hardware, software, telecommunications and other
services;
- sufficient user base to attract general interest advertisers as well as
specialized advertisers seeking users in specific demographic targets; and
- sufficient user base to develop direct marketing and e-commerce
opportunities.
ADVERTISING, DIRECT MARKETING AND E-COMMERCE ON THE INTERNET
The Web is emerging as an attractive new medium for advertisers, offering
the ability to target advertising more effectively than many traditional media.
Jupiter Communications projects that the amount of advertising dollars spent on
the Internet is expected to increase from approximately $1.9 billion in 1998 to
$7.7 billion by 2002, a compound annual growth rate of 42%. By advertising on
the Web, advertisers have the ability to target their messages to specific
groups of consumers. The Web also allows advertisers to measure the number of
times that a particular advertisement has been viewed and the responses to the
advertisement.
We also believe that the Web improves advertisers' direct marketing efforts,
which have been traditionally conducted through direct mail and telemarketing.
The interactive nature of the Web gives advertisers the potential to establish
dialogues and one-to-one relationships with potential consumers. Advertisers can
then make highly targeted product offers to consumers at the point of sale over
the Web at lower costs.
We believe that the growth in Web users and usage and the increasing
potential for e-commerce will continue to create growth in Web advertising and
direct marketing. The Web is becoming a vehicle for e-commerce, since online
purchases of goods and services can be less expensive and more convenient than
traditional transactions. We believe that as the volume of e-commerce
transactions expands, retailers will offer a greater variety of products and
services over the Web. Forrester Research has estimated that online sales for
retail goods other than automobiles totaled $4.8 billion in 1998 and projects
that such sales will increase to $50.2 billion in 2002.
BUSINESS STRATEGY
As a global provider of email services, we seek to grow our member base and
increase usage of our services by expanding our partner network, developing the
Mail.com brand and adding additional features to our services. We believe this
will provide us with greater advertising and other revenue opportunities and
economies of scale. Our strategies include:
- BUILDING OUR MEMBER BASE. We intend to add new members by expanding our
partner network to include additional Web sites and ISPs. We plan to use a
portion of the proceeds of this offering to launch marketing, promotional
and communications programs in an attempt to increase our brand
recognition, and to attract new partners and members. We will also seek to
acquire businesses with established user bases to which we can offer our
service.
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<PAGE>
- INCREASING MEMBER USAGE. We believe that adding features to our service
will increase member usage and generate more page views and revenue
opportunities. For example, in 1999 we plan to introduce a spell checker
and integrated personal calendars with "to do" lists and event reminders.
We also plan to expand our portfolio of domain names from which members
can select their email addresses. We are designing our technology to be
the foundation for additional messaging services. Our long-term objective
is to become a member's communications portal on the Web by combining
email, fax, voicemail, calendars, address books and related tools into one
fully-integrated service.
- INCREASING OUR ADVERTISING RELATED REVENUE OPPORTUNITIES, INCLUDING DIRECT
MARKETING AND E-COMMERCE PROMOTION. As our number of active members
grows, we will seek to increase our advertising revenues by using the
demographic data we collect to offer advertisers access to larger and
increasingly segmented pools of members who fit their desired criteria. We
plan to offer advertisers a broader array of advertising formats and
tools. Examples include custom mailings to members who have requested
special advertiser offers and instant member polls regarding their planned
purchases, brand preferences, price sensitivity and other areas of
interest to our sponsors. We also intend to continue to develop additional
e-commerce relationships.
- EXPANDING SUBSCRIPTION, OUTSOURCING AND OTHER REVENUE OPPORTUNITIES. We
plan to offer additional premium services during 1999. MailPro, introduced
in March 1999, provides members with larger email storage and attachment
capacity and priority customer support. MailFax will permit faxing through
the Internet. We have designed our new subscription system to permit us to
add additional Internet messaging and related services on a regular basis.
In the fourth quarter of 1998, we started requiring fees from select Web
sites seeking our email services and intend to continue this practice in
the future where appropriate.
- ENTERING ADDITIONAL MARKET SEGMENTS. We also plan to offer outsourced
email services to small businesses, colleges and other organizations. In
addition, we plan to expand our international member base by adding
additional international partners and by providing new features such as
email language translation. We plan to add foreign language sites in
addition to the German, Italian, Spanish, French, Dutch and Japanese sites
we offer today. We will also continue to seek to acquire strategic
businesses and technology that will help us serve these markets.
OUR SERVICES
We offer our members traditional email services and Webmail services. The
majority of our members use our Webmail services. Webmail differs from
traditional email in several respects. Traditional email services are typically
provided by ISPs, employers and schools as part of a larger offering, usually
including Internet access. Traditional email users generally download their
email from their ISP or other source to their own computer. The user then reads
their email using a program provided by the ISP or a commercial program such as
Eudora, Microsoft Outlook or Netscape Messenger.
Our members sign up for our free Webmail services at one of our partners' or
our own Web sites. After a brief sign-up procedure, which includes providing
selected demographic data, a member selects an email address and establishes a
password. Our members are not required to install or set up any email software
on their computers. In order to access and read their email, our members can
visit the site at which they established service using any computer or other
device with Web access and a Web browser, such as Microsoft Internet Explorer or
Netscape Navigator. In addition, members store their email, address books,
folders and other data on our computers, rather than on the individual computer
they used for a particular visit. With our basic service, members perform all
their email tasks while on line and connected to the Web.
We have recently begun to offer a service which gives members access to
their existing ISP email accounts from any computer or other device with a Web
browser and access to the Internet. Customers of ISPs that offer our service can
access their ISP email by going to their ISP's Web site and signing in using
their existing ISP email address and password.
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<PAGE>
We have developed a broad array of services to provide Internet messaging
capabilities. All of our services share a common foundation of technology,
features and applications. The primary services are described below.
<TABLE>
<CAPTION>
BASIC FREE SERVICES
<S> <C>
Universal access Universal access to all email sending and receiving
capabilities, including reply, forward, attachments, address
book, and storage folders, from any computer or other device
with a Web browser and access to the Internet. This permits
members to read and send email when they are away from home,
school or work. Universal access also allows for permanent
email addresses. Our members keep their email addresses even
if they change ISPs, leave school or switch jobs.
Email forwarding Set an account to forward email to any emailbox anywhere in
the world.
External mail collection Consolidate mail from up to five emailboxes into one Webmail
account. This feature permits a user with multiple
emailboxes to manage their email without having to check all
their emailboxes on a regular basis. Mail collection will
not work with any third party account that is protected by a
"firewall" or similar software that prevents us from
accessing the account. Many ISPs, schools and businesses use
software of this nature.
Multiple accounts Create separate email accounts for different family members
or colleagues even if they have only one Internet account.
Storage capacity Includes up to four megabytes of storage on our system.
Privacy Messages are stored centrally on Mail.com's system and are
accessed only after a password is verified. With traditional
email, messages are downloaded onto a user's computer, where
they could potentially be viewed by others who have access
to the computer.
Spam blocking Using proprietary software, we attempt to block unsolicited
bulk email (spam) from members' accounts.
PREMIUM PAY SERVICES
MailPro Increased storage capacity above the current limit of four
megabytes of data. Increased ability to send and receive
larger file attachments above the current limit of 500
kilobytes of data. Priority customer service.
Premium address Members can select a personalized email address from a list
of unique domain names owned either by us or by one of our
partners. Such popular email addresses include
@bruinsfan.com and @startrek.com.
Post Office Protocol The ability to download email to a computer, including a
("POP3") access laptop or other portable device. The member can then read
their email while offline, such as when traveling or
commuting, using an email program such as Microsoft Outlook,
Eudora or Netscape Messenger. This also permits members to
save telephone and ISP charges.
</TABLE>
45
<PAGE>
<TABLE>
<S> <C>
OTHER SERVICES SCHEDULED TO LAUNCH IN 1999
Web-based calendar Universal access to manage calendar, address book and
(free service) electronic reminders of appointments, birthdays and
anniversaries.
MailFax (pay service) Send faxes through one universally accessible Web site.
</TABLE>
PORTFOLIO OF DOMAIN NAMES
We have a portfolio of approximately 1,200 domain names in a variety of
categories including professions, business, entertainment, places and sports. We
offer a portion of these domain names to our members as choices for email
addresses. Some domain names are offered for free to members and some are
offered on a subscription basis. On certain sites, members are offered one free
choice and on other sites members are offered multiple free and pay domain
names, up to a maximum of 300 domain names at a site. Often the free default
domain name offered on a partner's site is owned by the partner, along with a
few other domain names, and the rest are controlled by us. We do not offer the
same selection of domain names at all of our sites. We either own the domain
names in our portfolio or have the right to use them to offer email services. We
pay a royalty to the sellers or owners of approximately 10 domain names. Also,
we are required to pay to a third party 30% of the proceeds from the sale of any
of approximately 150 domain names.
We may also offer our domain names in the future as personalized addresses
for member homepages. Many of these domain names also present potential business
opportunities as independent Web sites. For example, we have licensed the domain
names London.com, Britain.com and England.com as Web site addresses for Web
sites being developed by the London Tourist Board. We have also entered into an
agreement with Southam, Inc., the parent of THE DAILY TELEGRAPH, a large English
daily newspaper, to offer email services to their newspaper readers using the
domain name London.com. We intend to acquire more domain names to appeal to
additional segments of users.
Below is a sample of our domain names by category.
<TABLE>
<S> <C> <C> <C>
- --------------------- --------------------- --------------------- ---------------------
MAIL PLACES PROFESSION SPORTS / AFFINITY
Mail.com USA.com Doctor.com SPORTS
Email.com Asia.com Lawyer.com Fan.com
Webmail.com Europe.com Engineer.com Footballmail.com
Post.com India.com Accountant.com Hockeymail.com
Faxmail.com London.com Consultant.com MUSIC
Schoolmail.com Rome.com Teacher.com Bluesfan.com
Workmail.com Madrid.com Journalist.com Jazzfan.com
</TABLE>
DISTRIBUTION NETWORK
We have built our member base by signing up members in partnership with
third party Web sites and ISPs as well as by signing up members directly through
our own Web sites. We generally share a portion of our revenues with our
partners in exchange for their making our service available to their users.
WEBMAIL FOR OUR WEB SITE PARTNERS
One of our core strategies since inception has been to offer our email
service in partnership with third party Web sites. These partner sites attract a
large number of visitors and provide a cost-effective way for us to rapidly add
new members to our service. We believe that when we launched our email service
for InfoSpace in 1996, we became the first party to outsource email for a Web
site. Since then we have built our partner network and currently offer our email
service at 43 Web sites in diverse categories such as technology, media, sports,
entertainment and business.
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<PAGE>
We enable partners to offer Webmail without having to incur the expense of
developing and maintaining the necessary technology and infrastructure. We
provide the technology development, manage the hardware infrastructure, and
provide users with customer support. Since our technology allows for flexibility
in the design of Web pages, we can allow our partners to customize the look and
feel of the user interface to provide a better integration between the partner's
Web site and our email service.
By offering our Webmail service to their visitors, Web site partners seek to
increase the traffic at their site because they expect that visitors will return
to the site to check their email. By attaching customized tag lines to outgoing
emails that identify the partner's Web site, we believe our service can enhance
a partner's branding efforts. We believe that our selection of personalized
domain names can also help increase user loyalty if users choose an email
address that relates to the Web site's content. In addition, the demographic
data that we request at sign up can help a partner learn about its user base and
give the partner access to information that might otherwise be difficult to
obtain.
WEBMAIL FOR ISPS
During the second half of 1998, we used our expertise in outsourcing email
for Web sites to develop a proprietary Webmail service for the ISP marketplace.
In February 1999, we launched our service with Prodigy and have entered into
contracts with GTE and Cable & Wireless. Additionally, we entered into an
agreement with RemarQ, an outsourcer of newsreader services to approximately 900
ISPs. RemarQ will seek to distribute our Webmail service to their ISP customers
in return for a share of the revenue generated.
According to ELECTRONIC MAIL & MESSAGING SYSTEMS, there were approximately
42 million emailboxes provided by ISPs worldwide at the end of 1998. We believe
that our Webmail service significantly enhances ISP email services by providing
their email users with universal email access.
ISP partners can offer their users Webmail without the cost of developing or
maintaining technology, infrastructure or customer support. As with our Web site
partners, ISPs seek to increase user loyalty and to generate additional
revenues. Additionally, ISPs may benefit from lower network costs. With Web
access to their ISP email accounts, users can more easily access their ISP email
during the workday. This may help ISPs lower network costs by shifting some user
demand away from peak evening times, when users are at home, resulting in a more
even distribution of usage throughout the day.
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The following are our Web site and ISP partners and the Web site addresses
at which members can access our services.
<TABLE>
<CAPTION>
PARTNER ADDRESS DESCRIPTION
- ----------------------------- ----------------------------- -----------------------------
BUSINESS
<S> <C> <C>
CNN www.cnn.com World news
Lexis-Nexis www.lexis.com/xchange Legal content
Martindale-Hubbell www.martindale.com Legal content
SmartResume www.smartresume.net Career services
Standard & Poor's www.personalwealth.com Financial information
TECHNOLOGY PUBLISHERS
CMP Media www.techweb.com Technology
CNET www.cnet.com, www.news.com, Technology content and
www.download.com services
IDG www.idg.net International technology
content
MEDIA
Barbour/Langley www.cops.com COPS television show
Cox Interactive Media to be launched Regional content
NBC to be launched National and affiliate T.V.
Paramount Entertainment www.startrek.com Online home of StarTrek
Rolling Stone, Tunes.com email.rollingstone.com Music industry content
Time Warner www.pathfinder.com, General interest
www.time.com, www.money.com
E-COMMERCE
Alloy Online www.alloyonline.com Teen shopping catalog
Call Sciences www.istc.org International student travel
Club VDO www.vdo.net/clubvdo Streaming video
INTERNATIONAL
Lycos/Bertelsmann www.lycos.co.uk, British, Dutch, French,
www.lycos.nl, German, Italian and
www.lycos.fr, www.lycos.de, Spanish portal sites
www.lycos.it, www.es.lycos.de
G.R. Home Net to be launched Japanese portal
Futebol www.futeboltotal.com Brazilian soccer
Basis Technologies www.nichibei.net Japanese Webmail
Southam/Hollinger Digital www.canada.com Canadian portal
Southam/Daily Telegraph www.ukmax.com British newspaper
Associated New Media to be launched British portal
INTERNET
AltaVista www.altavista.com Portal
InfoSpace.com www.infospace.com Directory services
RemarQ www.remarq.com Newsgroup service
Snap www.snap.com Portal
INTERNET SERVICE PROVIDERS
GTE www.gte.net (Webmail in Internet service provider
service; ISP service to be
launched)
Prodigy www.prodigy.com Internet service provider
Cable & Wireless to be launched Internet service provider
SPORTS
CBS SportsLine www.sportsline.com Sports content
CNN/SI www.cnnsi.com Sports content
Denver Broncos www.denverbroncos.com Team site
FANSonly.com www.fansonly.com, College sports content
www.calbears.com,
www.goducks.com
NHL www.nhl.com Professional hockey
Philadelphia Eagles www.eaglesnet.com Team site
</TABLE>
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PARTNER ECONOMICS
While each Web site and ISP partner contract is different, contracts
typically run one to two years in length. In addition to assuming all costs
associated with providing the email service, we also pay out a percentage
(generally up to 50%) of any advertising and subscription revenues attributable
to our Webmail service at the partner's site. Under some of our revenue-sharing
arrangements, our partners are entitled to receive guaranteed minimum amounts,
most often based upon the number of member registrations processed during the
applicable pay period. In addition, several contracts with specific promotional
commitments from our partners require us to pay upfront or scheduled fees. More
recently we have entered into contracts where we collect a fee for providing our
service. We currently have three such contracts.
We generally manage and sell the advertising on the Web sites. Under some of
our contracts, our partners assume responsibility for managing advertising sales
and pay us a percentage of the advertising revenues. A number of our partners do
not permit us to place advertisements in our email service at their site unless
we also place those advertisements throughout our network, which prevents us
from specifically targeting members who use those particular sites.
Members are generally given a choice of domain names when registering for
our service at a partner site. Typically, the free default domain name offered
on a partner's site is owned by the partner and the other selections are owned
by us. As of March 31, 1999, we estimate that approximately 23% of our total
member base, including members that have signed up at our own Web sites, have
email addresses at partner-owned domains.
Upon expiration, a small number of contracts obligate us to relinquish
existing members with addresses at partner-owned domains, but most require us to
continue providing service to those members until the partner elects to
designate an alternative provider or provide service itself. By contrast, we
generally retain the member accounts with addresses at domains owned by us.
Thus, we can continue our efforts to generate revenues from these retained
accounts even if our partners choose not to extend or renew their contracts with
us. After their contract ends, many of our partners will have the option to
maintain a way for members who registered for our service to continue signing in
at their site. See "Risk Factors--Our contracts with our Web site partners
require us to incur substantial expenses;--Our partner contracts have only
limited terms, and the failure to renew a contract can be very costly for us;
and--Several of our most significant partner contracts have expired or will soon
terminate."
MAIL.COM BRANDED EMAIL
In addition to offering Webmail services through our partners, members can
sign up directly at our own Web sites. Since November 1996, members have
accessed www.iName.com to sign up for service. iName is short for "Internet
Name" and was the name of our company until January 1999, when we changed our
name to Mail.com, Inc. Beginning in May 1999, members will sign up for service
at www.Mail.com. In addition, we offer email service through other Web sites
owned by us, including www.USA.com.
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REVENUES
We seek to generate revenues from advertising related sales, subscription
services and other revenue sources. Other sources include revenue from the sale
of domain names and revenue from email service outsourcing fees. The following
table presents our revenues across these categories.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
--------- ---------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Advertising related $ -- $ -- $ 1,117,000 $ 10,000 $ 1,007,000
Subscription services 2,000 61,000 285,000 41,000 128,000
Other 17,000 112,000 93,000 29,000 51,000
--------- ---------- ------------- --------- ------------
Total Revenues $ 19,000 $ 173,000 $ 1,495,000 $ 80,000 $ 1,186,000
--------- ---------- ------------- --------- ------------
--------- ---------- ------------- --------- ------------
</TABLE>
ADVERTISING RELATED SALES
Most of our revenues are generated from advertising related sales. We can
deliver advertisements to our members when they access our email service to read
and write messages and perform other email functions. Every page viewed during
an email session has the capability to carry one or more advertisements. These
may be in the form of a banner, typically across the top of each page, or
smaller rectangular buttons and portals, typically located in the left margin of
the Web pages. We currently do not deliver Web-based advertisements to our email
forwarding and POP3 service members. We sell to advertisers, direct marketers
and their agencies through our own sales force. Advertisers pay us based upon a
variety of delivery measurements. They pay us either a fixed payment amount for
every 1,000 advertisements that we deliver to our members, or an amount for each
time one of our members clicks on their advertisement or responds to their
offers. We believe that our Webmail service has several benefits as an
advertising vehicle including:
- LOW COST CONTENT THAT IS MEANINGFUL TO OUR MEMBERS--The content of our Web
pages consists primarily of emails written by our members or their
friends, family and colleagues. Therefore, unlike online publishers, we do
not incur the cost of hiring writers or paying for content that is typical
of online publishers. Because most of our content is written specifically
for our members by their friends, family and colleagues, it is important
to them and it is likely that they will read it.
- DEMOGRAPHIC COLLECTION CAPABILITY--When members sign up for email accounts
we request, but do not verify, demographic data such as:
<TABLE>
<S> <C> <C> <C>
Zip code or postal code Date of birth Income range
Gender Occupation Street address
</TABLE>
- EFFECTIVE TARGETING--Since members must log in and thus identify
themselves in order to use the service, we can direct advertising to
individual members on every page they view after signing in. This enables
us to target advertising to individual members based on the demographic
data we have collected. As our member base grows, we can more finely
target using more demographic variables and still have target groups that
are large enough to be valuable to our advertisers.
- NETWORK SALES--Since our advertising opportunities are generated by
members across many partner Web sites as well as our own Web sites, we can
sell this space as an advertising network. Our advertising network
includes several recognizable brand name sites that advertisers recognize
and trust. Our advertisers can purchase targeted advertising directed to
members across our advertising network by making a single purchase of
advertising space from Mail.com.
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We can also deliver advertisements to our members through our BARGAIN HUNTER
direct marketing program. Under this program, members can identify categories of
products and services of interest to them and request that notices be sent to
their emailbox about special opportunities, information and offers from
companies in those categories. Current categories include:
<TABLE>
<S> <C> <C> <C> <C> <C>
technology software sports finance family/kids
hardware entertainment shopping auto home
</TABLE>
We send messages and special offers on behalf of our advertisers, who pay
for one-time access to the list. Our mailing list is an "opt-in" list in that
members must affirmatively check a box to indicate interest. We believe email
"opt-in" lists generally command higher advertising rates than "opt-out" lists.
Revenues from opt-in lists are a small but growing part of our overall revenues.
We also generate advertising related revenues by facilitating transactions
for third party e-commerce sites. Examples include the promotion of CD sales for
N2K/Music Boulevard, the promotion of video tape sales for BigStar, and the
promotion of credit cards for First USA. Our e-commerce partners have paid
upfront fees to secure exclusive promotional rights within their product
categories on the Mail.com network. They also may pay acquisition fees on a per
customer basis or commissions on the sale of products or services. The
agreements we have entered into so far typically run from six months to three
years in length.
We believe that over time we may choose to sell products other than email
services directly to our members. We believe that e-commerce is a natural
supplement to our service. Through March 1999, approximately 40,000 members have
provided us credit card information for subscription services. We expect this
number to grow as we offer more subscription services to a larger membership
base. Once we have collected a member's credit card information and billing
address, subsequent purchases should be greatly simplified. A portion of the
proceeds from this offering may be used to expand our staff to manage in-house
and third party e-commerce opportunities.
Since July 1, 1998, approximately 100 companies have advertised on our
network. Selected advertisers included:
<TABLE>
<S> <C> <C> <C> <C> <C>
BonusMail GMER H&R Block MiningCo.com N2K/Music Boulevard
CMP Media GoTo.com Infobeat MSN.com Spree.com
First USA GTE iVillage Netscape Uproar
</TABLE>
SUBSCRIPTION SERVICES
While the majority of our members sign up for free service, we also generate
revenues from upgraded email services. Until March 10, 1999, we charged $14.95,
$23.95, $36.95 and $49.95 for one-year, two-year, five-year and lifetime
subscriptions to our premium names, and we charged $23.95, $37.95, $59.95, and
$79.95 for one-year, two-year, five-year and lifetime subscriptions to our POP3
service. Commencing March 10, 1999, we changed our rates to $2.95 per month or
$29.95 for a one-year subscription to our premium names and $3.95 per month or
$39.95 for a one-year subscription to our POP3 service. We started offering
MailPro on March 10, 1999. We charge $2.95 per month or $29.95 for a one-year
subscription to our MailPro service.
Historically, we offered members a free one month trial for premium
services, without collecting credit card information in advance. At the end of
the trial period, we had great difficulty collecting the necessary billing
information, and as a result a substantial majority of premium members did not
pay for their services. In addition, for those members who did provide credit
card information, we experienced a high fraud rate because of limitations in our
billing technology. We are currently installing the
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Portal billing system and have begun requiring credit card information at the
time a member signs up for a subscription service. We believe our new billing
system will improve our tracking, reporting, and fraud identification abilities,
as well as allow us to terminate unpaid premium member services. See "Risk
Factors--We must improve our billing, management information and other systems."
OTHER REVENUE SOURCES
To date, our other revenue sources have represented a small portion of total
revenues. We have generated other revenue primarily from the sale of domain
names.
We are also positioning Mail.com to take advantage of email service
outsourcing revenue opportunities. We believe that organizations, particularly
small businesses and schools, will increasingly seek to outsource their email
requirements. We believe that we will have the scale to provide these
organizations with better service at a lower cost than they could provide
themselves. We do, however, expect that it will be more difficult to enter into
outsourcing agreements with schools and small businesses than it has been with
Web sites. This is because schools and small businesses may already have
established internal networks on which they are dependent and may have higher
security concerns.
MARKETING
We market to members, partners and advertisers. Our primary marketing
objectives are:
- to drive new signups
- promote higher usage
- build our brand
- recruit new partners
- support advertising sales
We have marketed to potential and existing members primarily through our
partner Web sites. At our partner Web sites we use a combination of buttons,
links, sign-up portals and banners to promote our email service. We intend to
use welcome emails and regular communications with our members to promote new
features, special offers and contests and provide a mechanism for customer
feedback.
An important brand-building vehicle, "Powered by Mail.com", is displayed on
the Webmail interface across all our partner Web sites. We also intend to use
Web-based and traditional advertising to build the Mail.com brand and to acquire
new members.
We use business-to-business print and online advertising to help attract new
Web site and ISP partners and retain existing relationships. We also plan to
direct market to ISPs, small businesses and educational institutions using both
online and traditional methods of direct marketing, such as telemarketing and
mailings, to support our sales efforts.
We engage in trade advertising and participate in trade shows to attract new
advertisers. In addition, we use targeted sales materials and direct marketing
efforts to promote our network to potential advertisers.
CUSTOMER SUPPORT
Our members are very valuable to us and to our partners. Our goal is to
provide quality customer support through our online support areas on our Web
site and through a dedicated customer support team. During March 1999, the
average response time for all non-billing inquiries was less than two
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<PAGE>
hours. We believe this positions us as a leader in Internet customer support.
Only approximately 7% of Web sites surveyed in a February 1999 Jupiter
Communications report were able to respond to customer queries within 24 hours
with a personalized, signed message.
ONLINE SUPPORT
We have created and frequently update an online searchable knowledge base
with over 400 Web pages that allows members to find the answers to many of their
questions about our services. Members can find answers by viewing our frequently
asked questions or through the use of our full text search function. We have
also developed a facility to enable members to help themselves with requests for
forgotten passwords. We believe that approximately 80% of our members who seek
our help are able to find answers using our online support area and without
having to contact our customer service department.
CUSTOMER SUPPORT TEAM
Our customer service department is available by email or telephone 24 hours
a day, seven days a week and is staffed by experienced technical support
engineers and customer service representatives. We do not currently offer a toll
free number for customer support. Both phone and email interactions with
customers are randomly monitored to ensure consistent quality and accuracy. The
majority of customers who contact our customer service department use the
customer service request form on our Web site or send us an email. When members
submit a request electronically, they receive a confirmation email with a
tracking number. Our customized email-tracking system allows us to access a full
history of each customer service request, prioritize issues based on customer
status, classify issues based on the topic and route issues to customer service
representatives depending upon the particular type of issue.
TECHNOLOGY
Our Webmail technology has evolved rapidly since we commenced commercial
operations. Our hardware network has grown from one computer at the end of June
1996 to approximately 250 computers at the end of March 1999. These computers
run an extensive library of proprietary software we have developed to provide
member and partner services. Currently, we are focused on building an integrated
hardware and software network that is reliable and can be expanded to support
tens of millions of members. We cannot be sure that our technology will operate
adequately at these levels.
HARDWARE NETWORK
Our hardware network is designed to provide high availability and
performance and to accommodate rapid growth of our member base. The six primary
elements of our hardware infrastructure are:
- Mail transfer machines: Redundant banks of computers receive, transfer and
send email on behalf of our members.
- Web page servers: Redundant banks of computers generate customized Webmail
pages for each member and partner.
- Database machines: Member account data is stored in disk storage arrays.
The data is managed using database software.
- Email storage: Members' email messages are stored separately from their
account data in disk storage arrays.
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<PAGE>
- Bill presentment servers: Redundant computers run the secure on-line
billing system.
- Data network: Our computer network uses high speed routers and switches
and is connected to the Internet through high capacity links from BBN
Planet, MFS and UUNET.
For our core infrastructure, we use industrial grade hardware from leading
manufacturers. Generally, our hardware infrastructure is built using redundant
components. However, some components, including the database and email storage
machines, are not redundant. A failure of any of these components could disrupt
our service until a replacement component is received and installed. We have
experienced service outages resulting from failures in these systems. We plan to
install additional computer hardware to reduce the impact of any future computer
system failures. Our member account data is saved to tape and stored off site on
a daily basis. Our member emails are stored on redundant hard drives within our
email storage machines in case a hard drive should fail. However, we cannot be
sure that we will be able to restore member data in the event of a hardware
failure or that a restoration can be completed on a timely basis. See "Risk
Factors--Our computer systems may fail and interrupt our service."
SOFTWARE
No commercial software is available to adequately meet the demands of our
large member base and diverse partner network. As a result, we have developed a
substantial amount of software internally and will attempt to develop additional
software. Where available, we use software from off-the-shelf software suppliers
such as Oracle. Examples of our software related developments include:
- Webmail technology which offers improved response times to members and
gives us the ability to deploy new features in less time.
- A customizable Webmail interface that integrates with the technology and
branding of our partners' Web sites. This allows members a more seamless
experience in signing in and navigating.
- A design for secure email. We have applied for a related patent.
DATA CENTER
Our computers are located in Telehouse International's commercial data
center housed in the building adjacent to our headquarters in lower Manhattan.
Telehouse provides 24-hour security, fire protection, computer-grade air
handling and backup power sources. We intend to establish a second data center
outside of New York City. When completed, this data center will provide
additional capacity and will serve as a backup site in the event of an emergency
at our primary data center.
OPERATIONS
Our operations group monitors our sites 24 hours a day, seven days a week.
Systems operators use automated monitoring tools to continuously test site
performance and repeatedly perform manual checks of major functions.
UNSOLICITED BULK EMAIL (SPAM)
Unsolicited bulk email, or spam as it is often called, is a significant
problem for any provider of email services. To address this chronic problem, we
have developed proprietary software and have implemented internal procedures for
detecting and terminating accounts engaged in this activity. We have full time
staff dedicated to the detection and reduction of spam.
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SECURITY
While no computer system is impenetrable, our system is designed to guard
against intruders who might seek to either damage or slow our service, or gain
access to our users' accounts or information. We have also implemented automated
monitors that are designed to provide an early warning if attempts are made to
breach our systems.
COMPETITION
We compete for members, partners and advertisers.
Members typically receive an emailbox from their employer, school or an ISP
such as AOL, @Home or Microsoft's MSN network. In addition, they can subscribe
to email services at most of the major Web sites. The leading sites offering
email services include Microsoft's MSN network, which claims to have 40 million
Web-based emailboxes at its Hotmail site, Yahoo!, Excite, Disney's GO Network,
which includes InfoSeek, and the Lycos Network. Alternatively, members can sign
up for email services through Web sites that have partnered with our outsourcing
competitors. For example, Netscape offers email at its Web site outsourced from
USA.net. Microsoft and Netscape have modified their browsers to promote their
email offerings to users, and Compaq and other major PC manufacturers now
include keyboard buttons linking users directly to their email offerings. Users
that do not have Internet access can also receive free email services from Juno
Online Services. Our success in attracting members over these competitors is
highly dependent on our partners' level of visitor traffic and their commitment
to promoting our email service.
We compete for Web site and ISP partners with USA.net, Bigfoot, CommTouch,
Critical Path and Lycos' WhoWhere subsidiary. In offering outsourcing services
to business customers, schools and other organizations, we expect to compete
with AT&T Mail, MCI Mail and Fabrik and major ISPs such as Netcom. In addition,
companies such as Software.com, Microsoft, Netscape, Lotus, Oracle and Sun
Microsystems are currently offering email software products that would permit
potential partners to provide their own email services, as opposed to through an
outsourcer. Success in attracting new partners and outsourcing customers is
dependent on scale, ability to rapidly deploy services, partner portfolio, and
pricing structure. Some potential partners and outsourcing customers may elect
not to outsource for other strategic reasons such as a need for direct control
over the user experience or a desire to integrate their email service with other
service offerings.
We compete for Internet advertising revenues with large Web publishers and
Web portals, such as America Online, Excite, Lycos, Yahoo!, Disney's GO Network
and Microsoft. Further, we compete with a variety of Internet advertising
networks, including DoubleClick and 24/7 Media. We also encounter competition
from a number of other sources, including advertising agencies and other
companies that facilitate Internet advertising. We also compete with traditional
advertising media, such as print, radio, television and outdoor advertising for
a share of advertisers' total advertising budgets.
The level of competition is likely to increase as current competitors
increase the sophistication of their offerings and as new participants enter the
market. In the future, as we expand our service offerings, we expect to
encounter increased competition in the development and delivery of these
services. Many of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we do. Some of our
competitors have the ability to bundle a variety of Web-based services such as
Internet access, browser software, homepage design, hosting and calendars in
addition to email services. The ability of these competitors to offer a suite of
services may give them an advantage over us. Smaller companies may enter into
strategic or commercial relationships with larger, more established and well
financed companies. For example, Hotmail was acquired by Microsoft, and WhoWhere
was recently acquired by Lycos. Further, some of our competitors may offer
services similar
55
<PAGE>
to ours at a lower price or for free. In addition, new technologies and the
expansion of existing technologies may increase competitive pressures on us. We
cannot be sure that we will be able to compete successfully against our current
or future competitors or that competition will not have a material adverse
effect on our business, results of operations and financial condition. See "Risk
Factors--Several of our competitors have substantially greater resources, longer
operating histories, larger customer bases and broader product offerings."
INTELLECTUAL PROPERTY
Our intellectual property is among our most valued assets. We protect our
intellectual property, technology and trade secrets primarily through
copyrights, trademarks, trade secret laws, restrictions on disclosure and other
methods. Parties with whom we discuss, or to whom we show, proprietary aspects
of our technology, including employees and consultants, are required to sign
confidentiality and non-disclosure agreements. If we fail to protect our
intellectual property effectively, our business, operating results and financial
condition may suffer. In addition, litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of the proprietary rights of others.
We have developed our own proprietary technology to offer our email services
and to allow us to deliver specific advertisements targeted to members based
upon demographic data that we have collected. We restrict access to and
distribution of our technology. We do not presently license our technology to
third parties.
Notwithstanding these protections, there is a risk that a third party could
copy or otherwise obtain and use our technology or trade secrets without
authorization. In addition, others may independently develop substantially
equivalent technology. The precautions we take may not prevent misappropriation
or infringement of our technology.
We jointly own our network member database with our respective partners.
This database includes contact and demographic information submitted by our
members when they sign up for email service. Any third parties receiving member
contact and demographic information are required to sign confidentiality,
non-disclosure and use restriction agreements, committing them to adhere to our
privacy policy and prohibiting them from using the contact and demographic
information in any way except as we expressly specify. In the absence of these
agreements, current law provides inadequate protection. As a result, we will
have difficulty protecting our rights if any of the information contained in our
member database is pirated or obtained by an unauthorized party.
In July 1998, we submitted a provisional application to the U.S. Patent and
Trademark Office for a secure email system. We conduct an ongoing review of all
of our proprietary technology to determine whether other aspects of our
technology should be patented. We have a registered trademark for iName, our
predecessor company name. In January 1999, we filed a trademark application with
the U.S. Patent and Trademark Office for Mail.com.
We own or have the rights to approximately 1,200 Internet domain names,
approximately 600 of which we currently use to provide email addresses to our
members. All of our domain names are registered with Network Solutions, Inc.
under a registration agreement which is renewed annually for a fee of $35.00 per
domain name. We try to review all domain names to ensure that they are not
subject to claims of ownership and other legal challenges by holders of any
trademarks. Our rights to our domain names have been challenged by third parties
in the past and we expect they will be challenged in the future. We will seek to
protect by all appropriate means our rights to our domain names.
We incorporate licensed, third-party technology in some of our services. In
these license agreements, the licensors have generally agreed to defend,
indemnify and hold us harmless with respect
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<PAGE>
to any claim by a third party that the licensed software infringes any patent or
other proprietary right. The outcome of any litigation between these licensors
and a third party or between us and a third party may lead to our having to pay
royalties for which we are not indemnified or for which such indemnification is
insufficient, or we may not be able to obtain additional licenses on
commercially reasonable terms, if at all. In the future, we may seek to license
additional technology to incorporate in our services. The loss of or inability
to obtain or maintain any necessary technology licenses could result in delays
in introduction of new services or curtailment of existing services, which could
have a material adverse effect on our business, results of operations and
financial condition.
To the extent that we license any of our content from third parties, our
exposure to copyright infringement actions may increase because we must rely
upon these third parties for information as to the origin and ownership of the
licensed content. We generally obtain representations as to the origins and
ownership of any licensed content and indemnification to cover breaches of any
representations. However, such representations may be inaccurate or any
indemnification may be insufficient to provide adequate compensation for any
breach of these representations.
We cannot assure you that infringement or other claims will not be asserted
or prosecuted against us in the future or that any future assertions or
prosecutions will not materially adversely affect our business, results of
operations and financial condition. It is also possible that claims could be
asserted against us because of the content of emails sent over our system. Any
such claims, with or without merit, could be time-consuming, result in costly
litigation and diversion of technical and management personnel or require us to
develop non-infringing technology or enter into royalty or licensing agreements.
Any royalty or licensing agreements, if required, may not be available on terms
acceptable to us, if at all. In the event of a successful claim of infringement
against us and our failure or inability to develop non-infringing technology or
license the infringed or similar technology on a timely basis, our business,
results of operations and financial condition could be materially adversely
affected.
MAIL.COM EMPLOYEES
As of March 31, 1999, there were 103 people dedicated full-time to our
business. Of these personnel, 42 persons worked in technology, product
development and Web production; 20 persons worked in sales, marketing and
business development; 13 persons worked in customer support; 23 persons worked
in operations and administration; and 5 persons are executives. We have never
had a work stoppage and no personnel are represented under collective bargain
agreements. We consider our employee relations to be good.
We believe that our future success will depend in part on our continued
ability to attract, integrate, retain and motivate highly qualified sales,
technical, and managerial personnel, and upon the continued service of our
senior management and key sales and technical personnel. To help us retain our
personnel, all of our full-time employees have received stock option grants. To
increase our geographic reach and ability to attract talented employees, we have
opened a technology office in Morristown, New Jersey and a sales office in San
Francisco, California. None of our personnel are bound by employment agreements
that prevent them from terminating their relationship at any time for any
reason.
Competition for qualified personnel is intense, and we may not be successful
in attracting, integrating, retaining and motivating a sufficient number of
qualified personnel to conduct our business in the future. See "Risk
Factors--Our rapid expansion is straining our existing resources, and we may not
be able to manage our growth effectively."
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FACILITIES
Our headquarters are located in leased space at 11 Broadway in lower
Manhattan consisting of approximately 19,200 square feet. We have two and one
half years remaining on our original five-year lease which ends June 30, 2001.
We have a one-time option to terminate the lease in September 1999. We have
leased an additional 2,576 square feet on the second floor beginning May 1, 1999
and an additional 5,494 square feet on the second floor beginning September 1,
1999. We believe there is enough vacant space available in our building and the
neighboring area for us to expand our operations as necessary. Our landlord is
entitled to relocate us to a similar space for any reason upon 60 days written
notice. Our landlord may cancel our lease upon 90 days written notice if it
plans to demolish our building.
We have an additional technology development team located in approximately
2,400 square feet of leased space in Morristown, New Jersey. We have a
three-year lease that ends on September 14, 2001 and we have the right to
terminate this lease at any time after the first year with three months notice.
In addition we have an advertising sales team in approximately 800 square
feet of leased space in San Francisco, California.
Our data center is housed in approximately 1,100 square feet of space leased
from Telehouse International, a commercial data center in lower Manhattan.
Telehouse provides 24 hour security, fire protection, computer grade air
handling, and backup power facilities.
We have leased 280 square feet at Exodus Communications, Inc. in Jersey
City, New Jersey that we plan to use as an additional data center which is
expandable at will. Exodus provides 24 hour security, fire protection, computer
grade air handling and backup power facilities.
LEGAL PROCEEDINGS
From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of business. These include
claims of alleged infringement of third-party trademarks, copyrights, domain
names and other similar proprietary rights. These claims, even if not
meritorious, could require us to expend significant financial and managerial
resources. We believe that there are no claims or actions pending or threatened
against us that will have a material adverse effect on our business, results of
operations or financial condition.
58
<PAGE>
MANAGEMENT
The following table identifies the executive officers and directors of
Mail.com:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Gerald Gorman....................... 44 Chairman and Chief Executive Officer
Gary Millin......................... 29 President, Director
Lon Otremba......................... 42 Chief Operating Officer, Director
Charles Walden...................... 45 Executive Vice President, Technology, Director
Debra McClister..................... 44 Executive Vice President, Chief Financial Officer
William Donaldson................... 66 Director
Stephen Ketchum..................... 37 Director
Jack Kuehler........................ 65 Director
John Whitman........................ 54 Director
</TABLE>
The following table identifies other key employees of Mail.com:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Michael Agesen...................... 36 Vice President, Business Development
Catherine Billon.................... 34 Vice President, Marketing and Partner Development
Courtney Nichols.................... 28 Vice President, Advertising Sales
</TABLE>
EXECUTIVE OFFICERS AND DIRECTORS
GERALD GORMAN--CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Gorman has served as our Chairman since founding our company in December
1995 and as our Chief Executive Officer since February 1997. Prior to founding
Mail.com, Mr. Gorman spent 12 years in the Investment Banking Division of
Donaldson, Lufkin & Jenrette Securities Corporation where he founded and managed
the Satellite Financing Group. Mr. Gorman also held positions at General
Electric Capital Corporation from 1983 to 1985 and at Utah International from
1982 to 1983. Mr. Gorman received his Bachelor of Mechanical Engineering degree
from Melbourne University and his M.B.A. from Columbia University.
GARY MILLIN--PRESIDENT, DIRECTOR
Mr. Millin has served as our President and as a member of our board of
directors since founding our company in December 1995. Prior to founding
Mail.com, Mr. Millin spent three years at the venture capital firm Consumer
Venture Partners (CVP) from 1991 to 1994. Mr. Millin received his B.S. in
Economics from the Wharton School and his M.B.A. from Harvard Business School,
where he was a Baker Scholar.
LON OTREMBA--CHIEF OPERATING OFFICER, DIRECTOR
Mr. Otremba has served as our Chief Operating Officer and as a member of our
board of directors since October 1997. Prior to joining Mail.com, Mr. Otremba
served as Executive Vice President, Network Sales at CNET. Prior to joining
CNET, Mr. Otremba served as Associate Publisher of PC MAGAZINE from 1991 to
1993. He also held positions at CMP Media from 1987 to 1990, Lebhar-Friedman
from 1982 to 1987 and Procter & Gamble from 1980 to 1981. Mr. Otremba received
his B.A. in Economics from Michigan State University.
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<PAGE>
CHARLES WALDEN--EXECUTIVE VICE PRESIDENT, TECHNOLOGY
Mr. Walden has served as our Executive Vice President of Technology since
February 1998. Before joining Mail.com, Mr. Walden worked for Dialogic
Corporation from 1985 to 1997 in several capacities, including Director of
Software Development, Vice President of Engineering and, during his last two
years, as Chief Technical Officer. Mr. Walden received his B.A. in Computer
Science from the University of Texas at Austin.
DEBRA MCCLISTER--EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Ms. McClister has served as our Chief Financial Officer since July 1998.
Prior to joining Mail.com, Ms. McClister held a variety of executive positions
at Philips Media, and most recently served as Chief Operating Officer of Philips
Media Software from 1996 to 1997. She was the Senior Vice President and Chief
Financial Officer for Philips Media, North America from 1995 to 1996, Corporate
Vice President and Controller for Philips Electronics, North America from 1988
to 1995 and she held various positions at Philips Electronics from 1984 to 1988.
Ms. McClister also worked in financial management for Hitachi America from 1981
to 1984. Ms. McClister received her B.S. in Commerce from Rider University and
is a Certified Public Accountant.
WILLIAM DONALDSON--DIRECTOR
Mr. Donaldson serves as Senior Advisor to Donaldson, Lufkin & Jenrette,
Inc., which he co-founded in 1959, serving as its Chief Executive Officer until
1973. From 1991 to 1995, he was Chairman and CEO of the New York Stock Exchange.
He founded the private investment firm Donaldson Enterprises in 1981 and served
as its Chairman until 1990. In 1975, Mr. Donaldson was named founding Dean and
Professor of Management at the Yale Management School and in 1973 he was
appointed U.S. Undersecretary of State and subsequently served as Counsel to
Vice President Nelson Rockefeller. Mr. Donaldson is a director of Aetna, Inc.,
the Philip Morris Companies and Bright Horizons Family Solutions. He received
his B.A. from Yale University and his M.B.A. with distinction from the Harvard
Business School.
STEPHEN KETCHUM--DIRECTOR
Mr. Ketchum is a Senior Vice President of Donaldson, Lufkin, & Jenrette
Securities Corporation's Satellite Financing Group. Prior to joining Donaldson,
Lufkin & Jenrette Securities Corporation in 1990, Mr. Ketchum was employed at
Dean Witter Reynolds. Mr. Ketchum serves on the board of Manufacturer's Services
Limited, a contract manufacturing company based in Boston. Mr. Ketchum received
his B.A. in Finance and Marketing from New England College and his M.B.A. from
the Harvard Business School.
JACK KUEHLER--DIRECTOR
Mr. Kuehler retired in August 1993 as Vice Chairman and a director of
International Business Machines Corporation, having held various positions since
joining IBM in 1958. Prior to his appointment as Vice Chairman of IBM in January
1993, Mr. Kuehler served as President from 1989 to 1993, as Vice Chairman from
1988 to 1989 and as Executive Vice President from 1987 to 1988. Mr. Kuehler is a
director of Aetna, Inc., In Focus Systems, Inc., Olin Corporation and The
Parsons Corporation. He is member of the National Academy of Engineering, a
fellow of the Institute of Electrical and Electronics Engineers, Inc. and a
fellow of the American Academy of Arts and Sciences.
JOHN WHITMAN--DIRECTOR
Mr. Whitman has been a Managing Partner of Sycamore Ventures since 1995.
Prior to joining Sycamore, Mr. Whitman was an advisor to several organizations,
including the Ford Motor Company,
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<PAGE>
AT&T Venture Corp., Coopers & Lybrand, the United States Agency for
International Development, and Prudential Securities Inc. From 1987 through
1990, Mr. Whitman was Chairman and Chief Executive Officer of Prudential-Bache
Interfunding Inc., and from 1972 to 1987 he held various positions at Citicorp
and Citicorp Venture Capital, Ltd. Mr. Whitman sits on the boards of directors
of Comprehensive Automotive Recycling Services Inc., Wilson Haas Beverages,
MacDonald Communications Corp., and Global Household Brands, and serves as a
member of the merchant banking firm Cross Border L.L.C. and as a member of the
Investment Committee of Spartek Emerging Opportunities of India Fund. Mr.
Whitman received his B.A. from Yale University and his M.B.A. from the Harvard
Business School.
KEY EMPLOYEES
MICHAEL AGESEN--VICE PRESIDENT, BUSINESS DEVELOPMENT
Mr. Agesen, our Vice President of Business Development, has been with us
since November 1998. Prior to joining Mail.com, Mr. Agesen was Vice President of
Affiliate Development at Snap from March 1997 to November 1998. Mr. Agesen was
Vice President of Licensing and Business Development at CNET from December 1995
until March 1997. From 1992 to 1995, Mr. Agesen was Product Marketing Manager
for AT&T WorldNet and AT&T Consumer Interactive Services. Mr. Agesen received
his B.A. from the University of Virginia.
CATHERINE BILLON--VICE PRESIDENT, MARKETING AND PARTNER DEVELOPMENT
Ms. Billon, our Vice President of Marketing and Partner Development, has
been with us since October 1998. Prior to joining Mail.com, Ms. Billon was Vice
President of International Sales and Marketing at the Discovery Channel from
1993 to 1998. Ms. Billon worked in the consumer marketing group at TIME magazine
from 1989 to 1993. Ms. Billon worked at Columbia TriStar International Video
from 1988 to 1989 and at the National Geographic Society from 1985 to 1987. Ms.
Billon received her B.A. in International Relations from Brown University, and
her M.B.A. from Columbia University.
COURTNEY NICHOLS--VICE PRESIDENT, ADVERTISING SALES
Ms. Nichols, our Vice President of Advertising Sales, has been with us since
February 1998. Prior to joining Mail.com, Ms. Nichols was a Sales Manager for
CNET from January 1997 to January 1998. From 1995 to 1997, she served as
Director of Sales at Interactive Imaginations, now 24/7 Media. From 1993 to
1995, she served as a liaison to General Motors' board of directors and worked
in GM's Treasurer's Office. Ms. Nichols received her B.A. from Davidson College.
DIRECTOR TERMS
Members of the board of directors, other than the members of the initial
board of directors, shall be elected at the annual meeting of stockholders and
shall hold office until their successor is elected and qualified or until their
earlier resignation or removal.
BOARD COMMITTEES
The compensation committee is currently composed of three outside directors:
William Donaldson, Stephen Ketchum and John Whitman. Under agreements with
stockholders who formerly held shares of our Class A and Class C preferred
stock, we are required to elect at least two non-management directors to the
three person compensation committee.
The members of the audit committee of the board of directors will be
appointed prior to the closing of this offering and will review, act on and
report to the board of directors with respect to
61
<PAGE>
various auditing and accounting matters, including the recommendation of
Mail.com's auditors, the scope of the annual audits, fees to be paid to the
auditors, the performance of Mail.com's independent auditors and the accounting
practices of Mail.com.
DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses of
attending board of directors or committee meetings, Mail.com does not currently
compensate directors who are part of the management team. However, in 1997 and
1998, two outside, non-management directors were granted options as compensation
for their serving as board members. In 1997, Mr. Donaldson and Mr. Kuehler were
each granted options to purchase 100,000 shares of Class A common stock at an
exercise price of $1.00, vesting monthly for one year, from May 1997 through May
1998. In May 1998, these two directors were each granted options to purchase
25,000 shares of Class A common stock at an exercise price of $3.50, vesting
monthly for one year, from May 1998 to May 1999. On March 1, 1999, four outside,
non-management directors were granted options for their service. Mr. Kuehler and
Mr. Donaldson were each granted options to purchase 20,000 shares of Class A
common stock at an exercise price of $5.00 per share, vesting on a monthly basis
for one year from May 1999 through May 2000. Mr. Ketchum and Mr. Whitman were
each granted options to purchase 10,000 shares of Class A common stock at $5.00
per share, vesting on a monthly basis for one year from March 1999 through March
2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mail.com's compensation committee is comprised of three non-management
directors. All decisions relating to the compensation of Mail.com's executive
officers are made by the compensation committee and Gerald Gorman.
EMPLOYMENT, SEVERANCE AND OTHER ARRANGEMENTS
Mail.com's current employment agreement with Gerald Gorman is dated April 1,
1999. The agreement provides that Mr. Gorman is to receive a base salary of
$200,000 per year. Mr. Gorman's base salary and bonus amount is adjustable on an
annual basis at the sole discretion of the compensation committee. Additionally,
the agreement provides that for two years after Mr. Gorman leaves our employ, he
will not work for a competitor or disclose any of our confidential information.
Mail.com's current employment agreement with Gary Millin is dated April 1,
1999. Under this agreement, Mr. Millin receives an annual base salary of
$130,000. Mr. Millin's base salary and bonus amount is adjustable in the sole
discretion of our Chief Executive Officer and the compensation committee.
Additionally, the agreement provides that for two years after Mr. Millin leaves
our employ, he will not work for a competitor or disclose any of our
confidential information.
Mail.com's current employment agreement with Lon Otremba is dated April 1,
1999. The agreement provides that Mr. Otremba will receive an annual base salary
of $200,000 and a bonus of up to 30% of his base salary. Under his initial
employment agreement with us, dated September 24, 1997, Mr. Otremba was granted
an initial option of acquiring 473,200 shares of our Class A common stock, which
vest quarterly over the first three years of his employment and are exercisable
at the price of $2.00 per share. The initial agreement also provided for the
grant of additional contingent options, which were linked to advertising
revenues that we recognized through 1998, granting Mr. Otremba options to
purchase up to 402,975 shares of our Class A common stock at $2.00 per share.
These additional options vest quarterly over three years from the date of grant.
Finally, the current agreement provides that for two years after Mr. Otremba
leaves our employ, he will not work for a competitor or disclose any of our
confidential information.
62
<PAGE>
Mail.com's current employment agreement with Debra McClister is dated April
1, 1999. The agreement provides that Ms. McClister will receive an annual base
salary of $180,000 which will be reviewed each year, and an annual bonus between
15%-45% of base annual salary. Under Ms. McClister's initial employment
agreement with us, dated June 29, 1998, she was granted an option to purchase
200,000 shares of our Class A common stock at an exercise price of $3.50 upon
the commencement of her employment. In accordance with the initial agreement, we
granted Ms. McClister an additional option to purchase 40,000 shares at an
exercise price of $3.50 per share on September 14, 1998 for achievement of a
specified objective. Under the initial agreement, Ms. McClister waived her
salary until October 19, 1998 in return for receiving an option to purchase
90,000 shares of our Class A common stock, which were granted at an exercise
price of $3.50 per share and vest quarterly over 4 years. The current agreement
also provides that in the event that Mail.com is sold to a third party, Ms.
McClister's options will be converted into options to acquire the third party's
stock, with an equivalent value and the same remaining vesting period as her
Mail.com options. In the event that Ms. McClister's position at Mail.com is
eliminated, replaced or taken over by the third party in connection with an
acquisition, merger or transfer of a majority interest, we will attempt to offer
Ms. McClister a comparable senior management position with the same
compensation, commuting and travel requirements. In the event that such a
position is not offered to Ms. McClister, she will be entitled to a severance
package comprised of (a) six months base salary, (b) annual bonus pro rated for
the portion of the year worked and (c) immediate vesting of 50% of her remaining
unvested options. Additionally, her current employment agreement provides that
for two years after Ms. McClister leaves our employ, she will not work for a
competitor or disclose any of our confidential information.
Mail.com's employment agreement with Charles Walden is dated February 4,
1999. The agreement provides that Mr. Walden will receive an annual base salary
of $160,000. In addition to his base salary, Mr. Walden is eligible for
incentive compensation, which together with his salary, are to be determined and
reviewed by the Chief Executive Officer and the compensation committee. In lieu
of cash salary and bonus in 1998, Mr. Walden received an option grant on January
1, 1998 of 285,000 shares and a second option grant on February 16, 1998 of
395,200 shares, each granted at the fair market value of the common stock at the
date of grant. Mr. Walden's current employment agreement with us provides that
for two years after he leaves our employ, he will not work for a competitor or
disclose any of our confidential information.
EXECUTIVE COMPENSATION
The following table presents certain summary information concerning the
compensation awarded to, earned by, or paid for services rendered to us in all
capacities during the year ended December 31, 1998, by our Chief Executive
Officer and each of the other executive officers whose salary and bonus exceeded
$100,000 in 1998 (collectively, the "Named Executive Officers"). No executive
who would otherwise have been included in this table on the basis of salary and
bonus earned for 1998 has resigned or otherwise terminated employment during
1998.
63
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION SALARY OPTIONS(1)
- ----------------------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
Gerald Gorman,..................................................................... $ 200,000 23,720
Chairman and Chief Executive Officer
Gary Millin,....................................................................... 130,000 29,267
President
Lon Otremba,....................................................................... 180,000 420,107
Chief Operating Officer
Charles Walden,.................................................................... 0 680,200
Executive Vice President, Technology
Debra McClister,................................................................... 37,461(2) 340,573
Executive Vice President and Chief Financial Officer
</TABLE>
- ------------------------
(1) Includes annual bonus compensation earned for the year ended December 31,
1998 and foregone at the election of the Named Executive officers and
instead paid in the form of stock options as follows: Mr. Gorman, 19,920
options; Mr. Millin, 20,267 options; Mr. Otremba, 15,932 options; and Ms.
McClister, 10,573 options. Mr. Walden waived cash salary and bonus for his
first year of employment with us and in return received an option grant on
January 1, 1998 for 285,000 shares and a second option grant on February 16,
1998 for 395,200 shares, each of which was granted at the fair market value
of common stock at the date of grant.
(2) Salary did not commence until October 19, 1998.
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<PAGE>
OPTION GRANTS IN FISCAL YEAR
The following table provides certain information regarding stock options
granted to the Named Executive Officers during the year ended December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE MARKET OPTION TERMS(1)
OPTIONS TO EMPLOYEES IN PRICE PER PRICE PER EXPIRATION ------------------------
NAME GRANTED (#) FISCAL YEAR (%) SHARE SHARE DATE 0% 5%
- ------------------------- ----------- --------------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald Gorman............ 3,800 0.1% $ 3.50 $ 3.50 1/31/08 $ -- $ 8,360
Gary Millin.............. 9,000 0.3% 3.50 3.50 1/31/08 -- 19,800
Lon Otremba.............. 1,200 0.0% 3.50 3.50 1/31/08 -- 2,640
10,114 0.3% 2.00 3.50 6/28/08 15,172 37,421
18,590(2) 0.6% 2.00 3.50 7/30/08 27,885 68,783
46,312(2) 1.6% 2.00 3.50 8/30/08 69,467 171,354
82,161(2) 2.8% 2.00 5.00 9/29/08 246,483 504,468
208,446(2) 7.0% 2.00 5.00 10/30/08 625,337 1,279,858
24,402(2) 0.8% 2.00 5.00 11/29/08 73,205 149,828
12,950(2) 0.4% 2.00 5.00 12/30/08 38,850 79,513
Charles Walden........... 285,000(3) 9.6% 2.00 2.00 12/31/08 -- 359,100
395,200(4) 13.3% 3.50 3.50 2/15/08 -- 869,440
Debra McClister.......... 290,000 9.7% 3.50 3.50 6/27/08 -- 638,000
40,000 1.3% 3.50 3.50 9/13/08 -- 88,000
<CAPTION>
NAME 10%
- ------------------------- ------------
<S> <C>
Gerald Gorman............ $ 21,204
Gary Millin.............. 50,220
Lon Otremba.............. 6,696
71,607
131,617
327,888
901,306
2,286,652
267,689
142,061
Charles Walden........... 909,150
2,205,216
Debra McClister.......... 1,618,200
223,200
</TABLE>
- ------------------------
Unless otherwise noted all options vest quarterly over four years.
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted based upon the
fair market value on the date of grant. These assumptions are not intended
to forecast future appreciation of our stock price. The amounts reflected in
the table may not necessarily be achieved.
(2) Options vest in equal installments over 12 calendar quarters.
(3) Options vest in equal installments over 13 calendar quarters.
(4) Options vest biweekly in equal installments over 52 weeks.
65
<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table indicates for each of the Named Executive Officers the
number and year-end value of exercisable and unexercisable options for the year
ended December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998(1)
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ----------- ------------- ------------ -------------
Gerald Gorman............................................ 363,450 162,850 $ 1,682,675 $ 779,275
Gary Millin.............................................. 387,500 160,500 1,661,500 709,500
Lon Otremba.............................................. 273,037 664,418 818,661 1,988,304
Charles Walden........................................... 262,492 417,708 525,276 922,524
Debra McClister.......................................... 38,750 291,250 58,125 436,875
</TABLE>
- ------------------------
(1) All amounts reflected were determined using a December 31, 1998 price of $5
per share.
EMPLOYEE BENEFIT PLANS
Mail.com's board of directors adopted the Mail.com 1996 Stock Option Plan on
March 16, 1996, the Mail.com 1997 Stock Option Plan on May 1, 1997 and the
Mail.com 1998 Stock Option Plan on October 5, 1998, and each has been
subsequently approved by our stockholders. Mail.com's board of directors also
adopted the Mail.com 1999 Stock Option Plan on April 21, 1999. This will be
approved by our stockholders prior to the closing of this offering. The
principal provisions of the plans are summarized below. This summary is
qualified in its entirety by reference to the provisions of each of the plans.
PURPOSE
The purpose of the plans is to grant incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code and non-qualified stock
options as a means to provide an incentive to our selected directors, officers,
employees and consultants to acquire a proprietary interest in Mail.com, to
continue in their positions with us and to increase their efforts on our behalf.
ADMINISTRATION
The plans are administered by the board or a committee appointed by the
board. Under the plans, the plan administrator has the authority to, among other
things: (a) select the eligible persons to whom options will be granted, (b)
determine the size, type and the terms of each option granted, (c) adopt, amend
and rescind rules and regulations for the administration of the plans, and (d)
decide all questions and settle all controversies and disputes of general
applicability that may arise in connection with the plans.
SHARES AVAILABLE FOR ISSUANCE
A maximum of 1,000,000, 3,500,000 and 1,500,000 shares of Mail.com's Class A
common stock is available for issuance under the 1996 plan, the 1997 plan and
the 1998 plan, respectively. 2,500,000 shares of Class A common stock have been
authorized for issuance under the 1999 plan. Outstanding options under the
previous plan(s) will be incorporated into the 1999 plan upon the date of this
offering, and no further option grants will be made under the previous plan(s).
The incorporated options will continue to be governed by their existing terms,
unless the plan administrator elects to extend one or more features of the 1999
plan to those options.
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<PAGE>
The maximum number of shares underlying options granted to any individual
within a calendar year under the 1999 plan is 1,000,000. In the event of any
changes in the number or kind of outstanding shares of stock by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares or otherwise, the plan administrator may make equitable
adjustments to the price and other terms of any option previously granted or
which may be granted under the plans.
OPTIONS
Each option granted under the plans will be evidenced by an agreement that
states the terms and conditions of the grant. The exercise price of an option
granted under any of the plans shall not be less than 100% of the fair market
value of the stock at the time of grant (110% in the case of an incentive stock
option granted to any person owning stock or other capital stock in Mail.com
possessing more than 10% of the total combined voting power of all classes of
capital stock of Mail.com). Each option granted under the plans will be
exercisable at the times and in the amounts determined by the plan administrator
at the time of grant. In addition, the plan administrator, in its discretion,
may accelerate the exercisability of any option outstanding under any of the
plans. The exercise price of an option is payable in cash unless otherwise
approved by the plan administrator.
Options granted under the plans are not transferable except by will or the
laws of descent and distribution and are only exercisable by the grantee during
the grantee's lifetime. Each option shall terminate at the time determined by
the plan administrator provided that the term may not exceed ten years from the
date of grant (five years in the case of an incentive stock option granted to a
ten percent stockholder). However, the plan administrator may, subject to the
limitations of the plans, modify, extend or renew outstanding options granted
under the plans, or accept the surrender of outstanding unexercised options and
authorize the grant of substitute options.
AMENDMENTS AND TERMINATION
The plans will terminate on the earliest of (a) March 15, 2006 for the 1996
plan, April 23, 2007 for the 1997 plan, and October 4, 2008 for the 1998 plan
and May 1, 2009 for the 1999 plan, (b) the date when all shares of stock
reserved for issuance under each plan have been acquired through the exercise of
options granted under each plan or (c) any earlier date as may be determined by
Mail.com's board of directors. Subject to limitations, Mail.com's board of
directors may amend each plan, correct any defect, supply any omission or
reconcile any inconsistency in the plans. None of these modifications shall
alter or adversely impair any rights or obligations under any option previously
granted under the plans, except with the consent of the grantee.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is generally a summary of the principal United
States federal income tax consequences under current federal income tax laws
relating to grants or awards to employees under the plans. This summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign income tax or other tax consequences.
A grantee will not recognize any taxable income upon the grant of a
non-qualified option and Mail.com will not be entitled to a tax deduction with
respect to the grant. Generally, upon exercise of a non-qualified option, the
excess of the fair market value of stock on the date of exercise over the
exercise price will be taxable as ordinary income to the grantee. If Mail.com
complies with applicable withholding requirements, we will be entitled to a tax
deduction in the same amount and at the same time as the grantee recognizes
ordinary income subject to any deduction limitation under Section 162(m) of the
Internal Revenue Code. The subsequent disposition of shares acquired upon the
exercise of a nonqualified stock option will ordinarily result in capital gain
or loss.
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<PAGE>
Subject to the discussion below, a grantee will not recognize taxable income
at the time of grant or exercise of an incentive stock option and we will not be
entitled to a tax deduction with respect to the grant or exercise. However, the
exercise of an incentive stock option may result in an alternative minimum tax
liability for the grantee.
Generally, if a grantee has held shares acquired upon the exercise of an
incentive stock option for at least one year after the date of exercise and for
at least two years after the date of grant of the
incentive stock option, upon disposition of the shares by the grantee, the
difference, if any, between the sales price of the shares and the exercise price
will be treated as long-term capital gain or loss to the grantee. Generally,
upon a sale or other disposition of shares acquired upon the exercise of an
incentive stock option within one year after the date of exercise or within two
years after the date of grant of the incentive stock option (a "disqualifying
disposition"), any excess of the fair market value of the shares at the time of
exercise of the option over the exercise price of the option will constitute
ordinary income to the grantee. Any excess of the amount realized by the holder
on the disqualifying disposition over the fair market value of the shares on the
date of exercise will generally be capital gain. Subject to any deduction
limitation under Section 162(m) of the Internal Revenue Code, Mail.com will be
entitled to a deduction equal to the amount of the ordinary income recognized by
the holder.
If a non-qualified or incentive stock option is exercised through the use of
shares previously owned by the holder, such exercise generally will not be
considered a taxable disposition of the previously owned shares and thus no gain
or loss will be recognized with respect to such shares upon such exercise.
However, if the option is an incentive stock option, and the previously owned
shares were acquired on the exercise of an incentive stock option and the
holding period requirement for those shares is not satisfied at the time they
are used to exercise the option, this use will constitute a disqualifying
disposition of the previously owned shares resulting in the recognition of
ordinary income in the amount described above.
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<PAGE>
CERTAIN TRANSACTIONS
PREFERRED FINANCINGS
We used the funds raised in each of the preferred stock financings described
below:
- to expand our business operations, including acquiring additional hardware
to satisfy increased demand;
- to hire additional personnel;
- to provide additional services; and
- for other general corporate purposes related to the expansion of our
business.
All of the outstanding shares of Class A, Class C and Class E preferred
stock will automatically convert into Class A common stock upon the consummation
of this offering on a one-for-one basis before giving effect to the settlements
described below.
CLASS A PREFERRED FINANCING
On May 27, 1997 and December 17, 1997, we issued an aggregate of 3,460,000
shares of Class A preferred stock at $1.00 per share for an aggregate amount of
$3,290,000 in cash and $170,000 in the form of equity securities and services by
outside vendors. Among the purchasers were Gerald Gorman, our Chairman and Chief
Executive Officer (400,000 shares for $400,000), and William Donaldson (100,000
shares for $100,000), Stephen Ketchum (225,000 shares for $225,000) and Jack
Kuehler (100,000 shares for $100,000), each of whom is a director of Mail.com.
CLASS A PREFERRED STOCK ISSUANCE OBLIGATION SETTLEMENT
Prior to being amended, the Class A preferred stock purchase agreement dated
May 27, 1997, the purchase and sale agreement dated December 17, 1997 and the
purchase and sale agreement dated January 5, 1998 obligated us to issue
additional shares of Class A preferred stock to the purchasers if they were not
provided with an opportunity to dispose of shares of Class A preferred stock at
specified minimum prices.
We have since amended these agreements to provide that if we consummate an
initial public offering on or before July 31, 1999, then we will issue an
aggregate of 968,800 shares of Class A common stock to be divided on a pro rata
basis among the purchasers. This amendment eliminates the contingent issuance
obligations described above.
As a result of the Class A preferred stock contingent issuance obligation
settlement, the following persons will receive upon closing of this offering an
issuance of shares of Class A common stock in the following amounts: Gerald
Gorman, our Chairman and Chief Executive Officer (112,000 shares), and William
Donaldson (28,000 shares), Stephen Ketchum (63,000 shares) and Jack Kuehler
(28,000 shares), each of whom is a director of Mail.com.
CLASS C PREFERRED FINANCING
On July 31, 1998 and August 31, 1998, we issued an aggregate of 3,776,558
units, with each unit consisting of one share of Class C preferred stock and
detachable warrants to purchase .35 shares of Class C preferred stock at an
exercise price equal to the Class C conversion price as defined in our amended
and restated certificate of incorporation, for a price per unit of $3.50. The
aggregate amount of this financing was $13,218,000. Among the purchasers were
John Whitman, one of our directors (7,200 shares, 2,520 warrants for $25,200),
and The Whitman Children Irrevocable Trust (7,200 shares, 2,520 warrants for
$7,203.50). Also, Citi Growth Fund II, Offshore L.P. and CG Asian-American Fund
L.P., limited partnerships indirectly controlled by entities in which Mr.
Whitman holds a minority interest, purchased 1,099,200 shares and 384,720
warrants in the aggregate for a total purchase price of $3,847,200. Mr. Whitman
also has the power to vote or dispose of an additional 311,700 shares and
109,095 warrants purchased in this financing for $1,090,950.
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<PAGE>
CLASS C PREFERRED STOCK ISSUANCE OBLIGATION SETTLEMENT
Prior to being amended, our amended and restated certificate of
incorporation provided for a reduction in the conversion price of the Class C
preferred stock if the holders of Class C preferred stock were not provided with
an opportunity to dispose of the Class C shares at specified minimum prices.
We have since amended our amended and restated certificate of incorporation
to provide that, if we consummate an initial public offering on or before July
31, 1999, the holders of Class C preferred shares will receive a one time
reduction in the Class C conversion price from $3.50 per share to $2.80. This
amendment eliminates the contingent issuance obligation described above and
permits the Class C holders to receive an additional 944,139 shares of Class A
common stock upon conversion of their preferred shares, which will occur
automatically upon the closing of this offering. Also, upon the closing of this
offering, the warrants to purchase 1,321,778 shares of Class C preferred stock
will be cancelled and returned to Mail.com.
As a result of the Class C preferred stock contingent issuance obligation
settlement, Mr. Whitman and the persons or entities listed below will receive
upon the closing of this offering an aggregate issuance of 356,400 shares of
Class A common stock in the amounts listed. As indicated below, Mr. Whitman has
the power to vote or dispose of these shares or holds an interest in the
entities that control the owners of these shares.
<TABLE>
<CAPTION>
SHARES OF CLASS
A
COMMON STOCK
----------------
<S> <C>
John Whitman(2)................................................................................. 79,800
The Whitman Children Irrevocable Trust(1)....................................................... 1,800
CitiGrowth Fund II, Offshore L.P.(3)............................................................ 137,400
CG Asian-American Fund L.P.(3).................................................................. 137,400
-------
Total................................................................................. 356,400
</TABLE>
- ------------------------
(1) The Whitman Children Irrevocable Trust is a trust for the benefit of Mr.
Whitman's children and Mr. Whitman has the power to vote or dispose of these
shares.
(2) Includes 78,000 shares owned by other persons and over which Mr. Whitman has
the power to vote or to direct the disposition.
(3) Mr. Whitman holds a minority interest in the entities that control these
limited partnerships.
CLASS E PREFERRED FINANCING
On March 10, 1999, we issued an aggregate of 3,200,000 shares of Class E
preferred stock at $5.00 per share. The aggregate amount of this financing was
$16,000,000. Among the purchasers were John Whitman, one of our directors (3,000
shares for $15,000), and The Whitman Children Irrevocable Trust (1,000 shares
for $5,000), Gerald Gorman, our Chairman and Chief Executive Officer (35,000
shares for $175,000), Lon Otremba, our Chief Operating Officer and one of our
directors (50,000 shares for $250,000), Stephen Ketchum, one of our directors
(10,000 shares for $50,000), and Debra McClister, our Chief Financial Officer
(40,000 shares for $200,000). Also, Citi Growth Fund II, Offshore L.P. and CG
Asian-American Fund L.P., limited partnerships indirectly controlled by entities
in which Mr. Whitman holds a minority interest, purchased 76,880 shares in the
aggregate for $384,400. Mr. Whitman also has the power to vote or dispose of an
additional 33,820 shares purchased in this financing for $169,100.
CLASS E PREFERRED STOCK ISSUANCE OBLIGATION SETTLEMENT
Immediately before consummation of this offering, the Class E preferred
stock conversion price will be reduced based upon the amount of additional
shares of Class A common stock issuable as a result of the settlement of the
Class A and Class C preferred stock contingent issuance obligations described
above. We anticipate that an additional 169,038 shares of Class A common stock
will be
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<PAGE>
issuable upon conversion of the Class E preferred stock as a result of this
adjustment to the Class E preferred stock conversion price.
As a result of the Class E preferred stock contingent issuance obligation
settlement, the officers and directors of Mail.com and the other persons and
entities listed below will receive upon the closing of this offering an issuance
of shares of Class A common stock in the amounts listed. As indicated below, Mr.
Whitman has the power to vote or dispose of the shares, or has an interest in
the entities that control the owners of the shares, held by the persons listed
below other than Messrs. Gorman, Otremba and Ketchum.
<TABLE>
<CAPTION>
SHARES OF CLASS
A
COMMON STOCK
----------------
<S> <C>
Gerald Gorman................................................................................... 2,377
Lon Otremba..................................................................................... 2,641
Stephen Ketchum................................................................................. 528
John Whitman(2)................................................................................. 1,575
The Whitman Children Irrevocable Trust(1)....................................................... 53
CitiGrowth Fund II, Offshore L.P.(3)............................................................ 2,029
CG Asian-American Fund L.P.(3).................................................................. 2,029
-------
Total................................................................................. 11,602
</TABLE>
- ------------------------
(1) The Whitman Children Irrevocable Trust is a trust for the benefit of Mr.
Whitman's children and Mr. Whitman has the power to vote or dispose of these
shares.
(2) Includes 1,417 shares owned by other persons and over which Mr. Whitman has
the power to vote or to direct the disposition.
(3) Mr. Whitman holds a minority interest in the entities that control these
limited partnerships.
AGREEMENTS WITH STOCKHOLDERS
Holders of our Class A common stock who were formerly holders of our Class
A, Class C and Class E preferred stock and purchased their preferred stock in
the offerings described above are parties to stock purchase and investor
agreements with us and other stockholders. These agreements entitle them to a
number of rights, including the following:
- REGISTRATION RIGHTS. We have granted registration rights to holders of our
Class A common stock who were formerly holders of our Class A, Class C and
Class E preferred stock. See "Description of Capital Stock--Registration
Rights."
- RIGHT TO NOMINATE THREE MEMBERS OF THE BOARD OF DIRECTORS. Subject to
minimum ownership levels and other conditions, holders of our Class A
common stock who previously held our Class A, Class C and Class E
preferred stock purchased in the financings described above, voting as
separate groups, have the right to nominate one director each to our board
of directors. In the event that these groups fail to maintain minimum
ownership levels, they will have the right to have an observer attend all
board of directors meetings in a nonvoting capacity. We have also granted
U.S. Information Technology Financing, L.P. and the Encompass Group, Inc.,
holders of Class E preferred stock, the right to jointly appoint one
observer to attend all board of directors meetings in a nonvoting
capacity.
- CONTROLLING STOCKHOLDER AGREEMENT NOT TO SELL HIS SHARES OF CLASS B COMMON
STOCK. Gerald Gorman, our controlling stockholder, has agreed not to sell
his shares of Class B common stock until the holders of our Class A common
stock who formerly held Class A, Class C and Class E preferred stock have
had an opportunity to sell their shares of Class A common stock at
specified prices.
- RIGHT TO PARTICIPATE IN PROPOSED SALE OF STOCK BY CONTROLLING
STOCKHOLDER. Subject to exceptions, Mr. Gerald Gorman, our controlling
stockholder, has granted the holders of our Class A common stock who
formerly held Class A, Class C and Class E preferred stock purchased in
the
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<PAGE>
financings described above the right to sell their shares of Class A
common stock along with Mr. Gorman's shares, in any transaction in which
Mr. Gorman proposes to transfer his shares of our stock to a third party
at the same price and upon the same terms and conditions as Mr. Gorman.
- RIGHT OF CONTROLLING STOCKHOLDER TO COMPEL SOME OF OUR CLASS A COMMON
STOCKHOLDERS TO SELL THEIR SHARES OF OUR STOCK. Mr. Gorman, our
controlling stockholder, has the right to require the holders of our Class
A common stock who formerly held Class A, Class C and Class E preferred
stock purchased in the financings described above to sell their shares of
Class A common stock to a third party to whom Mr. Gorman proposes to sell
his common stock at the same price as and in the same proportion as Mr.
Gorman is selling his common stock.
- RIGHTS TO INFORMATION. We may be required to provide to selected holders
of Class A common stock who formerly held shares of our Class A, Class C
or Class E preferred stock purchased in the financings described above,
audited annual financial statements and unaudited quarterly financial
statements.
EMPLOYMENT RELATED AGREEMENTS
For information regarding the grant of stock options to executive officers
and directors, see "Management--Director Compensation," "--Executive
Compensation," "--Employee Benefit Plans" and "Principal Stockholders."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table provides information with respect to the beneficial
ownership of our common stock as of April 30, 1999 and as adjusted to reflect
the sale of the shares of common stock in this offering, for:
- each person who we know owns beneficially more than 5% of our common
stock;
- each of our directors, including our Chairman and Chief Executive Officer;
- our four most highly compensated executive officers, other than our Chief
Executive Officer, who were serving as executive officers at the end of
1998; and
- all of our executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS PERCENTAGE OF CLASS A COMMON PERCENTAGE OF
A COMMON STOCK BENEFICIALLY OWNED(2)(3) TOTAL VOTING
STOCK STOCK -------------------------------- POWER AFTER
BENEFICIALLY AFTER THE
NAME OF BENEFICIAL OWNER OWNED(1) BEFORE OFFERING OFFERING OFFERING(2)(3)
- ------------------------------------------------- -------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Gerald Gorman.................................... 12,065,815( (5) 33.9% 28.4% 77.1%(6)
Lycos, Inc....................................... 2,000,000 5.7 4.8 1.5
500 Old Connecticut Path
Framingham, MA 01701-4576
John Whitman..................................... 1,911,092( (8) 5.4 4.6 1.5
Gary Millin...................................... 1,698,006(9) 4.8 4.0 1.3
Lon Otremba...................................... 585,334(10) 1.6 1.3 *
Charles Walden................................... 444,015(11) 1.2 1.1 *
Stephen Ketchum.................................. 243,861(12) * * *
William Donaldson................................ 231,667(13) * * *
Jack Kuehler..................................... 231,667(14) * * *
Debra McClister.................................. 119,226(15) * * *
All directors and executive officers as a group
(9 persons).................................... 17,530,683 47.1 39.8 80.2
</TABLE>
- ------------------------
* Represents beneficial ownership or voting power of less than 1%.
(1) For purposes of this table, a person, entity or group is deemed to have
"beneficial ownership" of any shares of Class A common stock, including
shares subject to options, warrants or conversion rights, which such person,
entity or group has the right to acquire within 60 days after the date of
this prospectus. Unless otherwise noted below, the persons and entities
named in the table have sole voting and sole investment power with respect
to all shares beneficially owned, subject to community property laws where
applicable.
(2) For purposes of calculating the percentage of outstanding shares or voting
power held by each person named above, any shares which such person has the
right to acquire within 60 days after the date of this prospectus are deemed
to be outstanding, but shares which may similarly be acquired by other
persons are deemed not to be outstanding.
(3) The number of shares of Class A common stock for purpose of calculating the
percentages reflects the issuance of 968,800 shares issued in settlement of
the Class A preferred stock contingent
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<PAGE>
issuance obligation, the issuance of an additional 944,139 shares of Class A
common stock in settlement of the Class C preferred stock contingent
issuance obligation and the issuance of an additional 169,038 shares of
Class A common stock in settlement of the Class E preferred stock contingent
issuance obligation. See "Certain Transactions".
(4) Includes 10,000,000 shares of Class A common stock issuable upon conversion,
on a one for one basis, of Class B common stock.
(5) Includes 413,938 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999.
(6) Includes 10,000,000 shares of Class B common stock, each share of which
entitles Mr. Gorman to ten votes.
(7) In addition to the shares owned by Mr. Whitman directly, includes 10,053
shares owned by The Whitman Irrevocable Trust, a trust for the benefit of
Mr. Whitman's children, 727,469 shares owned by Citi Growth Fund II
Offshore, L.P. and 727,469 shares owned by CG Asian-American Fund, L.P.,
limited partnerships controlled by entities in which Mr. Whitman has a
controlling interest, and 425,977 shares owned by other persons and over
which Mr. Whitman exercises the power to vote or directs the disposition.
(8) Includes 3,333 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999.
(9) Includes 435,606 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999.
(10) Includes 382,693 shares issuable upon exercise of options exercisable
within 60 days of April 30, 1999.
(11) Includes 444,015 shares issuable upon exercise of options exercisable
within 60 days of April 30, 1999.
(12) Includes 3,333 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999.
(13) Includes 126,667 shares issuable upon exercise of options exercisable
within 60 days of April 30, 1999.
(14) Includes 126,667 shares issuable upon exercise of options exercisable
within 60 days of April 30, 1999.
(15) Includes 72,113 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following descriptions of our capital stock and the relevant provisions
of our amended and restated certificate of incorporation and our bylaws are
summaries and are qualified by reference to our amended and restated certificate
of incorporation and our bylaws, which are included as exhibits to the
registration statement of which this prospectus is a part.
We are authorized to issue up to 120,000,000 shares of Class A common stock,
par value $.01 per share, 10,000,000 shares of Class B common stock, par value
$.01 per share, and 60,000,000 shares of preferred stock, par value $.01 per
share.
The following summary of our capital stock assumes the conversion of all
currently outstanding preferred stock upon consummation of this offering.
COMMON STOCK
As of April 30, 1999, we had 6,866,783 shares of Class A common stock
outstanding held of record by 31 stockholders and 10,000,000 shares of Class B
common stock outstanding held entirely by Gerald Gorman, our Chairman and Chief
Executive Officer. Based upon the number of shares outstanding as of that date
and giving effect to the issuance of an aggregate of 25,172,441 shares of Class
A common stock to reflect:
- the offering;
- the conversion of all outstanding preferred stock;
- the settlement of our contingent obligations to issue additional equity to
our stockholders who formerly held shares of our preferred stock and to
CNET, Snap and NBC Multimedia;
- the exercise of the CNET and NBC Multimedia warrants; and
- the return of 1,000,000 shares of our Class A common stock from GeoCities;
there will be approximately 32,039,224 shares of Class A common stock
outstanding upon the closing of this offering.
All of the issued and outstanding shares of Class A common stock and the
shares of Class A common stock to be issued in this offering are or will be
fully paid and nonassessable. Except as described below, the issued and
outstanding shares of Class A common stock and Class B common stock will
generally have identical rights. In addition, under our amended and restated
certificate of incorporation, holders of Class A common stock have no preemptive
or other subscription rights to purchase our shares of stock of the Company, nor
are they entitled to the benefits of any redemption or sinking fund provisions.
VOTING RIGHTS
The holders of Class A common stock are entitled to one vote per share on
all matters to be voted on by stockholders generally, including the election of
directors. The holder of Class B common stock is entitled to ten votes per share
on all matters to be voted on by stockholders generally, including the election
of directors. In addition to any class vote that may be required under law or
our amended and restated certificate of incorporation, all classes of capital
stock entitled to vote generally on any matter shall vote together as a single
class. There are no cumulative voting rights. Accordingly, holders of a majority
of the total votes entitled to vote in an election of directors will be able to
elect all of the directors standing for election. See "Risk Factors--Gerald
Gorman will continue to control Mail.com after this offering and will be able to
prevent a change of control."
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<PAGE>
LIQUIDATION PREFERENCES
If we are liquidated, dissolved or wound up, the holders of Class A common
stock and Class B common stock will be entitled to receive distributions only
after satisfaction of all liabilities and the prior rights of any outstanding
class of preferred stock. If we are liquidated, dissolved or wound up, our
assets legally available after satisfaction of all of our liabilities shall be
distributed to the holders of Class A common stock and Class B common stock pro
rata based on the respective numbers of shares of Class A common stock held by
these holders or issuable upon conversion of Class B common stock held by such
holders.
CONVERSION RIGHTS/MANDATORY CONVERSION
Holders of Class A common stock have no conversion rights. Holders of Class
B common stock may convert each share into one share of Class A common stock. In
addition, each share of Class B common stock will automatically convert into one
share of Class A common stock upon a sale or other transfer by Gerald Gorman to
any person or entity other than entities controlled by Mr. Gorman.
DIVIDENDS
The holders of both classes of common stock are entitled to receive equal
non-cumulative dividends when and as declared from time to time by the board of
directors, subject to any preferential dividend rights of any outstanding
preferred stock.
PREFERRED STOCK
Under our amended and restated certificate of incorporation, the board of
directors is authorized, without further stockholder approval, to issue
60,000,000 authorized but unissued shares of preferred stock in one or more
classes or series. The board also has the authority to fix or alter the
designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each such class or series, including dividend
rights, conversion rights, voting rights, terms of redemption and liquidation
preferences. Preferred stock could thus be issued quickly with terms that could
delay or prevent a change in control of our Company or make removal of
management more difficult. Additionally, the issuance of preferred stock may
decrease the market price of the Class A common stock and may adversely affect
the voting and other rights of the holders of Class A common stock. As of the
closing of this offering, we will not have any preferred stock outstanding. We
currently have no plans to create or issue any shares of any new class or series
of preferred stock.
WARRANTS/OPTIONS
Under an engagement letter dated March 2, 1998 between PaineWebber
Incorporated and us and entered into in connection with the private placement of
the Class C preferred stock, we issued to PaineWebber warrants to purchase
143,484 shares of Class A common stock and we issued to a former employee of
PaineWebber, now employed by Salomon Smith Barney, warrants to purchase 35,872
shares of Class A common stock. These warrants are exercisable at an exercise
price of $3.50 per share and expire July 31, 2003. The warrants are entitled to
anti-dilution adjustment in the event of stock splits, stock dividends, stock
distributions or combinations.
Under our agreement with CNET and Snap, which subsequently assigned its
rights to NBC Multimedia, we issued as of March 1, 1999, warrants to purchase
990,000 shares of Class A common stock to CNET and warrants to purchase 510,000
shares of Class A common stock to NBC Multimedia. CNET and NBC Multimedia have
each exercised these warrants in full and have deposited the aggregate exercise
price in escrow. The warrant exercise price is the lesser of $5.00 per share and
the initial public offering price in this offering. The issuance of the shares
of Class A common stock to CNET and NBC as a result of the exercise of these
warrants and the payment of the exercise price to us is subject to the
consummation of the offering.
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<PAGE>
REGISTRATION RIGHTS
PREFERRED STOCKHOLDERS
The stockholders who formerly held shares of Class A preferred stock, other
than Lycos, and the stockholders who formerly held shares of Class C and Class E
preferred stock are entitled to various registration rights with respect to
their shares of Class A common stock issued upon conversion of each class of
preferred stock.
- DEMAND REGISTRATION RIGHTS. The holders of a majority of the shares issued
upon conversion of our Class A preferred stock and the holders of a
majority of the shares issued upon conversion of our Class C preferred
stock, voting as separate classes, have the right to demand that we
register their shares under the Securities Act. The stockholders who
formerly held shares of our Class A preferred stock may exercise their
demand registration rights up to three times, and the stockholders who
formerly held shares of our Class C preferred stock may exercise their
demand registration right once. In addition, the holders of 20% or more of
the shares issued upon conversion of Class E preferred stock may demand
that we register their shares under the Securities Act. If 30% or more of
the shares registered in any Class C or Class E demand registration are
shares requested to be registered by Lycos, then the former holders of
each of our Class C and Class E preferred stock have the right to a second
demand registration.
- PIGGYBACK REGISTRATION RIGHTS. The stockholders who formerly held shares
of our Class A, Class C and Class E preferred stock can request to have
their shares registered under the Securities Act any time we file a
registration statement to register any of our securities for our own
account or for the account of any of our stockholders. The number of times
such rights may be exercised is unlimited, but the number of shares that
can be registered at any one time is subject to limitations that any
underwriters may impose.
- S-3 DEMAND REGISTRATION RIGHTS. The holders of at least a majority of the
shares issued upon conversion of each of our Class A preferred stock and
each of our Class C preferred stock have the right to have their shares
registered under the Securities Act on Form S-3 once we become eligible.
The holders of at least 25% of the shares issued upon conversion of the
Class E preferred stock also have the right to demand a Form S-3
registration once we become eligible. The number of times these Form S-3
registration rights may be exercised is unlimited, but we are required to
file only one Form S-3 in any twelve-month period.
In the case of the stockholders who formerly held shares of our Class A
preferred stock, their registration rights will terminate five years from the
closing of this offering. In the case of the stockholders who formerly held
shares of our Class C and Class E preferred stock, their registration rights
will terminate 30 months from the closing of this offering.
LYCOS
Lycos has the right to have its shares of our Class A common stock
registered any time we file a registration statement for any of our securities
for our own account or the account of any of our stockholders. The number of
times Lycos may exercise its right is unlimited, but the number of shares that
can be registered at any one time is subject to limitations that any
underwriters may impose.
CNET AND NBC MULTIMEDIA
We granted registration rights to CNET and NBC Multimedia with respect to
the shares of Class A common stock issued upon exercise of their warrants. The
holder or holders of a majority of the Class A common shares issued upon
exercise of their warrants may require us to effect one registration under the
Securities Act. If 30% or more of the shares to be registered in that demand
registration are shares requested to be registered by Lycos, then the holders
have the right to a second demand registration.
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<PAGE>
The holder or holders of a majority of the Class A common shares issued upon
exercise of the CNET and NBC Multimedia warrants have the right to have their
Class A common shares registered under the Securities Act any time we file a
registration statement to register any of our securities for our own account or
for the account of any of our stockholders. The number of times such rights may
be exercised is unlimited, but the number of shares that can be registered at
any one time is subject to limitations that any underwriters may impose.
The holder or holders of a majority of the Class A common shares issued upon
exercise of the CNET and NBC Multimedia warrants have the right to have their
Class A common shares registered on Form S-3 once we become eligible. The number
of times this registration right may be exercised is unlimited, but we are
required to file only one Form S-3 in any twelve-month period.
These registration rights will terminate 30 months from the closing of this
offering.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND MAIL.COM'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
Mail.com is subject to the provisions of Section 203 of the Delaware General
Corporation Law. Generally, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the interested
stockholder attained that status with the approval of the board of directors or
unless the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholders. Generally, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years did own, 15% or more of a corporation's voting stock. This
statute could prohibit or delay the accomplishment of mergers or other takeovers
or changes in control with respect to Mail.com and, accordingly, may discourage
attempts to acquire Mail.com.
In addition, provisions of the amended and restated certificate and bylaws,
which provisions will be in effect upon the closing of the offering and are
summarized in the following paragraphs, may be deemed to have an anti-takeover
effect. These provisions may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider to be in its best interests, including
those attempts that might result in a premium over the market price for the
shares held by stockholders.
BOARD OF DIRECTORS VACANCIES. Our bylaws authorize the board of directors
to fill vacant directorships or increase the size of the board of directors.
This may prevent a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
resulting vacancies created by such removal with its own nominees.
SPECIAL MEETINGS OF STOCKHOLDERS. Our bylaws provide that special meetings
of stockholders of Mail.com may be called only by the Chairman or a Co-Chairman,
if any, the Vice Chairman, if any, the President or a majority of the board of
directors.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to the limitations imposed by the Nasdaq National
Market. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of Mail.com by means of a
proxy contest, tender offer, merger or otherwise.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation, or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage.
78
<PAGE>
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our amended and restated certificate of incorporation includes a provision
that eliminates the personal liability of our directors and executive officers
for monetary damages for breach of fiduciary duty as a director or executive
officer, except:
- for any breach of the director's or executive officer's duty of loyalty to
Mail.com or our stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- for unlawful dividends and stock purchases under section 174 of the
Delaware General Corporation Law or
- for any transaction from which the director derived an improper personal
benefit.
Our bylaws provide that:
- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law, subject to very limited exceptions;
- we may indemnify our other employees and agents to the same extent that we
indemnify our officers and directors, unless otherwise required by law,
our amended and restated certificate of incorporation, our bylaws or
agreements; and
- we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to limited exceptions.
Mail.com has entered into indemnity agreements with each of our directors
and executive officers to give them additional contractual assurances regarding
the scope of the indemnification described above and to provide additional
procedural protections. In addition, we have obtained directors' and officers'
insurance providing indemnification for our directors, officers and key
employees for various liabilities. We believe that these indemnification
provisions and agreements are necessary to attract and retain qualified
directors and officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also have the effect of reducing the likelihood of stockholder derivative
litigation against directors and officers, even though a derivative action, if
successful, might otherwise benefit us and our stockholders. Furthermore, a
stockholder's investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and officers under these
indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees for which indemnification is sought, nor
are we aware of any threatened litigation that may result in claims for
indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Continental Stock
Transfer & Trust Company, New York, New York.
LISTING
We have applied to have our Class A common stock included for quotation on
the Nasdaq National Market under the trading symbol "MAIL."
79
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for our Class A
common stock, and no predictions can be made regarding the effect, if any, that
market sales of shares or the availability of shares for sale will have on the
market price prevailing from time to time. As described below, only a limited
number of shares will be available for sale shortly after this offering due to
contractual and legal restrictions on resale. Nevertheless, sales of substantial
amounts of our Class A common stock in the public market after the restrictions
lapse or are waived could adversely affect the prevailing market price.
Upon completion of this offering, we expect to have 42,039,224 shares of
Class A and Class B common stock outstanding (assuming no exercise of the
underwriters' over-allotment option). As of April 30, 1999, we had granted stock
options to employees and directors for the purchase of an aggregate of 7,648,117
shares of Class A common stock. As of April 30, 1999, we also had outstanding
warrants to purchase 209,539 shares of Class A common stock (excluding the
shares of Class A common stock issuable upon exercise of the CNET and NBC
Multimedia warrants). The shares of Class A common stock being sold hereby
(other than shares held by our "affiliates" as defined in the Securities Act and
other than 685,000 shares sold pursuant to the directed share program) will be
freely tradable without restriction or registration under the Securities Act.
All remaining shares were issued and sold by us in private transactions and are
restricted shares under Rule 144. These shares are eligible for public sale only
if registered under the Securities Act or sold in accordance with Rules 144,
144(k) or 701 thereunder.
Shareholders who purchase shares of Class A common stock in this offering
under the directed share program have agreed that they will not sell these
shares for a period of 30 days from the date of this prospectus. After the
expiration of this lockup period, those shares (other than those held by
officers and directors, who are subject to 180 day lockups) will be freely
tradeable without restriction or registration under the Securities Act.
Shareholders owning in the aggregate shares of Class A common
stock have agreed they will not sell any Class A common stock owned by them
without the prior written consent of the representatives of the underwriters for
a period of 180 days from the date of this prospectus is a part. Following the
expiration of this lockup period, approximately shares of Class A common
stock, including shares issuable upon the exercise of options, will be available
for sale in the public market subject to compliance with Rules 144, 144(k) or
701. See "Underwriting."
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 may be relied upon with respect to the resale of
securities originally purchased from us by our employees, directors, officers,
consultants or advisers prior to the closing of this offering, under written
compensatory benefit plans or written contracts relating to the compensation of
such persons. In addition, the Securities and Exchange Commission has indicated
that Rule 701 will apply to stock options granted by us before this offering,
along with the shares acquired upon exercise of such options. Securities issued
in reliance on Rule 701 are deemed to be restricted shares and, beginning 90
days after the date of this prospectus (unless subject to the lockup period
described above), may be sold by persons other than affiliates subject only to
the manner of sale provisions of Rule 144. Affiliates under Rule 144 may sell
their shares without complying with the two-year minimum holding period
requirements.
In general, under Rule 144 a person (or persons whose shares are required to
be aggregated) who owns shares that were acquired from the issuer or an
affiliate of the issuer, directly or indirectly, at least one year prior to the
proposed sale, is entitled to sell, within any three-month period commencing 90
days after the date of this prospectus, a number of shares that does not exceed
the greater of (1) 1% of the then outstanding shares of common stock
(approximately shares immediately after the offering) or (2) the average
weekly trading volume in the common stock during the four calendar
80
<PAGE>
weeks preceding the date on which a notice of sale is filed, subject to
additional publication and notification requirements. In addition, if the shares
were acquired from the issuer or an affiliate of the issuer at least 2 years
prior to the proposed sale a person who is not deemed to have been an affiliate
of Mail.com at any time during the preceding 90 days would be entitled to sell
their shares under Rule 144(k) without regard to the volume limits described
above.
We intend to file a registration statement under the Securities Act covering
approximately shares of Class A common stock reserved for issuance under
the 1999 Stock Option Plan. This registration statement is expected to be filed
soon after the date of this prospectus and will automatically become effective
upon filing. Accordingly, shares registered under this registration statement
will be available for sale in the open market, unless their shares are subject
to vesting restrictions with us or the contractual restrictions described above.
In addition, after this offering, the holders of approximately 16,018,535
shares of Class A common stock will have rights to cause us to register the sale
of their shares under the Securities Act. Registration of these shares under the
Securities Act would result in their shares becoming freely tradeable without
restriction under the Securities Act (except for shares purchased by our
affiliates) immediately upon the effectiveness of a registration statement. See
"Description of Capital Stock--Registration Rights."
81
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and Mail.com has agreed to sell to such underwriter, the number of
shares set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Salomon Smith Barney Inc.........................................................
PaineWebber Incorporated.........................................................
SG Cowen Securities Corporation..................................................
Wit Capital Corporation..........................................................
DLJdirect Inc....................................................................
----------
Total............................................................................ 6,850,000
----------
----------
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of various legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.
The underwriters, for whom Salomon Smith Barney Inc., PaineWebber
Incorporated and SG Cowen Securities Corporation are acting as representatives,
propose to offer some of the shares directly to the public at the public
offering price set forth on the cover page of this prospectus and some of the
shares to certain dealers at the public offering price less a concession not in
excess of $ per share. The underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share on sales to other
dealers. If all of the shares are not sold at the initial offering price, the
representatives may change the public offering price and the other selling
terms. The representatives have advised us that the underwriters do not intend
to confirm any sales to any accounts over which they exercise discretionary
authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 1,027,500 additional shares of
Class A common stock at the public offering price less the underwriting
discount. The underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, in connection with this offering. To the
extent such option is exercised, each underwriter will be obligated, subject to
certain conditions, to purchase a number of additional shares approximately
proportionate to its initial purchase commitment.
At our request, the underwriters will reserve approximately 685,000 shares
of Class A common stock to be sold, at the initial public offering price, to
directors, officers and employees of Mail.com, and their friends and family
members, who will agree to hold their shares for at least 30 days after the date
of this prospectus. This directed share program will be administered by Salomon
Smith Barney Inc. The number of shares of common stock available for sale to the
general public will be reduced to the extent these individuals purchase reserved
shares. Any reserved shares which are not so purchased will be offered by the
underwriters to the general public on the same basis as the other shares offered
hereby.
Mail.com, our officers and directors, and our other stockholders have agreed
that, for a period of 180 days from the date of this prospectus, they will not,
without the prior written consent of Salomon Smith Barney Inc., dispose of or
hedge any common stock, except for shares acquired in the public market
following the offering by persons other than our officers and directors, of
Mail.com or any securities convertible into or exchangeable for Class A common
stock. Salomon Smith Barney Inc. in its sole discretion may release any of the
securities subject to these lock-up agreements at any time without notice.
82
<PAGE>
Prior to this offering, there has been no public market for the Class A
common stock. Consequently, the initial public offering price for the shares was
determined by negotiations between us and the representatives. Among the factors
considered in determining the initial public offering price were our record of
operations, our current financial condition, our future prospects, our markets,
the economic conditions in and future prospects for the industry in which we
compete, our management, and currently prevailing general conditions in the
equity securities markets, including current market valuations of publicly
traded companies considered comparable to Mail.com. We cannot assure you,
however, that the prices at which the shares will sell in the public market
after this offering will not be lower than the price at which they are sold by
the underwriters or that an active trading market in the Class A common stock
will develop and continue after this offering.
We have applied to have the Class A common stock included for quotation on
the Nasdaq National Market under the symbol "MAIL".
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by Mail.com in connection with this offering. These
amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of Class A common stock to
cover over-allotments.
<TABLE>
<CAPTION>
PAID BY MAIL.COM
-------------------------
<S> <C> <C>
FULL
NO EXERCISE EXERCISE
----------- ------------
Per share.......................................................... $ $
Total.............................................................. $ $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may over-allot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of Class A common stock in excess of the number of shares to be purchased
by the underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the Class A common stock in
the open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of bids or purchases
of Class A common stock made for the purpose of preventing or retarding a
decline in the market price of the Class A common stock while the offering is in
progress. Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when Salomon Smith Barney Inc., in covering syndicate
short positions or making stabilizing purchases, repurchases shares originally
sold by that syndicate member. These activities may cause the price of the Class
A common stock to be higher than the price that otherwise would exist in the
open market in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or in the over-the-counter market, or
otherwise and, if commenced, may be discontinued at any time.
Salomon Smith Barney and PaineWebber have performed investment banking and
advisory services for us from time to time for which they have received
customary compensation and reimbursement of expenses. Among other services, they
acted as our placement agents in connection with the private placement of Class
E preferred stock in March 1999, and PaineWebber acted as private placement
agent in connection with the private placement of Class C preferred stock in
July and August of 1998. In the private placement of our Class C preferred
stock, we granted PaineWebber a "right of first refusal" to serve as co-advisor,
co-placement agent or co-managing underwriter with respect to securities
offerings or specified financings that we may wish to undertake through August
31, 2000. The representatives may, from time to time, engage in transactions
with and perform services for us in the ordinary course of our business.
We have agreed to indemnify the underwriters against various liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
83
<PAGE>
LEGAL MATTERS
The validity of the shares of Class A common stock offered hereby will be
passed upon for Mail.com by Winthrop, Stimson, Putnam & Roberts, New York, New
York. Other legal matters in connection with this offering will be passed upon
for the underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The financial statements of Mail.com, Inc. as of December 31, 1997 and 1998
and for each of the years in the three year period ended December 31, 1998
included in this prospectus have been so included in reliance on the report of
KPMG LLP, independent accountants, appearing elsewhere herein, upon authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the Class A common stock offered hereby.
This prospectus, which constitutes a part of the registration statement, does
not contain all of the information provided in the registration statement or the
exhibits and schedules which are part of the registration statement. For further
information with respect to Mail.com and the Class A common stock, reference is
made to the registration statement and the related exhibits and schedules. You
may read and copy any document we file at the SEC's public reference rooms in
Washington, DC, New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings will also be available to the public from the SEC's Web site at
http://www.sec.gov.
84
<PAGE>
MAIL.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report............................................................................... F-2
Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999 (unaudited)............................. F-3
Statements of Operations for the years ended December 31, 1996, 1997 and 1998, and for the three months
ended March 31, 1998 (unaudited) and March 31, 1999 (unaudited).......................................... F-4
Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1996, 1997 and 1998, and for
the three months ended March 31, 1999 (unaudited)........................................................ F-5
Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998, and for the three months
ended March 31, 1998 (unaudited) and March 31, 1999 (unaudited).......................................... F-7
Notes to Financial Statements.............................................................................. F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Mail.com, Inc.:
We have audited the accompanying balance sheets of Mail.com, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for each of the years in the
three-year period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mail.com, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
March 19, 1999
F-2
<PAGE>
MAIL.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
---------------------- MARCH 31, (SEE NOTE 1 (B))
1997 1998 1999 MARCH 31, 1999
---------- ---------- ----------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 909,718 $8,414,352 2$0,136,543 $27,636,543
Accounts receivable, net of allowance for doubtful accounts
of $92,401 and $127,400 as of December 31, 1998 and as of
March 31, 1999, respectively............................. -- 702,065 1,417,374 1,417,374
Prepaid expenses and other current assets.................. 36,676 222,577 1,031,820 1,031,820
Receivable from sale leaseback............................. -- 631,003 -- --
---------- ---------- ----------- -----------------
Total current assets..................................... 946,394 9,969,997 22,585,737 30,085,737
---------- ---------- ----------- -----------------
Property and equipment, net.................................. 928,028 4,341,107 7,316,557 7,316,557
Domain assets, net........................................... 651,468 1,010,416 2,032,175 2,032,175
Partner advances............................................. -- 4,714,821 4,603,902 28,971,868
Investment in affiliated companies........................... 100,000 250,000 250,000 250,000
Other........................................................ 19,964 58,147 323,212 323,212
---------- ---------- ----------- -----------------
Total assets............................................. $2,645,854 $20,344,488 3$7,111,583 $68,979,549
---------- ---------- ----------- -----------------
---------- ---------- ----------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................... $ 66,725 $1,753,582 $2,658,001 $ 2,658,001
Accrued expenses........................................... 320,930 1,181,613 2,529,108 2,529,108
Accrued payroll and other related costs.................... 140,047 486,981 517,911 517,911
Current portion of capital lease obligations............... 240,513 479,461 714,050 714,050
Current portion of domain asset purchase obligations....... 62,654 168,582 168,582 168,582
Due to officer............................................. 200,000 -- -- --
Deferred revenue........................................... 106,488 823,908 1,376,264 1,376,264
---------- ---------- ----------- -----------------
Total current liabilities................................ 1,137,357 4,894,127 7,963,916 7,963,916
---------- ---------- ----------- -----------------
Capital lease obligations, less current portion.............. 568,728 1,437,731 2,506,645 2,506,645
Domain asset purchase obligation, less current portion....... 150,155 216,886 190,355 190,355
Deferred revenue............................................. 222,699 1,080,737 1,120,486 1,120,486
Redeemable convertible preferred stock, $0.01 par value;
Class C-- 12,000,000 shares authorized; 3,776,558 shares
issued and outstanding at December 31, 1998 and March 31,
1999, with an aggregate liquidation preference of
$13,047,650; no shares issued and outstanding pro forma
(unaudited)................................................ -- 13,047,650 13,047,650 --
Stockholders' equity (deficit):
Convertible preferred stock, $0.01 par value; 60,000,000
shares authorized:
Class A--12,000,000 shares authorized; 4,185,000, 6,185,000
and 6,185,000 shares issued and outstanding at December
31, 1997 and 1998, and at March 31, 1999, respectively,
with an aggregate liquidation preference of $2,932,580,
$7,647,580 and $7,647,580 at December 31, 1997 and 1998,
and at March 31, 1999, respectively; no shares issued and
outstanding pro forma (unaudited)........................ 41,850 61,850 61,850 --
Class D--10,000,000 shares authorized; no shares issued and
outstanding.............................................. -- -- --
Class E--10,000,000 shares authorized; 0, 0 and 3,200,000
shares issued and outstanding at December 31, 1997 and
1998, and at March 31, 1999, respectively, with an
aggregate liquidation preference of $16,000,000 at March
31, 1999; no shares issued and outstanding pro forma
(unaudited).............................................. -- -- 32,000 --
Common stock, $0.01 par value; 130,000,000 shares authorized:
Class A--120,000,000 shares authorized; 4,097,500,
5,931,405 and 6,682,481 shares issued and outstanding at
December 31, 1997 and 1998, and March 31, 1999,
respectively; 25,004,922 issued and outstanding pro forma
(unaudited).............................................. 40,975 59,314 66,825 250,051
Class B--10,000,000 shares authorized, issued and
outstanding at December 31, 1997 and 1998 and March 31,
1999; with an aggregate liquidation preference of
$1,000,000............................................... 100,000 100,000 100,000 100,000
Additional paid-in capital................................... 4,652,168 16,537,440 35,640,616 103,868,605
Subscriptions receivable..................................... (727,613) (500) (210,950) (210,950)
Deferred compensation........................................ -- (1,025,399) (934,399) (934,399)
Accumulated deficit.......................................... (3,540,465) (16,065,348) (22,473,411) (45,875,160)
---------- ---------- ----------- -----------------
Total stockholders' equity (deficit)..................... 566,915 (332,643) 12,282,531 57,198,147
---------- ---------- ----------- -----------------
Commitments and contingencies
Total liabilities and stockholders' equity (deficit)..... $2,645,854 $20,344,488 3$7,111,583 $68,979,549
---------- ---------- ----------- -----------------
---------- ---------- ----------- -----------------
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
MAIL.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------- -------------------------
1996 1997 1998 1998 1999
---------- ---------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................. $ 19,015 $ 173,234 $ 1,494,762 $ 80,413 $ 1,185,939
---------- ---------- ----------- ----------- ------------
Operating expenses:
Cost of revenues........ 187,890 1,081,848 2,890,582 351,665 1,477,690
Sales and marketing..... 65,096 930,420 6,679,478 272,650 3,590,636
General and
administrative........ 221,932 862,028 3,482,097 275,206 1,364,898
Product development..... 93,698 296,140 1,573,465 218,292 1,176,959
---------- ---------- ----------- ----------- ------------
Total operating
expenses............ 568,616 3,170,436 14,625,622 1,117,813 7,610,183
---------- ---------- ----------- ----------- ------------
Loss from
operations.......... (549,601) (2,997,202) (13,130,860) (1,037,400) (6,424,244)
---------- ---------- ----------- ----------- ------------
Other income (expense):
Gain on sale of
investment............ -- -- 438,000 -- --
Interest income......... 6,869 36,264 277,164 6,905 114,904
Interest expense........ (1,980) (34,815) (109,187) (13,368) (98,723)
---------- ---------- ----------- ----------- ------------
Total other income
(expense), net...... 4,889 1,449 605,977 (6,463) 16,181
---------- ---------- ----------- ----------- ------------
Net loss.................. $ (544,712) $(2,995,753) $(12,524,883) $(1,043,863) $ (6,408,063)
---------- ---------- ----------- ----------- ------------
---------- ---------- ----------- ----------- ------------
Basic and diluted net loss
per share............... $ (0.04) $ (0.21) $ (0.86) $ (0.07) $ (0.39)
---------- ---------- ----------- ----------- ------------
---------- ---------- ----------- ----------- ------------
Weighted-average basic and
diluted shares
outstanding............. 13,725,278 14,097,500 14,607,915 14,100,244 16,468,221
---------- ---------- ----------- ----------- ------------
---------- ---------- ----------- ----------- ------------
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
MAIL.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CLASS A PREFERRED CLASS A COMMON CLASS B COMMON
STOCK STOCK STOCK ADDITIONAL
---------------------- ---------------------- -------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ----------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995......... -- $ -- -- $ -- $ $ --
Issuance of Class A common stock to
founders........................... -- -- 2,422,500 24,225 -- -- (12,112)
Issuance of Class B common stock to
founder............................ -- -- -- -- 10,000,000 100,000 900,000
Issuance of Class A preferred stock
to founders........................ 100,000 1,000 -- -- -- -- (500)
Domain assets purchased in exchange
for Class A preferred stock........ 225,000 2,250 -- -- -- -- 20,330
Domain assets purchased in exchange
for Class A common stock........... -- -- 1,675,000 16,750 -- 160,670
Issuance of Class A preferred stock
for cash........................... 400,000 4,000 -- -- -- -- 161,000
Net loss............................. -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- --------- ----------
Balance at December 31, 1996......... 725,000 7,250 4,097,500 40,975 10,000,000 100,000 1,229,388
Payment of founder's Class B common
stock subscription receivable...... -- -- -- -- -- -- --
Issuance of Class A preferred stock
in exchange for asset.............. 100,000 1,000 -- -- -- -- 99,000
Issuance of Class A preferred stock,
net of $54,640 issuance costs...... 3,290,000 32,900 -- -- -- -- 3,202,480
Issuance of Class A preferred stock
in exchange for services........... 70,000 700 -- -- -- -- 69,300
Issuance of options and warrants in
connection with partner and
consultant agreements.............. -- -- -- -- -- -- 52,000
Net loss............................. -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- --------- ----------
Balance at December 31, 1997......... 4,185,000 41,850 4,097,500 40,975 10,000,000 100,000 4,652,168
Issuance of Class A common stock to
vendor............................. -- -- 2,745 27 -- -- 5,461
Issuance of Class A common stock in
connection with partner
agreements......................... -- -- 1,831,160 18,312 -- -- 7,213,105
Proceeds from stock subscriptions
receivable......................... -- -- -- -- -- -- --
Issuance of Class A preferred stock
as a result of options exercised,
net of $226,696 issuance costs..... 2,000,000 20,000 -- -- -- -- 3,753,304
Issuance of warrants for Class A
common stock....................... -- -- -- -- -- -- 129,675
Issuance of warants in connection
with Class C redeemable convertible
preferred stock.................... -- -- -- -- -- -- 169,943
Offering costs in connection with
Class C redeemable convertible
preferred stock.................... -- -- -- -- -- -- (853,575)
Issuance of stock options to
officer............................ -- -- -- -- -- -- 1,096,399
Amortization of deferred compensation -- -- -- -- -- -- --
Issuance of stock options to
partner............................ -- -- -- -- -- -- 370,960
Net loss............................. -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- --------- ----------
Balance at December 31, 1998......... 6,185,000 $ 61,850 5,931,405 $ 59,314 10,000,000 $ 100,000 $16,537,440
--------- ----------- --------- ----------- --------- --------- ----------
--------- ----------- --------- ----------- --------- --------- ----------
<CAPTION>
TOTAL
STOCKHOLDERS'
SUBSCRIPTIONS DEFERRED ACCUMULATED EQUITY
RECEIVABLE COMPENSATION DEFICIT (DEFICIT)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995......... $ -- -- $ -- $ --
Issuance of Class A common stock to
founders........................... (12,113) -- -- --
Issuance of Class B common stock to
founder............................ (450,000) -- -- 550,000
Issuance of Class A preferred stock
to founders........................ (500) -- -- --
Domain assets purchased in exchange
for Class A preferred stock........ -- -- -- 22,580
Domain assets purchased in exchange
for Class A common stock........... -- 177,420
Issuance of Class A preferred stock
for cash........................... -- -- -- 165,000
Net loss............................. -- -- (544,712) (544,712)
------------ ------------- ------------ -------------
Balance at December 31, 1996......... (462,613) -- (544,712) 370,288
Payment of founder's Class B common
stock subscription receivable...... 450,000 -- -- 450,000
Issuance of Class A preferred stock
in exchange for asset.............. -- -- -- 100,000
Issuance of Class A preferred stock,
net of $54,640 issuance costs...... (715,000) -- -- 2,520,380
Issuance of Class A preferred stock
in exchange for services........... -- -- -- 70,000
Issuance of options and warrants in
connection with partner and
consultant agreements.............. -- -- -- 52,000
Net loss............................. -- -- (2,995,753) (2,995,753)
------------ ------------- ------------ -------------
Balance at December 31, 1997......... (727,613) -- (3,540,465) 566,915
Issuance of Class A common stock to
vendor............................. -- -- -- 5,488
Issuance of Class A common stock in
connection with partner
agreements......................... -- -- -- 7,231,417
Proceeds from stock subscriptions
receivable......................... 727,113 -- -- 727,113
Issuance of Class A preferred stock
as a result of options exercised,
net of $226,696 issuance costs..... -- -- -- 3,773,304
Issuance of warrants for Class A
common stock....................... -- -- -- 129,675
Issuance of warants in connection
with Class C redeemable convertible
preferred stock.................... -- -- -- 169,943
Offering costs in connection with
Class C redeemable convertible
preferred stock.................... -- -- -- (853,575)
Issuance of stock options to
officer............................ -- (1,096,399) -- --
Amortization of deferred compensation -- 71,000 -- 71,000
Issuance of stock options to
partner............................ -- -- -- 370,960
Net loss............................. -- -- (12,524,883) (12,524,883)
------------ ------------- ------------ -------------
Balance at December 31, 1998......... $ (500) $(1,025,399) ($16,065,348) $ (332,643)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
MAIL.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CLASS A PREFERRED CLASS E PREFERRED CLASS A COMMON STOCK CLASS B COMMON STOCK
STOCK STOCK ADDITIONAL
---------------------- ---------------------- ---------------------- -------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ----------- --------- ----------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1998............ 6,185,000 $ 61,850 -- $ -- 5,931,405 $ 59,314 10,000,000 $ 100,000 $16,537,440
Issuance of Class E
preferred stock net
of issuance costs of
$834,605
(unaudited)......... -- -- 3,200,000 32,000 -- -- -- -- 15,133,395
Purchase of domain
name (unaudited).... -- -- -- -- 225,000 2,250 -- -- 1,122,750
Issuance of Class A
common stock in
connection with
partner agreements
(unaudited)......... -- -- -- -- 471,076 4,711 -- -- 2,350,669
Issuance of stock
options to
consultant in lieu
of services
(unaudited)......... -- -- -- -- -- -- -- -- 8,992
Issuance of Class A
common stock to
vendor
(unaudited)......... -- -- -- -- 55,000 550 -- -- 274,450
Issuance of warrants
to vendor
(unaudited)......... -- -- -- -- -- -- -- -- 1,970
Amortization of
deferred
compensation........ -- -- -- -- -- -- -- -- --
Proceeds from stock
subscription
receivable
(unaudited)......... -- -- -- -- -- -- -- -- --
Issuance of employee
stock options....... -- -- -- -- -- -- -- -- 210,950
Net loss for three
months ended March
31, 1999
(unaudited)......... -- -- -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- --------- --------- ----------
Balance at March 31,
1999 (unaudited).... 6,185,000 $ 61,850 3,200,000 $ 32,000 6,682,481 $ 66,825 10,000,000 $ 100,000 $35,640,616
--------- ----------- --------- ----------- --------- ----------- --------- --------- ----------
--------- ----------- --------- ----------- --------- ----------- --------- --------- ----------
<CAPTION>
TOTAL
STOCKHOLDERS'
SUBSCRIPTIONS DEFERRED ACCUMULATED EQUITY
RECEIVABLE COMPENSATION DEFICIT (DEFICIT)
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at December
31, 1998............ $ (500) $(1,025,399) ($16,065,348) $ (332,643)
Issuance of Class E
preferred stock net
of issuance costs of
$834,605
(unaudited)......... -- -- -- 15,165,395
Purchase of domain
name (unaudited).... -- -- -- 1,125,000
Issuance of Class A
common stock in
connection with
partner agreements
(unaudited)......... -- -- -- 2,355,380
Issuance of stock
options to
consultant in lieu
of services
(unaudited)......... -- -- -- 8,992
Issuance of Class A
common stock to
vendor
(unaudited)......... -- 275,000
Issuance of warrants
to vendor
(unaudited)......... -- -- -- 1,970
Amortization of
deferred
compensation........ -- 91,000 -- 91,000
Proceeds from stock
subscription
receivable
(unaudited)......... 500 -- -- 500
Issuance of employee
stock options....... (210,950) -- -- --
Net loss for three
months ended March
31, 1999
(unaudited)......... -- -- (6,408,063) (6,408,063)
------------ ------------- ------------ ------------
Balance at March 31,
1999 (unaudited).... $ (210,950) $ (934,399) ($22,473,411) $12,282,531
------------ ------------- ------------ ------------
------------ ------------- ------------ ------------
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
MAIL.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------ --------------------------
1996 1997 1998 1998 1999
--------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(544,712) $(2,995,753) $(12,524,883) $ (1,043,863) $ (6,408,063)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non-cash charges related to partner agreements.......... -- -- 3,017,083 128,858 2,742,300
Non-cash compensation................................... -- 122,000 520,579 -- 10,962
Depreciation and amortization........................... 15,826 162,449 897,340 192,340 538,130
Amortization of domain assets........................... 25,351 126,340 206,426 44,459 103,240
Amortization of deferred compensation................... -- -- 71,000 -- 91,000
Write-off of property and equipment..................... -- 84,000 -- -- --
Provision for doubtful accounts......................... -- -- 92,401 -- 38,089
Changes in operating assets and liabilities:
Accounts receivable................................... -- -- (794,466) -- (753,398)
Prepaid expenses and other current assets............. (34,309) (10,887) (185,901) 34,228 (476,095)
Partner advances...................................... -- -- (500,000) -- --
Other assets.......................................... 1,378 (8,727) (35,987) (52,032) (598,212)
Accounts payable...................................... -- 66,725 1,686,857 65,327 904,419
Accrued expenses...................................... 62,316 258,614 860,683 (118,053) 1,347,495
Accrued payroll and other related costs............... 28,436 111,611 346,934 (98,902) 30,930
Deferred revenue...................................... 6,289 322,898 1,575,458 171,491 592,104
--------- ----------- ------------ ------------ ------------
Net cash used in operating activities............... (439,425) (1,760,730) (4,766,476) (676,147) (1,837,099)
--------- ----------- ------------ ------------ ------------
Cash flows from investing activities:
Purchases of domain assets.............................. (60,133) (334,312) (384,791) (92,697) --
Loan-related party...................................... (50,788) -- -- -- --
Repayment of loan-related party......................... 20,000 30,788 -- -- --
Proceeds from sale leaseback............................ 37,534 709,874 642,847 146,345 2,145,383
Purchases of property and equipment..................... (81,237) (895,689) (4,187,607) (178,420) (3,513,580)
--------- ----------- ------------ ------------ ------------
Net cash used in investing activities............... (134,624) (489,339) (3,929,551) (124,772) (1,368,197)
--------- ----------- ------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of Class A, C and E preferred
stock................................................. 165,000 2,520,380 16,682,379 585,634 15,164,895
Net proceeds from issuance of Class A and B common
stock................................................. 550,000 450,000 12,113 -- --
Payments under capital lease obligations................ (12,674) (138,870) (283,711) (138,757) (210,877)
Due to officer.......................................... -- 200,000 (200,000) -- --
Payments under domain asset purchase obligations........ -- -- (10,120) (10,120) (26,531)
--------- ----------- ------------ ------------ ------------
Net cash provided by financing activities........... 702,326 3,031,510 16,200,661 436,757 14,927,487
--------- ----------- ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents....................................... 128,277 781,441 7,504,634 (364,162) 11,722,191
Cash and cash equivalents at beginning of the period.... -- 128,277 909,718 909,718 8,414,352
--------- ----------- ------------ ------------ ------------
Cash and cash equivalents at the end of the period...... $ 128,277 $ 909,718 $ 8,414,352 $ 545,556 $ 20,136,543
--------- ----------- ------------ ------------ ------------
--------- ----------- ------------ ------------ ------------
Supplemental disclosure of non-cash information:
During the years ended December 31, 1996, 1997 and 1998, and during the three month periods ended March 31, 1998 and 1999,
the Company paid approximately $2,000, $35,000, $85,000, $13,000 and $45,000 respectively, for interest.
Non-cash investing activities:
During the year ended December 31, 1996, the Company purchased domain assets in exchange for the issuance of Class A
preferred and common stock. The transaction resulted in a non-cash investing activity of $200,000.
During the year ended December 31, 1996, the Company issued 100,000 shares of Class A preferred stock in exchange for
stock. The transaction resulted in a non-cash investing activity of $100,000.
During the year ending December 31, 1998, and the three month periods ending March 31, 1998 and 1999, the Company
issued 1,831,160, 0 and 471,076, respectively, shares of its common stock in connection with some of its Mail.com
partner agreements. These transactions resulted in a non-cash investing activity of approximately $7,196,000, 0 and
2,355,000 for the year ending December 31, 1998 and the three month periods March 31, 1998 and 1999, respectively.
Non-cash financing activities:
The Company entered into various capital leases for computer equipment. These capital lease obligations resulted in
non-cash financing activities aggregating $211,200, $749,585, $1,391,662, $146,345 and $1,514,380 for the years ended
December 31, 1996, 1997, and 1998, and for the three month periods ended March 31, 1998 and 1999, respectively.
The Company is obligated under various agreements to purchase domain assets. These obligations resulted in non-cash
financing activities aggregating $226,585, $169,003, $0 and $0 for the years ended December 31, 1997 and 1998, and for
the three month periods ended March 31, 1998 and 1999, respectively.
</TABLE>
See accompanying notes to financial statements
F-7
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(A) SUMMARY OF OPERATIONS
Mail.com, Inc. (the "Company" or "Mail.com"), formerly known as iName, Inc.,
is a provider of free and pay email services and functions to Web users. The
Company provides Web users with its email messaging services primarily through
its own Web sites and its network of third-party Web site partners ("Mail.com
Partners"). The Company generates revenues primarily from advertising related
sales, including, direct marketing and e-commerce promotions and from premium
services offered on a subscription basis. The Company has assembled a portfolio
of approximately 1,200 domain names.
In addition to providing email services, Mail.com provides domain name
trading services through its Best Domains Web site. Best Domains is a trading
site for domain names on the Internet.
The Company was incorporated in the State of Delaware on August 1, 1994
(inception), however, the business commenced operations in 1996 and launched its
first commercial email service in November 1996. The Company's financial
statements as of December 31, 1994 and 1995 and for the period from August 1,
1994 through December 31, 1995 reflect immaterial transactions. Accordingly, the
Company's results of operations for the period from August 1, 1994 through
December 31, 1995 have been combined with the Company's results of operations
for the year ended December 31, 1996 to facilitate presentation due to the
limited activity during the earlier period. During 1994 and 1995, the Company
only incurred expenses which resulted in a reported net loss of approximately
$6,000 and $3,000, respectively.
Inherent in the Company's business are various risks and uncertainties,
including its limited operating history, historical operating losses, dependence
upon strategic alliances, and the limited history of Web-based email and email
advertising. The Company's future success will be dependent upon its ability to
create and deliver effective and competitive email services, the acceptance of
the Internet and Web-based email as a medium for advertising, and the Company's
ability to develop and provide new services that meet members' changing
requirements, including the effective use of leading technologies, to continue
to enhance its current services, and to influence and respond to emerging
industry standards and other technological changes on a timely and
cost-effective basis.
(B) INITIAL PUBLIC OFFERING AND PRO FORMA BALANCE SHEET--UNAUDITED
In March 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission ("SEC") that
would permit the Company to sell shares of its Class A common stock in
connection with a proposed initial public offering ("IPO").
The accompanying pro forma balance sheet as of March 31, 1999 gives effect
to (i) the issuance, at the closing of the offering, of an aggregate of 1.5
million shares of Class A common stock to CNET and NBC Multimedia, at a purchase
price equal to the lower of $5 per warrant or the price per share in an initial
public offering, for net proceeds of approximately $7.5 million; (ii) the
automatic conversion on a one-for-one basis of all outstanding shares of
convertible preferred stock into 13,161,558 shares of Class A common stock upon
the closing of this offering; (iii) the issuance upon the closing of this
offering of 2,368,907 shares of Class A common stock in the aggregate to CNET
and Snap, and 210,000 shares of Class A common stock to NBC Multimedia, both at
the IPO price which is assumed to be $11 per share, in full settlement of the
contingent obligations to issue additional shares of
F-8
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Class A common stock to them and (iv) the return of 1,000,000 shares of Class A
common stock issued at $3.50 per share from GeoCities and the write-off of a
$500,000 non-refundable fee paid to GeoCities both of which were done in
connection with cancelling and rescinding the old contract and entering into a
new advertising agreement; and (v) the issuance of 2,081,977 shares of Class A
common stock at the closing of the offering, in full settlement of the Company's
contingent obligations to issue additional equity securities. Such issuances of
Class A common shares at the closing of this offering will be recorded as a
non-cash dividend to the Company's preferred stockholders. For purposes of the
pro forma balance sheet, the amount of the dividend is based on a value of $11
per common share, which is the mid point of the offering range in the IPO. The
actual amount of the dividend will be determined using the initial public
offering price upon consummation of the offering.
(C) UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial statements of the Company as of March 31, 1999, and
for the three months ended March 31, 1998 and 1999, are unaudited. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the SEC relating
to interim financial statements. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary for the fair
presentation of the financial position and the results of its operations and its
cash flows have been included in such unaudited financial statements. The
results of operations for the three months ended March 31, 1998 and 1999 are not
necessarily indicative of the results to be expected for the entire year.
(D) USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(E) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid securities, with original maturities
of three months or less when acquired, to be cash equivalents. Cash equivalents
at December 31, 1997 and 1998 and March 31, 1999 were approximately $773,000,
$7,727,000 and $19,952,219, respectively.
(F) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the related assets,
generally ranging from three to five years. Property and equipment under capital
leases are stated at the present value of minimum lease payments and are
amortized using the straight-line method over the shorter of the lease term or
the estimated useful lives of the assets. Leasehold improvements are amortized
using the straight-line method over the estimated useful lives of the assets or
the term of the lease, whichever is shorter.
F-9
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) DOMAIN ASSETS AND REGISTRATION FEES
A domain name is the part of an email address that comes after the @ sign
(for example, if [email protected] is the email address then "mail.com" is the
domain name). Domain assets represent the purchase of domain names and are
amortized using the straight-line method over their economic useful lives, which
has been estimated to be five years. Domain assets are stated at cost. Domain
assets acquired in exchange for future payment obligations are stated at the net
present value of such payments using a discount rate of 8.5%. The associated
payment obligation is also recorded at the net present value of the payment
obligations (see note 2). Payment terms vary from two to seven years.
Amortization of domain assets is charged to cost of revenues. The Company's
policy is to evaluate its domain assets prior to paying its annual registration
renewal fees. Any impairment is charged to cost of revenues. Retirements, sales
and disposals of domain assets are recorded by removing the cost and accumulated
amortization with the resulting amount charged to cost of revenues.
The Company pays domain name registration fees in advance to InterNIC, a
cooperative activity between the US government and Network Solutions, Inc.,
which is the national registry for domain names in the US. Payment of these fees
ensures legal ownership and registration of domain names. The initial
registration period is for a two year period with subsequent one year renewal
periods. These costs are deferred and amortized over the related registration
period.
(H) IMPAIRMENT OF LONG-LIVED ASSETS
Periodically, management determines whether any property and equipment or
any other assets have been impaired based on the criteria established in SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of." During 1997, the Company made an adjustment of
$84,000 to reduce the carrying value of a computer system deemed to be impaired.
(I) INCOME TAXES
Income taxes are accounted for under the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in results of operations in the period that
the tax change occurs. Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be realized.
(J) REVENUE RECOGNITION
The Company's revenues are derived principally from the sale of banner
advertisements. Other advertising revenue sources include up-front placement
fees and promotions. The Company's advertising products currently consist of
banner advertisements that appear on pages within the Company's properties,
promotional sponsorships that are typically focused on a particular event and
merchant buttons on targeted advertising inventory encouraging users to complete
a transaction. Advertising was
F-10
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a new source of revenue in 1998. Previously, the main source of revenue was
subscription services. For the year ended December 31, 1998 and for the three
months ended March 31, 1998 and 1999, revenue from advertising related sales
approximated $1,117,000 $10,000 and $1,007,000, respectively. Advertising
revenue is recognized as impressions are delivered providing collection is
probable. Up-front placement fees represent funds received from direct marketers
and e-commerce companies upon commencement of the contract. Such fees are
recorded as deferred revenues and amortized ratably to revenue over the term of
the contract.
The Company attempts to sell all available advertising space through a
combination of advertisements that are sold on either a cost per thousand
("CPM") basis whereby the advertiser pays an agreed upon amount for each
thousand advertisements or on a cost per action basis whereby revenue is
generated only if the member responds to the advertisement with an action such
as by "clicking" on the advertisement or purchasing the product advertised. In a
CPM based advertising contract, revenue is recognized ratably as advertisements
or impressions are delivered. In a cost per action contract, revenue is
recognized as members "click" or otherwise respond to the advertisement. In
instances where revenue is the result of a purchase by a member, revenue is
recognized after the item is purchased based upon notification from the vendor.
The Company trades advertisements on its Web properties in exchange for
advertisements on the Internet sites of other companies. Barter revenues and
expenses are recorded at the fair market value of services provided or received,
whichever is more determinable in the circumstances. Revenue from barter
transactions is recognized as income when advertisements are delivered on the
Company's Web properties. Barter expense is recognized when the Company's
advertisements are run on other companies' Web sites. If the advertising
impressions are received from the customer prior to the Company delivering the
advertising impressions a liability is recorded, and if the Company delivers the
advertising impressions to the other companies' Web sites prior to receiving the
advertising impressions a prepaid expense is recorded. As of December 31, 1998
and March 31, 1999, the Company has recorded a liability of approximately
$71,000 and $51,000, respectively, for barter advertising to be delivered.
Barter revenues and expenses were approximately $162,000 and $233,000,
respectively, during 1998. Barter revenues and expenses were approximately $0
and $0; and $144,000 and $124,000 for the three months ended March 31, 1998 and
1999, respectively.
Subscription services are deferred and recognized ratably over the term of
the subscription periods of one, two and five years as well as eight years for
its lifetime subscriptions. Commencing March 10, 1999, the Company no longer
offers lifetime memberships and only offers monthly and annual subscriptions.
Deferred revenues principally consist of subscription fees received from members
for use of the Company's premium email services. The Company is obligated to
provide any enhancements or upgrades it develops and other support in accordance
with the terms of the applicable Mail.com Partner agreements. For the years
ended December 31, 1996, 1997 and 1998, and for the three months ended March 31,
1998 and 1999, revenues from email subscriptions were approximately $2,000,
$61,000, $285,000, $41,000 and $128,000, respectively. The Company provides an
allowance for credit card charge backs on its subscription services based upon
historical experience.
The Company has entered into certain partner agreements whereby the Company
compensates its partners based upon a percentage of net revenues generated by
the Company on its partners' email
F-11
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Web sites. The Company's partner payments are included as a component of sales
and marketing expenses.
Revenues from the sale of domain names are recognized at the time when the
ownership of the domain name is transferred provided that no significant Company
obligation remains and collection of the resulting receivable is probable. For
the years ended December 31, 1996, 1997, and 1998, and for the three month
periods ended March 31, 1998 and 1999, revenues from the sale of domain names
and other related services were approximately $17,000, $112,000, $93,000,
$29,000 and $51,000, respectively.
(K) PRODUCT DEVELOPMENT COSTS
Product development costs consist principally of salaries and related costs,
which are charged to expense as incurred.
(L) SALES AND MARKETING COSTS
Marketing expense includes the costs to acquire and retain subscribers,
advertising and other general sales and marketing costs. Sales and marketing
costs include expenses related to customer acquisitions of approximately
$631,000 and $1,709,000 in cash and approximately $0 and $3,017,000 in common
stock issuances during 1997 and 1998, respectively, and approximately $123,000
and $407,000 in cash and approximately $0 and $2,358,000 in common stock for the
three month periods ended March 31, 1998 and 1999, respectively.
The Company expenses the cost of advertising and promoting its services as
incurred. Such costs are included in sales and marketing and totaled
approximately $2,000, $8,000, and $300,000 and $7,473 and $188,824 for the years
ending December 31, 1996, 1997, and 1998 and for the three month periods ended
March 31, 1998 and 1999, respectively.
(M) FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents and accounts
receivable. At December 31, 1997 and 1998, the fair value of these instruments
approximated their financial statement carrying amount because of the short-term
maturity of these instruments. Substantially all of the Company's cash
equivalents were invested in money market accounts. The Company has not
experienced any significant credit loss to date. One advertiser accounted for
31% and 32% of our revenue and 36% and 22% of accounts receivable in 1998 and
for the three months ended March 31, 1999, respectively. Revenues from the
Company's five largest advertisers accounted for an aggregate of 44% of our
revenues in 1998, and 100% and 51% of our revenues for the three months ended
March 31, 1998 and 1999, respectively. No single customer exceeded 10% of either
revenue or accounts receivable in either 1997 or 1996.
(N) STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation arrangements in accordance
with Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 allows entities to continue to apply the
F-12
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
provisions of Accounting Principle Board ("APB") Opinion No. 25 and provide pro
forma net earnings (loss) disclosures for employee stock option grants as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.
(O) BASIC AND DILUTED NET LOSS PER SHARE
Loss per share is presented in accordance with the provisions of SFAS No.
128. "Earnings Per Share", and the Securities and Exchange Commission Staff
Accounting Bulletin No. 98. SFAS No. 128 replaced the presentation of primary
and fully diluted earnings (loss) per share (EPS), with a presentation of basic
EPS and diluted EPS. Under SFAS No. 128, basic EPS excludes dilution for common
stock equivalents and is computed by dividing income or loss available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock and resulted in the issuance of common stock. Diluted net loss
per share is equal to basic loss per share since all common stock equivalents
are anti-dilutive for each of the periods presented.
Diluted net loss per common share for the years ended December 31, 1996,
1997 and 1998, and for the three months ended March 31, 1998 and 1999, does not
include the effects of employee options to purchase 2,195,770, 3,901,321,
6,656,297, 5,016,452 and 7,547,967 shares of common stock, respectively, 0,
20,000, 3,021,134, 20,000 and 3,029,537 common stock warrants, respectively,
4,185,000, 6,185,000, 13,161,558, 6,185,000 and 13,161,558 shares of convertible
preferred stock on an "as if" converted basis, respectively, and 0, 0,
2,085,120, 0 and 2,081,977 shares of Class A, C and E convertible preferred
stock issued upon the revised provisions of such agreements as the effect of
their inclusion is anti-dilutive during each period.
(P) STOCK SPLIT
Effective September 30, 1998, the Company authorized and implemented a
2-for-1 stock split of all preferred and common stock. Accordingly, all share
and per share amounts in the accompanying financial statements have been
retroactively restated to effect the stock split.
(Q) RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accounts issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1")." SOP 98-1 provides guidance
for determining whether computer software is internal-use software and on
accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It also
provides guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. The Company adopted SOP 98-1 in the
first quarter of 1999, the effect of which was insignificant.
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income" in 1998. SFAS No.
130 requires the Company to report in its financial statements, in addition to
its net income (loss), comprehensive income (loss), which
F-13
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
includes all changes in equity during a period from non-owner sources including,
as applicable, foreign currency items, minimum pension liability adjustments and
unrealized gains and losses on certain investments in debt and equity
securities. There were no differences between the Company's comprehensive loss
and its net loss as reported.
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way that public enterprises report information about operating segments. It also
establishes standards for related disclosures about products and services,
geographic area and major customers. The Company has determined that it does not
have any separately reportable segments.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
This statement is not expected to effect the Company, as the Company currently
does not have any derivative instruments or hedging activities.
(2) BALANCE SHEET COMPONENTS
Property and equipment, including equipment under capital leases, are stated
at cost and are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------- ------------
<S> <C> <C> <C>
1997 1998 1999
------------ ------------ ------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software, including amounts
related to capital leases of $960,785, $2,352,447
and $3,866,828, respectively...................... $ 1,091,579 $ 5,174,889 $ 8,675,623
Furniture and fixtures.............................. 14,724 38,769 45,283
Leasehold improvement............................... -- 24,050 30,392
------------ ------------ ------------
1,106,303 5,237,708 8,751,298
Less accumulated depreciation and amortization,
including amounts related to capital leases of
$159,517, $484,841 and $697,677, respectively..... 178,275 896,601 1,434,741
------------ ------------ ------------
Total........................................... $ 928,028 $ 4,341,107 $ 7,316,557
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-14
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) BALANCE SHEET COMPONENTS (CONTINUED)
Domain assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ ------------
<S> <C> <C> <C>
1997 1998 1999
---------- ------------ ------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Domain names.......................................... $ 755,565 $ 1,314,908 $ 2,439,908
Less accumulated amortization......................... 104,097 304,492 407,733
---------- ------------ ------------
Domain assets, net................................ $ 651,468 $ 1,010,416 $ 2,032,175
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
In connection with acquisition of domain assets, the Company has entered
into various domain asset purchase agreements. Principal payments in connection
with domain asset purchase obligations are due as follows: approximately
$169,000 in 1999, $116,000 in 2000, $17,000 in 2001, $21,000 in 2002, $16,000 in
2003, $21,000 in 2004 and $25,000 in 2005. In January 1999, the Company
purchased the domain name "USA.com" from Lansoft for 225,000 shares of Class A
common stock at $5 per share totalling $1,125,000. In April 1999, the Company
issued 130,000 common shares plus $880,000 in connection with its acquisition of
domain name assets.
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ ------------
<S> <C> <C> <C>
1997 1998 1999
---------- ------------ ------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Partner payments due.................................. $ 27,979 $ 721,587 $ 397,627
Professional services and consulting fees............. 138,066 128,118 1,647,076
Sales commissions..................................... -- 20,500 23,417
Travel and entertainment.............................. 30,000 77,825 48,728
Other................................................. 124,885 233,583 412,260
---------- ------------ ------------
Total............................................. $ 320,930 $ 1,181,613 $ 2,529,108
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
(3) PARTNER AGREEMENTS
Throughout 1998, the Company entered into many new Mail.com Partner
agreements. Included in these agreements are some percentage of revenue sharing
agreements, miscellaneous fees and other customer acquisition costs with
Mail.com Partners. The revenue sharing agreements vary for each party but
typically are based on selected revenues, as defined, or on a per sign-up basis.
As of December 31, 1998 and March 31, 1999, the Company owes approximately
$722,000 and $398,000, respectively to various Mail.com Partners under such
agreements. Such amounts are included in accrued expenses in the balance sheet.
The Company has issued stock to some of its Mail.com Partners and
capitalizes such issuances when the measurement date for such stock grants is
fixed and there is a sufficient disincentive to breach the contract in
accordance with Emerging Issues Task Force Abstract No. 96-18, "Accounting for
Equity Instruments That are Issued to Other Than Employees for Acquiring, or in
Conjunction with
F-15
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(3) PARTNER AGREEMENTS (CONTINUED)
Selling, Goods or Services." Such amounts are amortized ratably over the length
of the contract commencing on the site launch date.
In August 1998, the Company entered into a two year agreement with CNN. In
consideration of the advertising, subscription and customer acquisition
opportunities, CNN received 253,532 shares of Class A common stock upon the
commencement of the contract at $3.50 per share, the fair market value of
Mail.com's common stock on the date of grant, or $887,362. CNN also has the
right to receive a portion of the Company's selected revenues under the
agreement, as defined. The value of the stock issuance has been recorded in the
1998 balance sheet as partner advances and is amortized ratably to amortization
expense over the contract term. The launch of the services coincided with the
contract date. The Company recorded approximately $173,000 and $111,000 of
amortization expense in 1998 and for the three months ended March 31, 1999,
respectively, for this agreement. The Company shall also pay quarterly
sponsorship fees up to a maximum of $2 million during the term of the contract
of which $240,000 has been paid through March 31, 1999.
In September 1998, the Company entered into a minimum two year agreement
with GeoCities with an automatic one year renewal at the Company's option if
GeoCities has not delivered a specified number of sign-ups and two additional
one year renewals subject to approval by both parties. In consideration of the
advertising, subscription and customer acquisition opportunities, GeoCities
received 1,000,000 shares of Class A common stock upon the commencement of the
contract at $3.50 per share, the fair market value of Mail.com's common stock on
the date of grant, or $3,500,000. The Company was also required to pay GeoCities
$1.5 million in three installments, the first of which was paid in December
1998. GeoCities also had the right to receive a portion of the Company's
selected revenues under the agreement, as defined. The value of the stock
issuance and cash payments have been recorded in the 1998 balance sheet as
partner advances and would have been amortized ratably to amortization expense
over the contract term commencing upon the launch of the services. Yahoo!
recently announced its agreement to acquire GeoCities. The acquisition is
expected to close by May 1999.
In May 1999, the Company and GeoCities cancelled and rescinded their
agreement and agreed to abandon their joint efforts. As a result of the
cancellation and rescission of the agreement, GeoCities will retain the $500,000
non-refundable fee that the Company paid under the contract, but will return to
the Company the 1,000,000 shares of Class A common stock issued to them.
Accordingly, the Company will reverse the issuance of 1,000,000 shares and will
record the $500,000 write-off in the second quarter of 1999. Accordingly, such
events were given pro forma effect as of March 31, 1999 (see note 1(b)). In
addition, the Company has agreed to deliver advertisements over its network on
behalf of GeoCities and GeoCities has agreed to pay $125,000 per month for
sixteen months, representing $2,000,000 in the aggregate.
The Company issued an additional 577,628 (Alta Vista -- 29,528 shares at
$3.50 per share, 23,197 at $5.00 per share, totaling $220,000, CNET/Snap --
494,903 at $5.00 per share, totaling $2,474,000 and RemarQ -- 30,000 shares at
$5.00 per share, totaling $150,000) and 471,076 (Alta Vista -- 44,886 shares at
$5.00 per share, totaling $224,000 and CNET/Snap/NBC Multimedia -- 426,190
shares at $5.00 per share, totaling $2,023,000) shares of its common stock at
varying prices in 1998 and for the three months ended March 31, 1999,
respectively, in connection with certain strategic partnership
F-16
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(3) PARTNER AGREEMENTS (CONTINUED)
agreements. When stock issuances are either contingent upon the achievement of
certain targets or the measurement date is not fixed, the Company expenses the
issuance of such stock at the time such stock is issued or the targets are
achieved at the then fair market value of the Company's stock. Such amounts
aggregated approximately $2,844,000 and $2,247,000 for the year ended December
31, 1998 and for the three months ended March 31, 1999, respectively, and are
included in sales and marketing expenses in the statement of operations.
The Company's partnership agreement with Lycos expired on October 8, 1998,
shortly after Lycos acquired WhoWhere, a competitor which provides personal
homepage and Webmail services. Compaq, which owns the AltaVista Web site,
recently entered into a strategic relationship with Microsoft. As part of that
relationship, AltaVista agreed to offer Microsoft's Hotmail Webmail service
starting in July 1999, when the Company's contract with AltaVista expires. While
the Company will continue to own the right to serve the majority of the affected
members after the expiration of these contracts, it cannot be sure that these
members will continue to use its service as actively as the members have in the
past, if at all.
Prior to May 1, 1999, the Company was required to issue to CNET, Snap and
NBC Multimedia an aggregate of 1.25 shares of its Class A common stock for each
member who registers at their sites through December 31, 1999, up to a maximum
of two million members. The Company will also issue 0.5 shares of its Class A
common stock for each subsequent registration until December 31, 2000, subject
to a maximum of four million members (including members who registered prior to
December 31, 1999). The Company had guaranteed NBC Multimedia a minimum of
210,000 shares of Class A common stock if they launch the Company's services.
On May 1, 1999, the Company entered into an agreement to settle in full a
contingent obligation to issue shares of Class A common stock to CNET, Snap and
NBC Multimedia. Under this settlement, the Company will issue upon the closing
of the offering 2,368,907 shares of Class A common stock in the aggregate to
CNET and Snap and 210,000 shares of Class A common stock to NBC Multimedia. The
Company will capitalize the issuance of those shares and ratably amortize the
amount over the period from the date of the offering through September 2001. For
purposes of the pro forma data, we have calculated the amount of the settlement
based on an assumed initial public offering price of $11.00 per share. The
actual amount of the settlement will be determined using the actual initial
public offering price.
The following are contracts that require substantial minimum payments and/or
payments in the form of stock contingent upon the occurrence of certain events.
The issuance of such shares of Class A common stock will be accounted for at its
fair market value on the date of issuance:
- CBS SportsLine has the option of receiving its revenue share or $4.00 for
each confirmed signup at its Web site through June 30, 2000. In addition,
the Company must pay sponsorship fees totaling $450,000, $100,000 of which
the Company paid upon signing the contract. The Company shall pay the
remaining $350,000 in quarterly installments of $50,000 and has paid
$50,000 through March 31, 1999.
- The Company guaranteed Time Warner a minimum revenue share of $62,500 per
quarter. The current agreement with Time Warner expires in September 1999.
F-17
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(3) PARTNER AGREEMENTS (CONTINUED)
- The Company guaranteed NHL Interactive CyberEnterprises (NHL.com) a
minimum revenue share of $50,000 per year. The current agreement expires
in May 2000.
- AltaVista has the option of receiving its revenue share or $1.00 in cash
plus 0.25 shares of the Company's Class A common stock for each confirmed
member registration at their Web site through June 30, 1999.
- In October 1998, the Company made a cash payment of $75,000 to RemarQ and
issued 30,000 shares of Class A common stock. The Company has a contingent
obligation to make additional cash payments up to a maximum of $400,000
and to issue up to a maximum of 160,000 additional shares of its Class A
common stock based upon the number of active members that they generate.
The initial term of this agreement expires in August 1999. As of March 31,
1999, the Company has not paid any cash and has not issued any shares of
Class A common stock under this contingent obligation.
Certain Mail.com Partner agreements require minimum cash and/or equity
payments which aggregated $3.7 million of which $2.2 million is due in 1999 and
$1.5 million is due in 2000. Additional amounts become payable to certain
Mail.com Partners upon achieving varying member levels.
(4) INVESTMENT IN AFFILIATED COMPANIES
The Company has a minor investment in two of its Mail.com Partners, a white
page directory Web site and an Internet Service Provider. The investments are
accounted for on the cost basis as the Company owns less than 20% of each
company's stock and are stated at the lower of cost or market value.
(5) LEASES
The Company sold certain assets for approximately $710,000 and $1,276,000 in
1997 and 1998, respectively, and approximately $26,000 and $0 for the three
months ended March 31, 1998 and 1999, respectively. The assets were leased back
from the purchaser over 4-5 years. The Company recognized a $8,000 loss in 1998
in connection with the sale-leaseback. The Company had not received
approximately $633,000 from such sales as of December 31, 1998. The Company
leases facilities and certain equipment under agreements accounted for as
operating leases. These leases generally require the Company to pay all
executory costs such as maintenance and insurance. Rental expense for operating
leases for the years ending December 31, 1996, 1997, and 1998 and for the three
months ended March 31, 1998 and 1999 were approximately $21,000, $70,900,
$380,100, $44,000 and $192,000, respectively.
The Company's lease obligations are collateralized by certain assets at
December 31, 1998. Future minimum lease payments under non-cancelable operating
leases (with initial or remaining lease terms
F-18
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(5) LEASES (CONTINUED)
in excess of one year) and future minimum capital lease payments as of December
31, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31, LEASES LEASES
- -------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
1999.......................................................... $ 714,952 $ 626,974
2000.......................................................... 659,274 625,471
2001.......................................................... 522,164 337,920
2002.......................................................... 378,783 3,203
2003.......................................................... 327,927 --
Later years through 2005...................................... 15,227 --
------------- ---------------
Total minimum lease payments.............................. 2,618,327 $ 1,593,568
---------------
---------------
Less estimated executory costs................................ 67,857
-------------
Net minimum lease payments................................ 2,550,470
Less amount representing interest (at a weighted-average
interest rate of 11.5%)..................................... 633,278
-------------
Present value of net minimum capital lease payments........... 1,917,192
Less current portion of obligations under capital leases...... 479,461
-------------
Obligations under capital leases, excluding current portion... $ 1,437,731
-------------
-------------
</TABLE>
(6) CAPITAL STOCK
AUTHORIZED SHARES
During 1997, the Company amended and restated its certificate of
incorporation. As a result, the total number of shares which the Company was
authorized to issue was 54,000,000 shares: 32,000,000 of these shares were Class
A Common Stock, 10,000,000 shares were Class B Common Stock and 12,000,000
shares were Class A Preferred Stock, all classes having a par value of $0.01.
On October 1, 1998, the Company amended and restated its certificate of
incorporation, to increase the number of authorized shares to 104,000,000,
consisting of 60,000,000 and 10,000,000 shares of Class A and Class B Common
Stock, respectively; and 12,000,000, 12,000,000 and 10,000,000 shares of Class
A, C, and D Preferred Stock respectively; (collectively "Preferred Stock"), all
classes with a par value of $0.01 per share.
In March 1999, the Company amended and restated its certificate of
incorporation; to increase the number of authorized shares to 190,000,000
consisting of 120,000,000 and 10,000,000 shares of Class A and Class B common
stock, respectively; and 12,000,000, 12,000,000, 10,000,000 and 10,000,000
shares of Class A, C, D and E Preferred Stock respectively; and 16,000,000
undesignated Preferred shares (collectively "Preferred Stock"), all classes with
a par value of $0.01 per share.
F-19
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(6) CAPITAL STOCK (CONTINUED)
COMMON STOCK
During 1996, the Company issued 2,422,500 shares of Class A common stock (at
$0.005 per share) and 10,000,000 shares of Class B common stock (at $0.10 per
share) to its founders in exchange for $1,012,113; comprised of $550,000 in cash
and $462,113 in stock subscriptions receivable of which $450,000 was paid during
1997 and $12,113 was paid in 1998. Also during 1996, the Company issued
1,675,000 shares of Class A common stock (at approximately $0.10 per share) in
connection with a domain asset purchase agreement. During 1998, Mail.com issued
1,831,161 shares of its Class A common stock to various Mail.com Partners (see
note 3).
CONVERTIBLE PREFERRED STOCK
CLASS A PREFERRED STOCK
In May 1997, the Company completed a private placement of 3,460,000 shares
of Class A Preferred Stock at $1.00 per share for an aggregate price of
approximately $3,460,000, of which $2,575,000 was received in cash, $715,000 in
stock subscriptions receivable (all of which was paid during the first quarter
of 1998) and $170,000 was contributed in the form of equity securities and
services. The sale of securities was done in three stages. Proceeds were held in
escrow and released upon meeting certain milestones, namely: 1) $50,000 of
receipts in subscription revenue, and 2) $50,000 of receipts in banner
advertising and other revenues (excluding subscriptions). These milestones were
met during 1997 and all proceeds were released from escrow prior to the end of
1997.
Each share of Class A preferred stock shall automatically be converted into
one share of Class A common stock immediately upon an underwritten initial
public offering equal to or greater than $20,000,000 of company stock at an
offering price of $5 per share or greater (adjusted to reflect subsequent stock
splits, combinations, stock dividends, and recapitalizations).
At the earlier of 30 months or the sale of all or substantially all of the
assets or stock of the Company, each purchaser shall be issued additional Class
A preferred stock, without paying additional consideration, so that, after
giving effect to such issuance, the effective price of all issued shares shall
be reduced as follows: the adjusted share price shall be the greater of 1)
$0.50; or 2) 10% of the highest price per share offered to the purchasers in any
public or private sale to a third party, in which the purchasers declined an
opportunity to sell their shares; or 3) 10% of the price per share in a Company
sale. However in no event shall the adjusted share price exceed $1.00 per share.
During March 1999, with the consent of the Class A preferred shareholders,
the Company agreed to eliminate the Class A contingent additional stock issuance
obligation described above in exchange for giving the existing Class A preferred
shareholders 968,800 shares of Class A Common shares on an as if converted
basis, provided the Company completes an IPO before July 31, 1999, provided the
IPO price is greater than $5 per share, Class A preferred shares will
automatically convert into the same number of Class A common stock upon the
closing of the IPO.
REDEEMABLE CLASS C PREFERRED STOCK
In July and August 1998, a private placement of 3,776,558 of Class C
preferred shares with detachable warrants at a combined offering price of $3.50
per share ($3.455 per preferred C share and
F-20
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(6) CAPITAL STOCK (CONTINUED)
$0.12857 per warrant with each share having 0.35 warrants) was completed for
approximately $13,218,000. Such stock is redeemable at the option of the holders
in three equal annual installments commencing five years from the date of
purchase.
All of the preferred shares will automatically convert into one share of
Class A common stock in the event the Company closes a firm commitment for an
underwritten initial public offering with gross proceeds of at least $20,000,000
at an offering price per share of at least 200% of the then applicable
conversion price (adjusted for splits, dividends, etc.).
In the event that the Company does not provide the Class C preferred
shareholders with an offer to purchase their shares for a cash price equal to or
greater than 3.0 times the combined offering price within 24 months of the date
of purchase (such period to be extended to 30 months in the event the Company
has completed a qualified offering within 24 months from the date of purchase)
the stock price will be reduced ratably to a floor of $2.00 per share through
the issuance of additional shares.
During March 1999, with the consent of the Class C preferred shareholders,
the Company agreed to revise the Class C conversion price from $3.50 to $2.80 in
exchange for eliminating the Class C additional contingent stock issuance
obligation provisions described above. This revision will equate to an
additional 944,139 shares of Class C preferred stock being issued to the Class C
preferred shareholders upon the closing of the IPO. Such preferred shares will
be issued, and automatically convert into the same number of Class A common
stock upon the closing of the IPO.
CONVERSION
If the IPO is consummated under the terms currently anticipated, upon the
closing 6,185,000 and 3,776,558 shares of Class A and C convertible preferred
stock, respectively, on a one-for-one basis representing all of the outstanding
shares of the convertible preferred stock, shall automatically convert into
9,961,558 shares of Class A common stock. In addition, the 3.2 million Class E
Preferred shares will automatically convert into the same number of Class A
common stock upon closing of the IPO. Further, the Class A, C and E preferred
shares additional contingent stock issuance obligation provisions provide for
the issuance of 968,800, 944,139 and 169,038, preferred shares respectively,
which will all be issued, and automatically convert into the same number of
Class A common stock upon the closing of the IPO.
WARRANTS
As part of the Private Placement of Class C preferred shares in July and
August 1998, 1,321,778 detachable warrants were also issued for proceeds of
$169,943 at a value of $0.12857 per warrant. The Company has the right to
repurchase the warrants, or a portion of the warrants, at a price of $0.005 per
warrant if: 1) the holders of Class C preferred Stock are offered an opportunity
to sell their stock at a price of $10.50 per share or greater within 24 months
after the closing date, or 30 months after the closing date if the Company has
completed a qualified offering; or 2) the Company has net revenues, as defined,
during the 12 month period beginning the month after closing date in an amount
equal to or greater than $35,000,000. If net revenues during that period are
greater than $25,000,000 but less than $35,000,000, the Company will be entitled
to repurchase a pro-rata portion of the warrants. The warrants may be exercised
in the event that they are not repurchased within the 24 or 30 month period,
F-21
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(6) CAPITAL STOCK (CONTINUED)
or immediately before a merger, consolidation, sale of all or most of the assets
of the Company, or a liquidation or dissolution of the Company. In connection
with the March 1999 Class C additional contingent stock issuance obligation
described above, all such warrants shall be cancelled upon the closing of the
IPO.
In 1997, the Company issued warrants to purchase 20,000 shares of Class A
Common Stock at an exercise price of $1.00 per share to a consultant. These
warrants are exercisable for a period of 10 years. The Company recorded
compensation expense of $4,000 in connection with the issuance of these warrants
using a Black Scholes pricing model.
In addition, warrants were also issued in July and August 1998 to purchase
179,356 shares of Class A common stock at an exercise price of $3.50 per share.
The Company recorded offering costs of $129,675 in connection with the issuance
of these warrants using a Black Scholes pricing model. The terms of these
warrants are substantially identical to the terms of the warrants issued with
the Class C preferred stock, except for the additional contingent stock issuance
obligation and warrant provisions, anti-dilution provisions, registration rights
and cashless exercise. These warrants are exercisable for a period of five
years.
In the three months ended March 31, 1999, the Company issued 10,183 warrants
to a consultant and a vendor at prices ranging from $5 to $6 per share exercise
price. The Company recognized approximately $11,000 of expense using a Black
Scholes pricing model.
CLASS D PREFERRED STOCK
In July 1998, the Company authorized 10,000,000 of shares Class D preferred
stock (after giving effect to the October 2, 1998, 2-for 1 stock split),
however, no shares have been issued to date.
CLASS E PREFERRED STOCK
In March 1999, the Company completed a private placement of 3.2 million
shares of Class E preferred stock at $5.00 per shares for net proceeds of
approximately $15,200,000. These shares will automatically convert on a
one-for-one basis to an equivalent number of Class A common shares upon the
closing of the IPO. These shares also include a additional contingent stock
issuance obligation provision similar to the Class A and C preferred share
obligation whereby the Class E shareholders will receive an additional 169,038
shares of Class E common shares on an as if converted basis which will
automatically convert to Class A common stock upon the closing of the IPO.
UNDESIGNATED PREFERRED SHARES
The Company is authorized, without further stockholder approval, to issue
authorized but unissued shares of preferred stock in one or more classes or
series. 16,000,000 authorized shares of undesignated preferred stock were
available for creation and issuance in this manner.
VOTING RIGHTS
Each share of Class A common stock and Class A, C and E preferred stock
shall have one vote per share. Each share of Class B common stock shall have ten
votes per share.
F-22
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(6) CAPITAL STOCK (CONTINUED)
LIQUIDATION PREFERENCE
In the event of any liquidation or winding up of the Company, holders of the
Class A, C and E preferred stock and the Class B common stock will be entitled,
on a pro rata basis, in preference to the holders of the Class A common stock,
an amount equal to the applicable purchase price per share plus any accrued but
unpaid dividends.
The following summarizes the Company's preferred stock liquidation
preferences:
<TABLE>
<CAPTION>
REDEEMABLE
CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK COMMON STOCK
CLASS E CLASS C CLASS A CLASS B
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Number of shares................................ -- -- 400,000 10,000,000
Price per share................................. -- -- $ 0.41 $ 0.10
-------------- -------------- -------------- --------------
Total consideration............................. -- -- $ 165,000 1,000,000
Issuance of stock in exchange of domain
assets........................................ -- -- 22,580 --
Subscription receivable......................... -- -- -- (450,000)
Liquidation value at December 31, 1996.......... -- -- 187,580 550,000
-------------- -------------- -------------- --------------
Number of shares................................ -- -- 3,290,000 --
Price per share................................. -- -- $1.00 --
-------------- -------------- -------------- --------------
Total consideration(1).......................... -- -- $ 3,290,000 --
Subscription receivable......................... -- -- (715,000) 450,000
Issuance of preferred stock in exchange for
asset......................................... -- -- 100,000 --
Issuance of stock for services.................. -- -- 70,000 --
-------------- -------------- -------------- --------------
Liquidation value at December 31, 1997.......... -- -- 2,932,580 1,000,000
-------------- -------------- -------------- --------------
Number of shares................................ -- 3,776,558 2,000,000 --
Price per share................................. -- $3.45 $2.00 --
-------------- -------------- -------------- --------------
Total consideration(2).......................... -- $ 13,047,650 $ 4,000,000 --
Subscription receivable......................... -- -- 715,000 --
-------------- -------------- -------------- --------------
Liquidation value at December 31, 1998.......... -- $ 13,047,650 $ 7,647,580 $ 1,000,000
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Numbers of shares............................... 3,200,000 -- -- --
Price per share................................. $5.00 -- -- --
-------------- -------------- -------------- --------------
Total consideration(3).......................... $ 16,000,000 -- -- --
Liquidation value at March 31, 1999............. $ 16,000,000 $ 13,047,650 $ 7,647,580 $ 1,000,000
</TABLE>
- ------------------------
1. Excludes issuance costs of $54,640
2. Excludes issuance costs of $226,696 and $853,575, respectively
3. Excludes issuance costs of $834,605
F-23
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(7) CNET/SNAP STOCK WARRANT
In 1998, the Company entered into a partner agreement with CNET, Inc. which
was amended shortly thereafter to include the newly formed Snap, LLC. During
March 1999, Snap assigned their rights to NBC Multimedia. As part of this
agreement, on November 6, 1998, when 250,000 users completed subscriptions for
the Email.com service, a stock warrant for 1,500,000 Class A common shares was
granted at an exercise price of the lesser of $5.00 per share (the fair market
value at the date of grant) or the IPO price. This warrant expires on the
earlier of (a) December 31, 1999 or (b) the closing of a firm commitment,
underwritten initial public offering of common stock by Mail.com. The Company
recorded a non-cash charge of approximately $371,000, based upon the fair market
value of the stock warrant, using a Black Scholes pricing model. Such amount is
included in sales and marketing in the 1998 statement of operations. In March
1999, CNET and NBC Multimedia exercised their warrant in accordance with this
agreement by placing the proceeds of approximately $7.5 million in an escrow
account. Upon the closing of the IPO, funds from the exercise of the warrant in
accordance with the agreement will be disbursed to the Company and the shares of
the Class A common stock relating to the warrant will be issued to CNET and NBC
Multimedia.
(8) LYCOS STOCK WARRANT
In October 1997, the Company entered into a partner agreement with Lycos,
Inc. As part of this agreement, a stock warrant for 2,000,000 Class A preferred
shares was granted at an exercise price of $2.00 per share, the fair market
value at the date of grant. The Company recorded a non-cash charge of $48,000,
based upon the fair market value of the stock warrant, using a Black Scholes
pricing model. In March 1998, Lycos exercised its warrant in accordance with
this agreement whereby the Company received 100,062 shares of Lycos stock valued
at $39.98 per share on the closing date, which the Company sold over the next
week for proceeds totaling approximately $4.4 million. The Company recognized a
gain of approximately $438,000 on such sale.
(9) STOCK OPTIONS
During 1996, the Company established the 1996 Stock Option Plan. Under the
Plan, the Board of Directors may issue incentive stock options or nonqualified
stock options to purchase up to 1,000,000 common shares.
In 1997, the 1997 Stock Option Plan was approved by the Board of Directors
and Shareholders and provided for the issuance of 3,500,000 options, including
both incentive stock and nonqualified stock options.
During 1998, the Board of Directors, approved the 1998 Stock Option Plan
providing for the issuance of 1,500,000 options, including both incentive stock
and nonqualified stock options. Most options are granted at fair market value,
except as noted below, and are for periods not to exceed 10 years.
On April 21, 1999, the Board of Directors approved the 1999 Stock Option
Plan providing for the issuance of 2,500,000 options, including both incentive
stock and non-qualified stock options.
During 1998, 40,000 options were issued to a key executive at an exercise
price of $3.50 per share. Such options were contingent upon the executive
achieving a specified target. Such options were issued
F-24
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(9) STOCK OPTIONS (CONTINUED)
when the executive achieved a specific target at the then fair value of the
Company's common stock of $3.50 per share. Accordingly, no compensation expense
was recorded.
During 1998, 402,975 options were issued to a key executive at an exercise
price of $2 per share, all of which were granted in 1998. Such options were
outside of the Company's Stock Option Plans and contingent upon the Company
achieving specified advertising revenue targets, as defined. For the year ended
December 31, 1998, the Company recorded deferred compensation expense of
approximately $1.1 million in the aggregate in connection with these grants,
representing the difference between the deemed fair value of the Company's stock
at the date of each grant and the $2 per share exercise price of the related
options. This amount is presented as a reduction of stockholders' equity
(deficit) and amortized over the three year vesting from the achievement of the
performance targets which was concurrent with each option grant. The Company has
amortized $71,000 and $91,000 of deferred compensation for the year ended
December 31, 1998 and the three months ended March 31, 1999, respectively. The
Company will amortize the remaining deferred compensation of approximately
$934,000 as of March 31, 1999 over the remaining vesting period.
For the year ended December 31, 1997 and 1998 and for three months ended
March 31, 1998 and 1999, the Company recorded compensation expense of
approximately $52,000, $442,000, $0 and $102,000, respectively, for stock option
and warrant issuances. Such amounts include the CNET and Lycos stock options
(see notes 7 and 8).
During March 1999, certain non-bonus eligible employees were permitted to
purchase common stock options with an exercise price of $5.00 per share. The
employees were required to pay $2.50 per share in cash for these options,
however, the cash was not received until the second quarter of 1999.
The Company applies APB No. 25 and related interpretations in accounting for
its stock options issued to employees. Under APB 25, because the exercise price
of the Company's employee stock options equals the fair value of the underlying
common stock on the date of grant, no compensation cost has been recognized for
its stock option grants to employees and directors. Had compensation cost for
the Company's stock option grants been determined based on the fair value at the
grant date for awards consistent with the method of SFAS No. 123, the Company's
net loss would have increased the pro forma amounts for each year indicated
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
----------- ------------- --------------
Net loss:
As reported..................................... $ (544,712) $ (2,995,753) $ (12,524,883)
----------- ------------- --------------
----------- ------------- --------------
Pro forma....................................... $ (704,594) $ (3,594,618) $ (13,833,044)
----------- ------------- --------------
----------- ------------- --------------
Net loss per share:
As reported..................................... $ (0.04) $ (0.21) $ (0.86)
----------- ------------- --------------
----------- ------------- --------------
Pro forma....................................... $ (0.05) $ (0.25) $ (0.95)
----------- ------------- --------------
----------- ------------- --------------
</TABLE>
The resulting effect on the pro forma net loss disclosed for the year ended
December 31, 1996, 1997 and 1998 is not likely to be representative of the
effects on the net loss on a pro forma basis in
F-25
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(9) STOCK OPTIONS (CONTINUED)
future years, because the pro forma results include the impact of only one and
two years respectively, of grants and related vesting, while subsequent years
will include additional grants and vesting.
The fair value of each option grant is estimated on the date of grant using
the Black Scholes method option-pricing model with the following weighted
average assumptions used for grants in 1996, 1997, 1998: dividend yield of zero
(0%) percent, risk-free interest rate ranging from 5.81% to 6.89% and expected
life of 10 years. As permitted under the provisions of SFAS No. 123 and based on
the historical lack of a public marker for the company's stock, no factor for
volatility has been reflected in the option pricing calculation.
A summary of the Company's stock option activity (excluding 402,975 options
granted to a key executive outside of the Company's Stock Option Plans) and
weighted average exercise prices is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
THREE MONTHS ENDED
1996 1997 1998 MARCH 31, 1999
----------------------- ----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of period.......... -- -- 2,195,770 $ 0.27 3,901,321 $ 0.93 6,253,322 $ 1.93
---------- ---------- ----------
Options granted................ 2,195,770 $ 0.27 2,176,130 $ 1.85 2,683,910 $ 3.35 907,045 $ 5.00
Options canceled............... -- -- (470,579) $ 0.35 (331,909) $ 1.85 (15,375) $ 4.48
---------- ---------- ----------
Options outstanding at end of
period....................... 2,195,770 $ 0.27 3,901,321 $ 0.94 6,253,322 $ 1.93 7,144,992 $ 2.30
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Options exercisable at period
end.......................... 1,429,976 2,108,028 3,230,469 3,801,016
Weighted average fair value of
options granted during the
period....................... $ 0.12 $ 0.81 $ 1.59 $ 1.99
</TABLE>
F-26
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(9) STOCK OPTIONS (CONTINUED)
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------- OPTIONS EXERCISABLE
WEIGHTED --------------------------------------------
RANGE OF AVERAGE WEIGHTED WEIGHTED
EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- -------------- ----------- ------------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
0$.10-$0.20... 920,256 7.55 $ 0.11 650,255 $ 0.11
0 $.50......... 906,440 7.95 $ 0.50 779,721 $ 0.50
1 $.00......... 896,260 8.25 $ 1.00 617,057 $ 1.00
2 $.00......... 1,456,853 8.95 $ 2.00 810,755 $ 2.00
3 $.50......... 1,795,013 9.36 $ 3.50 372,087 $ 3.50
5 $.00......... 278,500 9.85 $ 5.00 594 $ 5.00
----------- ----------
6,253,322 3,230,469
----------- ----------
----------- ----------
</TABLE>
(10) INCOME TAXES
There is no provision for federal, state or local income taxes for all
periods presented, since the Company has incurred losses since inception. At
December 31, 1998, the Company had approximately $12.7 million of federal net
operating loss carryforwards available to offset future taxable income, such
carryforwards expire in various years through 2018. The Company has recorded a
full valuation allowance against its deferred tax assets since management
believes that, after considering all the available objective evidence, it is not
more likely than not that these assets will be realized. The tax effect of
temporary differences that give rise to significant portions of federal deferred
tax assets principally consists of the Company's net operating loss
carryforward.
Under Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"), the utilization of net operating loss carryforwards may be limited
under the change in stock ownership rules of the Code. The Company has not yet
determined whether an ownership change has occurred.
F-27
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(10) INCOME TAXES (CONTINUED)
The effects of temporary differences and tax loss carryforwards that give
rise to significant portions of federal deferred tax assets and deferred tax
liabilities at December 31, 1997 and 1998 are presented below.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1997 1998
------------- -------------
Deferred tax assets:
Net operating loss carryforwards................................ $ 1,490,625 $ 6,292,415
Deferred revenues............................................... 102,442 978,578
Accounts receivable principally due to allowance for doubtful
accounts...................................................... -- 42,504
Non-cash compensation........................................... -- 48,760
Other........................................................... 38,640 61,640
------------- -------------
Gross deferred tax assets................................... 1,631,707 7,423,897
Less: valuation allowance................................... (1,625,551) (7,373,334)
------------- -------------
Net deferred tax assets................................... 6,156 50,563
Deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation.............................................. (6,156) (50,563)
------------- -------------
Gross deferred tax liabilities.................................. (6,156) (50,563)
------------- -------------
$ -- $ --
------------- -------------
------------- -------------
</TABLE>
(11) VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING COSTS DEDUCTIONS/ BALANCE AT END
OF YEAR AND EXPENSES WRITE-OFFS OF YEAR
----------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
For the year ended December 31, 1996:
Allowance for doubtful accounts....................... $ -- $ -- $ -- $ --
----------- --------------- ----------- --------------
----------- --------------- ----------- --------------
For the year ended December 31, 1997:
Allowance for doubtful accounts....................... $ -- $ -- $ -- $ --
----------- --------------- ----------- --------------
----------- --------------- ----------- --------------
For the year ended December 31, 1998:
Allowance for doubtful accounts....................... $ -- $ 92,401 $ 0 $ 92,401
----------- --------------- ----------- --------------
----------- --------------- ----------- --------------
For the three months ended March 31, 1999:
Allowance for doubtful accounts (unaudited)........... $ 92,401 $ 38,089 $ 3,090 $ 127,400
----------- --------------- ----------- --------------
----------- --------------- ----------- --------------
</TABLE>
F-28
<PAGE>
MAIL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(12) SUBSEQUENT EVENTS--UNAUDITED
In February 1999, the Company entered into an agreement with a third party
vendor to provide bulk email to the Company's members for e-commerce
opportunities and Company updates. This agreement calls for a minimum payment of
approximately $2.1 million over the life of the agreement (nineteen months). In
March 1999, the Company also entered into a consulting contract with a third
party for services related to system performance, activitation and maintenance
of a partner email site. This agreement calls for the grant of 55,000 shares of
Class A common stock at $5 per share. During the three months ended March 31,
1999, the Company recorded $275,000 of expense in connection with this
consulting contract.
In April 1999, the Company issued 100,150 stock options to employees at
prices ranging from $5 to $11 per share, the fair value of the Company's common
stock at the date of grant. Also, in April 1999, select employees exercised
54,302 stock options.
F-29
<PAGE>
Inside Back Cover:
A similar background to the gatefold with Mail.com's muted domain names arranged
in a linear fashion with certain domain names highlighted.
In the center of the page is a depiction of a Mail.com user's Inbox as it
appears on the user's computer screen. On the left side of the screen is the
Mail.com toolbar which enables the user to navigate the servicces provided by
Mail.com's Web-based email. At the top of the screen is an ad banner for
uBid.com. In the user's Inbox the following letter is viewed:
"To: [email protected]
From: [email protected]
Hi Sandy:
I want to let you know that I have a new email service provided by Mail.com. My
email address is [email protected]. This is a Web-based email service which means
that I can access my email from any computer that has a Web browser connected to
the Internet. This is different from traditional email where I generally have to
access my email through my own individual computer. Please use this address to
send me email as I can now read my email from home and work. Also I will be sure
to check my email while on vacation next week. I know a cybercafe in Paris that
has computers with Internet access : -)
See you soon,
Bill"
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6,850,000 SHARES
MAIL.COM, INC.
CLASS A COMMON STOCK
[LOGO]
------------------
P R O S P E C T U S
, 1 9 9 9
------------------
SALOMON SMITH BARNEY
PAINEWEBBER INCORPORATED
SG COWEN
---------------
THE UNDERSIGNED ARE FACILITATING INTERNET DISTRIBUTION.
WIT CAPITAL CORPORATION
AS E-MANAGER-TM-
DLJDIRECT Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses expected to be incurred
by the registrant in connection with the sale and distribution of the securities
being registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee, the National Association of Securities Dealers, Inc. filing fee and the
Nasdaq National Markets listing fee.
<TABLE>
<CAPTION>
PAYABLE BY
REGISTRANT
------------
<S> <C>
SEC registration fee................................................................................ $ 24,090
National Association of Securities Dealers, Inc. filing fee......................................... 8,000
Nasdaq National Markets Listing Fee................................................................. 95,000
Accounting fees and expenses........................................................................ 300,000
Legal fees and expenses............................................................................. 400,000
Printing and engraving expenses..................................................................... 275,000
Blue Sky fees and expenses.......................................................................... 1,000
Registrar and Transfer Agent's fees................................................................. 3,000
Miscellaneous fees and expenses..................................................................... 40,000
------------
Total............................................................................................... $ 1,146,090
------------
------------
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's amended and restated certificate of incorporation in effect
as of the date hereof provides that, except to the extent prohibited by the
Delaware General Corporation Law, as amended (the "DGCL"), the registrant's
directors shall not be personally liable to the registrant or its stockholders
for monetary damages for any breach of fiduciary duty as directors of the
registrant. Under the DGCL, the directors have a fiduciary duty to the
registrant which is not eliminated by this provision of the certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to the registrant, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by the DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the Federal securities laws or state or Federal environmental laws. The
registrant owns liability insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise. The certificate eliminates the personal liability
of directors to the fullest extent permitted by Section 102(b)(7) of the
II-1
<PAGE>
DGCL and provides that the registrant may fully indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person is or was a director or
officer of the registrant, or is or was serving at the request of the registrant
as a director or officer of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate. The registrant is not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
COMMON STOCK AND PREFERRED STOCK. The registrant from time to time has
issued both common and preferred stock to investors, consultants and other third
parties in connection with business transactions in reliance upon exemption from
registration pursuant to Section 4(2), Rule 701 or Regulation S of the
Securities Act of 1933.
In March 1996, the registrant sold a total of 10,000,000 shares of Class B
common stock at $0.10 per share for $1,000,000 to Gerald Gorman, one of our
founders. Concurrently, the registrant sold 2,422,500 shares of Class A common
stock at $0.005 per share in the aggregate for $12,113 to Gerald Gorman, Gary
Millin, our President, Anthony Millin and Bob Helfant, our Senior Vice President
and 100,000 shares of Class A preferred stock $0.01 per share in the aggregate
for $1,000 to Gary Millin and Jean Brodsky.
In June 1996, the registrant sold 1,675,000 shares of Class A common stock
and 225,000 shares of Class A preferred stock at $0.10 per share for both which
was the fair value of the stock at that time to Eric Woodward and David
Milligan, in the name of Vanity Mail, for $200,000, in consideration for the
purchase of various domain names and the Vanity Mail Web site.
In October 1996, the registrant sold 400,000 shares of Class A preferred
stock to Naveen Jain for $165,000 at $0.41 per share.
On May 27, 1997 and December 17, 1997 the registrant sold an aggregate of
3,460,000 shares of Class A preferred stock at $1.00 per share of which
$3,290,000 was received in cash and $170,000 in contributions in the form of
equity securities and services performed by outside vendors. Gerald Gorman, the
Chairman and Chief Executive Officer of the registrant purchased securities in
this offering contributing cash and equity securities of InfoSpace.com. In
addition, William Donaldson, Stephen Ketchum, and Jack Kuehler, each a director
of the registrant purchased securities in this offering, with cash.
In May 1997, the registrant granted warrants to purchase 20,000 shares of
Class A common stock at an exercise price of $1.00 per share to Barry Layne
expiring on May 15, 2007, which purchase price was paid by performance of
services.
In October 1997, the registrant entered into a partner agreement with Lycos,
Inc. As part of this agreement, a stock option for 2,000,000 Class A preferred
shares was granted at an exercise price of $2.00 per share, the fair market
value at the date of grant. The registrant recorded compensation expense of
$52,000, based upon the fair market value of the stock option. In March 1998,
Lycos exercised its option in accordance with this agreement whereby the
registrant received 100,062 shares of Lycos stock valued at $39.98 per share on
the closing date, which the registrant sold over the next week for proceeds
totaling approximately $4.4 million.
In January 1998, the registrant sold 2,745 shares of Class A common stock
for $2.00 per share to Mr. F. Connolly.
II-2
<PAGE>
On July 31, 1998 and August 31, 1998, the registrant sold an aggregate of
3,776,558 units with each unit consisting of one share of Class C preferred
stock, and detachable warrants to purchase .35 shares of Class C preferred stock
at an exercise price equal to the Class C conversion price, for a price per unit
of $3.50 or $13,218,000 in the aggregate. Purchasers of Class C preferred stock
in this offering included John R. Whitman, a director of the registrant and The
Whitman Children Irrevocable Trust. Immediately before the consummation of this
offering, the conversion price of the Class C preferred stock will be reduced to
$2.80 per share and the warrants will be cancelled. See "Certain Transactions."
In August 1998, the registrant issued 253,532 shares of Class A common stock
valued at $3.50 per share to CNN in performance of obligations pursuant to our
contract dated August 10, 1998.
In June, September and December of 1998, and March of 1999 the registrant
issued 97,611 shares (52,725 shares in 1998 and 44,886 shares in the first
quarter of 1999) of Class A common stock valued at $3.50 and $5.00 per share to
AltaVista for confirmed member registrations, pursuant to the contract dated
July 1, 1998 in performance of the registrant's obligations.
In September 1998, the registrant issued 1,000,000 shares of Class A common
stock to GeoCities valued at $3.50 per share pursuant to a contract dated
September 10, 1998. We subsequently entered into an agreement rescinding the
issuance of these shares. See "Risk Factors--Several of our most significant
partner contracts have expired or will soon terminate."
Beginning September 1998, the registrant has issued 352,257 shares (242,982
shares in 1998 and 109,275 shares in the first quarter of 1999) of Class A
common stock valued at $5.00 per share to CNET. Additionally, the registrant
issued 568,837 shares (251,921 shares in 1998 and 316,915 shares in the first
quarter of 1999) of Class A common stock to Snap valued at $5.00 per share. Both
of these issuances were made in performance of the registrant's obligations
under contracts dated May 13, 1998 as amended.
In December 1998, the registrant issued 30,000 shares of Class A common
stock valued at $5.00 per share to RemarQ pursuant to our contract dated January
1, 1999 in consideration of promoting our services.
In January 1999, the registrant issued 225,000 shares of Class A common
stock valued at $5.00 per share to Lansoft pursuant to our contract January 26,
1999 in consideration of the domain name "USA.com."
On March 10, 1999, Mail.com sold an aggregate of 3,200,000 shares of Class E
preferred stock of the registrant at $5.00 per share. The $16 million purchase
price was paid in cash. Purchasers of Class E preferred stock in this offering
include John R. Whitman, a director of the registrant, and The Whitman Children
Irrevocable Trust, Gerald Gorman, the Chairman and Chief Executive Officer of
the registrant, Stephen Ketchum, a director of the registrant, Debra L.
McClister, the Chief Financial Officer of the registrant and Lon Otremba, Chief
Operating Officer of the registrant. Immediately before the consummation of the
offering, the Class E preferred stock conversion price will be reduced. See
"Certain Transactions--Class E Preferred Stock Issuance Obligation Settlement."
On March 15, 1999, we granted 55,000 shares of Class A common stock to Basis
Technology and some of their employees as consideration for consulting services
performed by them.
During April 1999, ten former employees exercised stock options with
exercise prices ranging from $0.20 to $3.50 per share to purchase 54,302 shares
of Class A common stock.
On April 27, 1999, Mail.com agreed to issue 115,000 shares of Class A common
stock at $11.00 per share as a portion of the purchase price for the Paris.com
domain name.
On April 30, 1999, we granted 15,000 shares of Class A common stock to Mojam
Media at $11.00 per share as a portion of the purchase price for the
Calendar.com domain name.
On April 30, 1999, Mail.com entered into an agreement to settle in full its
contingent obligations to issue additional shares of Class A common stock to
CNET, Snap and NBC Multimedia. Under this
II-3
<PAGE>
settlement, Mail.com will issue upon the closing of this offering 2,368,907
shares of Class A common stock in the aggregate to CNET and Snap and 210,000
shares of Class A common stock to NBC Multimedia.
WARRANTS. The registrant from time to time has granted warrants to
investors, consultants and other third parties in connection with business
transactions in reliance upon exemption from registration pursuant to Section
4(2) of the Securities Act of 1933.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
---------- -----------
<S> <C> <C>
January 1, 1996 to December 31, 1996....................................................... -- --
January 1, 1997 to December 31, 1997....................................................... 2,020,000 $ 1.99
January 1, 1998 to December 31, 1998....................................................... 1,679,356 $ 4.84
January 1, 1999 to April 30, 1999.......................................................... 10,183 $ 5.50
</TABLE>
OPTIONS. The registrant from time to time has granted stock options to
employees and directors in reliance upon exemption from registration pursuant to
either (i) Section 4(2) of the Securities Act of 1933, as amended, or (ii) Rule
701 promulgated under the Securities Act of 1933, as amended.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
---------- -----------
<S> <C> <C>
January 1, 1996 to December 31, 1996....................................................... 2,195,770 $ 0.27
January 1, 1997 to December 31, 1997....................................................... 2,176,130 $ 1.85
January 1, 1998 to December 31, 1998....................................................... 3,086,885 $ 3.17
January 1, 1999 to April 30, 1999.......................................................... 1,007,195 $ 5.09
</TABLE>
The above securities were offered and sold by the registrant in reliance
upon exemptions from registration pursuant to either (i) Section 4(2) of the
Securities Act of 1933, as amended, as transactions not involving any public
offering, or (ii) Rule 701 promulgated under the Securities Act of 1933, as
amended. No underwriters were involved in connection with the sales of
securities referred to in this Item 15.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2 Bylaws.
4.1 Specimen common stock certificate.
5.1* Opinion of Winthrop, Stimson, Putnam & Roberts re: validity of the securities.
10.1 Employment Agreement between Mail.com and Gerald Gorman dated April 1, 1999.
10.2 Employment Agreement between Mail.com and Gary Millin dated April 1, 1999.
10.3 Employment Agreement between Mail.com and Lon Otremba dated April 1, 1999.
10.4 Employment Agreement between Mail.com and Debra McClister dated April 1, 1999.
10.5 Employment Agreement between Mail.com and Charlie Walden dated February 4, 1999.
10.6 Stock Option Agreement between Mail.com and Charles Walden dated January 1, 1998.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.7 Stock Option Agreement between Mail.com and Gary Millin 1996 dated December 31, 1996.
10.8 Stock Option Agreement between Mail.com and Gary Millin 1996 dated June 1, 1996.
10.9 Stock Option Agreement between Mail.com and Gary Millin 1997 dated February 1, 1997.
10.10 Stock Option Agreement between Mail.com and Gerry Gorman 1996 dated December 31,
1996.
10.11 Stock Option Agreement between Mail.com and Gerry Gorman 1996 dated June 1, 1996.
10.12 Stock Option Agreement between Mail.com and Lon Ottremba 1998 dated June 30, 1999.
10.13 1996 Employee Stock Option Plan.
10.14 1997 Employee Stock Option Plan.
10.15 1998 Employee Stock Option Plan.
10.16 1999 Employee Stock Option Plan.
10.17 Lease between Mail.com and Braun Management and six amendments thereto, the most
recent dated May 21, 1998.
10.18 Lease between Mail.com and Spitfire Marketing Systems Inc. dated August 14, 1998.
10.19 Space License Agreement and three amendments thereto between Mail.com and Telehouse
International Corporation of America, Inc., the most recent amendment dated March 9,
1999.
10.20 Lease between Mail.com and 55 Madison Associates dated September 15, 1998.
10.21 Lease Agreement between Mail.com and the Leastec Sylvan Credit dated June 20, 1996.
10.22 Master Lease Agreement between Mail.com and RCC dated July 17, 1998.
10.23 Lease Agreement between Mail.com and Pacific Atlantic Systems Leasing, dated January
22, 1999.
10.24 Class A Preferred Stock Purchase Agreement dated May 27, 1997.
10.25 Waiver, Consent and Amendment to Class A Preferred Stock Purchase Agreement and
Investors' Rights Agreement, dated July 31, 1998.
10.26 Accession Agreement among Mail.com and Primus Capital Fund IV Limited Partnership and
the Primus Executive Fund Limited Partnership dated August 31, 1998.
10.27 Letter Agreement among Gerald Gorman, Primus Capital Fund Limited Partnership and the
Primus Executive Fund Limited Partnership dated August 31, 1998.
10.28 Class E Preferred Stock Investors' Rights Agreement dated March 10, 1999.
10.29 Observer Rights Agreement among the Company, Primus, et. al., and Sycamore Ventures
dated August 31, 1998.
10.30 Investors' Rights Agreement between NBC Multimedia, Inc., CNET, Inc. and Mail.com,
Inc. dated March 1, 1999.
10.31 Lycos Term Sheet Agreement dated October 8, 1997 and the Amendments thereto.
10.32 CNET Warrants dated March 1, 1999.
10.33 NBC Multimedia Warrants dated March 1, 1999.
10.34 Stock Purchase Agreement between Mail.com and CNN Interactive dated July 7, 1998.
11.1 Statement re: Computation of Basic and Diluted Net Loss Per Share.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
23.1 Consent of KPMG LLP.
23.2* Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibit 5.1).
23.3 Consent of Electronic Mail & Messaging Systems.
23.4 Consent of Forrester Research, Inc.
23.5 Consent of Jupiter Communications.
23.6 Consent of International Data Corporation.
24.1 Powers of Attorney (See Signature Page on Page II-7).
27.1 Financial Data Schedule.
</TABLE>
* To be supplied by amendment.
- ------------------------
(b) Financial Statement Schedules.
None.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424 (b)(1) or
(4), or 497(h) under the Securities Act of 1933, shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in The
City of New York, State of New York, on this 4th day of May, 1999.
MAIL.COM, INC.
By: /s/ GARY MILLIN
-----------------------------------------
Name: Gary Millin
Title: President
II-7
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and/or officers of Mail.com, Inc., (the
"Company") hereby severally constitute and appoint Gerald Gorman, Chairman and
Chief Executive Officer, and Gary Millin, President and each of them
individually, with full powers of substitution and resubstitution, our true and
lawful attorneys, with full powers to them and each of them to sign for us, in
our names and in the capacities indicated below, the Registration Statement on
Form S-1 filed with the Securities and Exchange Commission, and any and all
amendments to said Registration Statement (including post-effective amendments),
and any registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, in connection with the registration under
the Securities Act of 1933, as amended, of equity securities of the Company, and
to file or cause to be filed the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as each of them might
or could do in person, and hereby ratifying and confirming all that said
attorneys, and each of them, or their substitute or substitutes, shall do or
cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 4, 1999:
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ GERALD GORMAN Chairman & Chief Executive
- ------------------------------ Officer, Director May 4, 1999
Gerald Gorman
/s/ GARY MILLIN President, Director
- ------------------------------ May 4, 1999
Gary Millin
/s/ LON OTREMBA Chief Operating Officer,
- ------------------------------ Director May 4, 1999
Lon Otremba
/s/ DEBRA L. MCCLISTER Executive Vice President &
- ------------------------------ Chief Financial Officer May 4, 1999
Debra L. McClister
/s/ CHARLES WALDEN Executive Vice President,
- ------------------------------ Technology, Director May 4, 1999
Charles Walden
/s/ WILLIAM J. DONALDSON Director
- ------------------------------ May 4, 1999
William J. Donaldson
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2 Bylaws.
4.1 Specimen common stock certificate.
5.1* Opinion of Winthrop, Stimson, Putnam & Roberts re: validity of the securities.
10.1 Employment Agreement between Mail.com and Gerald Gorman dated April 1, 1999.
10.2 Employment Agreement between Mail.com and Gary Millin dated April 1, 1999.
10.3 Employment Agreement between Mail.com and Lon Otremba dated April 1, 1999.
10.4 Employment Agreement between Mail.com and Debra McClister dated April 1, 1999.
10.5 Employment Agreement between Mail.com and Charlie Walden dated February 4, 1999.
10.6 Stock Option Agreement between Mail.com and Charles Walden dated January 1, 1998.
10.7 Stock Option Agreement between Mail.com and Gary Millin 1996 dated December 31, 1996.
10.8 Stock Option Agreement between Mail.com and Gary Millin 1996 dated June 1, 1996.
10.9 Stock Option Agreement between Mail.com and Gary Millin 1997 dated February 1, 1997.
10.10 Stock Option Agreement between Mail.com and Gerry Gorman 1996 dated December 31, 1996.
10.11 Stock Option Agreement between Mail.com and Gerry Gorman 1996 dated June 1, 1996.
10.12 Stock Option Agreement between Mail.com and Lon Ottremba 1998 dated June 30, 1999.
10.13 1996 Employee Stock Option Plan.
10.14 1997 Employee Stock Option Plan.
10.15 1998 Employee Stock Option Plan.
10.16 1999 Employee Stock Option Plan.
10.17 Lease between Mail.com and Braun Management and six amendments thereto, the most recent dated
May 21, 1998.
10.18 Lease between Mail.com and Spitfire Marketing Systems Inc. dated August 14, 1998.
10.19 Space License Agreement and three amendments thereto between Mail.com and Telehouse
International Corporation of America, Inc., the most recent amendment dated March 9, 1999.
10.20 Lease between Mail.com and 55 Madison Associates dated September 15, 1998.
10.21 Lease Agreement between Mail.com and the Leastec Sylvan Credit dated June 20, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
10.22 Master Lease Agreement between Mail.com and RCC dated July 17, 1998.
10.23 Lease Agreement between Mail.com and Pacific Atlantic Systems Leasing, dated January 22, 1999.
10.24 Class A Preferred Stock Purchase Agreement dated May 27, 1997.
10.25 Waiver, Consent and Amendment to Class A Preferred Stock Purchase Agreement and Investors'
Rights Agreement, dated July 31, 1998.
10.26 Accession Agreement among Mail.com and Primus Capital Fund IV Limited Partnership and the Primus
Executive Fund Limited Partnership dated August 31, 1998.
10.27 Letter Agreement among Gerald Gorman, Primus Capital Fund Limited Partnership and the Primus
Executive Fund Limited Partnership dated August 31, 1998.
10.28 Class E Preferred Stock Investors' Rights Agreement dated March 10, 1999.
10.29 Observer Rights Agreement among the Company, Primus, et. al., and Sycamore Ventures dated August
31, 1998.
10.30 Investors' Rights Agreement between NBC Multimedia, Inc., CNET, Inc. and Mail.com, Inc. dated
March 1, 1999.
10.31 Lycos Term Sheet Agreement dated October 8, 1997 and the Amendments thereto.
10.32 CNET Warrants dated March 1, 1999.
10.33 NBC Multimedia Warrants dated March 1, 1999.
10.34 Stock Purchase Agreement between Mail.com and CNN Interactive dated July 7, 1998.
11.1 Statement re: Computation of Basic and Diluted Net Loss Per Share.
23.1 Consent of KPMG LLP.
23.2* Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibit 5.1).
23.3 Consent of Electronic Mail & Messaging Systems.
23.4 Consent of Forrester Research, Inc.
23.5 Consent of Jupiter Communications.
23.6 Consent of International Data Corporation.
24.1 Powers of Attorney (See Signature Page on Page II-7).
27.1 Financial Data Schedule.
</TABLE>
* To be supplied by amendment.
<PAGE>
Exhibit 3.1
-------------------------------------------
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MAIL.COM, INC.
--------------------------------------------
Pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware
--------------------------------------------
<PAGE>
Mail.com, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify as follows:
FIRST: The name of the Corporation is
MAIL.COM, INC.
SECOND: The Certificate of Incorporation of the Corporation was originally
filed in the Office of the Secretary of State of the State of Delaware on August
1, 1994 under the name of "GlobeComm, Inc."
THIRD: An Amended and Restated Certificate of Incorporation was filed in
the Office of the Secretary of State of the State of Delaware on July 31, 1998.
FOURTH: This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 242 and 245 of the
Delaware General Corporation Law, the Board of Directors having duly adopted
resolutions setting forth and declaring advisable this Amended and Restated
Certificate of Incorporation and, in lieu of a vote of stockholders, written
consent to this Amended and Restated Certificate of Incorporation having been
given by holders having not less than the minimum number of votes necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, with prompt notice of the taking of such action
having been given to those holders who have not consented in writing, all in
accordance with Section 228 of the Delaware General Corporation Law.
FIFTH: This Amended and Restated Certificate of Incorporation is being
filed pursuant to Sections 242 and 245 of the Delaware General Corporation Law
in order to amend and restate the Certificate of Incorporation of the
Corporation, as amended and restated to date.
SIXTH: The Certificate of Incorporation of the Corporation, as amended and
restated to date, is hereby amended and restated in its entirety as follows:
ARTICLE I
The name of the Corporation shall be: Mail.com, Inc.
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE III
The Corporation shall have perpetual duration.
<PAGE>
ARTICLE IV
The registered office of this Corporation in Delaware is Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle,
Delaware 19801, and the name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE V
The total number of shares of all classes of capital stock that the
Corporation is authorized to issue is one hundred and ninety million
(190,000,000) of which one hundred and twenty million (120,000,000) shall be
shares of Class A Common Stock, par value one cent ($.01) per share, and ten
million (10,000,000) shall be shares of Class B Common Stock, par value one cent
($.01) per share, and sixty million (60,000,000) shall be shares of Preferred
Stock, par value one cent ($.01) per share. On September 30, 1998, pursuant to a
Certificate of Amendment to the Certificate of Incorporation of the Corporation,
as corrected pursuant to a Certificate of Correction filed on March 5, 1999,
each issued and then outstanding share of each class of capital stock of the
Corporation was thereby and thereupon subdivided and converted into two shares
of such class of capital stock. A statement of the respective classes and series
of stock and a description of the designations, preferences, voting powers,
relative, participating, optional or other special rights and privileges, and
the qualifications, limitations and restrictions of the Class A Common Stock,
the Class B Common Stock and the Preferred Stock are as follows:
The Class A Common Stock and the Class B Common Stock shall have such
powers, preferences and rights, including voting rights, and the qualifications,
limitations and restrictions as set forth in this Article V.
The Preferred Stock, subject to the limitations prescribed by applicable
law and the provisions of this Certificate of Incorporation, may be issued by
the Board of Directors. Such Board of Directors is hereby empowered to cause the
Preferred Stock to be issued from time to time for such consideration as it may
from time to time fix, and to cause such Preferred Stock to be issued in one or
more classes, with such voting powers, full or limited, or no voting powers, and
such designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions providing for the
issue of such stock adopted by the Board of Directors. Each such class of
Preferred Stock shall be distinctly designated. Except in respect of the
particulars fixed by the Board of Directors for each class as permitted hereby,
all shares of Preferred Stock shall be of equal rank and shall be identical. All
shares of any one class of Preferred Stock so designated by the Board of
Directors shall be alike in every particular, except that shares of any one
class issued at different times may differ as to the dates from which dividends
thereon shall be cumulative. The voting rights, if any, of each such class and
the preferences and relative, participating, optional and other special rights
of each such class and the qualifications, limitations and restrictions thereof,
if any, may differ from those of any and all other classes at any time
outstanding; and the Board of Directors of the Corporation is hereby expressly
granted authority to fix, by resolutions duly adopted prior to the issuance of
any shares of a particular class of Preferred Stock so designated by the Board
of Directors, the voting powers of stock of such class, if any, and the
designations, preferences and relative,
3
<PAGE>
participating, optional and other special rights and the qualifications,
limitations and restrictions thereof, if any, for such class, including without
limitation the following:
(a) The distinctive designation of and the number of shares of
Preferred Stock which shall constitute such class; provided that such
number may be increased (but not above the total number of authorized
shares of Preferred Stock) or decreased (but not below the number of
shares thereof then outstanding) from time to time by like action of
the Board of Directors;
(b) The rate and time at which, and the terms and conditions
upon which, dividends, if any, on Preferred Stock of such class shall
be paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class of Preferred
Stock or any other class of stock of the Corporation and whether such
dividends shall be cumulative or noncumulative;
(c) The right, if any, of the holders of Preferred Stock of
such class to convert the same into, or exchange the same for, shares
of any other class of stock or any series of any class of stock of the
Corporation and the terms and conditions of such conversion or
exchange;
(d) Whether or not Preferred Stock of such class shall be
subject to redemption, and the redemption price or prices and the time
or times at which, and the terms and conditions upon which, Preferred
Stock of such class may be redeemed;
(e) The rights, if any, of the holders of Preferred Stock of
such class upon the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary;
(f) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such class;
and
(g) The voting powers, if any, of the holders of such class of
Preferred Stock which may, without limiting the generality of the
foregoing, include the right, voting as a class by itself or together
with any other class of the Preferred Stock as a class, (i) to vote
more or less than one vote per share on any or all matters voted upon
by the stockholders and (ii) to elect one or more directors of the
Corporation if there has been a default in the payment of dividends on
any one or more class of the Preferred Stock or under such other
circumstances and upon such other conditions as the Board of Directors
may fix.
There hereby shall be designated a Class A Preferred Stock, and the
number of shares constituting such class shall be twelve million (12,000,000); a
Class C Preferred Stock, and the number of shares constituting such class shall
be twelve million (12,000,000); a Class D Preferred Stock, and the number of
shares constituting such class shall be ten million (10,000,000); and a Class E
Preferred Stock, and the number of shares constituting such class shall be ten
million (10,000,000).
4
<PAGE>
Such classes of Preferred Stock shall have the designations, powers,
preferences and rights, including voting rights, and the qualifications,
limitations and restrictions as set forth in this Article V.
1. VOTING RIGHTS. Each share of Class A Common Stock and Class D
Preferred Stock shall have one (1) vote per share. Each share of Class B Common
Stock shall have ten (10) votes per share. Each share of Class A Preferred
Stock, Class C Preferred Stock and Class E Preferred Stock shall have one vote
for each share of Class A Common Stock into which such stock could then be
converted, and with respect to such vote, such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Class
A Common Stock. In addition to any rights under applicable law or under this
Certificate of Incorporation of any class to vote as a separate class on any
matter, and except as expressly provided under this Certificate of Incorporation
with respect to any class of capital stock, all shares of Class A Common Stock,
Class B Common Stock, Class A Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock, Class E Preferred Stock and any other class of capital stock
with general voting rights then outstanding shall vote together as a single
class on each matter on which shareholders are entitled to vote.
2. LIQUIDATION. (a) In case of liquidation, dissolution, or winding up
of the affairs of the Corporation, whether voluntary or involuntary, holders of
Class A Preferred Stock, Class C Preferred Stock, Class D Preferred Stock and
Class E Preferred Stock shall be preferred equally with each such class and with
holders of Class B Common Stock over all holders of Class A Common Stock of the
Corporation to the extent set forth herein.
(b) Out of the distributable assets of the Corporation, in an
amount up to the total dollar investment of Class A Preferred Stock, Class B
Common Stock, Class C Preferred Stock, Class D Preferred Stock and Class E
Preferred Stock, holders of Class A Preferred Stock shall receive pro rata among
all such shares of Class A Preferred Stock, in the aggregate for all such shares
outstanding, the total dollar investment of Class A Preferred Stock divided by
the sum of the total dollar investment of Class A Preferred Stock plus Class B
Common Stock plus Class C Preferred Stock plus Class D Preferred Stock plus
Class E Preferred Stock, expressed as a percentage, and holders of Class C
Preferred Stock shall receive pro rata among all such shares of Class C
Preferred Stock, in the aggregate for all such shares outstanding, the total
dollar investment of Class C Preferred Stock divided by the sum of the total
dollar investment of Class A Preferred Stock plus Class B Common Stock plus
Class C Preferred Stock plus Class D Preferred Stock plus Class E Preferred
Stock, expressed as a percentage, and holders of Class B Common Stock shall
receive pro rata among all such shares of Class B Common Stock, in the aggregate
for all such shares outstanding, the total dollar investment of Class B Common
Stock divided by the sum of the total dollar investment of Class A Preferred
Stock plus Class B Common Stock plus Class C Preferred Stock plus Class D
Preferred Stock plus Class E Preferred Stock, expressed as a percentage, and
holders of Class D Preferred Stock shall receive pro rata among all such shares
of Class D Preferred Stock, in the aggregate for all such shares outstanding,
the total dollar investment of Class D Preferred Stock divided by the sum of the
total dollar investment of Class A Preferred Stock plus Class B Common Stock
plus Class C Preferred Stock plus Class D Preferred Stock plus Class E Preferred
Stock, expressed as a percentage, and holders of Class E Preferred Stock shall
receive pro rata among all such shares of Class E Preferred Stock, in the
aggregate for all such shares outstanding, the total dollar
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investment of Class E Preferred Stock divided by the sum of the total dollar
investment of Class A Preferred Stock plus Class B Common Stock plus Class C
Preferred Stock plus Class D Preferred Stock plus Class E Preferred Stock,
expressed as a percentage.
(c) After distributing the assets of the Corporation in the
manner set forth in Section 2(b), the holders of Class A Common Stock shall
receive an amount in the aggregate for all such shares outstanding up to the
total dollar investment of Class A Common Stock, pro rata among all such shares
based on the respective numbers of shares held by such holders. Thereafter, to
the exclusion of the holders of Class C Preferred Stock and the holders of Class
E Preferred Stock, the holders of Class A Common Stock, Class A Preferred Stock,
Class B Common Stock and Class D Preferred Stock, shall receive the remaining
assets of the Corporation, pro rata among such holders based on the respective
numbers of shares of Class A Common Stock held by such holders or issuable upon
conversion of the Class A Preferred Stock, Class B Common Stock and Class D
Preferred Stock held by such holders.
(d) Notwithstanding the foregoing, (i) prior to the
distribution of the assets of the Corporation in accordance with this section,
the holders of Class C Preferred Stock and the holders of Class E Preferred
Stock shall be entitled to receive any accrued but unpaid dividends declared by
the board of directors, and (ii) in the event of any conversion of all shares of
Class A Preferred Stock, Class C Preferred Stock and Class E Preferred Stock,
the liquidation preference applicable to the Class B Common Stock and the Class
D Preferred Stock set forth herein shall terminate automatically and the holders
of Class B Common Stock and the holders of Class D Preferred Stock shall be
entitled, in the event of a liquidation, dissolution or winding up of the
affairs of the Corporation, only to share in the remaining assets of the
Corporation with the Class A Common Stock pro rata among such holders of Class A
Common Stock, Class B Common Stock and Class D Preferred Stock based on the
respective numbers of shares of Class A Common Stock held by such holders or
issuable upon conversion of the Class B Common Stock and Class D Preferred Stock
held by such holders.
(e) The consolidation or merger of the Corporation with or
into any other corporation or corporations or the sale of all or substantially
all of the assets of the Corporation shall be deemed a liquidation, dissolution
or winding up of the Corporation, unless the holders of a majority of the voting
power of the capital stock of the Corporation before the merger, consolidation
or sale continue to own a majority of the voting power of the capital stock of
the surviving entity after the transaction, and the Class C Preferred Stock and
Class E Preferred Stock are continued in the surviving entity on substantially
identical terms (including, without limitation, ranking as to payment,
conversion and rights as to voting on certain matters) as set forth herein.
3. CONVERSION (a) The holders of the Class A Preferred Stock shall have
conversion rights as follows:
(i) RIGHT TO CONVERT. The holders of the Class A
Preferred Stock shall have the right to convert their shares into Class
A Common Stock upon the affirmative vote of the holders of a majority
of the Class A Preferred Stock. From and after such affirmative vote,
each share of Class A Preferred Stock shall be convertible at the
election of the
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<PAGE>
holder thereof into one share of Class A Common Stock (adjusted to
reflect subsequent stock splits, combinations, stock dividends and
recapitalizations).
(ii) AUTOMATIC CONVERSION. Each share of Class A
Preferred Stock shall automatically be converted into one share of
Class A Common Stock (adjusted to reflect subsequent stock splits,
combinations, stock dividends and recapitalizations) immediately upon
the earlier of (A) an underwritten offering of at or greater than
twenty million dollars ($20,000,000) of Class A Common Stock at or
greater than an offering price of five dollars ($5.00) per share
(adjusted to reflect subsequent stock splits, combinations, stock
dividends and recapitalizations) and (B) the affirmative vote of the
holders of a majority of the Class A Preferred Stock.
(iii) MECHANICS OF CONVERSION. Before any holder of Class
A Preferred Stock shall be entitled to convert the same into shares of
Class A Common Stock, it shall surrender the certificate therefor, duly
endorsed, at the office of the Corporation, and shall give written
notice to the Corporation at its principal corporate office, of the
election to convert the same and shall state the name in which the
certificate for shares of Class A Common Stock is to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Class A Preferred Stock a certificate
for the number of shares of Class A Common Stock to which such holder
shall be entitled.
(b) The holders of the Class B Common Stock shall have
conversion rights as follows:
(i) RIGHT TO CONVERT. The holders of the Class B Common
Stock shall have the right to convert each share of Class B Common
Stock into one share of Class A Common Stock or one share of Class D
Preferred Stock (in each case adjusted to reflect subsequent stock
splits, combinations, stock dividends and recapitalizations).
(ii) MECHANICS OF CONVERSION. Before any holder of Class
B Common Stock shall be entitled to convert the same into shares of
Class A Common Stock or Class D Preferred Stock, it shall surrender the
certificate therefor, duly endorsed, at the office of the Corporation,
and shall give written notice to the Corporation at its principal
corporate office, of the election to convert the same and shall state
the name in which the certificate for shares of Class A Common Stock or
Class D Preferred Stock are to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to
such holder of Class B Common Stock a certificate for the number of
shares of Class A Common Stock or Class D Preferred Stock to which such
holder shall be entitled.
(c) The holders of the Class C Preferred Stock shall have
conversion rights as follows:
(i) RIGHT TO CONVERT. Each share of Class C Preferred
Stock shall be convertible, at the option of the holder thereof, at any
time after the date of issuance of such share on or prior to the fifth
day prior to the initial Class C Preferred Redemption
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Date (defined below), at the office of the Corporation or any transfer
agent for such stock, into such number of fully paid and nonassessable
shares of Class A Common Stock as is determined by dividing three
dollars and fifty cents ($3.50) (as adjusted for subsequent stock
splits, combinations, stock dividends and recapitalizations, the
"Original Class C Share Price") by the Class C Conversion Price,
determined as hereafter provided, in effect on the date the
certificate is surrendered for conversion. The initial Class C
Conversion Price per share for shares of Class C Preferred Stock shall
be the Original Class C Share Price; provided, however, that the Class
C Conversion Price for the Class C Preferred Stock shall be subject to
adjustment as set forth in Sections 3(c)(iv) and 3(c)(v).
(ii) AUTOMATIC CONVERSION. Except as provided below in
Section 3(c)(iii), each share of Class C Preferred Stock shall
automatically be converted into shares of Class A Common Stock at the
Class C Conversion Price at the time in effect for such Class C
Preferred Stock immediately upon the earlier of (A) the Corporation's
sale of its Class A Common Stock in a firm commitment underwritten
public offering pursuant to a registration statement under the
Securities Act of 1933, as amended, the public offering price of which
was not less than two hundred percent (200%) of the then applicable
Class C Conversion Price and with gross proceeds of not less than
twenty million dollars ($20,000,000) (such a public offering referred
to herein as a "Class C Qualified Offering") and (B) the affirmative
vote of the holders of the majority of the Class C Preferred Stock.
(iii) MECHANICS OF CONVERSION. Before any holder of Class
C Preferred Stock shall be entitled to convert the Class C Preferred
Stock into shares of Class A Common Stock, he shall surrender the
certificates therefor, duly endorsed, at the office of this Corporation
or of any transfer agent for the Class C Preferred Stock, and shall
give written notice to the Corporation at its principal place of
business, of the election to convert the Class C Preferred Stock and
shall state therein the name in which the certificates for shares of
Class A Common Stock are to be issued. The Corporation shall, as soon
as practicable thereafter, issue and deliver at such office to such
holder of Class C Preferred Stock, a certificate for the number of
shares of Class A Common Stock to which such holder shall be entitled,
together with a cash payment in lieu of any fraction of a share of such
Class A Common Stock and all dividends on the shares of Class C
Preferred Stock surrendered for conversion accrued and unpaid up to and
including the date surrendered for conversion. No fraction of a share
of Class A Common Stock shall be issued upon any conversion but, in
lieu thereof, shall be paid upon such conversion an amount in cash
equal to the same fraction of the Conversion Price at the time of
conversion. No payment or adjustment for dividends on any shares of
Class A Common Stock that shall be issuable upon conversion on the
Class C Preferred Stock, accrued and unpaid up to and including the
date surrendered for conversion, shall be made. The Corporation will
pay all issue taxes, if any, incurred upon the issue of Class A Common
Stock upon the conversion of the Class C Preferred Stock. Such
conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of Class
C Preferred Stock to be converted, and the person entitled to receive
the shares of Class A Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder of such shares of
Class A Common Stock as
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<PAGE>
of such date. If the conversion is in connection with an underwritten
offering of securities registered pursuant to the Securities Act of
1933, as amended, the conversion may, at the option of any holder
tendering Class C Preferred Stock for conversion, be conditioned upon
the closing with the underwriters of the sale of securities pursuant
to such offering, in which event the person entitled to receive the
Class A Common Stock upon conversion of the Class C Preferred Stock
shall not be deemed to have converted such Class C Preferred Stock
until prior to the closing of such sale of securities.
(iv) CONVERSION PRICE ADJUSTMENTS. The Class C Conversion
Price shall be subject to adjustment from time to time as follows:
(A) Subject to subparagraphs (B) through (J)
of this Section 3(c)(iv), if the Corporation shall issue,
after the date upon which any shares of Class C Preferred
Stock were first issued (the "Class C Preferred Closing
Date"), any Additional Stock (as defined below), other than an
Excluded Issuance (as defined below), without consideration or
for a consideration per share less than the Class C Conversion
Price in effect immediately prior to the issuance of such
Additional Stock, the Class C Conversion Price in effect
immediately prior to each such issuance shall forthwith be
adjusted to a price equal to the result obtained by
multiplying such Class C Conversion Price by the quotient
obtained by dividing the total computed under clause (x) below
by the total computed under clause (y) below as follows:
(x) an amount equal to the sum of (a) the
aggregate number of shares of Class A Common Stock
outstanding on a fully diluted basis (after giving
effect to the issuance of all shares of Class A
Common Stock issuable upon Exercise (as defined
below) of all outstanding Derivative Securities (as
defined below) immediately prior to such issuance)
(as used in this Section 3(c), the "Fully Diluted
Shares Outstanding") plus (b) the aggregate
consideration, if any, received by the Corporation
for the issuance of such Additional Stock divided by
the Class C Conversion Price in effect immediately
prior to the issuance of such Additional Stock;
(y) an amount equal to the sum of (a) the
aggregate number of Fully Diluted Shares Outstanding
immediately prior to such issuance, plus (b) the
number of such shares of Additional Stock so issued.
(B) In the case of the issuance of stock for
cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(C) In the case of the issuance of stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
value thereof as determined by the board of directors
irrespective of any accounting treatment, unless otherwise
agreed in writing by
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<PAGE>
holders of a majority in interest of the outstanding shares
of Class C Preferred Stock.
(D) For purposes of any such adjustment, the
following provisions shall be applicable:
If after the Class C Preferred Closing Date, the
Corporation shall issue any securities convertible into or
exchangeable for shares of Class A Common Stock ("Convertible
Securities") or shall grant any rights or options to subscribe
for, purchase or otherwise acquire shares of Class A Common
Stock or Convertible Securities (as used in this Section 3(c),
the "Options," Options and Convertible Securities being
referred to in this Section 3(c) as "Derivative Securities"),
other than an Excluded Issuance, then in each such case, such
issue or grant shall be deemed to be an issuance of Additional
Stock and the price per share of the stock issuable upon the
exercise, conversion or exchange (as used in this Section
3(c), the "Exercise") of such Derivative Securities shall be
determined by dividing (x) the total amount, if any, received
or receivable by the Corporation as consideration for the
issuance or granting of such Derivative Securities, plus the
minimum aggregate amount of additional consideration payable
to the Corporation upon the Exercise of such Derivative
Securities, by (y) the maximum number of shares of Class A
Common Stock issuable upon such Exercise. If the price per
share so determined is less than the Class C Conversion Price
in effect immediately prior to the issuance or granting of
such Derivative Securities, such issuance or granting shall be
deemed to be an issuance or granting for cash of such maximum
number of shares of Class A Common Stock deliverable upon the
Exercise of such Derivative Securities at such price per share
and such maximum number of shares of Class A Common Stock
shall be deemed to be outstanding, provided that
(1) if such Derivative Securities by their
terms provide, with the passage of time or otherwise,
for any increase in the amount of additional
consideration payable to the Corporation or decrease
in the number of shares of Class A Common Stock
issuable upon such Exercise (by change of rate or
otherwise), the Class C Conversion Price shall, upon
each such increase or decrease becoming effective, be
readjusted to reflect such increase or decrease
insofar as it affects rights of Exercise which have
not theretofore expired, and
(2) upon the expiration of such Derivative
Securities, or if any thereof shall not have been
Exercised, the Class C Conversion Price shall, upon
such expiration, be readjusted and shall thereafter
be such as it would have been had it been originally
adjusted (or had the original adjustment not been
required, as the case may be) on the basis that (xx)
the only shares of Class A Common Stock so issued
were the shares of Class A Common Stock, if any,
actually issued or granted upon the Exercise of such
Derivative Securities, and (yy) such shares of Class
A Common Stock, if any, were issued or granted for
the consideration
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<PAGE>
actually received by the Corporation upon such
Exercise plus the consideration, if any, actually
received by the Corporation for the issuance or
granting of all of such Derivative Securities,
whether or not Exercised,
provided, further, that no such readjustment shall have the
effect of increasing the Class C Conversion Price by an amount
in excess of the amount of the adjustment thereof initially
made in respect of the issuance or granting of such Derivative
Securities.
(E) "Additional Stock" for the purposes of
this Section 3(c) shall mean any shares of Class A Common
Stock issued by the Corporation after the Class C Preferred
Closing Date other than:
(1) up to a maximum aggregate of
70,000 shares of stock issuable or issued to any
person, and up to a maximum aggregate 1,500,000
shares of stock issuable or issued (at fair market
value) to employees, consultants, directors or
officers of the Corporation directly or pursuant to a
stock option plan or restricted stock plan approved
by the Board of Directors of the Corporation and the
Compensation Committee thereof;
(2) shares of stock issued or
issuable in a public offering before or in connection
with which all outstanding shares of Class C
Preferred Stock will be converted to Class A Common
Stock or upon exercise of warrants or rights granted
to underwriters in connection with such a public
offering;
(3) shares of stock issued or
issuable in accordance with Section 3(c)(v) below or
Section 3(e)(v) below or up to 3,460,000 shares
of Class A Preferred Stock or shares of Class A
Common Stock issued or issuable upon conversion of
such shares (adjusted to reflect subsequent stock
splits, combinations, stock dividends and
recapitalizations) in accordance with Section 10.2 of
the Class A Preferred Stock Purchase Agreement dated
May 27, 1997, as amended by the Purchase and Sale
Agreement dated December 17, 1997 and the Purchase
and Sale Agreement dated January 5, 1998, as amended
through the date of the original issuance of shares
of Class E Preferred Stock (collectively, the "Class
A Stock Purchase Agreement"); or
(4) shares issuable upon conversion
of the Class A Preferred Stock, Class B Common Stock,
Class C Preferred Stock, Class D Preferred Stock and
Class E Preferred Stock (such shares of capital stock
described in clauses (1) through (4) being referred
to in this Section 3(c) as "Excluded Issuances").
(F) The Corporation shall at all times
reserve and keep available out of its authorized but unissued
shares of Class A Common Stock, solely for the
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purpose of effecting the conversion of the shares of the
Class C Preferred Stock, such number of its shares of Class
A Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Class
C Preferred Stock and the Class E Preferred Stock and if at
any time the number of authorized but unissued shares of
Class A Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Class C
Preferred Stock and the Class E Preferred Stock, in the
aggregate, in addition to such other remedies as shall be
available to the holder of such Class C Preferred Stock, the
Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its
authorized but unissued shares of Class A Common Stock to
such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any
necessary amendment to these articles.
(G) Notwithstanding any provision to the contrary in
this Section 3(c)(iv), any and all adjustments of the Class
C Conversion Price under this Section 3(c)(iv) arising out
of the issuance or deemed issuance of Additional Stock
between the Class C Preferred Closing Date and the date upon
which the adjustment to the Class C Conversion Price
effected pursuant to Section 3(c)(v) (as used in this
Section 3(c), the "Liquidity Ratchet Adjustment") is made
shall be recalculated immediately after the Liquidity
Ratchet Adjustment is made and shall be so recalculated as
though the initial Class C Conversion Price were equal to
the Class C Conversion Price after giving effect to the
Liquidity Ratchet Adjustment; provided, however, that in the
event that any shares of Class C Preferred Stock have been
converted into shares of Class A Common Stock prior to the
Liquidity Ratchet Adjustment, the holders of the Class A
Common Stock issued upon conversion of such shares of Class
C Preferred Stock shall return to the Corporation any such
shares of Class A Common Stock so issued in excess of the
number of shares of Class A Common Stock that such holders
would have been entitled based on the Class C Conversion
Price(s) recalculated as set forth in this paragraph at the
time(s) such shares of Class C Preferred Stock were
converted (it being understood that any shares of Class A
Common Stock resulting from adjustments to the Class C
Conversion Price arising out of issuances or deemed
issuances of Additional Stock at a price equal to or greater
than $2.00 per share (as adjusted to reflect subsequent
stock splits, combinations, stock dividends and
recapitalizations) may not be transferred until after the
Liquidity Ratchet Adjustment and the return to the
Corporation of any such excess shares).
(H) If the Corporation shall subdivide or reclassify
the then outstanding shares of its Class A Common Stock into
a greater number of shares of Class A Common Stock or
combine or reclassify the then outstanding shares of its
Class A Common Stock into a smaller number of shares of
Class A Common Stock, the Class C Conversion Price in effect
immediately prior to such subdivision, combination or
reclassification, as the case may be, shall be
proportionately adjusted as of the effective date thereof so
that the holder of any Class C Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the
number of shares of Class A Common Stock which he would have
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<PAGE>
owned after the happening of such event had such Class C
Preferred Stock been converted immediately prior to the
happening of such event.
(I) In case of any capital reorganization of the
Corporation, or any consolidation or merger of the
Corporation with or into another corporation, or any sale or
conveyance to another corporation of all or substantially
all of the property of the Corporation, the holder of each
share of Class C Preferred Stock then outstanding (or of the
stock or securities received in lieu of such share) shall
have the right thereafter to convert such share (or such
stock or securities) into the kind and amount of shares of
stock and other securities and property receivable upon such
reorganization, consolidation, merger, sale or conveyance by
a holder of the number of shares of Class A Common Stock of
the Corporation into which such share of the Class C
Preferred Stock might have been converted immediately prior
to such reorganization, consolidation, merger, sale or
conveyance, and shall have no conversion rights under these
provisions; and effective provision shall be made in the
Certificate of Incorporation of the resulting or surviving
corporation or otherwise so that the provisions set forth in
this Section 3(c) for the protection of the conversion
rights of the Class C Preferred Stock shall thereafter be
applicable, as nearly as reasonably may be, to any such
other shares of stock and other securities and property
deliverable upon conversion of the Class C Preferred Stock
remaining outstanding or other convertible securities
received by the holders in place thereof; and any such
resulting or surviving corporation shall expressly assume
the obligation to deliver, upon the exercise of the
conversion privilege, such shares, securities or property as
the holders of the Class C Preferred Stock, or other
convertible securities received by the holders in place
thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provisions for the protection
of the conversion right as above provided. In case
securities or property other than Class A Common Stock shall
be issuable or deliverable upon conversion as aforesaid,
then all references in this Section 3(c) to Class A Common
Stock shall be deemed to apply, so far as appropriate and as
nearly as may be, to such other securities or property.
(J) Upon each adjustment or readjustment in the Class C
Conversion Price, the Chief Financial Officer of the
Corporation shall compute such adjustment or readjustment in
accordance with the provisions of this Section 3(c) and
prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement
of (i) the consideration received or to be received by the
Corporation for any additional shares of Class A Common
Stock issued or sold or deemed to have been issued or sold,
(ii) the number of shares of Class A Common Stock
outstanding or deemed to be outstanding, and (iii) the Class
C Conversion Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required) on
account thereof. In the event holders of shares of Class C
Preferred Stock representing a majority in interest of such
class of stock represent to the Corporation in writing that
they dispute the adjustment or readjustment, or any
information or calculations contained in the
above-referenced certificate of the Chief Financial Officer,
then the Corporation, at its
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expense, will cause the independent public accountants who
regularly audit the books and accounts of the Corporation or
other independent accountants of recognized standing
selected by the Corporation to compute such adjustment or
readjustment in accordance with the provisions of this
Section 3(c) and prepare a certificate setting forth any
necessary revisions to such adjustment or readjustment and
showing in detail the facts upon which such revisions to the
adjustment or readjustment, if any, are based. With respect
to the certificate of the Chief Financial Officer, and with
respect to any certificate of the independent public
accountants, the Corporation shall, forthwith upon the
availability to the Corporation of any such certificate,
file such certificate with its corporate records and mail a
copy to each holder of the Class C Preferred Stock then
outstanding at such holder's address as it appears on the
records of the Corporation. No such determination by the
Corporation's independent public accountants shall bind the
Corporation or the holders of Class C Preferred Stock in
connection with any dispute with respect to such adjustment.
(v) LIQUIDITY RATCHET ADJUSTMENT. (A) Subject to
subparagraph (B) of this Section 3(c)(v) below, if the holders of the
Class C Stock Units (as defined below) shall not be offered an
opportunity to sell, transfer or dispose of one hundred percent (100%)
of the Class C Stock Units for an amount equal to or greater than ten
dollars fifty cents ($10.50) per Class C Stock Unit in cash or
Marketable Securities (as defined below) within twenty four (24) months
from the Class C Preferred Closing Date, or thirty (30) months from the
Class C Preferred Closing Date if the Corporation has completed a
registration under the Securities Act of 1933, as amended, in
connection with a Class C Qualified Offering within twenty four (24)
months of the Class C Preferred Closing Date, whether or not such
holders accept or reject such offer, the initial Class C Conversion
Price shall be reduced (but not increased) to the greater of (A) two
dollars ($2.00) per share (as adjusted to reflect subsequent stock
splits, combinations, stock dividends or recapitalizations), (B) thirty
three and one third percent (33 1/3%) of the highest price per Class C
Stock Unit offered to the holders of Class C Stock Units in any Class C
Qualified Offering or private sale in which the holders of Class C
Stock Units were provided an opportunity to sell stock, (C) thirty
three and one third percent (33 1/3%) of the price per Class C Stock
Unit paid in cash or Marketable Securities to the holders of Class C
Stock Units in the event of the sale of all or substantially all of the
assets or capital stock of the Corporation or the merger, consolidation
or combination of the Corporation with another entity, if such has
occurred, or (D) thirty-three and one third percent (33 1/3%) of the
price per Class C Stock Unit otherwise offered in cash or Marketable
Securities to the holders of Class C Stock Units; provided, however,
that, subject to Section 3(c)(iv)(G), in the event the shares of Class
C Preferred Stock have been converted to Class A Common Stock, the
holders of the Class A Common Stock issued upon such conversion shall
receive additional shares of Class A Common Stock such that such
additional shares, together with the shares issued upon conversion,
shall equal the number of shares that would have been issued had the
Liquidity Ratchet Adjustment been effective immediately before such
conversion.
"Class C Stock Unit" means each share of Class C
Preferred Stock and the shares of Class A Common Stock issued or
issuable upon conversion of such share of
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Class C Preferred Stock (adjusted to reflect stock splits,
combinations, stock dividends and recapitalizations occurring
subsequent to the date of conversion of such share of Class C
Preferred Stock).
"Marketable Securities" as used in this Section 3(c)
means: (i) securities issued or directly and fully guaranteed and
insured by the United States Government or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof) having maturities of less
than six months from the date of acquisition; or (ii) short term debt
instruments with a maturity of less than 90 days from the date of
issuance of an issuer rated at least A by Standard & Poors Rating
Services or equity securities of an issuer with a market capitalization
of at least $150,000,000, which equity securities are traded on a major
nationally recognized exchange (other than the NASDAQ small cap index
or the NASDAQ bulletin board).
(B) If the Corporation shall consummate an initial
public offering pursuant to a registration statement filed pursuant to
the Securities Act of 1933, as amended, on or before July 31, 1999 (a
"Timely IPO"), subparagraph (A) of Section 3(c)(v) above shall
terminate and be of no further force and effect. In consideration for
the termination of the rights of the holders of shares of Class C
Preferred Stock under such subparagraph (A), immediately before the
consummation of a Timely IPO (but subject to the consummation of the
Timely IPO), the Class C Conversion Price shall be reduced to $2.80 per
share (subject to adjustment for stock splits, combinations, stock
dividends and recapitalizations).
(vi) AUTHORIZATION OF ADDITIONAL CLASS C PREFERRED STOCK.
If at any time the number of authorized but unissued shares of Class C
Preferred Stock shall not be sufficient to effect the obligations of
the Corporation to issue additional shares of Class C Preferred Stock,
the Corporation shall take such corporate action as may be necessary or
advisable to increase the number of authorized but unissued shares of
Class C Preferred Stock to such number of shares as shall be sufficient
for such purpose.
(d) The holders of the Class D Preferred Stock shall have
conversion rights as follows:
(i) RIGHT TO CONVERT. The holders of the Class D
Preferred Stock shall have the right to convert each share of Class D
Preferred Stock into one share of Class A Common Stock (adjusted to
reflect subsequent stock splits, combinations, stock dividends,
recapitalizations).
(ii) MECHANICS OF CONVERSION. Before any holder of Class
D Preferred Stock shall be entitled to convert the same into shares of
Class A Common Stock, it shall surrender the certificate therefor, duly
endorsed, at the office of the Corporation, and shall give written
notice to the Corporation at its principal corporate office, of the
election to convert the same and shall state the name in which the
certificate for shares of Class A Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Class D Preferred Stock a
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certificate for the number of shares of Class A Common Stock to which
such holder shall be entitled.
(e) The holders of the Class E Preferred Stock shall have
conversion rights as follows:
(i) RIGHT TO CONVERT. Each share of Class E Preferred
Stock shall be convertible, at the option of the holder thereof, at any
time after the date of issuance of such share on or prior to the fifth
day prior to the initial Class E Preferred Redemption Date (defined
below), at the office of the Corporation or any transfer agent for such
stock, into such number of fully paid and nonassessable shares of Class
A Common Stock as is determined by dividing five dollars ($5.00) (as
adjusted for subsequent stock splits, combinations, stock dividends or
recapitalizations, the "Original Class E Share Price") by the Class E
Conversion Price, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion. The initial Class E
Conversion Price per share for shares of Class E Preferred Stock shall
be the Original Class E Share Price; provided, however, that the Class
E Conversion Price for the Class E Preferred Stock shall be subject to
adjustment as set forth in Sections 3(e)(iv) and 3(e)(v).
(ii) AUTOMATIC CONVERSION. Except as provided below in
Section 3(e)(iii), each share of Class E Preferred Stock shall
automatically be converted into shares of Class A Common Stock at the
Class E Conversion Price at the time in effect for such Class E
Preferred Stock immediately upon the earlier of (A) the Corporation's
sale of its Class A Common Stock in a firm commitment underwritten
public offering pursuant to a registration statement under the
Securities Act of 1933, as amended, with gross proceeds of not less
than twenty million dollars ($20,000,000) (such a public offering
referred to herein as a "Class E Qualified Offering") and (B) the
affirmative vote of the holders of the majority of the Class E
Preferred Stock.
(iii) MECHANICS OF CONVERSION. Before any holder of Class
E Preferred Stock shall be entitled to convert the Class E Preferred
Stock into shares of Class A Common Stock, he shall surrender the
certificates therefor, duly endorsed, at the office of this Corporation
or of any transfer agent for the Class E Preferred Stock, and shall
give written notice to the Corporation at its principal place of
business, of the election to convert the Class E Preferred Stock and
shall state therein the name in which the certificates for shares of
Class A Common Stock are to be issued. The Corporation shall, as soon
as practicable thereafter, issue and deliver at such office to such
holder of Class E Preferred Stock, a certificate for the number of
shares of Class A Common Stock to which such holder shall be entitled,
together with a cash payment in lieu of any fraction of a share of such
Class A Common Stock and all dividends on the shares of Class E
Preferred Stock surrendered for conversion accrued and unpaid up to and
including the date surrendered for conversion. No fraction of a share
of Class A Common Stock shall be issued upon any conversion but, in
lieu thereof, shall be paid upon such conversion an amount in cash
equal to the same fraction of the Conversion Price at the time of
conversion. No payment or adjustment for dividends on any shares of
Class A Common Stock that shall be issuable upon conversion on the
Class E Preferred Stock, accrued and unpaid up to and including the
date surrendered for conversion, shall be made. The
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Corporation will pay all issue taxes, if any, incurred upon the issue
of Class A Common Stock upon the conversion of the Class E Preferred
Stock. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the
shares of Class E Preferred Stock to be converted, and the person
entitled to receive the shares of Class A Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder
of such shares of Class A Common Stock as of such date. If the
conversion is in connection with an underwritten offering of
securities registered pursuant to the Securities Act of 1933, as
amended, the conversion may, at the option of any holder tendering
Class E Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of securities pursuant to
such offering, in which event the person entitled to receive the Class
A Common Stock upon conversion of the Class E Preferred Stock shall
not be deemed to have converted such Class E Preferred Stock until
prior to the closing of such sale of securities.
(iv) CONVERSION PRICE ADJUSTMENTS. The Class E Conversion Price
shall be subject to adjustment from time to time as follows:
(A) Subject to subparagraphs (B) through (J)
of this Section 3(e)(iv), if the Corporation shall issue,
after the date upon which any shares of Class E Preferred
Stock were first issued (the "Class E Preferred Closing
Date"), any Additional Stock (as defined below), other than an
Excluded Issuance (as defined below), without consideration or
for a consideration per share less than the Class E Conversion
Price in effect immediately prior to the issuance of such
Additional Stock, the Class E Conversion Price in effect
immediately prior to each such issuance shall forthwith be
adjusted to a price equal to the result obtained by
multiplying such Class E Conversion Price by the quotient
obtained by dividing the total computed under clause (x) below
by the total computed under clause (y) below as follows:
(x) an amount equal to the sum of (a) the
aggregate number of shares of Class A Common Stock
outstanding on a fully diluted basis (after giving
effect to the issuance of all shares of Class A
Common Stock issuable upon Exercise (as defined
below) of all outstanding Derivative Securities (as
defined below) immediately prior to such issuance)
(as used in this Section 3(e), the "Fully Diluted
Shares Outstanding") plus (b) the aggregate
consideration, if any, received by the Corporation
for the issuance of such Additional Stock divided by
the Class E Conversion Price in effect immediately
prior to the issuance of such Additional Stock;
(y) an amount equal to the sum of (a) the
aggregate number of Fully Diluted Shares Outstanding
immediately prior to such issuance, plus (b) the
number of such shares of Additional Stock so issued.
(B) In the case of the issuance of stock for
cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by
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the Corporation for any underwriting or otherwise in
connection with the issuance and sale thereof.
(C) In the case of the issuance of stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
value thereof as determined by the board of directors
irrespective of any accounting treatment, unless otherwise
agreed in writing by holders of a majority in interest of the
outstanding shares of Class E Preferred Stock.
(D) For purposes of any such adjustment, the
following provisions shall be applicable:
If after the Class E Preferred Closing Date, the
Corporation shall issue any securities convertible into or
exchangeable for shares of Class A Common Stock ("Convertible
Securities") or shall grant any rights or options to subscribe
for, purchase or otherwise acquire shares of Class A Common
Stock or Convertible Securities (as used in this Section 3(e),
the "Options," Options and Convertible Securities being
referred to in this Section 3(e) as "Derivative Securities"),
other than an Excluded Issuance, then in each such case, such
issue or grant shall be deemed to be an issuance of Additional
Stock and the price per share of the stock issuable upon the
exercise, conversion or exchange (as used in this Section 3(e)
, the "Exercise") of such Derivative Securities shall be
determined by dividing (x) the total amount, if any, received
or receivable by the Corporation as consideration for the
issuance or granting of such Derivative Securities, plus the
minimum aggregate amount of additional consideration payable
to the Corporation upon the Exercise of such Derivative
Securities, by (y) the maximum number of shares of Class A
Common Stock issuable upon such Exercise. If the price per
share so determined is less than the Class E Conversion Price
in effect immediately prior to the issuance or granting of
such Derivative Securities, such issuance or granting shall be
deemed to be an issuance or granting for cash of such maximum
number of shares of Class A Common Stock deliverable upon the
Exercise of such Derivative Securities at such price per share
and such maximum number of shares of Class A Common Stock
shall be deemed to be outstanding, provided that
(1) if such Derivative Securities by
their terms provide, with the passage of time or
otherwise, for any increase in the amount of
additional consideration payable to the Corporation
or decrease in the number of shares of Class A Common
Stock issuable upon such Exercise (by change of rate
or otherwise), the Class E Conversion Price shall,
upon each such increase or decrease becoming
effective, be readjusted to reflect such increase or
decrease insofar as it affects rights of Exercise
which have not theretofore expired, and
(2) upon the expiration of such
Derivative Securities, or if any thereof shall not
have been Exercised, the Class E Conversion Price
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<PAGE>
shall, upon such expiration, be readjusted and shall
thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment
not been required, as the case may be) on the basis
that (xx) the only shares of Class A Common Stock so
issued were the shares of Class A Common Stock, if
any, actually issued or granted upon the Exercise of
such Derivative Securities, and (yy) such shares of
Class A Common Stock, if any, were issued or granted
for the consideration actually received by the
Corporation upon such Exercise plus the
consideration, if any, actually received by the
Corporation for the issuance or granting of all of
such Derivative Securities, whether or not Exercised,
provided, further, that no such readjustment shall have the
effect of increasing the Class E Conversion Price by an amount
in excess of the amount of the adjustment thereof initially
made in respect of the issuance or granting of such Derivative
Securities.
(E) "Additional Stock" for purposes of this
Section 3(e) shall mean any shares of Class A Common Stock
issued by the Corporation after the Class E Preferred Closing
Date other than:
(1) up to a maximum aggregate of
35,000 shares of stock issuable or issued to any
person, and up to a maximum aggregate 750,000 shares
of stock issuable or issued (at fair market value) to
employees, consultants, directors or officers of the
Corporation directly or pursuant to a stock option
plan or restricted stock plan approved by the Board
of Directors of the Corporation and the Compensation
Committee thereof;
(2) shares of stock issued or
issuable in a public offering before or in connection
with which all outstanding shares of Class E
Preferred Stock will be converted to Class A Common
Stock or upon exercise of warrants or rights granted
to underwriters in connection with such a public
offering;
(3) shares of stock issued or
issuable in accordance with Section 3(c)(v) above or
Section 3(e)(v) below or up to 3,460,000 shares of
Class A Preferred Stock or shares of Class A Common
Stock issued or issuable upon conversion of such
shares (adjusted to reflect subsequent stock splits,
combinations, stock dividends and recapitalizations)
in accordance with Section 10.2 of the Class A
Preferred Stock Purchase Agreement; or
(4) shares issuable upon conversion
of the Class A Preferred Stock, Class B Common Stock,
Class C Preferred Stock, Class D Preferred Stock and
Class E Preferred Stock (such shares of capital stock
described in clauses (1) through (4) being referred
to in this Section 3(e) as "Excluded Issuances").
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<PAGE>
(F) The Corporation shall at all times
reserve and keep available out of its authorized but unissued
shares of Class A Common Stock, solely for the purpose of
effecting the conversion of the shares of the Class E
Preferred Stock, such number of its shares of Class A Common
Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Class C Preferred
Stock and the Class E Preferred Stock and if at any time the
number of authorized but unissued shares of Class A Common
Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Class C Preferred Stock and the
Class E Preferred Stock, in the aggregate, in addition to such
other remedies as shall be available to the holder of such
Class E Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of
Class A Common Stock to such number of shares as shall be
sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite shareholder
approval of any necessary amendment to these articles.
(G) Notwithstanding any provision to the
contrary in this Section 3(e)(iv), any and all adjustments of
the Class E Conversion Price under this Section 3(e)(iv)
arising out of the issuance or deemed issuance of Additional
Stock between the Class E Preferred Closing Date and the date
upon which the adjustment to the Class E Conversion Price
effected pursuant to Section 3(e)(v) (as used in this Section
3(e), the "Liquidity Ratchet Adjustment") is made shall be
recalculated immediately after the Liquidity Ratchet
Adjustment is made and shall be so recalculated as though the
initial Class E Conversion Price were equal to the Class E
Conversion Price after giving effect to the Liquidity Ratchet
Adjustment; provided, however, that in the event that any
shares of Class E Preferred Stock have been converted into
shares of Class A Common Stock prior to the Liquidity Ratchet
Adjustment, the holders of the Class A Common Stock issued
upon conversion of such shares of Class E Preferred Stock
shall return to the Corporation any such shares of Class A
Common Stock so issued in excess of the number of shares of
Class A Common Stock that such holders would have been
entitled based on the Class E Conversion Price(s) recalculated
as set forth in this paragraph at the time(s) such shares of
Class E Preferred Stock were converted (it being understood
that any shares of Class A Common Stock resulting from
adjustments to the Class E Conversion Price arising out of
issuances or deemed issuances of Additional Stock at a price
equal to or greater than $3.50 per share (as adjusted to
reflect subsequent stock splits, combinations, stock dividends
and recapitalizations) may not be transferred until after the
Liquidity Ratchet Adjustment and the return to the Corporation
of any such excess shares).
(H) If the Corporation shall subdivide or
reclassify the then outstanding shares of its Class A Common
Stock into a greater number of shares of Class A Common Stock
or combine or reclassify the then outstanding shares of its
Class A Common Stock into a smaller number of shares of Class
A Common Stock, the Class E Conversion Price in effect
immediately prior to such subdivision, combination or
reclassification, as the case may be, shall be proportionately
adjusted as of the effective date thereof so that the holder
of any
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<PAGE>
Class E Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares
of Class A Common Stock which he would have owned after the
happening of such event had such Class E Preferred Stock
been converted immediately prior to the happening of such
event.
(I) In case of any capital reorganization of
the Corporation, or any consolidation or merger of the
Corporation with or into another corporation, or any sale or
conveyance to another corporation of all or substantially all
of the property of the Corporation, the holder of each share
of Class E Preferred Stock then outstanding (or of the stock
or securities received in lieu of such share) shall have the
right thereafter to convert such share (or such stock or
securities) into the kind and amount of shares of stock and
other securities and property receivable upon such
reorganization, consolidation, merger, sale or conveyance by a
holder of the number of shares of Class A Common Stock of the
Corporation into which such share of the Class E Preferred
Stock might have been converted immediately prior to such
reorganization, consolidation, merger, sale or conveyance, and
shall have no conversion rights under these provisions; and
effective provision shall be made in the Certificate of
Incorporation of the resulting or surviving corporation or
otherwise so that the provisions set forth in this Section
3(e) for the protection of the conversion rights of the Class
E Preferred Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and other
securities and property deliverable upon conversion of the
Class E Preferred Stock remaining outstanding or other
convertible securities received by the holders in place
thereof; and any such resulting or surviving corporation shall
expressly assume the obligation to deliver, upon the exercise
of the conversion privilege, such shares, securities or
property as the holders of the Class E Preferred Stock, or
other convertible securities received by the holders in place
thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provisions for the protection
of the conversion right as above provided. In case securities
or property other than Class A Common Stock shall be issuable
or deliverable upon conversion as aforesaid, then all
references in this Section 3(e) to Class A Common Stock shall
be deemed to apply, so far as appropriate and as nearly as may
be, to such other securities or property.
(J) Upon each adjustment or readjustment in
the Class E Conversion Price, the Chief Financial Officer of
the Corporation shall compute such adjustment or readjustment
in accordance with the provisions of this Section 3(e) and
prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of
(i) the consideration received or to be received by the
Corporation for any additional shares of Class A Common Stock
issued or sold or deemed to have been issued or sold, (ii) the
number of shares of Class A Common Stock outstanding or deemed
to be outstanding, and (iii) the Class E Conversion Price in
effect immediately prior to such issue or sale and as adjusted
and readjusted (if required) on account thereof. In the event
holders of shares of Class E Preferred Stock representing a
majority in interest of such class of stock represent to the
Corporation in writing that they dispute the adjustment or
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<PAGE>
readjustment, or any information or calculations contained in
the above-referenced certificate of the Chief Financial
Officer, then the Corporation, at its expense, will cause the
independent public accountants who regularly audit the books
and accounts of the Corporation or other independent
accountants of recognized standing selected by the Corporation
to compute such adjustment or readjustment in accordance with
the provisions of this Section 3(e) and prepare a certificate
setting forth any necessary revisions to such adjustment or
readjustment and showing in detail the facts upon which such
revisions to the adjustment or readjustment, if any, are
based. With respect to the certificate of the Chief Financial
Officer, and with respect to any certificate of the
independent public accountants, the Corporation shall,
forthwith upon the availability to the Corporation of any such
certificate, file such certificate with its corporate records
and mail a copy to each holder of the Class E Preferred Stock
then outstanding at such holder's address as it appears on the
records of the Corporation. No such determination by the
Corporation's independent public accountants shall bind the
Corporation or the holders of Class E Preferred Stock in
connection with any dispute with respect to such adjustment.
(v) LIQUIDITY RATCHET ADJUSTMENT. The shares of Class E
Preferred Stock shall be entitled to the following adjustments:
(A) If the Corporation does not satisfy at least one
of the Ratchet Conditions (as defined below), the conversion
price of the Class E Preferred Stock will be reduced ratably
to a floor of $3.50 per share (as adjusted for subsequent
stock splits, combinations, stock dividends and
recapitalizations) as described below. As used herein,
"Ratchet Conditions" means (I) the completion of a Class E
Qualified Offering on or before December 31, 1999 at an
offering price per share of at least $5.00 per share (as
adjusted for subsequent stock splits, combinations, stock
dividends and recapitalizations) and (II) the holders of the
Class E Preferred Stock shall have had an opportunity to sell
on or before December 31, 1999 all of their Class E Preferred
Stock or shares of Class A Common Stock issuable upon
conversion of such shares at a price of at least $10.00 per
share (as adjusted for subsequent stock splits, combinations,
stock dividends and recapitalizations). If the Corporation
completes a Class E Qualified Offering on or before December
31, 1999 at an offering price below $5.00 per share (as
adjusted for subsequent stock splits, combinations, stock
dividends and recapitalizations), the Class E Conversion Price
shall be reduced to the price at which shares are offered in
such Class E Qualified Offering but not below $3.50 (as
adjusted for subsequent stock splits, combinations, stock
dividends and recapitalizations). If the holders of Class E
Preferred Stock shall have had the opportunity to sell all of
their Class E Preferred Stock or shares of Class A Common
Stock issuable upon conversion thereof (a "Liquidity Event")
at a price below $10.00 per share (as adjusted for subsequent
stock splits, combinations, stock dividends and
recapitalizations), the Class E Conversion Price shall be
reduced proportionately to the price per share equal to the
sum of $3.50 (as adjusted for subsequent stock splits,
combinations, stock dividends and recapitalizations) plus an
amount equal to the Applicable Percentage (as defined
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<PAGE>
below) multiplied by $1.50 (as adjusted for subsequent stock
splits, combinations, stock dividends and
recapitalizations). The "Applicable Percentage" shall equal
the quotient obtained by dividing the excess, if any, of the
offered sales price over $5.00 (as adjusted for subsequent
stock splits, combinations, stock dividends and
recapitalizations) by $5.00 (as adjusted for subsequent
stock splits, combinations, stock dividends and
recapitalizations); provided that the Applicable Percentage
shall not exceed 100%. If both a Class E Qualified Offering
and a Liquidity Event occur during 1999, the Class E
Conversion Price shall be reduced to the higher of the
prices determined in accordance with the foregoing.
(B) If the Corporation shall issue additional shares of
stock to the holders of Class A Preferred Stock in
accordance with Section 10.2.2. or Section 10.2.3. of the
Class A Stock Purchase Agreement or shall reduce the Class C
Conversion Price pursuant to Section 3(c)(v)(B) above, the
Class E Conversion Price shall be reduced to the price
determined by multiplying the Class E Conversion Price in
effect immediately before such issuance or such reduction by
a fraction the numerator of which is the total number of
Fully Diluted Shares Outstanding immediately before such
issuance or reduction and the denominator of which is the
total number of Fully Diluted Shares Outstanding immediately
after such issuance or reduction.
(C) If the Class E Preferred Stock shall have been
previously converted into Class A Common Stock before the
determination of the adjustments set forth in this Section
3(e)(v), the Corporation shall effect such adjustments by
issuing to the holders additional shares of Class A Common
Stock such that such holders will hold the number of shares
they would have held if such adjustments were made
immediately before such conversion.
(vi) AUTHORIZATION OF ADDITIONAL CLASS E PREFERRED STOCK. If
at any time the number of authorized but unissued shares of Class
E Preferred Stock shall not be sufficient to effect the
obligations of the Corporation to issue additional shares of
Class E Preferred Stock, the Corporation shall take such
corporate action as may be necessary or advisable to increase the
number of authorized but unissued shares of Class E Preferred
Stock to such number of shares as shall be sufficient for such
purpose.
(f) The Corporation shall at all times reserve and keep available out
of its authorized and unissued shares of Class A Common Stock, solely for the
purpose of effecting the conversion of all outstanding shares of capital stock
which are convertible into shares of Class A Common Stock, such number of shares
of Class A Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of capital stock which are convertible into
Class A Common Stock.
4. DIVIDENDS. The holders of shares of Class A Preferred Stock, Class B
Common Stock, Class C Preferred Stock, Class D Preferred Stock and Class E
Preferred Stock shall be entitled to receive non-cumulative dividends, pari
passu with the holders of Class A Common Stock and in each case on an
as-if-converted basis, out of any assets legally available to the
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<PAGE>
Corporation, at a rate determined on a per annum basis, payable quarterly when,
as and if declared by the Board of Directors.
5. REDEMPTION. (a) At the option of each holder of Class C Preferred
Stock, the Corporation shall redeem, on the first day of August of each year
commencing in the year 2003, and continuing thereafter for two (2) consecutive
years (each a "Class C Preferred Redemption Date"), the number of shares of
Class C Preferred Stock held by such holder that is specified in a request for
redemption delivered to the Corporation by the holder on or prior to the thirty
(30) days immediately prior to the applicable Class C Preferred Redemption Date,
by paying in cash, seven dollars ($7.00) per share of Class C Preferred Stock
(adjusted to reflect subsequent stock splits, combinations, stock dividends, and
recapitalizations) plus all declared but unpaid dividends on such shares (the
"Class C Preferred Redemption Price"); provided, however, that the Corporation
shall not be required to redeem from any holder (i) in connection with the
initial Class C Preferred Redemption Date upon which such holder's shares of
Class C Preferred Stock are being redeemed, a number of shares of Class C
Preferred Stock greater than 33-1/3% of the aggregate number of shares of Class
C Preferred Stock held by such holder immediately prior to such redemption, and
(ii) in connection with the second Class C Preferred Redemption Date upon which
such holder's shares of Class C Preferred Stock are being redeemed, a number of
shares of Class C Preferred Stock greater than fifty percent (50%) of the
aggregate number of shares of Class C Preferred Stock held by such holder
immediately prior to such redemption. If the funds legally available for
redemption for the Class C Preferred Stock on any Class C Preferred Redemption
Date are insufficient to redeem the total number of shares of Class C Preferred
Stock requested to be redeemed as set forth in all requests for redemption in
connection with such Class C Preferred Redemption Date, those funds which are
legally available will be used to redeem the maximum number of shares so
requested to be redeemed ratably among such requesting holders in proportion to
the respective amounts which would be payable with respect to the full number of
shares so requested to be redeemed by them as if all such shares so requested to
be redeemed were redeemed in full. Any shares requested to be redeemed in
connection with any Class C Preferred Redemption Date shall remain outstanding
and entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of such shares so requested to be redeemed, such funds will
immediately be used to redeem the balance of the shares requested to be redeemed
pursuant to this section 5(a) on the Class C Preferred Redemption Date but which
it has not redeemed, on the same terms and conditions as are set forth above.
(b) At the option of each holder of Class E Preferred Stock,
the Corporation shall redeem, on the first day of March of each year commencing
in the year 2004, and continuing thereafter for two (2) consecutive years (each
a "Class E Preferred Redemption Date"), the number of shares of Class E
Preferred Stock held by such holder that is specified in a request for
redemption delivered to the Corporation by the holder on or prior to the thirty
(30) days immediately prior to the applicable Class E Preferred Redemption Date,
by paying in cash, five dollars ($5.00) per share of Class E Preferred Stock
(adjusted to reflect subsequent stock splits, combinations, stock dividends, and
recapitalizations) plus all declared but unpaid dividends on such shares (the
"Class E Preferred Redemption Price"); provided, however, that the Corporation
shall not be required to redeem from any holder (i) in connection with the
initial Class E Preferred Redemption Date upon which such holder's shares of
Class E Preferred Stock are
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<PAGE>
being redeemed, a number of shares of Class E Preferred Stock greater than
33-1/3% of the aggregate number of shares of Class E Preferred Stock held by
such holder immediately prior to such redemption, and (ii) in connection with
the second Class E Preferred Redemption Date upon which such holder's shares of
Class E Preferred Stock are being redeemed, a number of shares of Class E
Preferred Stock greater than fifty percent (50%) of the aggregate number of
shares of Class E Preferred Stock held by such holder immediately prior to such
redemption. If the funds legally available for redemption for the Class E
Preferred Stock on any Class E Preferred Redemption Date are insufficient to
redeem the total number of shares of Class E Preferred Stock requested to be
redeemed as set forth in all requests for redemption in connection with such
Class E Preferred Redemption Date, those funds which are legally available will
be used to redeem the maximum number of shares so requested to be redeemed
ratably among such requesting holders in proportion to the respective amounts
which would be payable with respect to the full number of shares so requested to
be redeemed by them as if all such shares so requested to be redeemed were
redeemed in full. Any shares requested to be redeemed in connection with any
Class E Preferred Redemption Date shall remain outstanding and entitled to all
the rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
such shares so requested to be redeemed, such funds will immediately be used to
redeem the balance of the shares requested to be redeemed pursuant to this
section 5(b) on the Class E Preferred Redemption Date but which it has not
redeemed, on the same terms and conditions as are set forth above.
6. PROTECTIVE PROVISIONS. (a) So long as any shares of Class A
Preferred Stock are outstanding, without first obtaining the approval of the
holders of a majority of the shares of the Class A Preferred Stock, the
Corporation shall not (i) alter or change the rights, preferences or privileges
of the shares of Class A Preferred Stock, whether by way of amendment to the
Corporation's Certificate of Incorporation or Bylaws, (ii) increase or decrease
the total number of authorized shares of Class A Preferred Stock, (iii) create,
authorize or issue any class or series of any equity security having a
preference over, or being on parity with, the Class A Preferred Stock with
respect to dividends or upon liquidation, or increase the authorized amount of
any class of capital stock of the Corporation ranking prior to or on parity with
the Class A Preferred Stock, or (iv) redeem, repurchase or otherwise acquire for
value any shares of Class A Common Stock, Class B Common Stock, Class C
Preferred Stock, Class D Preferred Stock or Class E Preferred Stock except for
the redemption of Class C Preferred Stock and Class E Preferred Stock pursuant
to Section 5 above or the reacquisition of shares of Class A Common Stock
pursuant to Section 3(c)(iv)(G) or Section 3(e)(iv)(G).
(b) So long as any shares of Class C Preferred Stock are
outstanding, without first obtaining the approval of the holders of a majority
of the shares of the Class C Preferred Stock, the Corporation shall not (i)
alter or change the rights, preferences or privileges of the shares of Class C
Preferred Stock, whether by way of amendment to the Corporation's Certificate of
Incorporation or Bylaws, (ii) increase or decrease the total number of
authorized shares of Class C Preferred Stock, (iii) create, authorize or issue
any class or series of any equity security having a preference over, or being on
parity with, the Class C Preferred Stock with respect to dividends or upon
liquidation, or increase the authorized amount of any class of capital stock of
the Corporation ranking prior to or on parity with the Class C Preferred Stock,
(iv) redeem, repurchase or otherwise acquire for value any shares of Class A
Common Stock, Class
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B Common Stock, Class A Preferred Stock, Class D Preferred Stock or Class E
Preferred Stock except for the reacquisition of shares of Class A Common Stock
pursuant to Section 3(c)(iv)(G) or Section 3(e)(iv)(G), or (v) declare dividends
(other than in shares of Class A Common Stock) on any share of capital stock of
the Corporation.
(c) So long as any shares of Class E Preferred Stock are
outstanding, without first obtaining the approval of the holders of a majority
of the shares of the Class E Preferred Stock, the Corporation shall not (i)
alter or change the rights, preferences or privileges of the shares of Class E
Preferred Stock, whether by way of amendment to the Corporation's Certificate of
Incorporation or Bylaws, (ii) increase or decrease the total number of
authorized shares of Class E Preferred Stock, (iii) create, authorize or issue
any class or series of any equity security having a preference over, or being on
parity with, the Class E Preferred Stock with respect to dividends or upon
liquidation, or increase the authorized amount of any class of capital stock of
the Corporation ranking prior to or on parity with the Class E Preferred Stock,
(iv) redeem, repurchase or otherwise acquire for value any shares of Class A
Common Stock, Class B Common Stock, Class A Preferred Stock, Class C Preferred
Stock or Class D Preferred Stock except for the reacquisition of shares of Class
A Common Stock pursuant to Section 3(c)(iv)(G) or Section 3(e)(iv)(G), or (v)
declare dividends (other than in shares of Class A Common Stock) on any share of
capital stock of the Corporation.
ARTICLE VI
In furtherance, and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, amend, alter,
change, add to or repeal bylaws of this Corporation, without any action on the
part of the stockholders. The bylaws made by the directors may be amended,
altered, changed, added to or repealed by the stockholders. Any specific
provision in the bylaws regarding amendment thereof shall be controlling.
ARTICLE VII
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that this article shall not eliminate or
limit the liability of a director (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (c) for the unlawful payment of dividends or unlawful stock repurchases
under Section 174 of the Delaware General Corporation Law; or (d) for any
transaction from which the director derived an improper personal benefit.
ARTICLE VIII
The Corporation shall, to the fullest extent permitted by Section 145
of the Delaware General Corporation Law, as the same may be amended and
supplemented, indemnify each director and officer of the Corporation from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section and the indemnification provided for herein shall not
be deemed exclusive of any other rights to which those indemnified may be
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entitled under any bylaw, agreement, vote of stockholders, vote of disinterested
directors or otherwise, and shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such persons, and the Corporation may purchase and maintain
insurance on behalf of any director or officer to the extent permitted by
Section 145 of the Delaware General Corporation Law.
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IN WITNESS WHEREOF, this certificate has been subscribed by the undersigned
who affirms that the statements made herein are true under the penalties of
perjury.
Dated: March [ ], 1999
New York, New York
MAIL.COM, INC.
By: /s/ Gary Millin
----------------------------------
Name: Gary Millin
Title: President
Corporate Seal
<PAGE>
eXHIBIT 3.2
BYLAWS
OF
[GlobeComm, Inc.]
ARTICLE I
STOCKHOLDERS
Section 1.1. ANNUAL MEETINGS. An annual meeting of the stockholders
shall be held for the election of directors at such date, time and place either
within or without the State of Delaware as may be designated by the Board of
Directors from time to time. Any other proper business may be transacted at the
annual meeting.
Section 1.2. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or the
certificate of incorporation of the Corporation, may be called at any time by
the Chairman or either Co-Chairman of the Board, as the case may be, the Vice
Chairman of the Board, if any, the President, if any, or the Board of Directors,
to be held at such date, time and place either within or without the State of
Delaware as may be stated in the notice of the meeting. A special meeting of
stockholders shall be called by the Secretary upon the written request, stating
the purpose of the meeting, of stockholders who together own of record a
majority of the outstanding shares of all classes of stock entitled to vote at
such meeting. Business transacted at any special meeting of the stockholders
shall be limited to the purpose or purposes stated in the notice.
Section 1.3. NOTICE OF MEETINGS. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the stockholder at such stockholder's
address as it appears on the records of the Corporation.
Section 1.4. ADJOURNMENTS. Any meeting of stockholders, annual or
special, may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
<PAGE>
Section 1.5. QUORUM. At each meeting of the stockholders, except where
otherwise provided by law or by the certificate of incorporation or these
bylaws, the holders of a majority of the outstanding shares of stock entitled to
vote on a matter at the meeting, present in person or represented by proxy,
shall constitute a quorum. For purposes of the foregoing, where a separate vote
by class or classes is required for any matter, the holders of a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum to take action with respect to that vote on
that matter. Two or more classes or series of stock shall be considered a single
class if the holders thereof are entitled to vote together as a single class at
the meeting. In the absence of a quorum of the holders of any class of stock
entitled to vote on a matter the holders of such class so present or represented
may, by majority vote, adjourn the meeting of such class from time to time in
the manner provided by Section 1.4 of these bylaws until a quorum of such class
shall be so present or represented. Shares of its own capital stock belonging on
the record date of the meeting to the Corporation or to another corporation, of
which a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the Corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
Section 1.6. ORGANIZATION. Meetings of the stockholders shall be
presided over by the Chairman or both Co-Chairmen of the Board, as the case may
be, or in the absence of the Chairman or Co-Chairmen of the Board, by the Vice
Chairman of the Board, if any, or, in the absence of the Vice Chairman of the
Board, by the President, or, in the absence of the President by a Vice
President, or, in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or, in the absence of such designation, by a chairman
chosen at the meeting. The Secretary, or in the absence of the Secretary, an
Assistant Secretary shall act as secretary of the meeting, but in the absence of
the Secretary and any Assistant Secretary, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 1.7. VOTING; PROXIES. Except as otherwise provided by law or in
the certificate of incorporation, each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote for each share of stock
held by such stockholder which has voting power upon the matter in question.
Each stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy, but no
such proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power,
regardless of whether the interest with which it is coupled is an interest in
the stock itself or any interest in the Corporation generally. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary of the Corporation.
Voting at meetings of the stockholders need not be by written ballot and need
not be conducted by inspectors unless the holders of a majority of the
outstanding shares of all classes of stock entitled to vote thereon present in
person or represented by proxy at such meeting shall so determine. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted. Directors
shall be
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elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. In all other matters, unless otherwise provided by law or by the
certificate of incorporation or these bylaws, the affirmative vote of the
holders of a majority of the shares present in person or represented by proxy at
the meeting and entitled to vote on the subject matter shall be the act of the
stockholders.
Section 1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of the stockholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than sixty nor less
than ten days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to (a) its registered office in the State of Delaware,
(b) its principal place of business, or (c) an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall not be more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
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Section 1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
Section 1.10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action
which may be taken at a meeting of the stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the actions so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
required to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. POWERS; NUMBER; QUALIFICATIONS. The business and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law or in the certificate of
incorporation. The Board of Directors shall consist of five (5) members. The
number of the Board of Directors may be increased or decreased from time to time
by the affirmative vote of a majority of the entire Board of Directors, but may
not be reduced except in accordance with the provisions hereof applicable to the
right of the holders of Class A Preferred Stock to elect members to the Board of
Directors.
The holders of Class A Preferred Stock have the right to elect two
directors; provided, however, that the right of the holders of Class A Preferred
Stock to elect one such director shall terminate in the event that there are not
outstanding at least 500,000 shares of Class A Preferred Stock (adjusted to
reflect subsequent stock splits, combinations, stock dividends and
recapitalizations), and provided further, that the right of the holders of Class
A Preferred Stock to elect one of such directors shall terminate in the event
that a third party has (1) invested cash or consideration greater than or equal
to $3,000,000 in the Company, the value of any non-cash consideration to be
determined by the Board of Directors in good faith evidenced by a board
resolution, or (2) acquired an equity interest in the Company of or in excess of
ten percent (10%) of the outstanding shares of Company Stock, and in either
case, such third party requires as a condition to its investment the right to
elect a member of the board of directors.
In the event the holders of Class A Preferred Stock shall lose their
rights to elect at least one member to the board of directors, the Company shall
invite a representative designated by the holders of Class A Preferred Stock to
attend all meetings of its board of directors in a
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nonvoting observer capacity; provided, however, (1) that such representative
shall agree to hold in confidence and trust and to act in a fiduciary manner
with respect to all Confidential Information concerning the Company furnished to
such representative in connection with any such meeting of the board of
directors, and (2) the Company reserves the right to withhold any information
and to exclude such representative from any meeting or portion thereof if access
to such information or attendance at such meeting would reasonably be expected
to adversely affect the attorney-client privilege between the Company and its
counsel.
Section 2.2. ELECTION; TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES.
Except as otherwise provided by statute or these bylaws, the directors (other
than members of the initial Board of Directors) shall be elected at the annual
meeting of stockholders. Each director shall hold office until his or her
successor is elected and qualified or until his or her earlier resignation or
removal. Any director may resign at any time upon written notice to the Board of
Directors or to the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. Any director or the entire Board of Directors may be
removed, with cause, by the holders of a majority of the shares then entitled to
vote at an election of directors. Unless otherwise provided in the certificate
of incorporation or these bylaws, vacancies and newly created directorships
resulting from any increase in the authorized number of directors or from any
other cause may be filled by a majority of the directors then in office,
although less than a quorum, or by the sole remaining director or by the
stockholders at the next annual meeting thereof or at a special meeting thereof.
Section 2.3. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board may from time to time determine, and if so determined
notice thereof need not be given.
Section 2.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman or either Co-Chairman of the Board, as
the case may be, by the Vice Chairman of the Board, if any, by the President, if
any, or by any two directors. Reasonable notice thereof shall be given by the
person or persons calling the meeting.
Section 2.5. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE
PERMITTED. Unless otherwise restricted by the certificate of incorporation or
these bylaws, members of the Board of Directors, or any committee designated by
the Board, may participate in a meeting of the Board or of such committee, as
the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this bylaw shall
constitute presence in person at such meeting.
Section 2.6. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the
Board of Directors, a majority of the entire Board shall constitute a quorum for
the transaction of business. The vote of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board unless the
certificate of incorporation or these bylaws shall require a vote of a greater
number. In case at any meeting of the Board a quorum is not present, the members
of the Board present may adjourn the meeting from time to time until a quorum
shall be present.
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Section 2.7. ORGANIZATION. Meetings of the Board of Directors shall be
presided over by the Chairman or jointly by Co-Chairmen of the Board, as the
case may be, or in the absence of the Chairman or both Chairmen of the Board by
the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman
of the Board by the President, if any, or in their absence by a chairman chosen
at the meeting. The Secretary, or in the absence of the Secretary an Assistant
Secretary, shall act as secretary of the meeting, but in the absence of the
Secretary and any Assistant Secretary the chairman of the meeting may appoint
any person to act as secretary of the meeting.
Section 2.8. ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise
restricted by the certificate of incorporation or these bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee, as the case may be.
Section 2.9. COMPENSATION OF DIRECTORS. Unless otherwise restricted by
the certificate of incorporation or these bylaws, the Board of Directors shall
have the authority to fix the compensation of directors. All directors shall
receive their reasonable expenses, if any, of attendance at meetings of the
Board of Directors or any committee thereof. Any director may serve the
Corporation in any other capacity and receive proper compensation therefor.
ARTICLE III
COMMITTEES
Section 3.1. COMMITTEES. The Board of Directors may, by resolution
adopted by a majority of the total number of directors, designate one or more
committees, each to consist of two or more of the directors of the Corporation,
which, to the extent provided in the resolution, may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Such committee or committees shall have
such name or names as may be determined by the resolution adopted by the
directors. The committees shall keep regular minutes of their proceedings and
report the same to the Board of Directors when required.
Section 3.2. COMMITTEE RULES. Unless the Board of Directors otherwise
provides, each committee designated by the Board may adopt, amend and repeal
rules for the conduct of its business. In the absence of a provision by the
Board or a provision in the rules of such committee to the contrary, a majority
of the entire authorized number of members of such committee shall constitute a
quorum for the transaction of business, the vote of a majority of the members
present at a meeting at the time of such vote if a quorum is the present shall
be the act of such committee, and in other respects each committee shall conduct
its business in the same manner as the Board conducts its business pursuant to
Article II of these bylaws.
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ARTICLE IV
OFFICERS
Section 4.1. OFFICERS; ELECTION. The officers shall consist of at least
a Chairman or Co-Chairmen of the Board of Directors and a Secretary. As soon as
practicable after the annual meeting of stockholders in each year, the Board of
Directors shall elect a Chairman or Co-Chairmen of the Board of Directors and a
Secretary. The Board may also, if it so determines, elect as officers of the
Corporation a Vice Chairman of the Board, a President, one or more Vice
Presidents, one or more Assistant Vice Presidents, one or more Assistant
Secretaries, a Treasurer and one or more Assistant Treasurers and such other
officers as the Board, as the case may be, may deem desirable or appropriate and
may give any of them such further designations or alternate titles as it
considers desirable. Any number of offices may be held by the same person unless
the certificate of incorporation or these bylaws otherwise provide.
Section 4.2. TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Unless
otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. Any officer
may resign at any time upon written notice to the Board or to the Chairman or
Co-Chairmen of the Board, as the case may be, or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. The Board may remove any officer with or
without cause at any time by a majority vote of the total number of directors.
Any such removal shall be without prejudice to the contractual rights of such
officer, if any, with the Corporation, but the election of an officer shall not
of itself create contractual rights. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be filled for the
unexpired term by the Board at any regular or special meeting.
Section 4.3. CHAIRMAN OF THE BOARD. The Chairman or Co-Chairmen of the
Board, as the case may be, shall preside at all meetings of the Board of
Directors and of the stockholders at which he, she or they shall be present. In
the absence of one Co-Chairman, the other Co-Chairman shall preside at such
meetings, but if both are present they shall jointly preside at such meetings.
The Chairman or the Co-Chairmen of the Board, as the case may be, shall be the
chief executive officer[s] and, subject to the direction of the Board, shall
have general charge and supervision of the business of the Corporation and, in
general, shall perform all duties incident to the office of Chairman of a
corporation and such other duties as may, from time to time, be assigned to him,
her or them by the Board or as may be provided by law. Co-Chairmen shall have
equal power and authority in their office, unless otherwise provided in these
bylaws or by a resolution of the Board of Directors.
Section 4.4. VICE CHAIRMAN OF THE BOARD. In the absence of the Chairman
or both Co-Chairmen of the Board, as the case may be, the Vice Chairman of the
Board, if any, shall preside at all meetings of the Board of Directors and of
the stockholders at which he or she shall be present and shall have and may
exercise such powers as may, from time to time, be assigned to him or her by the
Board or as may be provided by law.
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Section 4.5. PRESIDENT. In the absence of the Chairman or both
Co-Chairmen of the Board, as the case may be, and Vice Chairman of the Board,
the President, if any, shall preside at all meetings of the Board of Directors
and of the stockholders at which he or she shall be present and shall have and
may exercise such powers as may from time to time be assigned to him or her by
the Board or as may be provided by law.
Section 4.6. VICE PRESIDENTS. The Vice President or Vice Presidents, at
the request or in the absence of the President or during the President's
inability to act, shall perform the duties of the President, and when so acting
shall have the powers of the President. If there be more than one Vice
President, the Board of Directors may determine which one or more of the Vice
Presidents shall perform such other duties as may, from time to time, be
assigned to him or her by them by the Board or the President or as may be
provided by law.
Section 4.7. SECRETARY. The Secretary shall have the duty to record the
proceedings of the meetings of the stockholders, the Board of Directors and any
committees in a book to be kept for that purpose, shall see that all notices are
duly given in accordance with the provisions of these bylaws or as required by
law, shall be custodian of the records of the Corporation, may affix the
corporate seal to any document the execution of which, on behalf of the
Corporation, is duly authorized, and when so affixed may attest the same, and,
in general, shall perform all duties incident to the office of secretary of a
corporation and such other duties as may, from time to time, be assigned to him
or her by the Board or the Chairman or Co-Chairmen of the Board of Directors, as
the case may be, or as may be provided by law.
Section 4.8. TREASURER. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by or under
authority of the Board of Directors. If required by the Board, the Treasurer
shall give a bond for the faithful discharge of his or her duties, with such
surety or sureties as the Board may determine. The Treasurer shall keep or cause
to be kept full and accurate records of all receipts and disbursements in books
of the Corporation, shall render to the Chairman or Co-Chairmen of the Board, as
the case may be, and to the Board, whenever requested, an account of the
financial condition of the Corporation, and, in general, shall perform all the
duties incident to the office of treasurer of a corporation and such other
duties as may, from time to time, be assigned to him or her by the Board or the
Chairman or Co-Chairmen of the Board of Directors, as the case may be, or as may
be provided by law.
Section 4.9. OTHER OFFICERS. The other officers, if any, of the
Corporation shall have such powers and duties in the management of the
Corporation as shall be stated in a resolution of the Board of Directors which
is not inconsistent with these bylaws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Board may require any officer, agent or employee to give security for
the faithful performance of his or her duties.
Section 4.10. COMPENSATION. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he or she is also a
director of the Corporation.
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ARTICLE V
STOCK
Section 5.1. CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or either of the Co-Chairmen, as the case may be, or
Vice Chairman of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, representing the number of shares of
stock in the Corporation owned by such holder. For purposes of ss. 158 of the
Corporation Law of the State of Delaware or any other provision of law, the
signature of either Co-Chairman of the Board of Directors shall constitute the
signature of "the Chairman" as provided for therein, unless otherwise prohibited
by law, the certificate of incorporation or these bylaws.
There shall be set forth on the face or back of the certificate a
statement referencing the restrictions on transfer of the certificates and
stating that the attempted transfer in violation of such restrictions shall not
be registered on the books of the Corporation.
If the Corporation is authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences and
relative, participating, option or other special rights of each class of stock
or series thereof and the qualifications of restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided by law, in lieu of
the foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF
NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to give
the Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 5.3. TRANSFER OF STOCK. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be
9
<PAGE>
made for collateral security, and not absolutely, it shall be so expressed in
the entry of transfer if, when the certificates are presented to the Corporation
for transfer, both the transferor and the transferee request the Corporation to
do so.
Section 5.4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
Section 5.5. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its records as the
owner of shares of stock to receive dividends and to vote as such owner, shall
be entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares of stock on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VI
MISCELLANEOUS
Section 6.1. REGISTERED OFFICE. The registered office of the
Corporation within the State of Delaware shall be in the City of Wilmington,
County of New Castle.
Section 6.2. OTHER OFFICES. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
Section 6.3. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 6.4. SEAL. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.5. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS
AND COMMITTEES. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these bylaws.
10
<PAGE>
Section 6.6. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The
Corporation shall indemnify such persons for such liabilities in such manner,
under such circumstances and to such extent as permitted by Section 145 of the
Delaware General Corporation Law, as now enacted or hereafter amended. The Board
of Directors may authorize the purchase and maintenance of insurance and/or the
execution of individual agreements for the purpose of such indemnification, and
the Corporation shall advance all reasonable costs and expenses (including
attorney's fees) incurred in defending any action, suit or proceeding to all
persons entitled to indemnification under this section 6.6, all in the manner,
under the circumstances and to the extent permitted by Section 145 of the
Delaware General Corporation Law, as now enacted or hereafter amended.
Section 6.7. INTERESTED DIRECTORS; QUORUM. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interests, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or her or their
votes are counted for such purpose, if: (1) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board, a committee thereof or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
Section 6.8. FORM OF RECORDS. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
accounts and minute books, may be kept in, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 6.9. DIVIDENDS. Subject to the provisions of law and the
certificate of incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special,
meeting. Dividends may be paid in cash, in property or in shares of stock of the
Corporation, unless otherwise provided by statute or the certificate of
incorporation.
Section 6.10. RESERVES. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repair or maintaining any property of the
11
<PAGE>
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may modify
or abolish any such reserves in the manner in which it was created.
Section 6.11. CHECKS, NOTES, DRAFTS, ETC. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
Section 6.12. EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of
Directors may authorize any officer or officers, agent or agents, in the name
and on behalf of the Corporation to enter into or execute and deliver any and
all deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific-instances.
Section 6.13. VOTING OF STOCK IN OTHER CORPORATIONS. Unless otherwise
provided by resolution of the Board of Directors, the Chairman or either
Co-Chairman of the Board, as the case may be, from time to time, may (or may
appoint one or more attorneys or agents to) cast the votes which the Corporation
may be entitled to cast as a shareholder or otherwise in any other corporation,
any of whose shares or securities may be held by the Corporation, at meetings of
the holders of the shares or other securities of such other corporation. In the
event one or more attorneys or agents are appointed, the Chairman or Co-Chairmen
of the Board, as the case may be, may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent. The
Chairman or Co-Chairmen of the Board, as the case may be, may, or may instruct
the attorneys or agents appointed to, execute or cause to be executed in the
name and on behalf of the Corporation and under its seal or otherwise, such
written proxies, consents, waivers or other instruments as may be necessary or
proper in the circumstances.
Section 6.14. AMENDMENT OF BYLAWS. These bylaws may be amended or
repealed by a vote of the majority of the total number of directors or of the
stockholders at any meeting upon proper notice.
12
<PAGE>
<TABLE>
<S> <C> <C>
NUMBER MAIL.COM -TM- SHARES
M
MAIL.COM, INC.
COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE COMMON STOCK
CUSIP
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
- -------------------------------------------------------- ---------------------------------------------------------
- -------------------------------------------------------- Mail.com, Inc. ---------------------------------------------------------
- -------------------------------------------------------- ---------------------------------------------------------
transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of
this Certificate properly endorsed.
This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
In Witness Whereof, the said Corporation has caused this Certificate to be signed by its duly authorized officers and to be
sealed with the Seal of the Corporation.
Dated Mail.com, Inc.
Corporate
[ILLEGIBLE] [SEAL] [ILLEGIBLE]
1994
CHIEF EXECUTIVE OFFICER Delaware PRESIDENT
</TABLE>
COUNTERSIGNED AND REGISTERED
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE>
MAIL.COM, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF THE
CORPORATION AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE
SECRETARY OF THE CORPORATION.
---------------
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS
LOST, STOLEN OR DESTROYED THE COMPANY WILL REQUIRE A BOND
OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ____________ Custodian ____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ___________________________
in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For value received, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________
________________________________________________________________
NOTICE: THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S)
GUARANTEED: ________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
Agreement dated as of April 1, 1999 between Mail.com, Inc., a Delaware
corporation, (hereinafter the "Company") and Gerald Gorman (hereinafter the
"Employee").
I. EMPLOYMENT: Effective on the date hereof, Company hereby agrees to
employ Employee upon the terms and conditions this agreement, and
Employee accepts employment by Company upon the terms and conditions
set forth in this Agreement (hereinafter the "Agreement").
A. DUTIES AND POSITION: The Company employs Mr. Gorman as Chairman
and Chief Executive Officer. The Employee will have such duties as
are assigned or delegated to the Employee by the Board of
Directors.
B. EMPLOYMENT AT WILL: Employment of Employee by Company is "at
will". Either the Employee or the Company may terminate the
employment relationship for any reason at any time upon thirty
(30) days prior written notice to the other party, subject to the
provisions of section B1.
a. COMPENSATION UPON TERMINATION: Except as otherwise provided
in this section, the Employee's compensation, and any and all
other rights of the Employee under this Agreement will
terminate upon the occurrence of any of the following events:
i. upon the death of the Employee;
ii. upon the disability of the Employee immediately upon
notice from either party to the other. Disability shall
mean the inability of the Employee, with or without a
reasonable accommodation, to perform his duties as a
result of a physical or mental illness for a period of
three (3) consecutive months ;
iii. for cause, immediately upon notice from the Company to
the Employee, or at such later time as such notice may
specify. Termination for cause shall mean (i) the
willful failure by the Employee to follow directions
communicated to him by the Board of Directors; (ii) the
willful engaging by the Employee in conduct which is
materially injurious to the Company, monetarily or
otherwise; (iii) a conviction of, a plea of NOLO
CONTENDERE, a guilty plea or confession by the Employee
to an act of fraud, misappropriation or embezzlement or
to a felony; (iv) the Employee's habitual drunkenness or
use of illegal substances; (v) the material breach by
the Employee of this Agreement; or (vi) an act of gross
neglect or gross misconduct which the Company deems to
be good and sufficient cause; or
iv. Upon the mutual consent of the Parties.
b. TERMINATION OF PAY: Effective upon the termination of the
Employee's employment, the Company will be obligated to pay
the Employee such compensation as is provided in this
Section. For purposes of this section, in the event of the
Employee's death, the Employee's designated beneficiary will
be such individual beneficiary or trust, located at such
address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give
notice to the Company of such a beneficiary, the Employee's
estate.
c. TERMINATION FOR CAUSE: If the Company terminates the
Employee's employment for cause, the Employee will be
entitled to receive his Salary only through the date such
termination is effective, but will not be entitled to any
Incentive Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
<PAGE>
d. TERMINATION UPON DISABILITY: If the Employee's employment is
terminated by either party as a result of the Employee's
disability, the Company will pay the Employee his Salary
through the remainder of the calendar month during which such
termination is effective and for the lesser of (A) three
consecutive months thereafter, or (B) the difference between
disability insurance benefits and full salary for six months.
e. TERMINATION UPON DEATH: If the Employee's employment is
terminated because of the Employee's death, the Employee will
be entitled to receive his Salary through the end of the
calendar month in which his death occurs and for three (3)
consecutive months thereafter.
f. TERMINATION WITHOUT CAUSE. If the Company terminates the
Employee's employment without cause, the Employee will be
entitled to receive his Salary through the end of the week in
which written notice of termination occurred and for four (4)
consecutive weeks thereafter.
g. TERMINATION UPON THE EMPLOYEE'S RESIGNATION: If the Employee
resigns his employment, the Employee will be entitled to
receive his Salary only through the date such termination is
effective, but will not be entitled to any Incentive
Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
h. SHARES AND OPTIONS TERMINATION PROVISION: Under all events of
termination above the options and shares on which the
Employee has vested prior to the date of Termination shall be
the property of the Employee in accordance with the terms of
the Stock Option Agreement and Plan and shall not be revoked.
C. FULL TIME EFFORTS: Employee will devote full time and attention to
the business of Company, and, during his or her employment, will
not engage in any other business activity, regardless of whether
such activity is pursued for profit, gain, or other pecuniary
advantage, unless Employee receives prior written approval from
Company. Employee will use his best efforts to promote the success
of the Company's business, and will cooperate fully with the
Officers and Board of Directors in the advancement of the best
interests of the Company. However, Employee is not prohibited from
making personal investments in any other businesses, so long as
those investments do not require Employee to participate in the
operation of the companies in which he or she invests, subject to
the qualifications set forth in section C1.
1. QUALIFICATIONS: Nothing in this Agreement will prevent the
Employee from engaging in additional activities in connection
with personal investments and businesses that are not
inconsistent with and which do not detract from the
Employee's duties under this Agreement.
D. SALARY: The Employee shall be paid an annual salary of two hundred
thousand dollars ($200,000) (the "Salary"), subject to adjustment
as provided below, which shall be payable in equal periodic
installments according to the Company's customary payroll
practices, but no less frequently than monthly, commencing on the
Effective Date. The Salary will be reviewed by the Compensation
Committee of the Board of Directors not less frequently than
annually, and may be adjusted upward or downward in their sole
discretion.
E. INCENTIVE COMPENSATION: As additional compensation for the
services to be rendered by the Employee pursuant to this
Agreement, the Employee shall be entitled to receive a bonus with
respect to each Fiscal Year, payable on such date as determined by
the Compensation Committee of the Board of Directors, and which
amount shall be determined and approved by the Compensation
Committee of the Board of Directors (the "Incentive
Compensation").
<PAGE>
F. ADDITIONAL INCENTIVE COMPENSATION: In addition to the Incentive
Compensation, the Company agrees to consider granting options to
the Employee (the "Option") in the future to purchase additional
shares of Class A Common Stock in the same manner as additional
grants may be given to other employees of the Company, i.e. as
part of a bonus, etc. Any additional option grants shall be
approved by the Compensation Committee of the Board of Directors.
G. EXERCISE OF OPTIONS: The Options may be exercised by the Employee,
in whole or in part, from time to time after the date hereof,
commencing and prior to the termination of the Option in
accordance with the terms of the Stock Option Agreement.
H. BENEFITS: The Employee shall be entitled to participate in such
pension, profit sharing, bonus, life insurance, hospitalization,
major medical, and other employee benefit plans of the Company
that may be in effect from time to time, to the extent the
Employee is eligible under the terms of those plans (collectively,
the "Benefits").
I. PAID TIME OFF: The Employee will be entitled to paid time off in
accordance with the provisions of Company's Comprehensive Paid
Time Off Plan. The Employee will also be entitled to all company
designated holidays.
J. COMPANY RULES AND REGULATIONS: Employee agrees to review and abide
by all Company rules and regulations set forth in the Company
Employee Handbook, a copy of which shall be made available to
Employee.
II. CONFIDENTIALITY: Company and its Affiliates hold certain trade,
business, and financial secrets in connection with the business. The
nature of services provided by the Company requires information to be
handled in a private, confidential manner. Throughout the Employee's
employment there may be disclosed to the Employee certain trade
secrets, confidential information and proprietary data.
A. EMPLOYEE CONFIDENTIALITY AGREEMENT: Employee agrees that all
knowledge and information Employee gains from the trade secrets,
confidential information and proprietary information, which are
revealed to Employee shall for all time be regarded as strictly
confidential, are, and shall remain the sole and confidential
property of Company. The Company shall be entitled to restrain
Employee from disclosing any trade secret or other confidential
information, or from rendering any services to any entity to whom
this information has been or is threatened to be disclosed. The
right to an injunction is not exclusive, and Company may pursue
any other remedies it has against Employee for a breach or
threatened breach of this condition, including the recovery of
damages. Employee will only reveal or disclose the trade secrets
to another person, firm, corporation, company or entity if Company
instructs Employee to do so in writing. This secrecy protection
will continue even after Employee's dismissal by Company. Employee
acknowledges that if employee reveals the trade secrets to
unauthorized persons Employee may be penalized and sued for
injunctive relief and money damages as well as face possible
criminal charges by Company.
B. CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT: Employee agrees
that during and after termination of employment, Employee shall
not use for employee or others, or disclose or divulge to others,
any trade secrets, confidential information, or any other data of
Company in violation of this agreement. Upon terminating
employment with Company:
1. Employee shall return to Company all documents and property
pertaining to Company, including but not limited to:
drawings, blueprints, records, reports, manuals,
correspondence, customer lists, computer programs,
inventions, and all other materials and all copies thereof
relating in any way to Company's business, or in any way
obtained by Employee during employment. Employee further
agrees that Employee shall not retain any copies or
reproductions of the foregoing.
<PAGE>
2. Company may notify any future or prospective Company of this
agreement.
C. DEFINITIONS: The definition of trade secrets, confidential
information and proprietary information includes but is not
limited to:
1. TECHNICAL INFORMATION: Methods, processes, formulae,
compositions, systems, techniques, inventions, machines,
computer programs and research projects, unpatented
inventions, designs, know-how, trade secrets, technical
information and data, specifications, blueprints,
transparencies, test data, and additions, modifications, and
improvements thereon which are revealed to Employee.
2. GENERAL BUSINESS INFORMATION: Customer lists, pricing data,
sources of supply, marketing, production, or merchandising
systems or plans, documents, financial statements, quotes,
correspondence.
3. "REDIRECT BUSINESS" shall mean any business based on or with
a focus on value-added email services or Email and URL,
redirect services, or that derives revenues from the sale of
Email or URL redirect services. Value added email services
include but are not limited to email to fax/pager
technologies and email redirection enhancements.
4. "BROKER/AGENT BUSINESS" shall mean any business that sells
Internet assets, including secondary domain name rights, and
IP address rights.
5. "NEW TLD BUSINESS" shall mean a business that registers new
top level domain names.
6. INDUSTRY SPECIFIC INFORMATION: Information regarding the
Redirect Business, the Broker/Agent Business, New TLD
Business or Company's business methods. Company's user
payment data, user demographic data, and user account
information. Company's business policies, procedures,
techniques, trade secrets, patents, processes, formulas,
research, intellectual property or other knowledge developed
by Company.
7. OTHER MATERIALS: Information, including without limitation
data processing reports, customer sales analyses, invoices,
price lists or information, samples, any other materials,
data or software of any kind furnished to Employee by Company
or developed by Employee on behalf of Company or for
Company's use or otherwise in connection with Employee's
employment hereunder, or any other data that could be used by
third parties to the disadvantage of Company.
III. INTELLECTUAL PROPERTY
A. AGREEMENT ON INVENTIONS AND PATENTS: Employee agrees that Employee
shall promptly provide Company a complete record of any and all
inventions and improvements, whether patentable or not, which
Employee, solely or jointly, may conceive, make, or first disclose
during said employment. Employee agrees to the following:
1. Employee hereby grants, assigns and delivers to Company, or
its nominee, Employee's entire right, title, and interest in
and to all inventions and improvements made, developed or
created by the Employee (whether at the request or the
suggestion of the Company or otherwise, whether alone or in
conjunction with others, and whether during working hours of
work or otherwise) during his employment with the Company
that relate in any way to the actual or anticipated business
or activities of Company, or its Affiliates, or that are
suggested by or result from any task or work
<PAGE>
for or on behalf of Company or its Affiliates, together with
any and all domestic and foreign patent rights in such
inventions and improvements. To assist Company or its nominee
in securing patents thereto, Employee agrees promptly to do
all lawful and reasonable things both during and after
employment, without additional compensation, but at Company's
expense.
2. Employee agrees that, upon accepting employment with any
organization in competition with Company or its Affiliates
during a two year period following termination of employment
Employee shall notify Company in writing within thirty days
of the name and address of such new Company. Such notice is
required regardless of whether Employees believes they will
be employed in competition with the business of the Company.
3. Employee agrees to give Company timely written notice of any
prior employment agreements or patent rights that may
conflict with the interests of Company or its Affiliates.
B. AGREEMENT ON PROPRIETARY RIGHTS: Employee acknowledges that
Employee may have Company and industry related ideas and
suggestions, which Company may consider for commercial
exploitation. Employee understands that Company cannot accept such
suggestions in confidence. Employee therefore agrees to submit any
suggestions to the Company under the following conditions:
1. Company's review of Employee's suggestions is made only upon
Employee's request, and Company accepts no responsibility for
holding any submitted information in confidence.
2. No obligation of any kind is assumed nor may be implied
against Company unless or until Employee has entered into a
formal written contract with Company pertaining to Employee's
submissions. In addition, any obligation shall be only such
as is expressed in writing.
3. Neither Company nor any of its Affiliates shall have any
rights under any patents Employee now has nor may later
obtain for Employee's submissions covered by this Agreement,
but, in consideration of Company examining and considering
same, Employee hereby releases the Company from any liability
in connection with Employee's submissions or from liability
because of Company's use of Employee's submissions or of any
portion thereof, except such liability as may accrue under
valid patents now or hereafter issued.
4. Subject to these conditions, Employee certifies that no prior
disclosure to Company or any of its Affiliates regarding
these submissions has been made and that the entire
disclosure now made by Employee to Company is included with
this Agreement and submitted for retention by Company. If, at
any time, Employee corresponds with or discuss submissions
with an officer, employee, agent or representative of Company
and, in the course of such correspondence or discussion,
makes any additional disclosures regarding such submissions,
Employee shall, upon request, furnish Company an illustration
or a complete description, or both, of such additional
disclosure, so that it can be made a part of the permanent
record of Company.
IV. NON-COMPETITION: Employee hereby acknowledges that Company shall or may
in reliance of this agreement provide Employee access to trade secrets,
customers and accounts, and other confidential or propriety
information, and that this agreement is reasonably necessary to protect
Company.
<PAGE>
A. NON-COMPETITION AGREEMENT: For good consideration and as an
inducement for Company to employ Employee, Employee hereby agrees
not to directly or indirectly compete with the business of Company
during the period of employment and for a period of two years
thereafter following termination of employment and notwithstanding
the cause or reason for termination, unless Company ceases
operations.
1. EXCEPTIONS: Any exceptions to this policy must be with
Company's written prior consent. Employee acknowledges that
money damages may not be sufficient remedy for any breach of
this agreement and agrees that Company will be entitled to
seek specific performance and injunctive or other equitable
relief for any such breach.
2. DEFINITIONS: The term "not compete" shall mean that:
a. Employee shall not, on Employee's behalf or on behalf of
any other party, solicit or seek the business of any
customer or account of Company existing during the term
of employment and wherein said solicitation involves a
product and/or service substantially similar to or
competitive with any present or future product and/or
service of Company.
b. Employee shall not directly or indirectly own, operate,
consult to or be employed by any firm in a business
substantially similar to or competitive with the present
business of the Company or such business activity in
which the Company may engage during the term of
employment.
c. Employee shall not to be involved, directly or
indirectly, in the Redirect Business, the the
Broker/Agent Business, New TLD Business, and other new
Company businesses while employed by Company and will
not be involved, directly or indirectly, nor have a
financial interest in, the Redirect Business, the
Broker/Agent Business, New TLD Business and other new
Company businesses.
d. Employee shall not directly or indirectly solicit
Company's customers, vendors, subcontractors, or
prospects with services or products of the nature of
those being sold by Company.
V. CONFLICT OF INTEREST: Employee acknowledges that neither Employee, nor
any other business to which Employee may be associated, nor, to the
best of Employee's knowledge, any member of Employee's immediate
family, has any conflict between Employee's personal affairs or
interests and the proper performance of Employee's responsibilities for
Company that would constitute a conflict of interest with Company.
Furthermore, Employee declares that during employment, Employee shall
continue to maintain avoid any conflict with Company's interests.
VI. DOMAIN NAME REGISTRATION: Employee agrees that while working for
Company, Employee will give Company the right of first refusal on any
Domain names that Employee intends on registering or purchasing. To the
extent that Company does not act to register the Domain name then
Employee can register the Domain name after seven days from notifying
Company of Employee's intent. Employee cannot use these Domain names
for any business while working for Company and then is bound by the
non-compete restrictions.
VII. GENERAL CONTRACT TERMS
A. SURVIVAL AND BREACH: Both parties recognize that the services to
be rendered under this Agreement by the Employee are special,
unique and extraordinary in character, and that in the event of a
breach or a threatened by Employee of the terms and conditions of
the Agreement to be performed by him, then the Company shall be
entitled, if it so elects, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in
equity, to obtain damages for any breach of this Agreement, or to
enforce the specific
<PAGE>
performance thereof by the Employee. Without limiting the
generality of the foregoing, the parties acknowledge that a breach
by the Employee of his obligations under Sections II, III or IV or
would cause the Company irreparable harm, that no adequate remedy
at law would be available in respect thereof and that therefore
the Company would be entitled to injunctive relief with respect
thereto. Employee affirms having the opportunity to fully discuss
and negotiate the covenants set forth in Sections II, III and IV
and acknowledges understanding and acceptance. If any part of this
covenant is declared invalid, then Employee agrees to be bound by
a covenant as near to the original as lawfully possible. The
covenants set forth in Sections II, III, and IV shall survive the
term and termination of employment. Employee shall further be
liable for all costs of enforcement.
B. LIMITED EFFECT OF WAIVER OF BREACH BY COMPANY. If Company waives a
breach of any provision of this agreement by Employee, that waiver
will not operate or be construed as a waiver of any succeeding
breach by Employee. No waiver of a right by Company constitutes a
waiver of any other right of Company, and temporary waiver by
Company does not constitute a permanent waiver or any additional
temporary waiver.
C. EFFECT OF PRIOR AGREEMENT: This agreement supersedes any prior
agreement between Company or any predecessor of Company and
Employee, except that this Agreement shall not affect or operate
to reduce any benefit or compensation inuring to Employee of a
kind elsewhere provided and not expressly provided in this
Agreement.
D. SETTLEMENT BY ARBITRATION: Any claim or controversy that arises
out of or relates to this Agreement, or the breach thereof, will
be settled by arbitration in the office nearest the Company in
accordance with the prevailing rules of the American Arbitration
Association. Judgment upon the award rendered may be entered in
any court possessing jurisdiction of arbitration awards. Company
shall be liable for all legal costs of any such arbitration
proceedings or legal proceedings relating to this agreement.
E. SEVERABILITY: If for any reason any portion of this Agreement and
the covenants herein are declared invalid, this agreement and the
covenants herein shall continue in effect as if the invalid
portion had never been part hereof, and the other portions of this
Agreement and the covenants herein will remain in effect, insofar
as is consistent with the governing laws.
F. INDEMNIFICATION Company shall defend and hold harmless employee
from all actions against such employee that occur as a result of
the business operations.
G. INVALIDITY: If this agreement is held invalid or cannot be
enforced, then to the full extent permitted by the governing laws
any prior agreement between Company (or any predecessor thereof)
and Employee will be deemed reinstated as if this Agreement had
not been executed.
H. ASSUMPTION OF AGREEMENT: The rights and obligations under this
Agreement will inure to the benefit and be binding upon the
parties, their successors, heirs, assigns and personal
representatives.
I. ORAL MODIFICATIONS NOT BINDING: This instrument is the entire
agreement. Oral changes will have no effect. This Agreement and
the covenants herein may be altered only by a written agreement
signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
J. GOVERNING LAW: This Agreement and the covenants herein shall be
governed and interpreted under the laws of the State of New York.
<PAGE>
K. FULL DISCLOSURE: Company and Employee know of no restrictions on
their ability to complete this Agreement
In Witness Whereof, the parties have executed this Agreement as of the date
first written above.
By: /s/ Gary Millin By: /s/ Gerald Gorman
- ---------------------- ---------------------------------
Name: Gary Millin Name: Gerald Gorman
President Chairman and Chief Executive Officer
Mail.com, Inc. Mail.com, Inc.
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
Agreement dated as of April 1, 1999 between Mail.com, Inc., a Delaware
corporation, (hereinafter the "Company") and Gary Millin (hereinafter the
"Employee").
I. EMPLOYMENT: Effective on the date hereof, Company hereby agrees to
employ Employee upon the terms and conditions this agreement, and
Employee accepts employment by Company upon the terms and conditions
set forth in this Agreement (hereinafter the "Agreement").
A. DUTIES AND POSITION: The Company employs Mr. Millin as President.
The Employee will have such duties as are assigned or delegated to
the Employee by the Chairman and Chief Executive Officer or the
Board of Directors.
B. EMPLOYMENT AT WILL: Employment of Employee by Company is "at
will". Either the Employee or the Company may terminate the
employment relationship for any reason at any time upon thirty
(30) days prior written notice to the other party, subject to the
provisions of section B1.
a. COMPENSATION UPON TERMINATION: Except as otherwise provided
in this section, the Employee's compensation, and any and all
other rights of the Employee under this Agreement will
terminate upon the occurrence of any of the following events:
i. upon the death of the Employee;
ii. upon the disability of the Employee immediately upon
notice from either party to the other. Disability shall
mean the inability of the Employee, with or without a
reasonable accommodation, to perform his duties as a
result of a physical or mental illness for a period of
three (3) consecutive months;
iii. for cause, immediately upon notice from the Company to
the Employee, or at such later time as such notice may
specify. Termination for cause shall mean (i) the
willful failure by the Employee to follow directions
communicated to him by the Chief Executive Officer; (ii)
the willful engaging by the Employee in conduct which is
materially injurious to the Company, monetarily or
otherwise; (iii) a conviction of, a plea of NOLO
CONTENDERE, a guilty plea or confession by the Employee
to an act of fraud, misappropriation or embezzlement or
to a felony; (iv) the Employee's habitual drunkenness or
use of illegal substances; (v) the material breach by
the Employee of this Agreement; or (vi) an act of gross
neglect or gross misconduct which the Company deems to
be good and sufficient cause; or
iv. Upon the mutual consent of the Parties.
b. TERMINATION OF PAY: Effective upon the termination of the
Employee's employment, the Company will be obligated to pay
the Employee such compensation as is provided in this
Section. For purposes of this section, in the event of the
Employee's death, the Employee's designated beneficiary will
be such individual beneficiary or trust, located at such
address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give
notice to the Company of such a beneficiary, the Employee's
estate.
c. TERMINATION FOR CAUSE: If the Company terminates the
Employee's employment for cause, the Employee will be
entitled to receive his Salary only through the date such
termination is effective, but will not be entitled to any
Incentive Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
<PAGE>
d. TERMINATION UPON DISABILITY: If the Employee's employment is
terminated by either party as a result of the Employee's
disability, the Company will pay the Employee his Salary
through the remainder of the calendar month during which such
termination is effective and for the lesser of (A) three
consecutive months thereafter, or (B) the difference between
disability insurance benefits and full salary for six months.
e. TERMINATION UPON DEATH: If the Employee's employment is
terminated because of the Employee's death, the Employee will
be entitled to receive his Salary through the end of the
calendar month in which his death occurs and for three (3)
consecutive months thereafter.
f. TERMINATION WITHOUT CAUSE. If the Company terminates the
Employee's employment without cause, the Employee will be
entitled to receive his Salary through the end of the week in
which written notice of termination occurred and for four (4)
consecutive weeks thereafter.
g. TERMINATION UPON THE EMPLOYEE'S RESIGNATION. If the Employee
resigns his employment, the Employee will be entitled to
receive his Salary only through the date such termination is
effective, but will not be entitled to any Incentive
Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
h. SHARES AND OPTIONS TERMINATION PROVISION: Under all events of
termination above the options and shares on which the
Employee has vested prior to the date of Termination shall be
the property of the Employee in accordance with the terms of
the Stock Option Agreement and Plan and shall not be revoked.
C. FULL TIME EFFORTS: Employee will devote full time and attention to
the business of Company, and, during his or her employment, will
not engage in any other business activity, regardless of whether
such activity is pursued for profit, gain, or other pecuniary
advantage, unless Employee receives prior written approval from
Company. Employee will use his best efforts to promote the success
of the Company's business, and will cooperate fully with the
Officers and Board of Directors in the advancement of the best
interests of the Company. However, Employee is not prohibited from
making personal investments in any other businesses, so long as
those investments do not require Employee to participate in the
operation of the companies in which he or she invests, subject to
the qualifications set forth in section C1.
1. QUALIFICATIONS: Nothing in this Agreement will prevent the
Employee from engaging in additional activities in connection
with personal investments and businesses that are not
inconsistent with and which do not detract from the
Employee's duties under this Agreement.
D. SALARY: The Employee shall be paid an annual salary of one hundred
twenty thousand dollars ($130,000) (the "Salary"), subject to
adjustment as provided below, which shall be payable in equal
periodic installments according to the Company's customary payroll
practices, but no less frequently than monthly, commencing on the
Effective Date. The Salary will be reviewed by the Chief Executive
Officer and Compensation Committee of the Board of Directors not
less frequently than annually, and may be adjusted upward or
downward in their sole discretion.
E. INCENTIVE COMPENSATION: As additional compensation for the
services to be rendered by the Employee pursuant to this
Agreement, the Employee shall be entitled to receive a bonus with
respect to each Fiscal Year, payable on such date as determined by
the Compensation Committee of the Board of Directors, and which
amount shall be determined by the Chief Executive Officer and
approved by the Compensation Committee of the Board of Directors
(the "Incentive Compensation").
<PAGE>
F. ADDITIONAL INCENTIVE COMPENSATION: In addition to the Incentive
Compensation, the Company agrees to consider granting options to
the Employee (the "Options") in the future to purchase additional
shares of Class A Common Stock in the same manner as additional
grants may be given to other employees of the Company, i.e. as
part of a bonus, etc. Any additional option grants shall be
approved by the Compensation Committee of the Board of Directors.
G. EXERCISE OF OPTIONS: The Options may be exercised by the Employee,
in whole or in part, from time to time after the date hereof,
commencing and prior to the termination of the Option in
accordance with the terms of the Stock Option Agreement.
H. BENEFITS: The Employee shall be entitled to participate in such
pension, profit sharing, bonus, life insurance, hospitalization,
major medical, and other employee benefit plans of the Company
that may be in effect from time to time, to the extent the
Employee is eligible under the terms of those plans (collectively,
the "Benefits").
I. PAID TIME OFF: The Employee will be entitled to paid time off in
accordance with the provisions of Company's Comprehensive Paid
Time Off Plan. The Employee will also be entitled to all company
designated holidays.
J. COMPANY RULES AND REGULATIONS: Employee agrees to review and abide
by all Company rules and regulations set forth in the Company
Employee Handbook, a copy of which shall be made available to
Employee.
II. CONFIDENTIALITY: Company and its Affiliates hold certain trade,
business, and financial secrets in connection with the business. The
nature of services provided by the Company requires information to be
handled in a private, confidential manner. Throughout the Employee's
employment there may be disclosed to the Employee certain trade
secrets, confidential information and proprietary data.
A. EMPLOYEE CONFIDENTIALITY AGREEMENT: Employee agrees that all
knowledge and information Employee gains from the trade secrets,
confidential information and proprietary information, which are
revealed to Employee shall for all time be regarded as strictly
confidential, are, and shall remain the sole and confidential
property of Company. The Company shall be entitled to restrain
Employee from disclosing any trade secret or other confidential
information, or from rendering any services to any entity to whom
this information has been or is threatened to be disclosed. The
right to an injunction is not exclusive, and Company may pursue
any other remedies it has against Employee for a breach or
threatened breach of this condition, including the recovery of
damages. Employee will only reveal or disclose the trade secrets
to another person, firm, corporation, company or entity if Company
instructs Employee to do so in writing. This secrecy protection
will continue even after Employee's dismissal by Company. Employee
acknowledges that if employee reveals the trade secrets to
unauthorized persons Employee may be penalized and sued for
injunctive relief and money damages as well as face possible
criminal charges by Company.
B. CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT: Employee agrees
that during and after termination of employment, Employee shall
not use for employee or others, or disclose or divulge to others,
any trade secrets, confidential information, or any other data of
Company in violation of this agreement. Upon terminating
employment with Company:
1. Employee shall return to Company all documents and property
pertaining to Company, including but not limited to:
drawings, blueprints, records, reports, manuals,
correspondence, customer lists, computer programs,
inventions, and all other materials and all copies thereof
relating in any way to Company's business, or
<PAGE>
in any way obtained by Employee during employment. Employee
further agrees that Employee shall not retain any copies or
reproductions of the foregoing.
2. Company may notify any future or prospective Company of this
agreement.
C. DEFINITIONS: The definition of trade secrets, confidential
information and proprietary information includes but is not
limited to:
1. TECHNICAL INFORMATION: Methods, processes, formulae,
compositions, systems, techniques, inventions, machines,
computer programs and research projects, unpatented
inventions, designs, know-how, trade secrets, technical
information and data, specifications, blueprints,
transparencies, test data, and additions, modifications, and
improvements thereon which are revealed to Employee.
2. GENERAL BUSINESS INFORMATION: Customer lists, pricing data,
sources of supply, marketing, production, or merchandising
systems or plans, documents, financial statements, quotes,
correspondence.
3. "REDIRECT BUSINESS" shall mean any business based on or with
a focus on value-added email services or Email and URL,
redirect services, or that derives revenues from the sale of
Email or URL redirect services. Value added email services
include but are not limited to email to fax/pager
technologies and email redirection enhancements.
4. "BROKER/AGENT BUSINESS" shall mean any business that sells
Internet assets, including secondary domain name rights, and
IP address rights.
5. "NEW TLD BUSINESS" shall mean a business that registers new
top level domain names.
6. INDUSTRY SPECIFIC INFORMATION: Information regarding the
Redirect Business, the Broker/Agent Business, New TLD
Business or Company's business methods. Company's user
payment data, user demographic data, and user account
information. Company's business policies, procedures,
techniques, trade secrets, patents, processes, formulas,
research, intellectual property or other knowledge developed
by Company.
7. OTHER MATERIALS: Information, including without limitation
data processing reports, customer sales analyses, invoices,
price lists or information, samples, any other materials,
data or software of any kind furnished to Employee by Company
or developed by Employee on behalf of Company or for
Company's use or otherwise in connection with Employee's
employment hereunder, or any other data that could be used by
third parties to the disadvantage of Company.
III. INTELLECTUAL PROPERTY
A. AGREEMENT ON INVENTIONS AND PATENTS: Employee agrees that Employee
shall promptly provide Company a complete record of any and all
inventions and improvements, whether patentable or not, which
Employee, solely or jointly, may conceive, make, or first disclose
during said employment. Employee agrees to the following:
1. Employee hereby grants, assigns and delivers to Company, or
its nominee, Employee's entire right, title, and interest in
and to all inventions and improvements made, developed or
created by the Employee (whether at the request or the
suggestion of the Company or otherwise, whether alone or in
conjunction with others, and whether during working hours of
work or otherwise) during his employment with
<PAGE>
the Company that relate in any way to the actual or
anticipated business or activities of Company, or its
Affiliates, or that are suggested by or result from any task
or work for or on behalf of Company or its Affiliates,
together with any and all domestic and foreign patent rights
in such inventions and improvements. To assist Company or its
nominee in securing patents thereto, Employee agrees promptly
to do all lawful and reasonable things both during and after
employment, without additional compensation, but at Company's
expense.
2. Employee agrees that, upon accepting employment with any
organization in competition with Company or its Affiliates
during a two year period following termination of employment
Employee shall notify Company in writing within thirty days
of the name and address of such new Company. Such notice is
required regardless of whether Employees believes they will
be employed in competition with the business of the Company.
3. Employee agrees to give Company timely written notice of any
prior employment agreements or patent rights that may
conflict with the interests of Company or its Affiliates.
B. AGREEMENT ON PROPRIETARY RIGHTS: Employee acknowledges that
Employee may have Company and industry related ideas and
suggestions, which Company may consider for commercial
exploitation. Employee understands that Company cannot accept such
suggestions in confidence. Employee therefore agrees to submit any
suggestions to the Company under the following conditions:
1. Company's review of Employee's suggestions is made only upon
Employee's request, and Company accepts no responsibility for
holding any submitted information in confidence.
2. No obligation of any kind is assumed nor may be implied
against Company unless or until Employee has entered into a
formal written contract with Company pertaining to Employee's
submissions. In addition, any obligation shall be only such
as is expressed in writing.
3. Neither Company nor any of its Affiliates shall have any
rights under any patents Employee now has nor may later
obtain for Employee's submissions covered by this Agreement,
but, in consideration of Company examining and considering
same, Employee hereby releases the Company from any liability
in connection with Employee's submissions or from liability
because of Company's use of Employee's submissions or of any
portion thereof, except such liability as may accrue under
valid patents now or hereafter issued.
4. Subject to these conditions, Employee certifies that no prior
disclosure to Company or any of its Affiliates regarding
these submissions has been made and that the entire
disclosure now made by Employee to Company is included with
this Agreement and submitted for retention by Company. If, at
any time, Employee corresponds with or discuss submissions
with an officer, employee, agent or representative of Company
and, in the course of such correspondence or discussion,
makes any additional disclosures regarding such submissions,
Employee shall, upon request, furnish Company an illustration
or a complete description, or both, of such additional
disclosure, so that it can be made a part of the permanent
record of Company.
IV. NON-COMPETITION: Employee hereby acknowledges that Company shall or may
in reliance of this agreement provide Employee access to trade secrets,
customers and accounts, and other confidential or propriety
information, and that this agreement is reasonably necessary to protect
Company.
<PAGE>
A. NON-COMPETITION AGREEMENT: For good consideration and as an
inducement for Company to employ Employee, Employee hereby agrees
not to directly or indirectly compete with the business of Company
during the period of employment and for a period of two years
thereafter following termination of employment and notwithstanding
the cause or reason for termination, unless Company ceases
operations.
1. EXCEPTIONS: Any exceptions to this policy must be with
Company's written prior consent. Employee acknowledges that
money damages may not be sufficient remedy for any breach of
this agreement and agrees that Company will be entitled to
seek specific performance and injunctive or other equitable
relief for any such breach.
2. DEFINITIONS: The term "not compete" shall mean that:
a. Employee shall not, on Employee's behalf or on behalf of
any other party, solicit or seek the business of any
customer or account of Company existing during the term
of employment and wherein said solicitation involves a
product and/or service substantially similar to or
competitive with any present or future product and/or
service of Company.
b. Employee shall not directly or indirectly own, operate,
consult to or be employed by any firm in a business
substantially similar to or competitive with the present
business of the Company or such business activity in
which the Company may engage during the term of
employment.
c. Employee shall not to be involved, directly or
indirectly, in the Redirect Business, the the
Broker/Agent Business, New TLD Business, and other new
Company businesses while employed by Company and will
not be involved, directly or indirectly, nor have a
financial interest in, the Redirect Business, the
Broker/Agent Business, New TLD Business and other new
Company businesses.
d. Employee shall not directly or indirectly solicit
Company's customers, vendors, subcontractors, or
prospects with services or products of the nature of
those being sold by Company.
V. CONFLICT OF INTEREST: Employee acknowledges that neither Employee, nor
any other business to which Employee may be associated, nor, to the
best of Employee's knowledge, any member of Employee's immediate
family, has any conflict between Employee's personal affairs or
interests and the proper performance of Employee's responsibilities for
Company that would constitute a conflict of interest with Company.
Furthermore, Employee declares that during employment, Employee shall
continue to maintain avoid any conflict with Company's interests.
VI. DOMAIN NAME REGISTRATION: Employee agrees that while working for
Company, Employee will give Company the right of first refusal on any
Domain names that Employee intends on registering or purchasing. To the
extent that Company does not act to register the Domain name then
Employee can register the Domain name after seven days from notifying
Company of Employee's intent. Employee cannot use these Domain names
for any business while working for Company and then is bound by the
non-compete restrictions.
VII. GENERAL CONTRACT TERMS
A. SURVIVAL AND BREACH: Both parties recognize that the services to
be rendered under this Agreement by the Employee are special,
unique and extraordinary in character, and that in the event of a
breach or a threatened by Employee of the terms and conditions of
the Agreement to be performed by him, then the Company shall be
entitled, if it so elects, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in
<PAGE>
equity, to obtain damages for any breach of this Agreement, or to
enforce the specific performance thereof by the Employee. Without
limiting the generality of the foregoing, the parties acknowledge
that a breach by the Employee of his obligations under Sections
II, III or IV or would cause the Company irreparable harm, that no
adequate remedy at law would be available in respect thereof and
that therefore the Company would be entitled to injunctive relief
with respect thereto. Employee affirms having the opportunity to
fully discuss and negotiate the covenants set forth in Sections
II, III and IV and acknowledges understanding and acceptance. If
any part of this covenant is declared invalid, then Employee
agrees to be bound by a covenant as near to the original as
lawfully possible. The covenants set forth in Sections II, III,
and IV shall survive the term and termination of employment.
Employee shall further be liable for all costs of enforcement.
B. LIMITED EFFECT OF WAIVER OF BREACH BY COMPANY. If Company waives a
breach of any provision of this agreement by Employee, that waiver
will not operate or be construed as a waiver of any succeeding
breach by Employee. No waiver of a right by Company constitutes a
waiver of any other right of Company, and temporary waiver by
Company does not constitute a permanent waiver or any additional
temporary waiver.
C. EFFECT OF PRIOR AGREEMENT: This agreement supersedes any prior
agreement between Company or any predecessor of Company and
Employee, except that this Agreement shall not affect or operate
to reduce any benefit or compensation inuring to Employee of a
kind elsewhere provided and not expressly provided in this
Agreement.
D. SETTLEMENT BY ARBITRATION: Any claim or controversy that arises
out of or relates to this Agreement, or the breach thereof, will
be settled by arbitration in the office nearest the Company in
accordance with the prevailing rules of the American Arbitration
Association. Judgment upon the award rendered may be entered in
any court possessing jurisdiction of arbitration awards. Company
shall be liable for all legal costs of any such arbitration
proceedings or legal proceedings relating to this agreement.
E. SEVERABILITY: If for any reason any portion of this Agreement and
the covenants herein are declared invalid, this agreement and the
covenants herein shall continue in effect as if the invalid
portion had never been part hereof, and the other portions of this
Agreement and the covenants herein will remain in effect, insofar
as is consistent with the governing laws.
F. INDEMNIFICATION Company shall defend and hold harmless employee
from all actions against such employee that occur as a result of
the business operations.
G. INVALIDITY: If this agreement is held invalid or cannot be
enforced, then to the full extent permitted by the governing laws
any prior agreement between Company (or any predecessor thereof)
and Employee will be deemed reinstated as if this Agreement had
not been executed.
H. ASSUMPTION OF AGREEMENT: The rights and obligations under this
Agreement will inure to the benefit and be binding upon the
parties, their successors, heirs, assigns and personal
representatives.
I. ORAL MODIFICATIONS NOT BINDING: This instrument is the entire
agreement. Oral changes will have no effect. This Agreement and
the covenants herein may be altered only by a written agreement
signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
J. GOVERNING LAW: This Agreement and the covenants herein shall be
governed and interpreted under the laws of the State of New York.
<PAGE>
K. FULL DISCLOSURE: Company and Employee know of no restrictions on
their ability to complete this Agreement
In Witness Whereof, the parties have executed this Agreement as of the date
first written above.
By: /s/ Gerald Gorman By: /s/ Gary Millin
-------------------- ---------------------
Name: Gerald Gorman Name: Gary Millin
CEO President
Mail.com, Inc. Mail.com, Inc.
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
Agreement dated as of April 1, 1999 between Mail.com, Inc., a Delaware
corporation, (hereinafter the "Company") and Lon Otremba (hereinafter the
"Employee").
I. EMPLOYMENT: Effective on the date hereof, Company hereby agrees to
employ Employee upon the terms and conditions this agreement, and
Employee accepts employment by Company upon the terms and conditions
set forth in this Agreement (hereinafter the "Agreement").
A. DUTIES AND POSITION: The Company employs Mr. Otremba as Chief
Operating Officer. The Employee will have such duties as are
assigned or delegated to the Employee by the Chairman and Chief
Executive Officer.
B. EMPLOYMENT AT WILL: Employment of Employee by Company is "at
will". Either the Employee or the Company may terminate the
employment relationship for any reason at any time upon thirty
(30) days prior written notice to the other party, subject to the
provisions of section B1.
a. COMPENSATION UPON TERMINATION: Except as otherwise provided
in this section, the Employee's compensation, and any and all
other rights of the Employee under this Agreement will
terminate upon the occurrence of any of the following events:
i. upon the death of the Employee;
ii. upon the disability of the Employee immediately upon
notice from either party to the other. Disability shall
mean the inability of the Employee, with or without a
reasonable accommodation, to perform his duties as a
result of a physical or mental illness for a period of
three (3) consecutive months ;
iii. for cause, immediately upon notice from the Company to
the Employee, or at such later time as such notice may
specify. Termination for cause shall mean (i) the
willful failure by the Employee to follow directions
communicated to him by the Chief Executive Officer; (ii)
the willful engaging by the Employee in conduct which is
materially injurious to the Company, monetarily or
otherwise; (iii) a conviction of, a plea of NOLO
CONTENDERE, a guilty plea or confession by the Employee
to an act of fraud, misappropriation or embezzlement or
to a felony; (iv) the Employee's habitual drunkenness or
use of illegal substances; (v) the material breach by
the Employee of this Agreement; or (vi) an act of gross
neglect or gross misconduct which the Company deems to
be good and sufficient cause; or
iv. Upon the mutual consent of the Parties.
b. TERMINATION OF PAY: Effective upon the termination of the
Employee's employment, the Company will be obligated to pay
the Employee such compensation as is provided in this
Section. For purposes of this section, in the event of the
Employee's death, the Employee's designated beneficiary will
be such individual beneficiary or trust, located at such
address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give
notice to the Company of such a beneficiary, the Employee's
estate.
c. TERMINATION FOR CAUSE: If the Company terminates the
Employee's employment for cause, the Employee will be
entitled to receive his Salary only through the date such
termination is effective, but will not be entitled to any
Incentive Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
<PAGE>
d. TERMINATION UPON DISABILITY: If the Employee's employment is
terminated by either party as a result of the Employee's
disability, the Company will pay the Employee his Salary
through the remainder of the calendar month during which such
termination is effective and for the lesser of (A) three
consecutive months thereafter, or (B) the difference between
disability insurance benefits and full salary for six months.
e. TERMINATION UPON DEATH: If the Employee's employment is
terminated because of the Employee's death, the Employee will
be entitled to receive his Salary through the end of the
calendar month in which his death occurs and for three (3)
consecutive months thereafter.
f. TERMINATION WITHOUT CAUSE. If the Company terminates the
Employee's employment without cause, the Employee will be
entitled to receive his Salary through the end of the week in
which written notice of termination occurred and for four (4)
consecutive weeks thereafter.
g. TERMINATION UPON THE EMPLOYEE'S RESIGNATION. If the Employee
resigns his employment, the Employee will be entitled to
receive his Salary only through the date such termination is
effective, but will not be entitled to any Incentive
Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
h. SHARES AND OPTIONS TERMINATION PROVISION: Under all events of
termination above the options and shares on which the
Employee has vested prior to the date of Termination shall be
the property of the Employee in accordance with the terms of
the Stock Option Agreement and Plan and shall not be revoked.
C. FULL TIME EFFORTS: Employee will devote full time and attention to
the business of Company, and, during his or her employment, will
not engage in any other business activity, regardless of whether
such activity is pursued for profit, gain, or other pecuniary
advantage, unless Employee receives prior written approval from
Company. Employee will use his best efforts to promote the success
of the Company's business, and will cooperate fully with the
Officers and Board of Directors in the advancement of the best
interests of the Company. However, Employee is not prohibited from
making personal investments in any other businesses, so long as
those investments do not require Employee to participate in the
operation of the companies in which he or she invests, subject to
the qualifications set forth in section C1.
1. QUALIFICATIONS: Nothing in this Agreement will prevent the
Employee from engaging in additional activities in connection
with personal investments and businesses that are not
inconsistent with and which do not detract from the
Employee's duties under this Agreement.
D. SALARY: The Employee shall be paid an annual salary of two hundred
thousand dollars ($200,000) (the "Salary"), subject to adjustment
as provided below, which shall be payable in equal periodic
installments according to the Company's customary payroll
practices, but no less frequently than monthly, commencing on the
Effective Date. The Salary will be reviewed by the Chief Executive
Officer and Compensation Committee of the Board of Directors not
less frequently than annually, and may be adjusted upward or
downward in their sole discretion.
E. INCENTIVE COMPENSATION: As additional compensation for the
services to be rendered by the Employee pursuant to this
Agreement, the Employee shall be entitled to receive a bonus with
respect to each Fiscal Year, with a bonus level up to 30% of base
salary, payable on such date as determined by the Compensation
Committee of the Board of Directors, and which amount shall be
determined by the Chief Executive Officer and approved by the
Compensation Committee of the Board of Directors (the "Incentive
Compensation").
<PAGE>
F. ADDITIONAL INCENTIVE COMPENSATION: In addition to the Incentive
Compensation, the Company agrees to consider granting options to
the Employee (the "Option") in the future to purchase additional
shares of Class A Common Stock in the same manner as additional
grants may be given to other employees of the Company, i.e. as
part of a bonus, etc. Any additional option grants shall be
approved by the Compensation Committee of the Board of Directors.
G. EXERCISE OF OPTIONS: The Options may be exercised by the Employee,
in whole or in part, from time to time after the date hereof,
commencing and prior to the termination of the Option in
accordance with the terms of the Stock Option Agreement.
H. BENEFITS: The Employee shall be entitled to participate in such
pension, profit sharing, bonus, life insurance, hospitalization,
major medical, and other employee benefit plans of the Company
that may be in effect from time to time, to the extent the
Employee is eligible under the terms of those plans (collectively,
the "Benefits").
I. PAID TIME OFF: The Employee will be entitled to paid time off in
accordance with the provisions of Company's Comprehensive Paid
Time Off Plan. The Employee will also be entitled to all company
designated holidays.
J. COMPANY RULES AND REGULATIONS: Employee agrees to review and abide
by all Company rules and regulations set forth in the Company
Employee Handbook, a copy of which shall be made available to
Employee.
II. CONFIDENTIALITY: Company and its Affiliates hold certain trade,
business, and financial secrets in connection with the business. The
nature of services provided by the Company requires information to be
handled in a private, confidential manner. Throughout the Employee's
employment there may be disclosed to the Employee certain trade
secrets, confidential information and proprietary data.
A. EMPLOYEE CONFIDENTIALITY AGREEMENT: Employee agrees that all
knowledge and information Employee gains from the trade secrets,
confidential information and proprietary information, which are
revealed to Employee shall for all time be regarded as strictly
confidential, are, and shall remain the sole and confidential
property of Company. The Company shall be entitled to restrain
Employee from disclosing any trade secret or other confidential
information, or from rendering any services to any entity to whom
this information has been or is threatened to be disclosed. The
right to an injunction is not exclusive, and Company may pursue
any other remedies it has against Employee for a breach or
threatened breach of this condition, including the recovery of
damages. Employee will only reveal or disclose the trade secrets
to another person, firm, corporation, company or entity if Company
instructs Employee to do so in writing. This secrecy protection
will continue even after Employee's dismissal by Company. Employee
acknowledges that if employee reveals the trade secrets to
unauthorized persons Employee may be penalized and sued for
injunctive relief and money damages as well as face possible
criminal charges by Company.
B. CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT: Employee agrees
that during and after termination of employment, Employee shall
not use for employee or others, or disclose or divulge to others,
any trade secrets, confidential information, or any other data of
Company in violation of this agreement. Upon terminating
employment with Company:
1. Employee shall return to Company all documents and property
pertaining to Company, including but not limited to:
drawings, blueprints, records, reports, manuals,
correspondence, customer lists, computer programs,
inventions, and all other materials and all copies thereof
relating in any way to Company's business, or
<PAGE>
in any way obtained by Employee during employment. Employee
further agrees that Employee shall not retain any copies or
reproductions of the foregoing.
2. Company may notify any future or prospective Company of this
agreement.
C. DEFINITIONS: The definition of trade secrets, confidential
information and proprietary information includes but is not
limited to:
1. TECHNICAL INFORMATION: Methods, processes, formulae,
compositions, systems, techniques, inventions, machines,
computer programs and research projects, unpatented
inventions, designs, know-how, trade secrets, technical
information and data, specifications, blueprints,
transparencies, test data, and additions, modifications, and
improvements thereon which are revealed to Employee.
2. GENERAL BUSINESS INFORMATION: Customer lists, pricing data,
sources of supply, marketing, production, or merchandising
systems or plans, documents, financial statements, quotes,
correspondence.
3. "REDIRECT BUSINESS" shall mean any business based on or with
a focus on value-added email services or Email and URL,
redirect services, or that derives revenues from the sale of
Email or URL redirect services. Value added email services
include but are not limited to email to fax/pager
technologies and email redirection enhancements.
4. "BROKER/AGENT BUSINESS" shall mean any business that sells
Internet assets, including secondary domain name rights, and
IP address rights.
5. "NEW TLD BUSINESS" shall mean a business that registers new
top level domain names.
6. INDUSTRY SPECIFIC INFORMATION: Information regarding the
Redirect Business, the Broker/Agent Business, New TLD
Business or Company's business methods. Company's user
payment data, user demographic data, and user account
information. Company's business policies, procedures,
techniques, trade secrets, patents, processes, formulas,
research, intellectual property or other knowledge developed
by Company.
7. OTHER MATERIALS: Information, including without limitation
data processing reports, customer sales analyses, invoices,
price lists or information, samples, any other materials,
data or software of any kind furnished to Employee by Company
or developed by Employee on behalf of Company or for
Company's use or otherwise in connection with Employee's
employment hereunder, or any other data that could be used by
third parties to the disadvantage of Company.
III. INTELLECTUAL PROPERTY
A. AGREEMENT ON INVENTIONS AND PATENTS: Employee agrees that Employee
shall promptly provide Company a complete record of any and all
inventions and improvements, whether patentable or not, which
Employee, solely or jointly, may conceive, make, or first disclose
during said employment. Employee agrees to the following:
1. Employee hereby grants, assigns and delivers to Company, or
its nominee, Employee's entire right, title, and interest in
and to all inventions and improvements made, developed or
created by the Employee (whether at the request or the
suggestion of the Company or otherwise, whether alone or in
conjunction with others, and whether during working hours of
work or otherwise) during his employment with
<PAGE>
the Company that relate in any way to the actual or
anticipated business or activities of Company, or its
Affiliates, or that are suggested by or result from any task
or work for or on behalf of Company or its Affiliates,
together with any and all domestic and foreign patent rights
in such inventions and improvements. To assist Company or its
nominee in securing patents thereto, Employee agrees promptly
to do all lawful and reasonable things both during and after
employment, without additional compensation, but at Company's
expense.
2. Employee agrees that, upon accepting employment with any
organization in competition with Company or its Affiliates
during a two year period following termination of employment
Employee shall notify Company in writing within thirty days
of the name and address of such new Company. Such notice is
required regardless of whether Employees believes they will
be employed in competition with the business of the Company.
3. Employee agrees to give Company timely written notice of any
prior employment agreements or patent rights that may
conflict with the interests of Company or its Affiliates.
B. AGREEMENT ON PROPRIETARY RIGHTS: Employee acknowledges that
Employee may have Company and industry related ideas and
suggestions, which Company may consider for commercial
exploitation. Employee understands that Company cannot accept such
suggestions in confidence. Employee therefore agrees to submit any
suggestions to the Company under the following conditions:
1. Company's review of Employee's suggestions is made only upon
Employee's request, and Company accepts no responsibility for
holding any submitted information in confidence.
2. No obligation of any kind is assumed nor may be implied
against Company unless or until Employee has entered into a
formal written contract with Company pertaining to Employee's
submissions. In addition, any obligation shall be only such
as is expressed in writing.
3. Neither Company nor any of its Affiliates shall have any
rights under any patents Employee now has nor may later
obtain for Employee's submissions covered by this Agreement,
but, in consideration of Company examining and considering
same, Employee hereby releases the Company from any liability
in connection with Employee's submissions or from liability
because of Company's use of Employee's submissions or of any
portion thereof, except such liability as may accrue under
valid patents now or hereafter issued.
4. Subject to these conditions, Employee certifies that no prior
disclosure to Company or any of its Affiliates regarding
these submissions has been made and that the entire
disclosure now made by Employee to Company is included with
this Agreement and submitted for retention by Company. If, at
any time, Employee corresponds with or discuss submissions
with an officer, employee, agent or representative of Company
and, in the course of such correspondence or discussion,
makes any additional disclosures regarding such submissions,
Employee shall, upon request, furnish Company an illustration
or a complete description, or both, of such additional
disclosure, so that it can be made a part of the permanent
record of Company.
IV. NON-COMPETITION: Employee hereby acknowledges that Company shall or may
in reliance of this agreement provide Employee access to trade secrets,
customers and accounts, and other confidential or propriety
information, and that this agreement is reasonably necessary to protect
Company.
<PAGE>
A. NON-COMPETITION AGREEMENT: For good consideration and as an
inducement for Company to employ Employee, Employee hereby agrees
not to directly or indirectly compete with the business of Company
during the period of employment and for a period of two years
thereafter following termination of employment and notwithstanding
the cause or reason for termination, unless Company ceases
operations.
1. EXCEPTIONS: Any exceptions to this policy must be with
Company's written prior consent. Employee acknowledges that
money damages may not be sufficient remedy for any breach of
this agreement and agrees that Company will be entitled to
seek specific performance and injunctive or other equitable
relief for any such breach.
2. DEFINITIONS: The term "not compete" shall mean that:
a. Employee shall not, on Employee's behalf or on behalf of
any other party, solicit or seek the business of any
customer or account of Company existing during the term
of employment and wherein said solicitation involves a
product and/or service substantially similar to or
competitive with any present or future product and/or
service of Company.
b. Employee shall not directly or indirectly own, operate,
consult to or be employed by any firm in a business
substantially similar to or competitive with the present
business of the Company or such business activity in
which the Company may engage during the term of
employment.
c. Employee shall not to be involved, directly or
indirectly, in the Redirect Business, the the
Broker/Agent Business, New TLD Business, and other new
Company businesses while employed by Company and will
not be involved, directly or indirectly, nor have a
financial interest in, the Redirect Business, the
Broker/Agent Business, New TLD Business and other new
Company businesses.
d. Employee shall not directly or indirectly solicit
Company's customers, vendors, subcontractors, or
prospects with services or products of the nature of
those being sold by Company.
V. CONFLICT OF INTEREST: Employee acknowledges that neither Employee, nor
any other business to which Employee may be associated, nor, to the
best of Employee's knowledge, any member of Employee's immediate
family, has any conflict between Employee's personal affairs or
interests and the proper performance of Employee's responsibilities for
Company that would constitute a conflict of interest with Company.
Furthermore, Employee declares that during employment, Employee shall
continue to maintain avoid any conflict with Company's interests.
VI. DOMAIN NAME REGISTRATION: Employee agrees that while working for
Company, Employee will give Company the right of first refusal on any
Domain names that Employee intends on registering or purchasing. To the
extent that Company does not act to register the Domain name then
Employee can register the Domain name after seven days from notifying
Company of Employee's intent. Employee cannot use these Domain names
for any business while working for Company and then is bound by the
non-compete restrictions.
VII. GENERAL CONTRACT TERMS
A. SURVIVAL AND BREACH: Both parties recognize that the services to
be rendered under this Agreement by the Employee are special,
unique and extraordinary in character, and that in the event of a
breach or a threatened by Employee of the terms and conditions of
the Agreement to be performed by him, then the Company shall be
entitled, if it so elects, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in
<PAGE>
equity, to obtain damages for any breach of this Agreement, or to
enforce the specific performance thereof by the Employee. Without
limiting the generality of the foregoing, the parties acknowledge
that a breach by the Employee of his obligations under Sections
II, III or IV or would cause the Company irreparable harm, that no
adequate remedy at law would be available in respect thereof and
that therefore the Company would be entitled to injunctive relief
with respect thereto. Employee affirms having the opportunity to
fully discuss and negotiate the covenants set forth in Sections
II, III and IV and acknowledges understanding and acceptance. If
any part of this covenant is declared invalid, then Employee
agrees to be bound by a covenant as near to the original as
lawfully possible. The covenants set forth in Sections II, III,
and IV shall survive the term and termination of employment.
Employee shall further be liable for all costs of enforcement.
B. LIMITED EFFECT OF WAIVER OF BREACH BY COMPANY: If Company waives a
breach of any provision of this agreement by Employee, that waiver
will not operate or be construed as a waiver of any succeeding
breach by Employee. No waiver of a right by Company constitutes a
waiver of any other right of Company, and temporary waiver by
Company does not constitute a permanent waiver or any additional
temporary waiver.
C. EFFECT OF PRIOR AGREEMENT: This agreement supersedes any prior
agreement between Company or any predecessor of Company and
Employee, except that this Agreement shall not affect or operate
to reduce any benefit or compensation inuring to Employee of a
kind elsewhere provided and not expressly provided in this
Agreement.
D. SETTLEMENT BY ARBITRATION: Any claim or controversy that arises
out of or relates to this Agreement, or the breach thereof, will
be settled by arbitration in the office nearest the Company in
accordance with the prevailing rules of the American Arbitration
Association. Judgment upon the award rendered may be entered in
any court possessing jurisdiction of arbitration awards. Company
shall be liable for all legal costs of any such arbitration
proceedings or legal proceedings relating to this agreement.
E. SEVERABILITY: If for any reason any portion of this Agreement and
the covenants herein are declared invalid, this agreement and the
covenants herein shall continue in effect as if the invalid
portion had never been part hereof, and the other portions of this
Agreement and the covenants herein will remain in effect, insofar
as is consistent with the governing laws.
F. INDEMNIFICATION: Company shall defend and hold harmless employee
from all actions against such employee that occur as a result of
the business operations.
G. INVALIDITY: If this agreement is held invalid or cannot be
enforced, then to the full extent permitted by the governing laws
any prior agreement between Company (or any predecessor thereof)
and Employee will be deemed reinstated as if this Agreement had
not been executed.
H. ASSUMPTION OF AGREEMENT: The rights and obligations under this
Agreement will inure to the benefit and be binding upon the
parties, their successors, heirs, assigns and personal
representatives.
I. ORAL MODIFICATIONS NOT BINDING: This instrument is the entire
agreement. Oral changes will have no effect. This Agreement and
the covenants herein may be altered only by a written agreement
signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
J. GOVERNING LAW: This Agreement and the covenants herein shall be
governed and interpreted under the laws of the State of New York.
<PAGE>
K. FULL DISCLOSURE: Company and Employee know of no restrictions on
their ability to complete this Agreement
In Witness Whereof, the parties have executed this Agreement as of the date
first written above.
By: /s/ Gerald Gorman By: /s/ Lon Otremba
-------------------------- ------------------------
Name: Gerald Gorman Name: Lon Otremba
CEO Chief Operating Officer
Mail.com, Inc. Mail.com, Inc.
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
Agreement dated as of April 1, 1999 between Mail.com, Inc., a Delaware
corporation, (hereinafter the "Company") and Debra L. McClister (hereinafter the
"Employee").
I. EMPLOYMENT: Effective on the date hereof, Company hereby agrees to
employ Employee upon the terms and conditions this agreement, and
Employee accepts employment by Company upon the terms and conditions
set forth in this Agreement (hereinafter the "Agreement").
A. DUTIES AND POSITION: The Company employs Ms. McClister as
Executive Vice President and Chief Financial Officer. The Employee
will have such duties as assigned or delegated to the Employee by
the Chairman and Chief Executive Officer.
1. REMOTE EMPLOYMENT: The Company agrees that Employee may work
from home one day per week provided employee is generally
accessible by phone, fax and email during business hours.
B. EMPLOYMENT AT WILL: Employment of Employee by Company is "at
will". Either the Employee or the Company may terminate the
employment relationship for any reason at any time upon thirty
(30) days prior written notice to the other party, subject to the
provisions of section B1.
a. COMPENSATION UPON TERMINATION: Except as otherwise provided
in this section, the Employee's compensation, and any and all
other rights of the Employee under this Agreement will
terminate upon the occurrence of any of the following events:
i. upon the death of the Employee;
ii. upon the disability of the Employee immediately upon
notice from either party to the other. Disability shall
mean the inability of the Employee, with or without a
reasonable accommodation, to perform his duties as a
result of a physical or mental illness for a period of
three (3) consecutive months;
iii. for cause, immediately upon notice from the Company to
the Employee, or at such later time as such notice may
specify. Termination for cause shall mean (i) the
willful failure by the Employee to follow directions
communicated to him by the Chief Executive Officer; (ii)
the willful engaging by the Employee in conduct which is
materially injurious to the Company, monetarily or
otherwise; (iii) a conviction of, a plea of NOLO
CONTENDERE, a guilty plea or confession by the Employee
to an act of fraud, misappropriation or embezzlement or
to a felony; (iv) the Employee's habitual drunkenness or
use of illegal substances; (v) the material breach by
the Employee of this Agreement; or (vi) an act of gross
neglect or gross misconduct which the Company deems to
be good and sufficient cause; or
iv. Upon the mutual consent of the Parties.
b. TERMINATION OF PAY: Effective upon the termination of the
Employee's employment, the Company will be obligated to pay
the Employee such compensation as is provided in this
Section. For purposes of this section, in the event of the
Employee's death, the Employee's designated beneficiary will
be such individual beneficiary or trust, located at such
address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give
notice to the Company of such a beneficiary, the Employee's
estate.
<PAGE>
c. TERMINATION FOR CAUSE: If the Company terminates the
Employee's employment for cause, the Employee will be
entitled to receive his Salary only through the date such
termination is effective, but will not be entitled to any
Incentive Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
d. TERMINATION UPON DISABILITY: If the Employee's employment is
terminated by either party as a result of the Employee's
disability, the Company will pay the Employee his Salary
through the remainder of the calendar month during which such
termination is effective and for the lesser of (A) three
consecutive months thereafter, or (B) the difference between
disability insurance benefits and full salary for six months.
e. TERMINATION UPON DEATH: If the Employee's employment is
terminated because of the Employee's death, the Employee will
be entitled to receive his Salary through the end of the
calendar month in which his death occurs and for three (3)
consecutive months thereafter.
f. TERMINATION WITHOUT CAUSE. If the Company terminates the
Employee's employment without cause, the Employee will be
entitled to receive his Salary through the end of the week in
which written notice of termination occurred and for four (4)
consecutive weeks thereafter unless termination is the result
of the sale of the company (see i).
g. TERMINATION UPON THE EMPLOYEE'S RESIGNATION. If the Employee
resigns his employment, the Employee will be entitled to
receive his Salary only through the date such termination is
effective, but will not be entitled to any Incentive
Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
h. SHARES AND OPTIONS TERMINATION PROVISION: Under all events of
termination above the options and shares on which the
Employee has vested prior to the date of Termination shall be
the property of the Employee in accordance with the terms of
the Stock Option Agreement and Plan and shall not be revoked.
i. TERMINATION IN THE EVENT COMPANY IS SOLD TO A THIRD PARTY: In
the event the Company is sold to a third party, employee's
options will be converted into options in the purchaser
having the same remaining vesting period and similar value as
determined by a qualified independent third party. In the
event your position is eliminated, replaced or taken over by
the purchaser while discussions regarding acquisition, merger
or transfer of majority interest are ongoing or finalized,
then the Company will attempt to offer Employee a comparable
senior management position within the Company with the same
compensation, commute (to Employee's current address) and
travel requirements. In the event such alternative position
not offered, employee will be entitled to a severance package
equal to:
i. Six months of Employee's base salary;
ii. Annual bonus pro-rated for the portion of the year
worked and severance period, at the bonus rate earned
in the prior calendar year; and
iii. Immediate vesting of 50% of Employee's remaining
unvested options.
C. FULL TIME EFFORTS: Employee will devote full time and attention to
the business of Company, and, during his or her employment, will
not engage in any other business activity, regardless of whether
such activity is pursued for profit, gain, or other pecuniary
advantage, unless Employee receives prior written approval from
Company. Employee will use his best efforts to promote the success
of the Company's business, and will cooperate fully with the
Officers and Board of Directors in the advancement of the best
interests of the Company. However, Employee is not prohibited from
making personal investments in any other businesses, so long as
those investments do not require Employee to participate in the
operation of the companies in which he or she invests, subject to
the qualifications set forth in section C1.
<PAGE>
1. QUALIFICATIONS: Nothing in this Agreement will prevent the
Employee from engaging in additional activities in connection
with personal investments and businesses that are not
inconsistent with and which do not detract from the
Employee's duties under this Agreement.
D. SALARY: The Employee shall be paid an annual salary of one hundred
eighty thousand dollars ($180,000) (the "Salary"), subject to
adjustment as provided below, which shall be payable in equal
periodic installments according to the Company's customary payroll
practices, but no less frequently than monthly, commencing on the
Effective Date. The Salary will be reviewed by the Chief Executive
Officer and Compensation Committee of the Board of Directors not
less frequently than annually (from date of hire), and may be
adjusted upward or downward in their sole discretion.
E. INCENTIVE COMPENSATION: As additional compensation for the
services to be rendered by the Employee pursuant to this
Agreement, the Employee shall be entitled to receive a bonus with
respect to each Fiscal Year, ranging between 15% and 45% of
Salary, payable two thirds in cash and one third in stock (unless
otherwise determined by the Compensation Committee of the Board of
Directors), on such date as determined by the Compensation
Committee of the Board of Directors, and which amount shall be
determined by the Chief Executive Officer and approved by the
Compensation Committee of the Board of Directors (the "Incentive
Compensation").
F. ADDITIONAL INCENTIVE COMPENSATION: In addition to the Incentive
Compensation, the Company agrees to consider granting options to
the Employee (the "Option") in the future to purchase additional
shares of Class A Common Stock in the same manner as additional
grants may be given to other employees of the Company, i.e. as
part of a bonus, etc. Any additional option grants shall be
approved by the Compensation Committee of the Board of Directors.
G. EXERCISE OF OPTIONS: The Options may be exercised by the Employee,
in whole or in part, from time to time after the date hereof,
commencing and prior to the termination of the Option in
accordance with the terms of the Stock Option Agreement.
H. BENEFITS: The Employee shall be entitled to participate in such
pension, profit sharing, bonus, life insurance, hospitalization,
major medical, and other employee benefit plans of the Company
that may be in effect from time to time, to the extent the
Employee is eligible under the terms of those plans (collectively,
the "Benefits").
I. PAID TIME OFF: The Employee will be entitled to paid time off in
accordance with the provisions of the Company's Comprehensive Paid
Time Off Plan, but shall be eligible for a minimum of 3 weeks
vacation. The Employee will also be entitled to all company
designated holidays.
J. COMPANY RULES AND REGULATIONS: Employee agrees to review and abide
by all Company rules and regulations set forth in the Company
Employee Handbook, a copy of which shall be made available to
Employee.
II. CONFIDENTIALITY: Company and its Affiliates hold certain trade,
business, and financial secrets in connection with the business. The
nature of services provided by the Company requires information to be
handled in a private, confidential manner. Throughout the Employee's
employment there may be disclosed to the Employee certain trade
secrets, confidential information and proprietary data.
A. EMPLOYEE CONFIDENTIALITY AGREEMENT: Employee agrees that all
knowledge and information Employee gains from the trade secrets,
confidential information and proprietary information,
<PAGE>
which are revealed to Employee shall for all time be regarded as
strictly confidential, are, and shall remain the sole and
confidential property of Company. The Company shall be entitled to
restrain Employee from disclosing any trade secret or other
confidential information, or from rendering any services to any
entity to whom this information has been or is threatened to be
disclosed. The right to an injunction is not exclusive, and
Company may pursue any other remedies it has against Employee for
a breach or threatened breach of this condition, including the
recovery of damages. Employee will only reveal or disclose the
trade secrets to another person, firm, corporation, company or
entity if Company instructs Employee to do so in writing. This
secrecy protection will continue even after Employee's dismissal
by Company. Employee acknowledges that if employee reveals the
trade secrets to unauthorized persons Employee may be penalized
and sued for injunctive relief and money damages as well as face
possible criminal charges by Company.
B. CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT: Employee agrees
that during and after termination of employment, Employee shall
not use for employee or others, or disclose or divulge to others,
any trade secrets, confidential information, or any other data of
Company in violation of this agreement. Upon terminating
employment with Company:
1. Employee shall return to Company all documents and property
pertaining to Company, including but not limited to:
drawings, blueprints, records, reports, manuals,
correspondence, customer lists, computer programs,
inventions, and all other materials and all copies thereof
relating in any way to Company's business, or in any way
obtained by Employee during employment. Employee further
agrees that Employee shall not retain any copies or
reproductions of the foregoing.
2. Company may notify any future or prospective Company of this
agreement.
C. DEFINITIONS: The definition of trade secrets, confidential
information and proprietary information includes but is not
limited to:
1. TECHNICAL INFORMATION: Methods, processes, formulae,
compositions, systems, techniques, inventions, machines,
computer programs and research projects, unpatented
inventions, designs, know-how, trade secrets, technical
information and data, specifications, blueprints,
transparencies, test data, and additions, modifications, and
improvements thereon which are revealed to Employee.
2. GENERAL BUSINESS INFORMATION: Customer lists, pricing data,
sources of supply, marketing, production, or merchandising
systems or plans, documents, financial statements, quotes,
correspondence.
3. "REDIRECT BUSINESS" shall mean any business based on or with
a focus on value-added email services or Email and URL,
redirect services, or that derives revenues from the sale of
Email or URL redirect services. Value added email services
include but are not limited to email to fax/pager
technologies and email redirection enhancements.
4. "BROKER/AGENT BUSINESS" shall mean any business that sells
Internet assets, including secondary domain name rights, and
IP address rights.
5. "NEW TLD BUSINESS" shall mean a business that registers new
top level domain names.
6. INDUSTRY SPECIFIC INFORMATION: Information regarding the
Redirect Business, the Broker/Agent Business, New TLD
Business or Company's business methods. Company's user
payment data, user demographic data, and user account
information. Company's business policies, procedures,
techniques, trade secrets,
<PAGE>
patents, processes, formulas, research, intellectual property
or other knowledge developed by Company.
7. OTHER MATERIALS: Information, including without limitation
data processing reports, customer sales analyses, invoices,
price lists or information, samples, any other materials,
data or software of any kind furnished to Employee by Company
or developed by Employee on behalf of Company or for
Company's use or otherwise in connection with Employee's
employment hereunder, or any other data that could be used by
third parties to the disadvantage of Company.
III. INTELLECTUAL PROPERTY
A. AGREEMENT ON INVENTIONS AND PATENTS: Employee agrees that Employee
shall promptly provide Company a complete record of any and all
inventions and improvements, whether patentable or not, which
Employee, solely or jointly, may conceive, make, or first disclose
during said employment. Employee agrees to the following:
1. Employee hereby grants, assigns and delivers to Company, or
its nominee, Employee's entire right, title, and interest in
and to all inventions and improvements made, developed or
created by the Employee (whether at the request or the
suggestion of the Company or otherwise, whether alone or in
conjunction with others, and whether during working hours of
work or otherwise) during his employment with the Company
that relate in any way to the actual or anticipated business
or activities of Company, or its Affiliates, or that are
suggested by or result from any task or work for or on behalf
of Company or its Affiliates, together with any and all
domestic and foreign patent rights in such inventions and
improvements. To assist Company or its nominee in securing
patents thereto, Employee agrees promptly to do all lawful
and reasonable things both during and after employment,
without additional compensation, but at Company's expense.
2. Employee agrees that, upon accepting employment with any
organization in competition with Company or its Affiliates
during a two year period following termination of employment
Employee shall notify Company in writing within thirty days
of the name and address of such new Company. Such notice is
required regardless of whether Employees believes they will
be employed in competition with the business of the Company.
3. Employee agrees to give Company timely written notice of any
prior employment agreements or patent rights that may
conflict with the interests of Company or its Affiliates.
B. AGREEMENT ON PROPRIETARY RIGHTS: Employee acknowledges that
Employee may have Company and industry related ideas and
suggestions, which Company may consider for commercial
exploitation. Employee understands that Company cannot accept such
suggestions in confidence. Employee therefore agrees to submit any
suggestions to the Company under the following conditions:
1. Company's review of Employee's suggestions is made only upon
Employee's request, and Company accepts no responsibility for
holding any submitted information in confidence.
2. No obligation of any kind is assumed nor may be implied
against Company unless or until Employee has entered into a
formal written contract with Company pertaining to Employee's
submissions. In addition, any obligation shall be only such
as is expressed in writing.
<PAGE>
3. Neither Company nor any of its Affiliates shall have any
rights under any patents Employee now has nor may later
obtain for Employee's submissions covered by this Agreement,
but, in consideration of Company examining and considering
same, Employee hereby releases the Company from any liability
in connection with Employee's submissions or from liability
because of Company's use of Employee's submissions or of any
portion thereof, except such liability as may accrue under
valid patents now or hereafter issued.
4. Subject to these conditions, Employee certifies that no prior
disclosure to Company or any of its Affiliates regarding
these submissions has been made and that the entire
disclosure now made by Employee to Company is included with
this Agreement and submitted for retention by Company. If, at
any time, Employee corresponds with or discuss submissions
with an officer, employee, agent or representative of Company
and, in the course of such correspondence or discussion,
makes any additional disclosures regarding such submissions,
Employee shall, upon request, furnish Company an illustration
or a complete description, or both, of such additional
disclosure, so that it can be made a part of the permanent
record of Company.
IV. NON-COMPETITION: Employee hereby acknowledges that Company shall or may
in reliance of this agreement provide Employee access to trade secrets,
customers and accounts, and other confidential or propriety
information, and that this agreement is reasonably necessary to protect
Company.
A. NON-COMPETITION AGREEMENT: For good consideration and as an
inducement for Company to employ Employee, Employee hereby agrees
not to directly or indirectly compete with the business of Company
during the period of employment and for a period of two years
thereafter following termination of employment and notwithstanding
the cause or reason for termination, unless Company ceases
operations.
1. EXCEPTIONS: Any exceptions to this policy must be with
Company's written prior consent. Employee acknowledges that
money damages may not be sufficient remedy for any breach of
this agreement and agrees that Company will be entitled to
seek specific performance and injunctive or other equitable
relief for any such breach.
2. DEFINITIONS: The term "not compete" shall mean that:
a. Employee shall not, on Employee's behalf or on behalf of
any other party, solicit or seek the business of any
customer or account of Company existing during the term
of employment and wherein said solicitation involves a
product and/or service substantially similar to or
competitive with any present or future product and/or
service of Company.
b. Employee shall not directly or indirectly own, operate,
consult to or be employed by any firm in a business
substantially similar to or competitive with the present
business of the Company or such business activity in
which the Company may engage during the term of
employment.
c. Employee shall not to be involved, directly or
indirectly, in the Redirect Business, the the
Broker/Agent Business, New TLD Business, and other new
Company businesses while employed by Company and will
not be involved, directly or indirectly, nor have a
financial interest in, the Redirect Business, the
Broker/Agent Business, New TLD Business and other new
Company businesses.
d. Employee shall not directly or indirectly solicit
Company's customers, vendors, subcontractors, or
prospects with services or products of the nature of
those being sold by Company.
<PAGE>
V. CONFLICT OF INTEREST: Employee acknowledges that neither Employee, nor
any other business to which Employee may be associated, nor, to the
best of Employee's knowledge, any member of Employee's immediate
family, has any conflict between Employee's personal affairs or
interests and the proper performance of Employee's responsibilities for
Company that would constitute a conflict of interest with Company.
Furthermore, Employee declares that during employment, Employee shall
continue to maintain avoid any conflict with Company's interests.
VI. DOMAIN NAME REGISTRATION: Employee agrees that while working for
Company, Employee will give Company the right of first refusal on any
Domain names that Employee intends on registering or purchasing. To the
extent that Company does not act to register the Domain name then
Employee can register the Domain name after seven days from notifying
Company of Employee's intent. Employee cannot use these Domain names
for any business while working for Company and then is bound by the
non-compete restrictions.
VII. GENERAL CONTRACT TERMS
A. SURVIVAL AND BREACH: Both parties recognize that the services to
be rendered under this Agreement by the Employee are special,
unique and extraordinary in character, and that in the event of a
breach or a threatened by Employee of the terms and conditions of
the Agreement to be performed by him, then the Company shall be
entitled, if it so elects, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in
equity, to obtain damages for any breach of this Agreement, or to
enforce the specific performance thereof by the Employee. Without
limiting the generality of the foregoing, the parties acknowledge
that a breach by the Employee of his obligations under Sections
II, III or IV or would cause the Company irreparable harm, that no
adequate remedy at law would be available in respect thereof and
that therefore the Company would be entitled to injunctive relief
with respect thereto. Employee affirms having the opportunity to
fully discuss and negotiate the covenants set forth in Sections
II, III and IV and acknowledges understanding and acceptance. If
any part of this covenant is declared invalid, then Employee
agrees to be bound by a covenant as near to the original as
lawfully possible. The covenants set forth in Sections II, III,
and IV shall survive the term and termination of employment.
Employee shall further be liable for all costs of enforcement.
B. LIMITED EFFECT OF WAIVER OF BREACH BY COMPANY. If Company waives a
breach of any provision of this agreement by Employee, that waiver
will not operate or be construed as a waiver of any succeeding
breach by Employee. No waiver of a right by Company constitutes a
waiver of any other right of Company, and temporary waiver by
Company does not constitute a permanent waiver or any additional
temporary waiver.
C. EFFECT OF PRIOR AGREEMENT: This agreement supersedes any prior
agreement between Company or any predecessor of Company and
Employee, except that this Agreement shall not affect or operate
to reduce any benefit or compensation inuring to Employee of a
kind elsewhere provided and not expressly provided in this
Agreement.
D. SETTLEMENT BY ARBITRATION: Any claim or controversy that arises
out of or relates to this Agreement, or the breach thereof, will
be settled by arbitration in the office nearest the Company in
accordance with the prevailing rules of the American Arbitration
Association. Judgment upon the award rendered may be entered in
any court possessing jurisdiction of arbitration awards. Company
shall be liable for all legal costs of any such arbitration
proceedings or legal proceedings relating to this agreement.
E. SEVERABILITY: If for any reason any portion of this Agreement and
the covenants herein are declared invalid, this agreement and the
covenants herein shall continue in effect as if the invalid
portion had never been part hereof, and the other portions of this
Agreement and the covenants herein will remain in effect, insofar
as is consistent with the governing laws.
<PAGE>
F. INDEMNIFICATION Company shall defend and hold harmless employee
from all actions against such employee that occur as a result of
the business operations.
G. INVALIDITY: If this agreement is held invalid or cannot be
enforced, then to the full extent permitted by the governing laws
any prior agreement between Company (or any predecessor thereof)
and Employee will be deemed reinstated as if this Agreement had
not been executed.
H. ASSUMPTION OF AGREEMENT: The rights and obligations under this
Agreement will inure to the benefit and be binding upon the
parties, their successors, heirs, assigns and personal
representatives.
I. ORAL MODIFICATIONS NOT BINDING: This instrument is the entire
agreement. Oral changes will have no effect. This Agreement and
the covenants herein may be altered only by a written agreement
signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
J. GOVERNING LAW: This Agreement and the covenants herein shall be
governed and interpreted under the laws of the State of New York.
K. FULL DISCLOSURE: Company and Employee know of no restrictions on
their ability to complete this Agreement
In Witness Whereof, the parties have executed this Agreement as of the date
first written above.
By: /s/ Gerald Gorman By: /s/ Debra L. McClister
---------------------- ----------------------------
Name: Gerald Gorman Name: Debra L. McClister
CEO Executive Vice President &
Chief Financial Officer
Mail.com, Inc. Mail.com, Inc.
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
Agreement dated as of February 4, 1999 between Mail.com, Inc., a
Delaware corporation, (hereinafter the "Company") and Charles Walden
(hereinafter the "Employee").
I. EMPLOYMENT: Effective on the date hereof, Company hereby agrees to
employ Employee upon the terms and conditions this agreement, and
Employee accepts employment by Company upon the terms and conditions
set forth in this Agreement (hereinafter the "Agreement").
A. DUTIES AND POSITION: The Company employs Mr. Walden as Executive
Vice President, Technology. The Employee will have such duties as
are assigned or delegated to the Employee by the Chairman and
Chief Executive Officer.
B. EMPLOYMENT AT WILL: Employment of Employee by Company is "at
will". Either the Employee or the Company may terminate the
employment relationship for any reason at any time upon thirty
(30) days prior written notice to the other party, subject to the
provisions of this agreement.
a. COMPENSATION UPON TERMINATION: Except as otherwise provided
in this section, the Employee's compensation, and any and all
other rights of the Employee under this Agreement will
terminate upon the occurrence of any of the following events:
i. upon the death of the Employee;
ii. upon the disability of the Employee immediately upon
notice from either party to the other. Disability shall
mean the inability of the Employee, with or without a
reasonable accommodation, to perform his duties as a
result of a physical or mental illness for a period of
three (3) consecutive months;
iii. for cause, immediately upon notice from the Company to
the Employee, or at such later time as such notice may
specify. Termination for cause shall mean (i) the
willful failure by the Employee to follow directions
communicated to him by the Chief Executive Officer; (ii)
the willful engaging by the Employee in conduct which is
materially injurious to the Company, monetarily or
otherwise; (iii) a conviction of, a plea of NOLO
CONTENDERE, a guilty plea or confession by the Employee
to an act of fraud, misappropriation or embezzlement or
to a felony; (iv) the Employee's habitual drunkenness or
use of illegal substances; (v) the material breach by
the Employee of this Agreement; or (vi) an act of gross
neglect or gross misconduct which the Company deems to
be good and sufficient cause; or
iv. Upon the mutual consent of the Parties.
b. TERMINATION OF PAY: Effective upon the termination of the
Employee's employment, the Company will be obligated to pay
the Employee such compensation as is provided in this
Section. For purposes of this section, in the event of the
Employee's death, the Employee's designated beneficiary will
be such individual beneficiary or trust, located at such
address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give
notice to the Company of such a beneficiary, the Employee's
estate.
c. TERMINATION FOR CAUSE: If the Company terminates the
Employee's employment for cause, the Employee will be
entitled to receive his Salary only through the date such
termination is effective, but will not be entitled to any
Incentive Compensation described at I(E) for the Fiscal Year
during which such termination occurs or any subsequent Fiscal
Year.
<PAGE>
d. TERMINATION UPON DISABILITY: If the Employee's employment is
terminated by either party as a result of the Employee's
disability, the Company will pay the Employee his Salary
through the remainder of the calendar month during which such
termination is effective and for the lesser of (A) three
consecutive months thereafter, or (B) the difference between
disability insurance benefits and full salary for six months.
e. TERMINATION UPON DEATH: If the Employee's employment is
terminated because of the Employee's death, the Employee will
be entitled to receive his Salary through the end of the
calendar month in which his death occurs and for three (3)
consecutive months thereafter.
f. TERMINATION WITHOUT CAUSE: If the Company terminates the
Employee's employment without cause, the Employee will be
entitled to receive his Salary through the end of the week in
which written notice of termination occurred and for four (4)
consecutive weeks thereafter.
g. TERMINATION UPON THE EMPLOYEE'S RESIGNATION: If the Employee
resigns his employment, the Employee will be entitled to
receive his Salary only through the date such termination is
effective, but will not be entitled to any Incentive
Compensation for the Fiscal Year during which such
termination occurs or any subsequent Fiscal Year.
h. SHARES AND OPTIONS TERMINATION PROVISION: Under all events of
termination above the options and shares on which the
Employee has vested prior to the date of Termination shall be
the property of the Employee in accordance with the terms of
the Stock Option Agreement and Plan under which they were
granted and shall not be revoked. Notwithstanding anything
herein to the contrary, the Options granted under the Charles
Walden Stock Option agreement dated January, 1, 1998 between
GlobeComm, Inc. and Charles Walden (the "Charles Walden Stock
Option Agreement") shall be exercisable in accordance with
the terms of such Agreement and such exercise rights shall
not terminate upon an event of termination described above.
C. FULL TIME EFFORTS: Except for Employee's business activity with
MusicTogether of Montclair, Inc., employee will devote full time
and attention to the business of Company, and, during his or her
employment, will not engage in any other business activity,
regardless of whether such activity is pursued for profit, gain,
or other pecuniary advantage, unless Employee receives prior
written approval from Company. Employee will use his best efforts
to promote the success of the Company's business, and will
cooperate fully with the Officers and Board of Directors in the
advancement of the best interests of the Company. However,
Employee is not prohibited from making personal investments in any
other businesses, so long as those investments do not require
Employee to participate in the operation of the companies in which
he or she invests, subject to the qualifications set forth in
section C1.
1. QUALIFICATIONS: Nothing in this Agreement will prevent the
Employee from engaging in additional activities in connection
with personal investments and businesses that are not
inconsistent with and which do not detract from the
Employee's duties under this Agreement.
D. SALARY: The Employee shall be paid an annual salary of one hundred
sixty thousand dollars ($160,000) (the "Salary"), subject to
adjustment as provided below, which shall be payable in equal
periodic installments according to the Company's customary payroll
practices, but no less frequently than monthly, commencing on the
Effective Date. The Salary will be reviewed
<PAGE>
by the Chief Executive Officer and Compensation Committee of the
Board of Directors not less frequently than annually, and may be
adjusted upward or downward in their sole discretion.
E. INCENTIVE COMPENSATION: As additional compensation for the
services to be rendered by the Employee pursuant to this
Agreement, the Employee shall be entitled to receive a bonus with
respect to each Fiscal Year, payable on such date as determined by
the Compensation Committee of the Board of Directors, and which
amount shall be determined by the Chief Executive Officer and
approved by the Compensation Committee of the Board of Directors
(the "Incentive Compensation").
F. ADDITIONAL INCENTIVE COMPENSATION: In addition to the Incentive
Compensation, the Company agrees to consider granting options to
the Employee (the "Option") in the future to purchase additional
shares of Class A Common Stock in the same manner as additional
grants may be given to other employees of the Company, i.e. as
part of a bonus, etc. Any additional option grants shall be
approved by the Compensation Committee of the Board of Directors.
This paragraph and other provisions of this Agreement governing
Options are not intended to refer to the options granted under the
Charles Walden Stock Option Agreement described at I(B)(h) nor are
they intended to affect, alter, amend or change in any way the
terms and conditions of such Agreement and the options granted
thereunder
G. EXERCISE OF OPTIONS: The Options described at Part I(F) may be
exercised by the Employee, in whole or in part, from time to time
after the date hereof, commencing and prior to the termination of
the Option in accordance with the terms of the Stock Option
Agreement under which they were granted.
H. BENEFITS: The Employee shall be entitled to participate in such
pension, profit sharing, bonus, life insurance, hospitalization,
major medical, and other employee benefit plans of the Company
that may be in effect from time to time, to the extent the
Employee is eligible under the terms of those plans (collectively,
the "Benefits").
I. PAID TIME OFF: The Employee will be entitled to paid time off in
accordance with the provisions of Company's Comprehensive Paid
Time Off Plan. The Employee will also be entitled to all company
designated holidays.
J. COMPANY RULES AND REGULATIONS: Employee agrees to review and abide
by all Company rules and regulations set forth in the Company
Employee Handbook, a copy of which shall be made available to
Employee.
II. CONFIDENTIALITY: Company and its Affiliates hold certain trade,
business, and financial secrets in connection with the business. The
nature of services provided by the Company requires information to be
handled in a private, confidential manner. Throughout the Employee's
employment there may be disclosed to the Employee certain trade
secrets, confidential information and proprietary data.
A. EMPLOYEE CONFIDENTIALITY AGREEMENT: Employee agrees that all
knowledge and information Employee gains from the trade secrets,
confidential information and proprietary information, which are
revealed to Employee shall for all time be regarded as strictly
confidential, are, and shall remain the sole and confidential
property of Company. The Company shall be entitled to restrain
Employee from disclosing any trade secret or other confidential
information, or from rendering any services to any entity to whom
this information has been or is threatened to be disclosed. The
right to an injunction is not exclusive, and Company may pursue
any other remedies it has against Employee for a breach or
threatened breach of this condition, including the recovery of
damages. Employee will only reveal or disclose the trade secrets
to another person, firm, corporation, company or entity if Company
instructs Employee to do so in writing. This secrecy protection
will continue even after Employee's dismissal by
<PAGE>
Company. Employee acknowledges that if employee reveals the trade
secrets to unauthorized persons Employee may be penalized and sued
for injunctive relief and money damages as well as face possible
criminal charges by Company.
B. CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT: Employee agrees
that during and after termination of employment, Employee shall
not use for employee or others, or disclose or divulge to others,
any trade secrets, confidential information, or any other data of
Company in violation of this agreement. Upon terminating
employment with Company:
1. Employee shall return to Company all documents and property
pertaining to Company, including but not limited to:
drawings, blueprints, records, reports, manuals,
correspondence, customer lists, computer programs,
inventions, and all other materials and all copies thereof
relating in any way to Company's business, or in any way
obtained by Employee during employment. Employee further
agrees that Employee shall not retain any copies or
reproductions of the foregoing.
2. Company may notify any future or prospective Company of this
agreement.
C. DEFINITIONS: The definition of trade secrets, confidential
information and proprietary information includes but is not
limited to:
1. TECHNICAL INFORMATION: Methods, processes, formulae,
compositions, systems, techniques, inventions, machines,
computer programs and research projects, unpatented
inventions, designs, know-how, trade secrets, technical
information and data, specifications, blueprints,
transparencies, test data, and additions, modifications, and
improvements thereon which are revealed to Employee.
2. GENERAL BUSINESS INFORMATION: Customer lists, pricing data,
sources of supply, marketing, production, or merchandising
systems or plans, documents, financial statements, quotes,
correspondence.
3. "REDIRECT BUSINESS" shall mean any business based on or with
a focus on value-added email services or Email and URL,
redirect services, or that derives revenues from the sale of
Email or URL redirect services. Value added email services
include but are not limited to email to fax/pager
technologies and email redirection enhancements.
4. "BROKER/AGENT BUSINESS" shall mean any business that sells
Internet assets, including secondary domain name rights, and
IP address rights.
5. "NEW TLD BUSINESS" shall mean a business that registers new
top level domain names.
6. INDUSTRY SPECIFIC INFORMATION: Information regarding the
Redirect Business, the Broker/Agent Business, New TLD
Business or Company's business methods. Company's user
payment data, user demographic data, and user account
information. Company's business policies, procedures,
techniques, trade secrets, patents, processes, formulas,
research, intellectual property or other knowledge developed
by Company.
7. OTHER MATERIALS: Information, including without limitation
data processing reports, customer sales analyses, invoices,
price lists or information, samples, any other materials,
data or software of any kind furnished to Employee by Company
or developed by Employee on behalf of Company or for
Company's use or otherwise in connection with Employee's
employment hereunder, or any other data that could be used by
third parties to the disadvantage of Company.
<PAGE>
III. INTELLECTUAL PROPERTY
A. AGREEMENT ON INVENTIONS AND PATENTS: Employee agrees that Employee
shall promptly provide Company a complete record of any and all
inventions and improvements, whether patentable or not, which
Employee, solely or jointly, may conceive, make, or first disclose
in the course of his employment with the Company. Employee agrees
to the following:
1. Employee hereby grants, assigns and delivers to Company, or
its nominee, Employee's entire right, title, and interest in
and to all inventions and improvements made, developed or
created by the Employee in the course of his employment with
the Company (whether at the request or the suggestion of the
Company or otherwise, whether alone or in conjunction with
others) that relate in any way to the actual or anticipated
business or activities of Company, or its Affiliates, or that
are suggested by or result from any task or work for or on
behalf of Company or its Affiliates, together with any and
all domestic and foreign patent rights in such inventions and
improvements. Employee agrees promptly to take all lawful and
reasonable action to assist Company or its nominee in
securing patents thereto, both during and after employment,
without additional compensation, but at Company's expense.
2. Employee agrees that, upon accepting employment with any
organization in competition with Company or its Affiliates
during a two year period following termination of employment
Employee shall notify Company in writing within thirty days
of the name and address of such new Company. Such notice is
required regardless of whether Employees believes they will
be employed in competition with the business of the Company.
3. Employee agrees to give Company timely written notice of any
prior employment agreements or patent rights that may
conflict with the interests of Company or its Affiliates.
B. AGREEMENT ON PROPRIETARY RIGHTS: Employee acknowledges that
Employee may have Company and industry related ideas and
suggestions, which Company may consider for commercial
exploitation. Employee understands that Company cannot accept such
suggestions in confidence. Employee therefore agrees to submit any
suggestions to the Company under the following conditions:
1. Company's review of Employee's suggestions is made only upon
Employee's request, and Company accepts no responsibility for
holding any submitted information in confidence.
2. No obligation of any kind is assumed nor may be implied
against Company unless or until Employee has entered into a
formal written contract with Company pertaining to Employee's
submissions. In addition, any obligation shall be only such
as is expressed in writing.
3. Neither Company nor any of its Affiliates shall have any
rights under any patents Employee now has nor may later
obtain for Employee's submissions covered by this Agreement,
but, in consideration of Company examining and considering
same, Employee hereby releases the Company from any liability
in connection with Employee's submissions or from liability
because of Company's use of Employee's submissions or of any
portion thereof, except such liability as may accrue under
valid patents now or hereafter issued.
4. Subject to these conditions, Employee certifies that no prior
disclosure to Company or any of its Affiliates regarding
these submissions has been made and that the entire
<PAGE>
disclosure now made by Employee to Company is included with
this Agreement and submitted for retention by Company. If, at
any time, Employee corresponds with or discuss submissions
with an officer, employee, agent or representative of Company
and, in the course of such correspondence or discussion,
makes any additional disclosures regarding such submissions,
Employee shall, upon request, furnish Company an illustration
or a complete description, or both, of such additional
disclosure, so that it can be made a part of the permanent
record of Company.
IV. NON-COMPETITION: Employee hereby acknowledges that Company shall or may
in reliance of this agreement provide Employee access to trade secrets,
customers and accounts, and other confidential or propriety
information, and that this agreement is reasonably necessary to protect
Company.
A. NON-COMPETITION AGREEMENT: For good consideration and as an
inducement for Company to employ Employee, Employee hereby agrees
not to directly or indirectly compete with the business of Company
during the period of employment and for a period of two years
thereafter following termination of employment and notwithstanding
the cause or reason for termination, unless Company ceases
operations.
1. EXCEPTIONS: Any exceptions to this policy must be with
Company's written prior consent. Employee acknowledges that
money damages may not be sufficient remedy for any breach of
this agreement and agrees that Company will be entitled to
seek specific performance and injunctive or other equitable
relief for any such breach.
2. DEFINITIONS: The term "not compete" shall mean that:
a. Employee shall not, on Employee's behalf or on behalf of
any other party, solicit or seek the business of any
customer or account of Company existing during the term
of employment and wherein said solicitation involves a
product and/or service substantially similar to or
competitive with any present or future product and/or
service of Company of which Employee was aware during
his employment.
b. Employee shall not directly or indirectly own, operate,
consult to or be employed by any firm in a business
substantially similar to or competitive with the present
business of the Company or such business activity in
which the Company may engage during the term of
employment.
c. Employee shall not to be involved, directly or
indirectly, in the Redirect Business, the Broker/Agent
Business, New TLD Business, and other new Company
businesses while employed by Company and will not be
involved, directly or indirectly, nor have a financial
interest in, the Redirect Business, the Broker/Agent
Business, New TLD Business and other new Company
businesses.
d. Employee shall not directly or indirectly solicit
Company's customers, vendors, subcontractors, or
prospects with services or products of the nature of
those being sold by Company.
V. CONFLICT OF INTEREST: Employee acknowledges that neither Employee, nor
any other business to which Employee may be associated, nor, to the
best of Employee's knowledge, any member of Employee's immediate
family, has any conflict between Employee's personal affairs or
interests and the proper performance of Employee's responsibilities for
Company that would constitute a conflict of interest with Company.
Furthermore, Employee declares that during employment, Employee shall
continue to maintain avoid any conflict with Company's interests.
VI. DOMAIN NAME REGISTRATION: Employee agrees that while working for
Company, Employee will give Company the right of first refusal on any
Domain names that Employee intends on
<PAGE>
registering or purchasing. To the extent that Company does not act
to register the Domain name then Employee can register the Domain
name after seven days from notifying Company of Employee's intent.
Employee cannot use these Domain names for any business while
working for Company and then is bound by the non-compete
restrictions.
VII. GENERAL CONTRACT TERMS
A. SURVIVAL AND BREACH: Both parties recognize that the services to
be rendered under this Agreement by the Employee are special,
unique and extraordinary in character, and that in the event of a
breach or a threatened by Employee of the terms and conditions of
the Agreement to be performed by him, then the Company shall be
entitled, if it so elects, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in
equity, to obtain damages for any breach of this Agreement, or to
enforce the specific performance thereof by the Employee. Without
limiting the generality of the foregoing, the parties acknowledge
that a breach by the Employee of his obligations under Sections
II, III or IV or would cause the Company irreparable harm, that no
adequate remedy at law would be available in respect thereof and
that therefore the Company would be entitled to injunctive relief
with respect thereto. Employee affirms having the opportunity to
fully discuss and negotiate the covenants set forth in Sections
II, III and IV and acknowledges understanding and acceptance. If
any part of this covenant is declared invalid, then Employee
agrees to be bound by a covenant as near to the original as
lawfully possible. The covenants set forth in Sections II, III,
and IV shall survive the term and termination of employment.
Employee shall further be liable for all costs of enforcement.
B. LIMITED EFFECT OF WAIVER OF BREACH BY COMPANY. If Company waives a
breach of any provision of this agreement by Employee, that waiver
will not operate or be construed as a waiver of any succeeding
breach by Employee. No waiver of a right by Company constitutes a
waiver of any other right of Company, and temporary waiver by
Company does not constitute a permanent waiver or any additional
temporary waiver.
C. EFFECT OF PRIOR AGREEMENT: This agreement supersedes any prior
employment agreement between Company or any predecessor of Company
and Employee, except that this Agreement shall not affect or
operate to reduce any benefit or compensation inuring to Employee
of a kind elsewhere provided and not expressly provided in this
Agreement and this Agreement shall not affect the terms and
conditions of the Chalres Walden Stock Option Agreement described
at I(B)(h).
D. SETTLEMENT BY ARBITRATION: Any claim or controversy that arises
out of or relates to this Agreement, or the breach thereof, will
be settled by arbitration in the office nearest the Company in
accordance with the prevailing rules of the American Arbitration
Association. Judgment upon the award rendered may be entered in
any court possessing jurisdiction of arbitration awards. Company
shall be liable for all legal costs of any such arbitration
proceedings or legal proceedings relating to this agreement.
E. SEVERABILITY: If for any reason any portion of this Agreement and
the covenants herein are declared invalid, this agreement and the
covenants herein shall continue in effect as if the invalid
portion had never been part hereof, and the other portions of this
Agreement and the covenants herein will remain in effect, insofar
as is consistent with the governing laws.
F. INDEMNIFICATION Company shall defend and hold harmless employee
from all actions against such employee that occur as a result of
the business operations.
G. INVALIDITY: If this agreement is held invalid or cannot be
enforced, then to the full extent permitted by the governing laws
any prior agreement between Company (or any predecessor
<PAGE>
thereof) and Employee will be deemed reinstated as if this
Agreement had not been executed.
H. ASSUMPTION OF AGREEMENT: The rights and obligations under this
Agreement will inure to the benefit and be binding upon the
parties, their successors, heirs, assigns and personal
representatives.
I. ORAL MODIFICATIONS NOT BINDING: This instrument is the entire
agreement. Oral changes will have no effect. This Agreement and
the covenants herein may be altered only by a written agreement
signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
J. GOVERNING LAW: This Agreement and the covenants herein shall be
governed and interpreted under the laws of the State of New York.
K. FULL DISCLOSURE: Company and Employee know of no restrictions on
their ability to complete this Agreement
In Witness Whereof, the parties have executed this Agreement as of the date
first written above.
By: /s/ Gerald Gorman By: /s/ Charles Walden
----------------------- ---------------------------------
Name: Gerald Gorman Name: Charles Walden
CEO Executive Vice President, Technology
Mail.com, Inc. Mail.com, Inc.
<PAGE>
Exhibit 10.6
GLOBECOMM, INC
CHARLES WALDEN
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of the 1st day of January, 1998, between
GLOBECOMM, INC., having a business address at 11 Broadway, Suit 660, New York,
New York (the "Company") and CHARLES WALDEN, residing at 194 Alexander Avenue
Upper Montclair, New Jersey (the "Optionee") whereby the Company grants to
Optionee the right and option to purchase shares of Class A Common Stock of the
Company (the "Stock") under the terms, herinafter provided:
(1) The right and option to purchase one hundred ninety-seven
thousand six hundred (197,600) shares of Stock at an exercise
price of Seven Dollars ($7.00) per share, referred to herein
as "Compensation Stock Options." These options are to be
granted on February 16, 1998.
(2) The right and option to purchase one hundred forty-two
thousand five hundred (142,500) shares of the Stock at an
exercise price of Four Dollars ($4.00) per share referred to
herein as "Bonus Stock Options." These options are granted are
granted on January 1, 1998.
These options are hereby designated Non-Statutory Stock Options
(Collectively referred to herein as the "Stock Options") which are not
intended to qualify as incentive stock options within the meaning of
Section 422 of the Internal revenue Code of 1986, as amended and shall
be exercised as hereinafter provided.
SECTION 1. EXERCISE OF STOCK OPTIONS
1.01. VESTING. The right to exercise a Stock Option is limited as
hereinafter provided:
(a). The Stock Options may be exercised as hereinafter provided
only to the extent that they had become vested as provided
herein.
(b). The Stock Options shall vest as follows:
(i). Compensation Stock Options shall vest at the rate of
1.93% for each two week period of Optionee's employment with
the Company, with full vesting in Compensation Stock Options
occurring on the last day of the fifty-second (52nd) two week
period of Optionee's employment with the Company. If Optionee
terminates his employment with the Company before his
Compensation Stock Options are fully vested hereunder and
prior to the last day of a two week period, then his vested
interest in Compensation tock Options shall be prorated to the
date of termination.
(ii). Bonus Stock Options shall vest at the rate of 7.69% for
each quarterly period of Optionee's employment with the
Company, with full vesting in bonus stock Options occurring on
the last day of the thirteenth quarterly period of Optionee's
employment with the Company. For this purpose,
<PAGE>
the quarterly periods of Optionee's employment with the
Company shall be the periods of employment ending on March 31,
June 30, September 30, and December 31. If Optionee terminates
his employment with the Company before his Bonus Stock Options
are fully vested hereunder and prior to the last day of
quarterly period, Optionee's vested interest in bonus Stock
Options shall be prorated to the date of termination.
1.02. TIME LIMITS. (a). A Stock Option shall terminate in all
respects on, and no exercise as to any shares covered by a
Stock Option shall be honored on or after the expiration of
ten (10) years from the Date of Grant thereof (the "Expiration
Date").
(b). Subject to Section 2.02 (b), a Stock Option may be
exercised, to the extent it is vested, at any time prior to
the Expiration Date and may be exercised by Optionee during
employment with the Company and subsequent to Optionee's
termination of employment with the Company for any reason.
1.03. PROCEDURES FOR EXERCISE. A Stock Option granted
hereunder shall be exercised by delivery to the Secretary or
any Assistant Secretary of the Company of a written notice of
election to exercise, signed by the Optionee or by his legal
representative, specifying the number of shares with respect
to which the Stock Option is being exercised and specifying a
date, which shall be a business day not less than seven (7)
nor more than fifteen (15) days after delivery of such notice
to the company, on which date the Company shall deliver, or
cause to be delivered to the Optionee, or to his legal
represantative, a certificate or certificates for the number
of shares specified against receipt of the entire purchase
price therefor. The notice shall be accompanied by full
payment of the exercise price for the Shares.
1.04. REGISTRATION OF SHARES AND LOCK-UP PERIOD. In the event
the Company registers the offering of any securities of the
Company under the Securities Exchange Act of 1933 (the "Act"),
the Optionee, upon notice from the Company, shall not exercise
any Options granted under this Agreement, or sell or otherwise
transfer any securities of the Company obtained in connection
with this Agreement, during the 180 day-period following the
effective date of a registration statement filed under the
Act; provided, however, that such registration shall only
apply to public offerings which include securities to be sold
on behalf of the Company to the public in an underwritten
public offering under the Act. The Company may impose
stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such 180-day
period.
SECTION 2. RESERVATION OF SHARES AND CHANGES IN CAPITALIZATION.
2.01. RESERVATION OF SHARES. The Company hereby agrees to
reserve in advance sufficient shares of its authorized but
unissued Stock or Treasury Stock for issuance pursuant to the
exercise of vested Stock Options hereunder. The aggregate
number and types of shares reserved hereunder shall be
appropriately adjusted in the event of a reorganization,
recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation, rights offering or any other
similar change in capitalization in order to prevent dilution
as provided in Section 2.02.
<PAGE>
2.02. DILUTION AND OTHER CHANGES. (a). The Company shall
adjust the number of shares and types of securities subject to
Stock Options and the exercise price of the Stock Options as
may be appropriate to prevent the dilution of Optionee's
rights in the event of a reorganization, recapitalization,
stock split, reverse stock split, stock dividend, exchange or
combination of shares merger, consolidation, rights offering
or any other similar change in capitalization.
(b). If, at any time prior to the expiration or complete
exercise of the Stock Options, the Company shall be
consolidated with, or merged into, any other corporation,
lawful provision shall be made as part of the terms of each
such consolidation or merger, for an appropriate adjustment,
as determined by an independent appraiser, in the number, kind
and/or price of shares for which the Stock Options may be
exercised hereunder to provide Optionee with substantially the
same relative rights before and after such merger or
consolidation to the extent practical; provided, however, that
the Board of Directors of the company may require that the
exercise of vested Stock Options must be made on or within a
specified time period after the effective date of the
consolidation or merger of the company.
SECTION 3. GENERAL.
3.01. NOTICES. Every direction, revocation or notice
authorized or required hereunder shall be deemed delivered to
the Company (1) on the date it is personally delivered to the
secretary of the Company at its principal executive offices or
(2) three business days after it is sent by registered or
certified mail, postage prepaid, addressed to the Secretary at
such offices, and shall be deemed delivered to the Optionee
(1) on the date it is personally delivered to him or (2) three
business days after it is sent by registered or certified
mail, postage prepaid addressed to him at the last address
shown for him on the records of the Company.
3.02. GENDER AND NUMBER. All reference made and all nouns or
pronouns used herein shall be construed in the singular or
plural and in such gender as the sense and circumstances
require.
3.03. CAPTIONS. The captions of this Agreement are for
convenience and reference only and in no way define, describe,
extend or limit the scope of intent of any provision hereof.
3.04. GOVERNING LAW. The validity and construction of this
Agreement shall be governed by the laws of the State of
Delaware, excluding the conflict-of-laws principles thereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and its corporate seal to be affixed hereto by its
officers thereunto duly authorized, and the Optionee has
hereunto set his hand and seal as of the date first
hereinabove set forth.
<PAGE>
GLOBECOMM, INC.
By: /s/ Gerald Gorman
- --------------------------------------
Gerald Gorman
Chairman and Chief Operating Officer
The undersigned hereby accepts the foregoing Stock Option Agreement and the
terms and conditions hereof.
/s/ Charles Walden
- --------------------------------------
Charles Walden
Optionee
<PAGE>
Exhibit 10.7
STOCK OPTION AGREEMENT
AGREEMENT, dated as of December 31, 1996, between GlobeComm, Inc.
(the "Company"), a Delaware corporation doing business at 11 Broadway, Suite
660, New York, New York and Gary Millin (the "Grantee") residing at 515 72nd
Street, 37-B, New York, NY 10021. The Company and the Grantee are
collectively referred to as the "Parties."
WHEREAS, the Grantee is employed by the Company in the capacity as
President, and in partial consideration for the Grantee's services, the
Company desires to award stock options to the Grantee in accordance with the
terms of this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Parties hereto agree as follows:
SECTION I. OPTION TO PURCHASE SHARES
1.1. Option. The Company hereby grants, as of the date of this
Agreement and future dates listed on Schedule A, to the Grantee an irrevocable
option (the "Option") to purchase the number of shares of Class A Common Stock
(the "Shares") listed on the attached Schedule A at the purchase price listed on
Schedule A (the "Purchase Price"). These options are not intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended nor
to qualify as an incentive stock option.
1.2. EXERCISE OF OPTION. In the event the Grantee wishes to exercise
the Option, in accordance with the restrictions specified below, the Grantee
shall send a written notice to the Company (the "Stock Exercise Notice")
specifying a date for the closing of such purchase.
1.3. VESTING. The right to exercise an Option is limited as hereinafter
provided:
(a) An Option may be exercised as hereinafter provided
only to the extent that the Option has become vested
as provided herein.
(b) The Options shall vest upon the date of grant, as is
listed on Schedule A.
1.4. TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option held by the Grantee shall be as
follows:
Grantee's rights hereunder are not contingent upon his or her
continued employment; provided, however, if the Grantee's employment with the
Company is terminated by reason of death, the Board or Committee, in its sole
discretion, may require that the estate of a deceased Grantee agree to be bound
by all of the terms and conditions of the Plan.
1.5. TRANSFERABILITY. No Option shall be transferable except by will or
the laws of
1
<PAGE>
descent and distribution. An Option shall be exercisable during the
Grantee's lifetime only by the Grantee.
1.6. DURATION OF OPTIONS. Options may be exercised, upon satisfaction
of the conditions specified in Section 1.3, for terms of up to but not exceeding
ten (10) years from the date of grant.
1.7. ADDITIONAL OPTIONS. In the event that the Company grants
additional options to purchase shares of Class A Common Stock to the Grantee,
unless agreed to the contrary between the Parties, the additional options will
be subject to the terms of this Agreement.
SECTION II. THE CLOSING
2.1. Closing Date. Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice pursuant to Section 1 at
10:00 A.M., at the offices of the Company, or at such other time and place as
the parties hereto may agree (the "Closing Date"). On the Closing Date, the
Company will deliver to the Grantee a certificate or certificates, duly
endorsed, representing the Shares and the Grantee will purchase such Shares from
the Company at the price per Share equal to the Exercise Price. In the event
that any federal, state, or local income taxes, employment taxes, Federal
Insurance Contribution Act ("FICA") withholdings or other amounts are required
by applicable law or governmental regulation to be withheld from the grantee in
connection with the exercise, these amounts must be remitted to the Company in
addition to the Exercise Price. Any payment made by the Grantee to the Company
pursuant to this Agreement shall be made by certified or official bank check.
2.2. LEGENDS. The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Act").
SECTION III. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
3.1. INVESTMENT REPRESENTATION. The Grantee represents and warrants to
the Company that the Grantee is acquiring the Option and, if and when it
exercises the Option, will be acquiring the Shares issuable upon the exercise
thereof for its own account and not with a view to distribution or resale in any
manner which would be in violation of the Act.
3.2. RESTRICTED SECURITIES. The Grantee represents and warrants to the
Company that the Grantee is an Accredited Investor as defined in Rule 501
promulgated under the Act. The Grantee understands that, if and when it
exercises the Option, the Grantee will be acquiring restricted securities under
applicable federal securities laws, and may dispose of such Shares only pursuant
to an effective registration statement under the Act or an exemption from
registration if available. The Grantee represents and warrants to the Company
that the Grantee is
2
<PAGE>
acquiring the Option and, if and when it exercises the Option, will be
acquiring the Shares issuable upon the exercise thereof for its own account
and not with a view to distribution or resale in any manner which would be in
violation of the Act.
SECTION IV. RIGHT OF FIRST REFUSAL
If, at any time after the Closing Date, the Grantee proposes to sell
all or any part of the Shares in a transaction not required to be registered
under the Act, it shall give the Company the opportunity, in the following
manner, to purchase such Shares:
4.1. NOTICE. The Grantee shall give notice to the Company in writing of
its intent to sell Shares (a "Disposition Notice"), specifying the number of
Shares to be sold, the price and the material terms of any agreement relating
thereto. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
4.2. RIGHT TO PURCHASE. The Company or its designee shall have the
right, exercisable by written notice given to the Grantee within five (5) days
after receipt of a Disposition Notice, to purchase all, but not less than all,
of the Shares specified in the Disposition Notice at the price set forth in the
Disposition Notice.
4.3. CLOSING. If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Shares with respect to which such
right has been exercised shall take place within five (5) days after the notice
of such exercise; provided, however, that at any time prior to the closing of
the purchase of Shares hereunder, the Grantee may determine not to sell the
Shares and revoke the Disposition Notice and, by so doing, cancel the Company's
right of first refusal with respect thereto.
4.4. RIGHT TO SELL. If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise, the Grantee shall
be free for thirty (30) days following the expiration of such time for exercise
to sell or enter into an agreement to sell the Shares specified in the
Disposition Notice, at the price specified in the Disposition Notice or any
price in excess thereof and otherwise on substantially the same terms set forth
in the Disposition Notice; provided, that if such sale is not consummated within
such 30-day period, then the provisions of this Section 4 will again apply to
the sale of such Shares.
SECTION V. INFORMATION
Upon written request by the Grantee, the Company shall furnish to the
Grantee such information regarding the Company and its operation as shall be
reasonably necessary to enable the Grantee to make a decision as to whether or
not to exercise the Option; provided, however, that in no event shall the
Company be required to furnish information which constitutes trade secrets or
other proprietary information or the furnishing of which would be unduly
burdensome, financially or otherwise, to the Company.
3
<PAGE>
SECTION VI. ADJUSTMENT FOR CHANGES IN THE STOCK
6.1. STOCK RECLASSIFICATION. In the event the shares of Stock, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares or other securities of the Company (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares or otherwise), then there shall be substituted for or
added to each share of Stock theretofore or thereafter subject to an Option the
number and kind of shares of capital stock or other securities into, which each
outstanding share of Stock shall be changed, or for which each such share shall
be exchanged, or to which each such share shall be entitled, as the case may be.
The price and other terms of outstanding Options shall also be appropriately
amended to reflect the foregoing events. In the event there shall be any other
change in the number or kind of outstanding shares of the Stock, or of any
capital stock or other securities into which the Stock shall have been changed
or for which it shall have been exchanged, if the Board of Directors shall, in
its sole discretion, determine that the change equitably requires an adjustment
in any Option theretofore granted, then adjustments shall be made in accordance
with its determination.
6.2. FRACTIONAL SHARES. Fractional shares resulting from any adjustment
in Options pursuant to this Section 6 may be settled in cash or otherwise as the
Board of Directors shall determine.
6.3. NOTICE. Notice of any adjustment shall be given by the Company to
the Grantee in accordance with the requirements for providing notice to a Party
set forth in Section 7.7.
6.4. SALE OF THE ASSETS OF THE COMPANY, ETC. Notwithstanding Section
6.1, the Board of Directors shall have the power, in the event of the
disposition of all or substantially all of the assets of the Company, or the
dissolution of the Company, or the merger or consolidation of the Company, or
the making of a tender offer to purchase all or a substantial portion of
outstanding Stock of the Company, to amend this Agreement (upon such conditions
as it shall deem fit) to (i) permit the exercise of the Options described herein
prior to the effective date of the transaction and to terminate all unexercised
Options as of that date, or (ii) require the forfeiture of all Options, provided
the Company pays to the Grantee the excess of the fair market value of the Stock
subject to the Option (as determined by the Board of Directors if the Company's
common stock is not then freely tradable) over the exercise price of the Option.
SECTION VII. PUBLIC OFFERING OF COMPANY'S COMMON STOCK
7.1. LOCK-UP AGREEMENT. Grantee, if requested by the Company and the
lead underwriter of any public offering of the common stock or other securities
of the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell,
contract to sell, grant any option to purchase, transfer the economic risk of
ownership in, make any short sale of, pledge or otherwise
4
<PAGE>
transfer or dispose of any interest in any common stock or any securities
convertible into or exchangeable or exercisable for or any other rights to
purchase or acquire common stock (except common stock included in such public
offering or acquired on the public market after such offering) during the
180-day period following the effective date of a registration statement of the
Company filed under the Securities Act, or such shorter period of time as the
Lead Underwriter shall specify. Grantee further agrees to sign such documents as
may be requested by the Lead Underwriter to effect the foregoing and agrees that
the Company may impose stop-transfer instructions with respect to such common
stock subject until the end of such period. The Company and Grantee acknowledge
that each Lead Underwriter of a public offering of the Company's stock, during
the period of such offering and for the 180-day period thereafter, is an
intended beneficiary of this Section 7.
7.2. NO AMENDMENT OR WAIVER. During the period from identification as a
Lead Underwriter in connection with any public offering of the Company's common
stock until the earlier of (i) the expiration of the lock-up period specified in
Section 7.1 in connection with such offering or (ii) the abandonment of such
offering by the Company and the Lead Underwriter, the provisions of the Section
7 may not be amended or waived except with the consent of the Lead Underwriter.
SECTION VIII. MISCELLANEOUS
8.1. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights of remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.2. DEFAULT. In the event a Party fails to comply with the terms of
this Agreement, any other Party to this Agreement shall be entitled to (a)
injunctive relief, as a matter of right, in any court of competent jurisdiction;
(b) any other relief or remedy that may be available pursuant to this Agreement
or at law or equity.
8.3. WAIVERS. The waiver by the undersigned of any of the provisions of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach.
8.4. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect the construction and interpretation
of this Agreement.
8.5. SEVERABILITY. The invalidity of all of any part of any section of
this Agreement shall not render invalid the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provisions
shall be interpreted to be only so broad as is enforceable.
8.6. BINDING EFFECTS. This Agreement shall not be assigned by any
Purchaser without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of the Parties, their heirs, personal
representatives, successors, and permitted assignees.
5
<PAGE>
8.7. NOTICES. Any notices provided pursuant to this Agreement shall be
in writing and shall be deemed given (i) if by hand, upon receipt thereof; (ii)
if mailed, three (3) days after deposit in the U.S. mails, postage prepaid,
certified mail return receipt requested, or (iii) if sent via overnight courier
upon receipt. All notices shall be addressed to the parties at the respective
addresses indicated herein. Either party may change its address by giving
written notice to the other in accordance with the terms of this paragraph.
8.8. ENTIRE AGREEMENT. This writing contains the entire agreement of
the Parties. The Parties are not bound by any oral statements that are made
outside of this Agreement.
8.9. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed of the laws of the State of Delaware.
WHEREAS, the Parties have signed their names to this Agreement on the
date as above written:
GlobeComm, Inc
/s/ Gerald Gorman
- ---------------------------------
Gerald Gorman
Title: Chairman and Chief Executive Officer
GRANTEE
/s/ Gary Millin
- -----------------------------------
Gary Millin
6
<PAGE>
NON-PLAN STOCK OPTION AGREEMENT
SCHEDULE A
IV
- --------------------------------------------------------------------------------
GARY MILLIN
- --------------------------------------------------------------------------------
$1.00 12/31/96 48,500
- --------------------------------------------------------------------------------
7
<PAGE>
NP4
EXHIBIT 10.8
STOCK OPTION AGREEMENT
AGREEMENT, dated as of June 1, 1996, between GlobeComm, Inc. (the
"Company"), a Delaware corporation doing business at 11 Broadway, Suite 660, New
York, New York and Gary Millin (the "Grantee") residing at 515 E. 72nd Street,
37-B, New York, NY 10021. The Company and the Grantee are collectively referred
to as the "Parties."
WHEREAS, the Grantee is employed by the Company in the capacity as
President, and in partial consideration for the Grantee's services, the Company
desires to award stock options to the Grantee in accordance with the terms of
this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Parties hereto agree as follows:
SECTION I. OPTION TO PURCHASE SHARES
1.1. OPTION. The Company hereby grants, as of the date of this
Agreement and future dates listed on Schedule A, to the Grantee an irrevocable
option (the "Option") to purchase the number of shares of Class A Common Stock
(the "Shares") listed on the attached Schedule A at the purchase price listed on
Schedule A (the "Purchase Price"). These options are not intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended nor
to qualify as an incentive stock option.
1.2. EXERCISE OF OPTION. In the event the Grantee wishes to exercise
the Option, in accordance with the restrictions specified below, the Grantee
shall send a written notice to the Company (the "Stock Exercise Notice")
specifying a date for the closing of such purchase.
1.3. VESTING. The right to exercise an Option is limited as hereinafter
provided:
(a) The Option may be exercised as hereinafter provided only to
the extent that they had become vested as provided herein.
(b) The Options shall vest as follows:
(i) The Option is granted on the date listed on Schedule A.
(ii) The Option shall vest at the rate of one-sixteenth for
each calendar quarter ("Calendar Quarter"), defined as the four three-month
periods of a year with commencing dates of January 1, April 1, July 1 and
October 1, on the last day of each such Calendar Quarter, over the course of
four years after the Option is granted to the Grantee.
(iii) (1) An Option granted after the first day of a Calendar
Quarter but before the fifteenth day of the second month of such Calender
Quarter shall not begin to vest
1
<PAGE>
until the last day of the subsequent Calendar Quarter ("Initial Vesting Date").
For such Options, two-sixteenths of the Option will vest on the Initial Vesting
Date, and an additional one-sixteenth will vest for each additional Calendar
Quarter until the Option is fully vested; (2) Options granted after the
fifteenth day of the second month of a Calendar Quarter but before the end of
such Calendar Quarter shall first not begin to vest until the last day of the
subsequent Calendar Quarter. For such Options, one-sixteenth of the Option will
vest on the Initial Vesting Date, and an additional one-sixteenth will vest for
each additional Calendar Quarter until the Option is fully vested.
1.4. TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option held by the Grantee shall be as
follows:
(a) Disability. If the Grantee's employment is terminated because
of permanent disability as defined in Code Section 22(e)(3), the Grantee may,
within one year following termination, exercise the Option with respect to all
or part of the shares subject thereto in which the right to purchase shares had
accrued or vested at the time of termination of employment.
(b) Death. If a Grantee's employment is terminated by death, his
or her estate shall have the right for a period of one year following the date
of death to exercise the Option to the extent that the right to exercise had
accrued or vested prior to the date of death. A Grantee's "estate" shall mean
his or her legal representative or any person who acquires the right to exercise
an Option by reason of the Grantee's death. The Board or Committee may in its
discretion require the estate of the Grantee to supply the Board or Committee
with written notice of the Grantee's death and a copy of the will or other
documents deemed necessary to establish the validity of the transfer of an
Option. The Board or Committee may also require that the estate of a deceased
Grantee agree to be bound by all of the terms and conditions of the Plan.
(c) Cause and Competition. If the employment of Grantee is
terminated for "Cause" (as defined below) or the Grantee terminates his or her
employment and commences working for a competitor (as defined below), the
Grantee's rights under any then outstanding Option, whether or not vested, shall
terminate at the time of termination of employment. "Cause" shall mean any
willful or intentional act having the effect of injuring the reputation,
business or business relationship of the Company. "Competitor" shall mean any
person or entity engaged in a business competitive (in the good faith judgment
of the Board or Committee) with that of the Company.
(d) Other Reason. In the case of a Grantee whose employment is
terminated for any reason other than those provided above, the Grantee may,
within sixty (60) days following the termination (or if the Board has notified
the Grantee of its intent to register an offering of the Company's securities as
described in Section 1.4 of this Agreement, the time period becomes sixty (60)
days following the 180-day lock-up period provided for in Section 1.4) exercise
an Option to the extent the right to exercise had accrued prior to termination;
provided, however that the Company may retain the shares of Stock issuable upon
exercise of an Option pursuant to this paragraph (iv) for a period of sixty (60)
days from exercise and, if the Grantee becomes
2
<PAGE>
employed or otherwise associated with a competitor or enters into an agreement
to do so during that sixty (60) day period, either as a director, officer,
employee, agent, representative or otherwise, then the Company may retain and
cancel those shares, refund the exercise price paid by the Grantee and
thereafter all rights of the Grantee in the Stock shall immediately cease; and
provided, further, that if the Grantee dies prior to the end of the sixty (60)
day period after termination of employment, his or her estate (as defined above)
shall have the right, subject to the procedures set forth above, to exercise the
Option within one year following the termination.
1.5. TRANSFERABILITY. No Option shall be transferable except by will or
the laws of descent and distribution. An Option shall be exercisable during the
Grantee's lifetime only by the Grantee.
1.6. DURATION OF OPTIONS. Options may be exercised, upon satisfaction
of the conditions specified in Section 1.3, for terms of up to but not exceeding
ten (10) years from the date of grant.
1.7. ADDITIONAL OPTIONS. In the event that the Company grants
additional options to purchase shares of Class A Common Stock to the Grantee,
unless agreed to the contrary between the Parties, the additional options will
be subject to the terms of this Agreement.
SECTION II. THE CLOSING
2.1. CLOSING DATE. Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice pursuant to Section 1 at
10:00 A.M., at the offices of the Company, or at such other time and place as
the parties hereto may agree (the "Closing Date"). On the Closing Date, the
Company will deliver to the Grantee a certificate or certificates, duly
endorsed, representing the Shares and the Grantee will purchase such Shares from
the Company at the price per Share equal to the Exercise Price. In the event
that any federal, state, or local income taxes, employment taxes, Federal
Insurance Contribution Act ("FICA") withholdings or other amounts are required
by applicable law or governmental regulation to be withheld from the grantee in
connection with the exercise, these amounts must be remitted to the Company in
addition to the Exercise Price. Any payment made by the Grantee to the Company
pursuant to this Agreement shall be made by certified or official bank check.
2.2. LEGENDS. The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Act").
SECTION III. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
3.1. INVESTMENT REPRESENTATION. The Grantee represents and warrants to
the Company that the Grantee is acquiring the Option and, if and when it
exercises the Option, will be
3
<PAGE>
acquiring the Shares issuable upon the exercise thereof for its own account and
not with a view to distribution or resale in any manner which would be in
violation of the Act.
3.2. RESTRICTED SECURITIES. The Grantee represents and warrants to the
Company that the Grantee is an Accredited Investor as defined in Rule 501
promulgated under the Act. The Grantee understands that, if and when it
exercises the Option, the Grantee will be acquiring restricted securities under
applicable federal securities laws, and may dispose of such Shares only pursuant
to an effective registration statement under the Act or an exemption from
registration if available. The Grantee represents and warrants to the Company
that the Grantee is acquiring the Option and, if and when it exercises the
Option, will be acquiring the Shares issuable upon the exercise thereof for its
own account and not with a view to distribution or resale in any manner which
would be in violation of the Act.
SECTION IV. RIGHT OF FIRST REFUSAL
If, at any time after the Closing Date, the Grantee proposes to sell
all or any part of the Shares in a transaction not required to be registered
under the Act, it shall give the Company the opportunity, in the following
manner, to purchase such Shares:
4.1. NOTICE. The Grantee shall give notice to the Company in writing of
its intent to sell Shares (a "Disposition Notice"), specifying the number of
Shares to be sold, the price and the material terms of any agreement relating
thereto. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
4.2. RIGHT TO PURCHASE. The Company or its designee shall have the
right, exercisable by written notice given to the Grantee within five (5) days
after receipt of a Disposition Notice, to purchase all, but not less than all,
of the Shares specified in the Disposition Notice at the price set forth in the
Disposition Notice.
4.3. CLOSING. If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Shares with respect to which such
right has been exercised shall take place within five (5) days after the notice
of such exercise; provided, however, that at any time prior to the closing of
the purchase of Shares hereunder, the Grantee may determine not to sell the
Shares and revoke the Disposition Notice and, by so doing, cancel the Company's
right of first refusal with respect thereto.
4.4. RIGHT TO SELL. If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise, the Grantee shall
be free for thirty (30) days following the expiration of such time for exercise
to sell or enter into an agreement to sell the Shares specified in the
Disposition Notice, at the price specified in the Disposition Notice or any
price in excess thereof and otherwise on substantially the same terms set forth
in the Disposition Notice; provided, that if such sale is not consummated within
such 30-day period, then the provisions of this Section 4 will again apply to
the sale of such Shares.
4
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SECTION V. INFORMATION
Upon written request by the Grantee, the Company shall furnish to the
Grantee such information regarding the Company and its operation as shall be
reasonably necessary to enable the Grantee to make a decision as to whether or
not to exercise the Option; provided, however, that in no event shall the
Company be required to furnish information which constitutes trade secrets or
other proprietary information or the furnishing of which would be unduly
burdensome, financially or otherwise, to the Company.
SECTION VI. ADJUSTMENT FOR CHANGES IN THE STOCK
6.1. STOCK RECLASSIFICATION. In the event the shares of Stock, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares or other securities of the Company (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares or otherwise), then there shall be substituted for or
added to each share of Stock theretofore or thereafter subject to an Option the
number and kind of shares of capital stock or other securities into, which each
outstanding share of Stock shall be changed, or for which each such share shall
be exchanged, or to which each such share shall be entitled, as the case may be.
The price and other terms of outstanding Options shall also be appropriately
amended to reflect the foregoing events. In the event there shall be any other
change in the number or kind of outstanding shares of the Stock, or of any
capital stock or other securities into which the Stock shall have been changed
or for which it shall have been exchanged, if the Board of Directors shall, in
its sole discretion, determine that the change equitably requires an adjustment
in any Option theretofore granted, then adjustments shall be made in accordance
with its determination.
6.2. FRACTIONAL SHARES. Fractional shares resulting from any adjustment
in Options pursuant to this Section 6 may be settled in cash or otherwise as the
Board of Directors shall determine.
6.3. NOTICE. Notice of any adjustment shall be given by the Company to
the Grantee in accordance with the requirements for providing notice to a Party
set forth in Section 7.7.
6.4. SALE OF THE ASSETS OF THE COMPANY, ETC. Notwithstanding Section
6.1, the Board of Directors shall have the power, in the event of the
disposition of all or substantially all of the assets of the Company, or the
dissolution of the Company, or the merger or consolidation of the Company, or
the making of a tender offer to purchase all or a substantial portion of
outstanding Stock of the Company, to amend this Agreement (upon such conditions
as it shall deem fit) to (i) permit the exercise of the Options described herein
prior to the effective date of the transaction and to terminate all unexercised
Options as of that date, or (ii) require the forfeiture of all Options, provided
the Company pays to the Grantee the excess of the fair market value of the Stock
subject to the Option (as determined by the Board of Directors if the Company's
common
5
<PAGE>
stock is not then freely tradable) over the exercise price of the Option.
SECTION VII. PUBLIC OFFERING OF COMPANY'S COMMON STOCK
7.1. LOCK-UP AGREEMENT. Grantee, if requested by the Company and the
lead underwriter of any public offering of the common stock or other securities
of the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell,
contract to sell, grant any option to purchase, transfer the economic risk of
ownership in, make any short sale of, pledge or otherwise transfer or dispose of
any interest in any common stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase or acquire
common stock (except common stock included in such public offering or acquired
on the public market after such offering) during the 180-day period following
the effective date of a registration statement of the Company filed under the
Securities Act, or such shorter period of time as the Lead Underwriter shall
specify. Grantee further agrees to sign such documents as may be requested by
the Lead Underwriter to effect the foregoing and agrees that the Company may
impose stop-transfer instructions with respect to such common stock subject
until the end of such period. The Company and Grantee acknowledge that each Lead
Underwriter of a public offering of the Company's stock, during the period of
such offering and for the 180-day period thereafter, is an intended beneficiary
of this Section 7.
7.2. NO AMENDMENT OR WAIVER. During the period from identification as a
Lead Underwriter in connection with any public offering of the Company's common
stock until the earlier of (i) the expiration of the lock-up period specified in
Section 7.1 in connection with such offering or (ii) the abandonment of such
offering by the Company and the Lead Underwriter, the provisions of the Section
7 may not be amended or waived except with the consent of the Lead Underwriter.
SECTION VIII. MISCELLANEOUS
8.1. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights of remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.2. DEFAULT. In the event a Party fails to comply with the terms of
this Agreement, any other Party to this Agreement shall be entitled to (a)
injunctive relief, as a matter of right, in any court of competent jurisdiction;
(b) any other relief or remedy that may be available pursuant to this Agreement
or at law or equity.
8.3. WAIVERS. The waiver by the undersigned of any of the provisions of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach.
8.4. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect the construction and interpretation
of this Agreement.
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<PAGE>
8.5. SEVERABILITY. The invalidity of all of any part of any section of
this Agreement shall not render invalid the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provisions
shall be interpreted to be only so broad as is enforceable.
8.6. BINDING EFFECTS. This Agreement shall not be assigned by any
Purchaser without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of the Parties, their heirs, personal
representatives, successors, and permitted assignees.
8.7. NOTICES. Any notices provided pursuant to this Agreement shall be
in writing and shall be deemed given (i) if by hand, upon receipt thereof; (ii)
if mailed, three (3) days after deposit in the U.S. mails, postage prepaid,
certified mail return receipt requested, or (iii) if sent via overnight courier
upon receipt. All notices shall be addressed to the parties at the respective
addresses indicated herein. Either party may change its address by giving
written notice to the other in accordance with the terms of this paragraph.
8.8. ENTIRE AGREEMENT. This writing contains the entire agreement of
the Parties. The Parties are not bound by any oral statements that are made
outside of this Agreement.
8.9. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed of the laws of the State of Delaware.
WHEREAS, the Parties have signed their names to this Agreement on the
date as above written:
GlobeComm, Inc
/s/ Gerald Gorman
- --------------------------------------------
By: Gerald Gorman
Title: Chairman and Chief Executive Officer
/s/ Gary Millin
- --------------------------------------------
Gary Millin
Grantee
7
<PAGE>
NON-PLAN STOCK OPTION AGREEMENT
SCHEDULE A
<TABLE>
<CAPTION>
NQ4
- ------------------------------------------------
GARY MILLIN
- ------------------------------------------------
<S> <C> <C>
$0.20 6/1/96 125,000
- ------------------------------------------------
</TABLE>
8
<PAGE>
NP4
EXHIBIT 10.9
STOCK OPTION AGREEMENT
AGREEMENT, dated as of February 1, 1997, between GlobeComm, Inc. (the
"Company"), a Delaware corporation doing business at 11 Broadway, Suite 660, New
York, New York and Gary Millin (the "Grantee") residing at 515 E. 72nd Street,
37-B, New York, NY 10021. The Company and the Grantee are collectively referred
to as the "Parties."
WHEREAS, the Grantee is employed by the Company in the capacity as
President, and in partial consideration for the Grantee's services, the Company
desires to award stock options to the Grantee in accordance with the terms of
this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Parties hereto agree as follows:
SECTION I. OPTION TO PURCHASE SHARES
1.1. OPTION. The Company hereby grants, as of the date of this
Agreement and future dates listed on Schedule A, to the Grantee an irrevocable
option (the "Option") to purchase the number of shares of Class A Common Stock
(the "Shares") listed on the attached Schedule A at the purchase price listed on
Schedule A (the "Purchase Price"). These options are not intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended nor
to qualify as an incentive stock option.
1.2. EXERCISE OF OPTION. In the event the Grantee wishes to exercise
the Option, in accordance with the restrictions specified below, the Grantee
shall send a written notice to the Company (the "Stock Exercise Notice")
specifying a date for the closing of such purchase.
1.3. VESTING. The right to exercise an Option is limited as hereinafter
provided:
(a) The Option may be exercised as hereinafter provided only to
the extent that they had become vested as provided herein.
(b) The Options shall vest as follows:
(i) The Option is granted on the date listed on Schedule A.
(ii) The Option shall vest at the rate of one-sixteenth for
each calendar quarter ("Calendar Quarter"), defined as the four three-month
periods of a year with commencing dates of January 1, April 1, July 1 and
October 1, on the last day of each such Calendar Quarter, over the course of
four years after the Option is granted to the Grantee.
(iii) (1) An Option granted after the first day of a Calendar
Quarter but before the fifteenth day of the second month of such Calender
Quarter shall not begin to vest
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<PAGE>
until the last day of the subsequent Calendar Quarter ("Initial Vesting Date").
For such Options, two-sixteenths of the Option will vest on the Initial Vesting
Date, and an additional one-sixteenth will vest for each additional Calendar
Quarter until the Option is fully vested; (2) Options granted after the
fifteenth day of the second month of a Calendar Quarter but before the end of
such Calendar Quarter shall first not begin to vest until the last day of the
subsequent Calendar Quarter. For such Options, one-sixteenth of the Option will
vest on the Initial Vesting Date, and an additional one-sixteenth will vest for
each additional Calendar Quarter until the Option is fully vested.
1.4. TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option held by the Grantee shall be as
follows:
(a) Disability. If the Grantee's employment is terminated because
of permanent disability as defined in Code Section 22(e)(3), the Grantee may,
within one year following termination, exercise the Option with respect to all
or part of the shares subject thereto in which the right to purchase shares had
accrued or vested at the time of termination of employment.
(b) Death. If a Grantee's employment is terminated by death, his
or her estate shall have the right for a period of one year following the date
of death to exercise the Option to the extent that the right to exercise had
accrued or vested prior to the date of death. A Grantee's "estate" shall mean
his or her legal representative or any person who acquires the right to exercise
an Option by reason of the Grantee's death. The Board or Committee may in its
discretion require the estate of the Grantee to supply the Board or Committee
with written notice of the Grantee's death and a copy of the will or other
documents deemed necessary to establish the validity of the transfer of an
Option. The Board or Committee may also require that the estate of a deceased
Grantee agree to be bound by all of the terms and conditions of the Plan.
(c) Cause and Competition. If the employment of Grantee is
terminated for "Cause" (as defined below) or the Grantee terminates his or her
employment and commences working for a competitor (as defined below), the
Grantee's rights under any then outstanding Option, whether or not vested, shall
terminate at the time of termination of employment. "Cause" shall mean any
willful or intentional act having the effect of injuring the reputation,
business or business relationship of the Company. "Competitor" shall mean any
person or entity engaged in a business competitive (in the good faith judgment
of the Board or Committee) with that of the Company.
(d) Other Reason. In the case of a Grantee whose employment is
terminated for any reason other than those provided above, the Grantee may,
within sixty (60) days following the termination (or if the Board has notified
the Grantee of its intent to register an offering of the Company's securities as
described in Section 1.4 of this Agreement, the time period becomes sixty (60)
days following the 180-day lock-up period provided for in Section 1.4) exercise
an Option to the extent the right to exercise had accrued prior to termination;
provided, however that the Company may retain the shares of Stock issuable upon
exercise of an Option pursuant to this paragraph (iv) for a period of sixty (60)
days from exercise and, if the Grantee becomes
2
<PAGE>
employed or otherwise associated with a competitor or enters into an agreement
to do so during that sixty (60) day period, either as a director, officer,
employee, agent, representative or otherwise, then the Company may retain and
cancel those shares, refund the exercise price paid by the Grantee and
thereafter all rights of the Grantee in the Stock shall immediately cease; and
provided, further, that if the Grantee dies prior to the end of the sixty (60)
day period after termination of employment, his or her estate (as defined above)
shall have the right, subject to the procedures set forth above, to exercise the
Option within one year following the termination.
1.5. TRANSFERABILITY. No Option shall be transferable except by will or
the laws of descent and distribution. An Option shall be exercisable during the
Grantee's lifetime only by the Grantee.
1.6. DURATION OF OPTIONS. Options may be exercised, upon satisfaction
of the conditions specified in Section 1.3, for terms of up to but not exceeding
ten (10) years from the date of grant.
1.7. ADDITIONAL OPTIONS. In the event that the Company grants
additional options to purchase shares of Class A Common Stock to the Grantee,
unless agreed to the contrary between the Parties, the additional options will
be subject to the terms of this Agreement.
SECTION II. THE CLOSING
2.1. Closing Date. Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice pursuant to Section 1 at
10:00 A.M., at the offices of the Company, or at such other time and place as
the parties hereto may agree (the "Closing Date"). On the Closing Date, the
Company will deliver to the Grantee a certificate or certificates, duly
endorsed, representing the Shares and the Grantee will purchase such Shares from
the Company at the price per Share equal to the Exercise Price. In the event
that any federal, state, or local income taxes, employment taxes, Federal
Insurance Contribution Act ("FICA") withholdings or other amounts are required
by applicable law or governmental regulation to be withheld from the grantee in
connection with the exercise, these amounts must be remitted to the Company in
addition to the Exercise Price. Any payment made by the Grantee to the Company
pursuant to this Agreement shall be made by certified or official bank check.
2.2. LEGENDS. The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Act").
SECTION III. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
3.1. INVESTMENT REPRESENTATION. The Grantee represents and warrants to
the Company that the Grantee is acquiring the Option and, if and when it
exercises the Option, will be
3
<PAGE>
acquiring the Shares issuable upon the exercise thereof for its own account and
not with a view to distribution or resale in any manner which would be in
violation of the Act.
3.2. RESTRICTED SECURITIES. The Grantee represents and warrants to the
Company that the Grantee is an Accredited Investor as defined in Rule 501
promulgated under the Act. The Grantee understands that, if and when it
exercises the Option, the Grantee will be acquiring restricted securities under
applicable federal securities laws, and may dispose of such Shares only pursuant
to an effective registration statement under the Act or an exemption from
registration if available. The Grantee represents and warrants to the Company
that the Grantee is acquiring the Option and, if and when it exercises the
Option, will be acquiring the Shares issuable upon the exercise thereof for its
own account and not with a view to distribution or resale in any manner which
would be in violation of the Act.
SECTION IV. RIGHT OF FIRST REFUSAL
If, at any time after the Closing Date, the Grantee proposes to sell
all or any part of the Shares in a transaction not required to be registered
under the Act, it shall give the Company the opportunity, in the following
manner, to purchase such Shares:
4.1. NOTICE. The Grantee shall give notice to the Company in writing of
its intent to sell Shares (a "Disposition Notice"), specifying the number of
Shares to be sold, the price and the material terms of any agreement relating
thereto. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
4.2. RIGHT TO PURCHASE. The Company or its designee shall have the
right, exercisable by written notice given to the Grantee within five (5) days
after receipt of a Disposition Notice, to purchase all, but not less than all,
of the Shares specified in the Disposition Notice at the price set forth in the
Disposition Notice.
4.3. CLOSING. If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Shares with respect to which such
right has been exercised shall take place within five (5) days after the notice
of such exercise; provided, however, that at any time prior to the closing of
the purchase of Shares hereunder, the Grantee may determine not to sell the
Shares and revoke the Disposition Notice and, by so doing, cancel the Company's
right of first refusal with respect thereto.
4.4. RIGHT TO SELL. If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise, the Grantee shall
be free for thirty (30) days following the expiration of such time for exercise
to sell or enter into an agreement to sell the Shares specified in the
Disposition Notice, at the price specified in the Disposition Notice or any
price in excess thereof and otherwise on substantially the same terms set forth
in the Disposition Notice; provided, that if such sale is not consummated within
such 30-day period, then the provisions of this Section 4 will again apply to
the sale of such Shares.
4
<PAGE>
SECTION V. INFORMATION
Upon written request by the Grantee, the Company shall furnish to the
Grantee such information regarding the Company and its operation as shall be
reasonably necessary to enable the Grantee to make a decision as to whether or
not to exercise the Option; provided, however, that in no event shall the
Company be required to furnish information which constitutes trade secrets or
other proprietary information or the furnishing of which would be unduly
burdensome, financially or otherwise, to the Company.
SECTION VI. ADJUSTMENT FOR CHANGES IN THE STOCK
6.1. STOCK RECLASSIFICATION. In the event the shares of Stock, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares or other securities of the Company (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares or otherwise), then there shall be substituted for or
added to each share of Stock theretofore or thereafter subject to an Option the
number and kind of shares of capital stock or other securities into, which each
outstanding share of Stock shall be changed, or for which each such share shall
be exchanged, or to which each such share shall be entitled, as the case may be.
The price and other terms of outstanding Options shall also be appropriately
amended to reflect the foregoing events. In the event there shall be any other
change in the number or kind of outstanding shares of the Stock, or of any
capital stock or other securities into which the Stock shall have been changed
or for which it shall have been exchanged, if the Board of Directors shall, in
its sole discretion, determine that the change equitably requires an adjustment
in any Option theretofore granted, then adjustments shall be made in accordance
with its determination.
6.2. FRACTIONAL SHARES. Fractional shares resulting from any adjustment
in Options pursuant to this Section 6 may be settled in cash or otherwise as the
Board of Directors shall determine.
6.3. NOTICE. Notice of any adjustment shall be given by the Company to
the Grantee in accordance with the requirements for providing notice to a Party
set forth in Section 7.7.
6.4. SALE OF THE ASSETS OF THE COMPANY, ETC. Notwithstanding Section
6.1, the Board of Directors shall have the power, in the event of the
disposition of all or substantially all of the assets of the Company, or the
dissolution of the Company, or the merger or consolidation of the Company, or
the making of a tender offer to purchase all or a substantial portion of
outstanding Stock of the Company, to amend this Agreement (upon such conditions
as it shall deem fit) to (i) permit the exercise of the Options described herein
prior to the effective date of the transaction and to terminate all unexercised
Options as of that date, or (ii) require the forfeiture of all Options, provided
the Company pays to the Grantee the excess of the fair market value of the Stock
subject to the Option (as determined by the Board of Directors if the Company's
common
5
<PAGE>
stock is not then freely tradable) over the exercise price of the Option.
SECTION VII. PUBLIC OFFERING OF COMPANY'S COMMON STOCK
7.1. LOCK-UP AGREEMENT. Grantee, if requested by the Company and the
lead underwriter of any public offering of the common stock or other securities
of the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell,
contract to sell, grant any option to purchase, transfer the economic risk of
ownership in, make any short sale of, pledge or otherwise transfer or dispose of
any interest in any common stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase or acquire
common stock (except common stock included in such public offering or acquired
on the public market after such offering) during the 180-day period following
the effective date of a registration statement of the Company filed under the
Securities Act, or such shorter period of time as the Lead Underwriter shall
specify. Grantee further agrees to sign such documents as may be requested by
the Lead Underwriter to effect the foregoing and agrees that the Company may
impose stop-transfer instructions with respect to such common stock subject
until the end of such period. The Company and Grantee acknowledge that each Lead
Underwriter of a public offering of the Company's stock, during the period of
such offering and for the 180-day period thereafter, is an intended beneficiary
of this Section 7.
7.2. NO AMENDMENT OR WAIVER. During the period from identification as a
Lead Underwriter in connection with any public offering of the Company's common
stock until the earlier of (i) the expiration of the lock-up period specified in
Section 7.1 in connection with such offering or (ii) the abandonment of such
offering by the Company and the Lead Underwriter, the provisions of the Section
7 may not be amended or waived except with the consent of the Lead Underwriter.
SECTION VIII. MISCELLANEOUS
8.1. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights of remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.2. DEFAULT. In the event a Party fails to comply with the terms of
this Agreement, any other Party to this Agreement shall be entitled to (a)
injunctive relief, as a matter of right, in any court of competent jurisdiction;
(b) any other relief or remedy that may be available pursuant to this Agreement
or at law or equity.
8.3. WAIVERS. The waiver by the undersigned of any of the provisions
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
8.4. HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect the construction and
interpretation of this Agreement.
8.5. SEVERABILITY. The invalidity of all of any part of any section of
this Agreement
6
<PAGE>
shall not render invalid the remainder of such section. If any provision of this
Agreement is so broad as to be unenforceable, such provisions shall be
interpreted to be only so broad as is enforceable.
8.6. BINDING EFFECTS. This Agreement shall not be assigned by any
Purchaser without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of the Parties, their heirs, personal
representatives, successors, and permitted assignees.
8.7. NOTICES. Any notices provided pursuant to this Agreement shall be
in writing and shall be deemed given (i) if by hand, upon receipt thereof; (ii)
if mailed, three (3) days after deposit in the U.S. mails, postage prepaid,
certified mail return receipt requested, or (iii) if sent via overnight courier
upon receipt. All notices shall be addressed to the parties at the respective
addresses indicated herein. Either party may change its address by giving
written notice to the other in accordance with the terms of this paragraph.
8.8. ENTIRE AGREEMENT. This writing contains the entire agreement of
the Parties. The Parties are not bound by any oral statements that are made
outside of this Agreement.
8.9. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed of the laws of the State of Delaware.
WHEREAS, the Parties have signed their names to this Agreement on the
date as above written:
GlobeComm, Inc
/s/ Gerald Gorman
- --------------------------------------------
By: Gerald Gorman
Title: Chairman and Chief Executive Officer
GRANTEE
/s/ Gary Millin
- -------------------------------------------
Gary Millin
7
<PAGE>
NON-PLAN STOCK OPTION AGREEMENT
SCHEDULE A
NQ4
<TABLE>
<CAPTION>
- ----------------------------------------------
GARY MILLIN
- ----------------------------------------------
<S> <C> <C>
$2.00 2/1/97 50,000
- ----------------------------------------------
$2.00 2/1/97 10,000
- ----------------------------------------------
</TABLE>
8
<PAGE>
NP
EXHIBIT 10.10
STOCK OPTION AGREEMENT
AGREEMENT, dated as of December 31, 1996, between GlobeComm, Inc. (the
"Company"), a Delaware corporation doing business at 11 Broadway, Suite 660, New
York, New York and Gerald Gorman (the "Grantee") residing at 415 Bernardsville
Road, Menham, NJ 07945. The Company and the Grantee are collectively referred to
as the "Parties."
WHEREAS, the Grantee is employed by the Company in the capacity as
Chairman and Chief Executive Officer, and in partial consideration for the
Grantee's services, the Company desires to award stock options to the Grantee in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Parties hereto agree as follows:
SECTION I. OPTION TO PURCHASE SHARES
1.1. Option. The Company hereby grants, as of the date of this
Agreement and future dates listed on Schedule A, to the Grantee an irrevocable
option (the "Option") to purchase the number of shares of Class A Common Stock
(the "Shares") listed on the attached Schedule A at the purchase price listed on
Schedule A (the "Purchase Price"). These options are not intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended nor
to qualify as an incentive stock option.
1.2. EXERCISE OF OPTION. In the event the Grantee wishes to exercise
the Option, in accordance with the restrictions specified below, the Grantee
shall send a written notice to the Company (the "Stock Exercise Notice")
specifying a date for the closing of such purchase.
1.3. VESTING. The right to exercise an Option is limited as hereinafter
provided:
(a) An Option may be exercised as hereinafter provided only to the
extent that the Option has become vested as provided herein. (b)
The Options shall vest upon the date of grant, as is listed on
Schedule A.
1.4. TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option held by the Grantee shall be as
follows:
Grantee's rights hereunder are not contingent upon his or her
continued employment; provided, however, if the Grantee's employment with the
Company is terminated by reason of death, the Board or Committee, in its sole
discretion, may require that the estate of a deceased Grantee agree to be bound
by all of the terms and conditions of the Plan.
1.5. TRANSFERABILITY. No Option shall be transferable except by will or
the laws of
1
<PAGE>
descent and distribution. An Option shall be exercisable during the Grantee's
lifetime only by the Grantee.
1.6. DURATION OF OPTIONS. Options may be exercised, upon satisfaction
of the conditions specified in Section 1.3, for terms of up to but not exceeding
ten (10) years from the date of grant.
1.7. ADDITIONAL OPTIONS. In the event that the Company grants
additional options to purchase shares of Class A Common Stock to the Grantee,
unless agreed to the contrary between the Parties, the additional options will
be subject to the terms of this Agreement.
SECTION II. THE CLOSING
2.1. Closing Date. Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice pursuant to Section 1 at
10:00 A.M., at the offices of the Company, or at such other time and place as
the parties hereto may agree (the "Closing Date"). On the Closing Date, the
Company will deliver to the Grantee a certificate or certificates, duly
endorsed, representing the Shares and the Grantee will purchase such Shares from
the Company at the price per Share equal to the Exercise Price. In the event
that any federal, state, or local income taxes, employment taxes, Federal
Insurance Contribution Act ("FICA") withholdings or other amounts are required
by applicable law or governmental regulation to be withheld from the grantee in
connection with the exercise, these amounts must be remitted to the Company in
addition to the Exercise Price. Any payment made by the Grantee to the Company
pursuant to this Agreement shall be made by certified or official bank check.
2.2. LEGENDS. The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Act").
SECTION III. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
3.1. INVESTMENT REPRESENTATION. The Grantee represents and warrants to
the Company that the Grantee is acquiring the Option and, if and when it
exercises the Option, will be acquiring the Shares issuable upon the exercise
thereof for its own account and not with a view to distribution or resale in any
manner which would be in violation of the Act.
3.2. RESTRICTED SECURITIES. The Grantee represents and warrants to the
Company that the Grantee is an Accredited Investor as defined in Rule 501
promulgated under the Act. The Grantee understands that, if and when it
exercises the Option, the Grantee will be acquiring restricted securities under
applicable federal securities laws, and may dispose of such Shares only pursuant
to an effective registration statement under the Act or an exemption from
registration if available. The Grantee represents and warrants to the Company
that the Grantee is
2
<PAGE>
acquiring the Option and, if and when it exercises the Option, will be acquiring
the Shares issuable upon the exercise thereof for its own account and not with a
view to distribution or resale in any manner which would be in violation of the
Act.
SECTION IV. RIGHT OF FIRST REFUSAL
If, at any time after the Closing Date, the Grantee proposes to sell
all or any part of the Shares in a transaction not required to be registered
under the Act, it shall give the Company the opportunity, in the following
manner, to purchase such Shares:
4.1. NOTICE. The Grantee shall give notice to the Company in writing of
its intent to sell Shares (a "Disposition Notice"), specifying the number of
Shares to be sold, the price and the material terms of any agreement relating
thereto. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
4.2. RIGHT TO PURCHASE. The Company or its designee shall have the
right, exercisable by written notice given to the Grantee within five (5) days
after receipt of a Disposition Notice, to purchase all, but not less than all,
of the Shares specified in the Disposition Notice at the price set forth in the
Disposition Notice.
4.3. CLOSING. If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Shares with respect to which such
right has been exercised shall take place within five (5) days after the notice
of such exercise; provided, however, that at any time prior to the closing of
the purchase of Shares hereunder, the Grantee may determine not to sell the
Shares and revoke the Disposition Notice and, by so doing, cancel the Company's
right of first refusal with respect thereto.
4.4. RIGHT TO SELL. If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise, the Grantee shall
be free for thirty (30) days following the expiration of such time for exercise
to sell or enter into an agreement to sell the Shares specified in the
Disposition Notice, at the price specified in the Disposition Notice or any
price in excess thereof and otherwise on substantially the same terms set forth
in the Disposition Notice; provided, that if such sale is not consummated within
such 30-day period, then the provisions of this Section 4 will again apply to
the sale of such Shares.
SECTION V. INFORMATION
Upon written request by the Grantee, the Company shall furnish to the
Grantee such information regarding the Company and its operation as shall be
reasonably necessary to enable the Grantee to make a decision as to whether or
not to exercise the Option; provided, however, that in no event shall the
Company be required to furnish information which constitutes trade secrets or
other proprietary information or the furnishing of which would be unduly
burdensome, financially or otherwise, to the Company.
3
<PAGE>
SECTION VI. ADJUSTMENT FOR CHANGES IN THE STOCK
6.1. STOCK RECLASSIFICATION. In the event the shares of Stock, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares or other securities of the Company (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares or otherwise), then there shall be substituted for or
added to each share of Stock theretofore or thereafter subject to an Option the
number and kind of shares of capital stock or other securities into, which each
outstanding share of Stock shall be changed, or for which each such share shall
be exchanged, or to which each such share shall be entitled, as the case may be.
The price and other terms of outstanding Options shall also be appropriately
amended to reflect the foregoing events. In the event there shall be any other
change in the number or kind of outstanding shares of the Stock, or of any
capital stock or other securities into which the Stock shall have been changed
or for which it shall have been exchanged, if the Board of Directors shall, in
its sole discretion, determine that the change equitably requires an adjustment
in any Option theretofore granted, then adjustments shall be made in accordance
with its determination.
6.2. FRACTIONAL SHARES. Fractional shares resulting from any adjustment
in Options pursuant to this Section 6 may be settled in cash or otherwise as the
Board of Directors shall determine.
6.3. NOTICE. Notice of any adjustment shall be given by the Company to
the Grantee in accordance with the requirements for providing notice to a Party
set forth in Section 7.7.
6.4. SALE OF THE ASSETS OF THE COMPANY, ETC. Notwithstanding Section
6.1, the Board of Directors shall have the power, in the event of the
disposition of all or substantially all of the assets of the Company, or the
dissolution of the Company, or the merger or consolidation of the Company, or
the making of a tender offer to purchase all or a substantial portion of
outstanding Stock of the Company, to amend this Agreement (upon such conditions
as it shall deem fit) to (i) permit the exercise of the Options described herein
prior to the effective date of the transaction and to terminate all unexercised
Options as of that date, or (ii) require the forfeiture of all Options, provided
the Company pays to the Grantee the excess of the fair market value of the Stock
subject to the Option (as determined by the Board of Directors if the Company's
common stock is not then freely tradable) over the exercise price of the Option.
SECTION VII. PUBLIC OFFERING OF COMPANY'S COMMON STOCK
7.1. LOCK-UP AGREEMENT. Grantee, if requested by the Company and the
lead underwriter of any public offering of the common stock or other securities
of the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell,
contract to sell, grant any option to purchase, transfer the economic risk of
ownership in, make any short sale of, pledge or otherwise
4
<PAGE>
transfer or dispose of any interest in any common stock or any securities
convertible into or exchangeable or exercisable for or any other rights to
purchase or acquire common stock (except common stock included in such public
offering or acquired on the public market after such offering) during the
180-day period following the effective date of a registration statement of the
Company filed under the Securities Act, or such shorter period of time as the
Lead Underwriter shall specify. Grantee further agrees to sign such documents as
may be requested by the Lead Underwriter to effect the foregoing and agrees that
the Company may impose stop-transfer instructions with respect to such common
stock subject until the end of such period. The Company and Grantee acknowledge
that each Lead Underwriter of a public offering of the Company's stock, during
the period of such offering and for the 180-day period thereafter, is an
intended beneficiary of this Section 7.
7.2. NO AMENDMENT OR WAIVER. During the period from identification as a
Lead Underwriter in connection with any public offering of the Company's common
stock until the earlier of (i) the expiration of the lock-up period specified in
Section 7.1 in connection with such offering or (ii) the abandonment of such
offering by the Company and the Lead Underwriter, the provisions of the Section
7 may not be amended or waived except with the consent of the Lead Underwriter.
SECTION VIII. MISCELLANEOUS
8.1. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights of remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.2. DEFAULT. In the event a Party fails to comply with the terms of
this Agreement, any other Party to this Agreement shall be entitled to (a)
injunctive relief, as a matter of right, in any court of competent jurisdiction;
(b) any other relief or remedy that may be available pursuant to this Agreement
or at law or equity.
8.3. WAIVERS. The waiver by the undersigned of any of the provisions of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach.
8.4. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect the construction and interpretation
of this Agreement.
8.5. SEVERABILITY. The invalidity of all of any part of any section of
this Agreement shall not render invalid the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provisions
shall be interpreted to be only so broad as is enforceable.
8.6. BINDING EFFECTS. This Agreement shall not be assigned by any
Purchaser without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of the Parties, their heirs, personal
representatives, successors, and permitted assignees.
5
<PAGE>
8.7. NOTICES. Any notices provided pursuant to this Agreement shall be
in writing and shall be deemed given (i) if by hand, upon receipt thereof; (ii)
if mailed, three (3) days after deposit in the U.S. mails, postage prepaid,
certified mail return receipt requested, or (iii) if sent via overnight courier
upon receipt. All notices shall be addressed to the parties at the respective
addresses indicated herein. Either party may change its address by giving
written notice to the other in accordance with the terms of this paragraph.
8.8. ENTIRE AGREEMENT. This writing contains the entire agreement of
the Parties. The Parties are not bound by any oral statements that are made
outside of this Agreement.
8.9. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed of the laws of the State of Delaware.
WHEREAS, the Parties have signed their names to this Agreement on the
date as above written:
GlobeComm, Inc
/s/ Gary Millin
- ---------------------------------
By: Gary Millin
Title: President
GRANTEE
/s/ Gerald Gorman
- ---------------------------------
Gerard Gorman
6
<PAGE>
NON-PLAN STOCK OPTION AGREEMENT
SCHEDULE A
IV
<TABLE>
<CAPTION>
- ---------------------------------------------
GERALD GORMAN
- ---------------------------------------------
<S> <C> <C>
$1.00 12/31/96 36,250
- ---------------------------------------------
</TABLE>
7
<PAGE>
EXHIBIT 10.11
NP4
STOCK OPTION AGREEMENT
AGREEMENT, dated as of June 1, 1996, between GlobeComm, Inc. (the
"Company"), a Delaware corporation doing business at 11 Broadway, Suite 660, New
York, New York and Gerald Gorman (the "Grantee") residing at 415 Bernardsville
Road, Mendham, NJ 07945. The Company and the Grantee are collectively referred
to as the "Parties."
WHEREAS, the Grantee is employed by the Company in the capacity as
Chairman and Chief Executive Officer, and in partial consideration for the
Grantee's services, the Company desires to award stock options to the Grantee in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Parties hereto agree as follows:
SECTION I. OPTION TO PURCHASE SHARES
1.1. Option. The Company hereby grants, as of the date of this
Agreement and future dates listed on Schedule A, to the Grantee an irrevocable
option (the "Option") to purchase the number of shares of Class A Common Stock
(the "Shares") listed on the attached Schedule A at the purchase price listed on
Schedule A (the "Purchase Price"). These options are not intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended nor
to qualify as an incentive stock option.
1.2. EXERCISE OF OPTION. In the event the Grantee wishes to exercise
the Option, in accordance with the restrictions specified below, the Grantee
shall send a written notice to the Company (the "Stock Exercise Notice")
specifying a date for the closing of such purchase.
1.3. VESTING. The right to exercise an Option is limited as hereinafter
provided:
(a) The Option may be exercised as hereinafter provided only
to the extent that they had become vested as provided herein.
(b) The Options shall vest as follows:
(i) The Option is granted on the date listed on
Schedule A.
(ii) The Option shall vest at the rate of
one-sixteenth for each calendar quarter ("Calendar Quarter"), defined as the
four three-month periods of a year with commencing dates of January 1, April 1,
July 1 and October 1, on the last day of each such Calendar Quarter, over the
course of four years after the Option is granted to the Grantee.
(iii) (1) An Option granted after the first day of a
Calendar Quarter but before the fifteenth day of the second month of such
Calender Quarter shall not begin to vest
1
<PAGE>
until the last day of the subsequent Calendar Quarter ("Initial Vesting Date").
For such Options, two-sixteenths of the Option will vest on the Initial Vesting
Date, and an additional one-sixteenth will vest for each additional Calendar
Quarter until the Option is fully vested; (2) Options granted after the
fifteenth day of the second month of a Calendar Quarter but before the end of
such Calendar Quarter shall first not begin to vest until the last day of the
subsequent Calendar Quarter. For such Options, one-sixteenth of the Option will
vest on the Initial Vesting Date, and an additional one-sixteenth will vest for
each additional Calendar Quarter until the Option is fully vested.
1.4. TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option held by the Grantee shall be as
follows:
(a) Disability. If the Grantee's employment is terminated
because of permanent disability as defined in Code Section 22(e)(3), the Grantee
may, within one year following termination, exercise the Option with respect to
all or part of the shares subject thereto in which the right to purchase shares
had accrued or vested at the time of termination of employment.
(b) Death. If a Grantee's employment is terminated by death,
his or her estate shall have the right for a period of one year following the
date of death to exercise the Option to the extent that the right to exercise
had accrued or vested prior to the date of death. A Grantee's "estate" shall
mean his or her legal representative or any person who acquires the right to
exercise an Option by reason of the Grantee's death. The Board or Committee may
in its discretion require the estate of the Grantee to supply the Board or
Committee with written notice of the Grantee's death and a copy of the will or
other documents deemed necessary to establish the validity of the transfer of an
Option. The Board or Committee may also require that the estate of a deceased
Grantee agree to be bound by all of the terms and conditions of the Plan.
(c) Cause and Competition. If the employment of Grantee is
terminated for "Cause" (as defined below) or the Grantee terminates his or her
employment and commences working for a competitor (as defined below), the
Grantee's rights under any then outstanding Option, whether or not vested, shall
terminate at the time of termination of employment. "Cause" shall mean any
willful or intentional act having the effect of injuring the reputation,
business or business relationship of the Company. "Competitor" shall mean any
person or entity engaged in a business competitive (in the good faith judgment
of the Board or Committee) with that of the Company.
(d) Other Reason. In the case of a Grantee whose employment is
terminated for any reason other than those provided above, the Grantee may,
within sixty (60) days following the termination (or if the Board has notified
the Grantee of its intent to register an offering of the Company's securities as
described in Section 1.4 of this Agreement, the time period becomes sixty (60)
days following the 180-day lock-up period provided for in Section 1.4) exercise
an Option to the extent the right to exercise had accrued prior to termination;
provided, however that the Company may retain the shares of Stock issuable upon
exercise of an Option pursuant to this paragraph (iv) for a period of sixty (60)
days from exercise and, if the Grantee becomes
2
<PAGE>
employed or otherwise associated with a competitor or enters into an agreement
to do so during that sixty (60) day period, either as a director, officer,
employee, agent, representative or otherwise, then the Company may retain and
cancel those shares, refund the exercise price paid by the Grantee and
thereafter all rights of the Grantee in the Stock shall immediately cease; and
provided, further, that if the Grantee dies prior to the end of the sixty (60)
day period after termination of employment, his or her estate (as defined above)
shall have the right, subject to the procedures set forth above, to exercise the
Option within one year following the termination.
1.5. TRANSFERABILITY. No Option shall be transferable except by will or
the laws of descent and distribution. An Option shall be exercisable during the
Grantee's lifetime only by the Grantee.
1.6. DURATION OF OPTIONS. Options may be exercised, upon satisfaction
of the conditions specified in Section 1.3, for terms of up to but not exceeding
ten (10) years from the date of grant.
1.7. ADDITIONAL OPTIONS. In the event that the Company grants
additional options to purchase shares of Class A Common Stock to the Grantee,
unless agreed to the contrary between the Parties, the additional options will
be subject to the terms of this Agreement.
SECTION II. THE CLOSING
2.1. Closing Date. Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice pursuant to Section 1 at
10:00 A.M., at the offices of the Company, or at such other time and place as
the parties hereto may agree (the "Closing Date"). On the Closing Date, the
Company will deliver to the Grantee a certificate or certificates, duly
endorsed, representing the Shares and the Grantee will purchase such Shares from
the Company at the price per Share equal to the Exercise Price. In the event
that any federal, state, or local income taxes, employment taxes, Federal
Insurance Contribution Act ("FICA") withholdings or other amounts are required
by applicable law or governmental regulation to be withheld from the grantee in
connection with the exercise, these amounts must be remitted to the Company in
addition to the Exercise Price. Any payment made by the Grantee to the Company
pursuant to this Agreement shall be made by certified or official bank check.
2.2. LEGENDS. The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Act").
SECTION III. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
3.1. INVESTMENT REPRESENTATION. The Grantee represents and warrants to
the Company that the Grantee is acquiring the Option and, if and when it
exercises the Option, will be
3
<PAGE>
acquiring the Shares issuable upon the exercise thereof for its own account and
not with a view to distribution or resale in any manner which would be in
violation of the Act.
3.2. RESTRICTED SECURITIES. The Grantee represents and warrants to the
Company that the Grantee is an Accredited Investor as defined in Rule 501
promulgated under the Act. The Grantee understands that, if and when it
exercises the Option, the Grantee will be acquiring restricted securities under
applicable federal securities laws, and may dispose of such Shares only pursuant
to an effective registration statement under the Act or an exemption from
registration if available. The Grantee represents and warrants to the Company
that the Grantee is acquiring the Option and, if and when it exercises the
Option, will be acquiring the Shares issuable upon the exercise thereof for its
own account and not with a view to distribution or resale in any manner which
would be in violation of the Act.
SECTION IV. RIGHT OF FIRST REFUSAL
If, at any time after the Closing Date, the Grantee proposes to sell
all or any part of the Shares in a transaction not required to be registered
under the Act, it shall give the Company the opportunity, in the following
manner, to purchase such Shares:
4.1. NOTICE. The Grantee shall give notice to the Company in writing of
its intent to sell Shares (a "Disposition Notice"), specifying the number of
Shares to be sold, the price and the material terms of any agreement relating
thereto. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
4.2. RIGHT TO PURCHASE. The Company or its designee shall have the
right, exercisable by written notice given to the Grantee within five (5) days
after receipt of a Disposition Notice, to purchase all, but not less than all,
of the Shares specified in the Disposition Notice at the price set forth in the
Disposition Notice.
4.3. CLOSING. If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Shares with respect to which such
right has been exercised shall take place within five (5) days after the notice
of such exercise; provided, however, that at any time prior to the closing of
the purchase of Shares hereunder, the Grantee may determine not to sell the
Shares and revoke the Disposition Notice and, by so doing, cancel the Company's
right of first refusal with respect thereto.
4.4. RIGHT TO SELL. If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise, the Grantee shall
be free for thirty (30) days following the expiration of such time for exercise
to sell or enter into an agreement to sell the Shares specified in the
Disposition Notice, at the price specified in the Disposition Notice or any
price in excess thereof and otherwise on substantially the same terms set forth
in the Disposition Notice; provided, that if such sale is not consummated within
such 30-day period, then the provisions of this Section 4 will again apply to
the sale of such Shares.
4
<PAGE>
SECTION V. INFORMATION
Upon written request by the Grantee, the Company shall furnish to the
Grantee such information regarding the Company and its operation as shall be
reasonably necessary to enable the Grantee to make a decision as to whether or
not to exercise the Option; provided, however, that in no event shall the
Company be required to furnish information which constitutes trade secrets or
other proprietary information or the furnishing of which would be unduly
burdensome, financially or otherwise, to the Company.
SECTION VI. ADJUSTMENT FOR CHANGES IN THE STOCK
6.1. STOCK RECLASSIFICATION. In the event the shares of Stock, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares or other securities of the Company (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares or otherwise), then there shall be substituted for or
added to each share of Stock theretofore or thereafter subject to an Option the
number and kind of shares of capital stock or other securities into, which each
outstanding share of Stock shall be changed, or for which each such share shall
be exchanged, or to which each such share shall be entitled, as the case may be.
The price and other terms of outstanding Options shall also be appropriately
amended to reflect the foregoing events. In the event there shall be any other
change in the number or kind of outstanding shares of the Stock, or of any
capital stock or other securities into which the Stock shall have been changed
or for which it shall have been exchanged, if the Board of Directors shall, in
its sole discretion, determine that the change equitably requires an adjustment
in any Option theretofore granted, then adjustments shall be made in accordance
with its determination.
6.2. FRACTIONAL SHARES. Fractional shares resulting from any adjustment
in Options pursuant to this Section 6 may be settled in cash or otherwise as the
Board of Directors shall determine.
6.3. NOTICE. Notice of any adjustment shall be given by the Company to
the Grantee in accordance with the requirements for providing notice to a Party
set forth in Section 7.7.
6.4. SALE OF THE ASSETS OF THE COMPANY, ETC. Notwithstanding Section
6.1, the Board of Directors shall have the power, in the event of the
disposition of all or substantially all of the assets of the Company, or the
dissolution of the Company, or the merger or consolidation of the Company, or
the making of a tender offer to purchase all or a substantial portion of
outstanding Stock of the Company, to amend this Agreement (upon such conditions
as it shall deem fit) to (i) permit the exercise of the Options described herein
prior to the effective date of the transaction and to terminate all unexercised
Options as of that date, or (ii) require the forfeiture of all Options, provided
the Company pays to the Grantee the excess of the fair market value of the Stock
subject to the Option (as determined by the Board of Directors if the Company's
common
5
<PAGE>
stock is not then freely tradable) over the exercise price of the Option.
SECTION VII. PUBLIC OFFERING OF COMPANY'S COMMON STOCK
7.1. LOCK-UP AGREEMENT. Grantee, if requested by the Company and the
lead underwriter of any public offering of the common stock or other securities
of the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell,
contract to sell, grant any option to purchase, transfer the economic risk of
ownership in, make any short sale of, pledge or otherwise transfer or dispose of
any interest in any common stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase or acquire
common stock (except common stock included in such public offering or acquired
on the public market after such offering) during the 180-day period following
the effective date of a registration statement of the Company filed under the
Securities Act, or such shorter period of time as the Lead Underwriter shall
specify. Grantee further agrees to sign such documents as may be requested by
the Lead Underwriter to effect the foregoing and agrees that the Company may
impose stop-transfer instructions with respect to such common stock subject
until the end of such period. The Company and Grantee acknowledge that each Lead
Underwriter of a public offering of the Company's stock, during the period of
such offering and for the 180-day period thereafter, is an intended beneficiary
of this Section 7.
7.2. NO AMENDMENT OR WAIVER. During the period from identification as a
Lead Underwriter in connection with any public offering of the Company's common
stock until the earlier of (i) the expiration of the lock-up period specified in
Section 7.1 in connection with such offering or (ii) the abandonment of such
offering by the Company and the Lead Underwriter, the provisions of the Section
7 may not be amended or waived except with the consent of the Lead Underwriter.
SECTION VIII. MISCELLANEOUS
8.1. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights of remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.2. DEFAULT. In the event a Party fails to comply with the terms of
this Agreement, any other Party to this Agreement shall be entitled to (a)
injunctive relief, as a matter of right, in any court of competent jurisdiction;
(b) any other relief or remedy that may be available pursuant to this Agreement
or at law or equity.
8.3. WAIVERS. The waiver by the undersigned of any of the provisions of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach.
8.4. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect the construction and interpretation
of this Agreement.
8.5. SEVERABILITY. The invalidity of all of any part of any section of
this Agreement
<PAGE>
shall not render invalid the remainder of such section. If any provision of this
Agreement is so broad as to be unenforceable, such provisions shall be
interpreted to be only so broad as is enforceable.
8.6. BINDING EFFECTS. This Agreement shall not be assigned by any
Purchaser without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of the Parties, their heirs, personal
representatives, successors, and permitted assignees.
8.7. NOTICES. Any notices provided pursuant to this Agreement shall be
in writing and shall be deemed given (i) if by hand, upon receipt thereof; (ii)
if mailed, three (3) days after deposit in the U.S. mails, postage prepaid,
certified mail return receipt requested, or (iii) if sent via overnight courier
upon receipt. All notices shall be addressed to the parties at the respective
addresses indicated herein. Either party may change its address by giving
written notice to the other in accordance with the terms of this paragraph.
8.8. ENTIRE AGREEMENT. This writing contains the entire agreement of
the Parties. The Parties are not bound by any oral statements that are made
outside of this Agreement.
8.9. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed of the laws of the State of Delaware.
WHEREAS, the Parties have signed their names to this Agreement on the
date as above written:
GlobeComm, Inc
/s/ Gary Millin
- ---------------------------------
By: Gary Millin
Title: President
GRANTEE
/s/ Gerald Gorman
- -----------------------------------
Gerald Gorman
<PAGE>
NON-PLAN STOCK OPTION AGREEMENT
SCHEDULE A
<TABLE>
<CAPTION>
NQ4
- --------------------------------------------------------------------------------
GERALD GORMAN
- --------------------------------------------------------------------------------
<S> <C> <C>
$0.20 6/1/96 200,000
- --------------------------------------------------------------------------------
$2.00 2/1/97 10,000
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 10.12
NP
STOCK OPTION AGREEMENT
AGREEMENT, dated as of June 30, 1998, between iName, Inc. (the
"Company"), a Delaware corporation doing business at 11 Broadway, Suite 660, New
York, New York and Lon Otremba(the "Grantee") residing at 318 Kenmore Road,
Douglaston NY 11363. The Company and the Grantee are collectively referred to as
the "Parties."
WHEREAS, the Grantee is employed by the Company in the capacity as
Chief Operating Officer, and in partial consideration for the Grantee's
services, the Company desires to award stock options to the Grantee in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Parties hereto agree as follows:
SECTION I. OPTION TO PURCHASE SHARES
1.1. Option. The Company hereby grants, as of the date of this
Agreement, to the Grantee an irrevocable option (the "Option") to purchase the
number of shares of Class A Common Stock (the "Shares") listed on the attached
Schedule A at the purchase price listed on Schedule A (the "Purchase Price").
This option is not intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended nor to qualify as an incentive stock
option.
1.2. EXERCISE OF OPTION. In the event the Grantee wishes to exercise
the Option, in accordance with the restrictions specified below, the Grantee
shall send a written notice to the Company (the "Stock Exercise Notice")
specifying a date for the closing of such purchase.
1.3. VESTING. The right to exercise an Option is limited as hereinafter
provided:
(a) An Option may be exercised as hereinafter provided
only to the extent that the Option has become vested
as provided herein.
(b) The Options shall vest over a three (3) year period
at the rate of one-twelfth per each three-month
period of a year with commencing dates on January 1,
April 1, July 1 and October 1 (a "Calendar Quarter"),
beginning on the first day of a Calendar Quarter
subsequent to the date of this Agreement.
(c) (i) An Option granted after the first day of a
Calendar Quarter but prior to the fifteenth day of
the second month of the Calendar Quarter shall not
begin to vest until the last day of the subsequent
Calendar Quarter (the "Initial Vesting Date"). For
such Options, one-half of the Option shall vest on
the Initial Vesting Date, and an additional
one-quarter will vest for each additional Calendar
Quarter until the Option is fully vested. (ii)
1
<PAGE>
Options granted after the fifteenth day of the second
month of a Calendar Quarter shall not begin to vest
until the last day of the subsequent Calendar
Quarter. For such Options, one-quarter of the Option
will vest on the Initial Vesting Date, and an
additional one-quarter will vest for each additional
Calendar Quarter until the Option is fully vested.
1.4. TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option held by the Grantee shall be as
follows:
(a) Disability. If the Grantee's employment is terminated
because of permanent disability as defined in Code Section 22(e)(3), the Grantee
may, within one year following termination, exercise the Option with respect to
all or part of the shares subject thereto in which the right to purchase shares
had accrued or vested at the time of termination of employment.
(b) Death. If a Grantee's employment is terminated by death,
his or her estate shall have the right for a period of one year following the
date of death to exercise the Option to the extent that the right to exercise
had accrued or vested prior to the date of death. A Grantee's "estate" shall
mean his or her legal representative or any person who acquires the right to
exercise an Option by reason of the Grantee's death. The Board or Committee may
in its discretion require the estate of the Grantee to supply the Board or
Committee with written notice of the Grantee's death and a copy of the will or
other documents deemed necessary to establish the validity of the transfer of an
Option. The Board or Committee may also require that the estate of a deceased
Grantee agree to be bound by all of the terms and conditions of the Plan.
(c) Cause and Competition. If the employment of Grantee is
terminated for "Cause" (as defined below) or the Grantee terminates his or her
employment and commences working for a competitor (as defined below), the
Grantee's rights under any then outstanding Option, whether or not vested, shall
terminate at the time of termination of employment. "Cause" shall mean any
willful or intentional act having the effect of injuring the reputation,
business or business relationship of the Company. "Competitor" shall mean any
person or entity engaged in a business competitive (in the good faith judgment
of the Board or Committee) with that of the Company.
(d) Other Reason. In the case of a Grantee whose employment is
terminated for any reason other than those provided above, the Grantee may,
within sixty (60) days following the termination (or if the Board has notified
the Grantee of its intent to register an offering of the Company's securities as
described in Section 1.4 of this Agreement, the time period becomes sixty (60)
days following the 180-day lock-up period provided for in Section 1.4) exercise
an Option to the extent the right to exercise had accrued prior to termination;
provided, however that the Company may retain the shares of Stock issuable upon
exercise of an Option pursuant to this paragraph (iv) for a period of sixty (60)
days from exercise and, if the Grantee becomes employed or otherwise associated
with a competitor or enters into an agreement to do so during that sixty (60)
day period, either as a director, officer, employee, agent, representative or
otherwise, then the Company may retain and cancel those shares, refund the
exercise price paid by the Grantee and thereafter all rights of the Grantee in
the Stock shall immediately cease; and
2
<PAGE>
provided, further, that if the Grantee dies prior to the end of the sixty (60)
day period after termination of employment, his or her estate (as defined above)
shall have the right, subject to the procedures set forth above, to exercise the
Option within one year following the termination.
1.5. TRANSFERABILITY. No Option shall be transferable except by will or
the laws of descent and distribution. An Option shall be exercisable during the
Grantee's lifetime only by the Grantee.
1.6. DURATION OF OPTIONS. Options may be exercised, upon satisfaction
of the conditions specified in Section 1.3, for terms of up to but not exceeding
ten (10) years from the date of grant.
1.7. ADDITIONAL OPTIONS. In the event that the Company grants
additional options to purchase shares of Class A Common Stock to the Grantee,
unless agreed to the contrary between the Parties, the additional options will
be subject to the terms of this Agreement.
SECTION II. THE CLOSING
2.1. Closing Date. Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice pursuant to Section 1 at
10:00 A.M., at the offices of the Company, or at such other time and place as
the parties hereto may agree (the "Closing Date"). On the Closing Date, the
Company will deliver to the Grantee a certificate or certificates, duly
endorsed, representing the Shares and the Grantee will purchase such Shares from
the Company at the price per Share equal to the Exercise Price. In the event
that any federal, state, or local income taxes, employment taxes, Federal
Insurance Contribution Act ("FICA") withholdings or other amounts are required
by applicable law or governmental regulation to be withheld from the grantee in
connection with the exercise, these amounts must be remitted to the Company in
addition to the Exercise Price. Any payment made by the Grantee to the Company
pursuant to this Agreement shall be made by certified or official bank check.
2.2. LEGENDS. The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Act").
SECTION III. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
3.1. INVESTMENT REPRESENTATION. The Grantee represents and warrants to
the Company that the Grantee is acquiring the Option and, if and when it
exercises the Option, will be acquiring the Shares issuable upon the exercise
thereof for its own account and not with a view to distribution or resale in any
manner which would be in violation of the Act.
3.2. RESTRICTED SECURITIES. The Grantee represents and warrants to the
Company that
3
<PAGE>
the Grantee is an Accredited Investor as defined in Rule 501 promulgated under
the Act. The Grantee understands that, if and when it exercises the Option, the
Grantee will be acquiring restricted securities under applicable federal
securities laws, and may dispose of such Shares only pursuant to an effective
registration statement under the Act or an exemption from registration if
available. The Grantee represents and warrants to the Company that the Grantee
is acquiring the Option and, if and when it exercises the Option, will be
acquiring the Shares issuable upon the exercise thereof for its own account and
not with a view to distribution or resale in any manner which would be in
violation of the Act.
SECTION IV. RIGHT OF FIRST REFUSAL
If, at any time after the Closing Date, the Grantee proposes to sell
all or any part of the Shares in a transaction not required to be registered
under the Act, it shall give the Company the opportunity, in the following
manner, to purchase such Shares:
4.1. NOTICE. The Grantee shall give notice to the Company in writing of
its intent to sell Shares (a "Disposition Notice"), specifying the number of
Shares to be sold, the price and the material terms of any agreement relating
thereto. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
4.2. RIGHT TO PURCHASE. The Company or its designee shall have the
right, exercisable by written notice given to the Grantee within five (5) days
after receipt of a Disposition Notice, to purchase all, but not less than all,
of the Shares specified in the Disposition Notice at the price set forth in the
Disposition Notice.
4.3. CLOSING. If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Shares with respect to which such
right has been exercised shall take place within five (5) days after the notice
of such exercise; provided, however, that at any time prior to the closing of
the purchase of Shares hereunder, the Grantee may determine not to sell the
Shares and revoke the Disposition Notice and, by so doing, cancel the Company's
right of first refusal with respect thereto.
4.4. RIGHT TO SELL. If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise, the Grantee shall
be free for thirty (30) days following the expiration of such time for exercise
to sell or enter into an agreement to sell the Shares specified in the
Disposition Notice, at the price specified in the Disposition Notice or any
price in excess thereof and otherwise on substantially the same terms set forth
in the Disposition Notice; provided, that if such sale is not consummated within
such 30-day period, then the provisions of this Section 4 will again apply to
the sale of such Shares.
SECTION V. INFORMATION
Upon written request by the Grantee, the Company shall furnish to the
Grantee such
4
<PAGE>
information regarding the Company and its operation as shall be reasonably
necessary to enable the Grantee to make a decision as to whether or not to
exercise the Option; provided, however, that in no event shall the Company be
required to furnish information which constitutes trade secrets or other
proprietary information or the furnishing of which would be unduly burdensome,
financially or otherwise, to the Company.
SECTION VI. ADJUSTMENT FOR CHANGES IN THE STOCK
6.1. STOCK RECLASSIFICATION. In the event the shares of Stock, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares or other securities of the Company (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares or otherwise), then there shall be substituted for or
added to each share of Stock theretofore or thereafter subject to an Option the
number and kind of shares of capital stock or other securities into, which each
outstanding share of Stock shall be changed, or for which each such share shall
be exchanged, or to which each such share shall be entitled, as the case may be.
The price and other terms of outstanding Options shall also be appropriately
amended to reflect the foregoing events. In the event there shall be any other
change in the number or kind of outstanding shares of the Stock, or of any
capital stock or other securities into which the Stock shall have been changed
or for which it shall have been exchanged, if the Board of Directors shall, in
its sole discretion, determine that the change equitably requires an adjustment
in any Option theretofore granted, then adjustments shall be made in accordance
with its determination.
6.2. FRACTIONAL SHARES. Fractional shares resulting from any adjustment
in Options pursuant to this Section 6 may be settled in cash or otherwise as the
Board of Directors shall determine.
6.3. NOTICE. Notice of any adjustment shall be given by the Company to
the Grantee in accordance with the requirements for providing notice to a Party
set forth in Section 7.7.
6.4. SALE OF THE ASSETS OF THE COMPANY, ETC. Notwithstanding Section
6.1, the Board of Directors shall have the power, in the event of the
disposition of all or substantially all of the assets of the Company, or the
dissolution of the Company, or the merger or consolidation of the Company, or
the making of a tender offer to purchase all or a substantial portion of
outstanding Stock of the Company, to amend this Agreement (upon such conditions
as it shall deem fit) to (i) permit the exercise of the Options described herein
prior to the effective date of the transaction and to terminate all unexercised
Options as of that date, or (ii) require the forfeiture of all Options, provided
the Company pays to the Grantee the excess of the fair market value of the Stock
subject to the Option (as determined by the Board of Directors if the Company's
common stock is not then freely tradable) over the exercise price of the Option.
SECTION VII. PUBLIC OFFERING OF COMPANY'S COMMON STOCK
5
<PAGE>
7.1. LOCK-UP AGREEMENT. Grantee, if requested by the Company and the
lead underwriter of any public offering of the common stock or other securities
of the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell,
contract to sell, grant any option to purchase, transfer the economic risk of
ownership in, make any short sale of, pledge or otherwise transfer or dispose of
any interest in any common stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase or acquire
common stock (except common stock included in such public offering or acquired
on the public market after such offering) during the 180-day period following
the effective date of a registration statement of the Company filed under the
Securities Act, or such shorter period of time as the Lead Underwriter shall
specify. Grantee further agrees to sign such documents as may be requested by
the Lead Underwriter to effect the foregoing and agrees that the Company may
impose stop-transfer instructions with respect to such common stock subject
until the end of such period. The Company and Grantee acknowledge that each Lead
Underwriter of a public offering of the Company's stock, during the period of
such offering and for the 180-day period thereafter, is an intended beneficiary
of this Section 7.
7.2. NO AMENDMENT OR WAIVER. During the period from identification as a
Lead Underwriter in connection with any public offering of the Company's common
stock until the earlier of (i) the expiration of the lock-up period specified in
Section 7.1 in connection with such offering or (ii) the abandonment of such
offering by the Company and the Lead Underwriter, the provisions of the Section
7 may not be amended or waived except with the consent of the Lead Underwriter.
SECTION VIII. TAXES
The amount to be paid by the Grantee upon exercise of any Option
granted by this Agreement shall be the full purchase price thereof provided in
the Option, together with the amount of federal, state, and local income and
FICA taxes required to be withheld by the Company. The Grantee may elect to pay
his or her federal, state, or local income and FICA withholding tax by having
the Company withhold shares of Company common stock having a value equal to the
amount required to be withheld. The value of the shares to be withheld is deemed
to equal the fair market value of the shares on the day the option is exercised
(as determined by the Board of Directors if the Company's common stock is not
then freely tradable). An election by a Grantee to have shares withheld for this
purpose will be subject to the following restrictions:
(a) if the Grantee has received additional Option grants in
accordance with this Agreement, a separate election must be
made for each grant;
(b) the election must be made prior to the day the Option is
exercised;
(c) the election will be irrevocable;
(d) the election will be subject to the disapproval of the Board
of Directors;
<PAGE>
(e) the election may not be made within six months following the
grant of the Option; and
(f) the election must be made either six months prior to the day
the Option is exercised or ten (10) days beginning on the
third day following the release of the Company's quarterly or
annual summary statement of sales and earnings.
SECTION IX. MISCELLANEOUS
9.1. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights of remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
9.2. DEFAULT. In the event a Party fails to comply with the terms of
this Agreement, any other Party to this Agreement shall be entitled to (a)
injunctive relief, as a matter of right, in any court of competent jurisdiction;
(b) any other relief or remedy that may be available pursuant to this Agreement
or at law or equity.
9.3. WAIVERS. The waiver by the undersigned of any of the provisions of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach.
9.4. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect the construction and interpretation
of this Agreement.
9.5. SEVERABILITY. The invalidity of all of any part of any section of
this Agreement shall not render invalid the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provisions
shall be interpreted to be only so broad as is enforceable.
9.6. BINDING EFFECTS. This Agreement shall not be assigned by any
Purchaser without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of the Parties, their heirs, personal
representatives, successors, and permitted assignees.
9.7. NOTICES. Any notices provided pursuant to this Agreement shall be
in writing and shall be deemed given (i) if by hand, upon receipt thereof; (ii)
if mailed, three (3) days after deposit in the U.S. mails, postage prepaid,
certified mail return receipt requested, or (iii) if sent via overnight courier
upon receipt. All notices shall be addressed to the parties at the respective
addresses indicated herein. Either party may change its address by giving
written notice to the other in accordance with the terms of this paragraph.
9.8. ENTIRE AGREEMENT. This writing contains the entire agreement of
the Parties. The Parties are not bound by any oral statements that are made
outside of this Agreement.
9.9. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed of the laws of the State of Delaware.
<PAGE>
WHEREAS, the Parties have signed their names to this Agreement on the
date as above written:
iNAME, INC.
/s/ Gary Millin
- ---------------------------------
By: Gary Millin
Title: President
GRANTEE
/s/ Len Otremba
- -----------------------------------
Lon Otremba
<PAGE>
NON-PLAN STOCK OPTION AGREEMENT
SCHEDULE A
<TABLE>
<CAPTION>
NP
- --------------------------------------------------------------------------------
LON OTREMBA
- --------------------------------------------------------------------------------
EXERCISE PRICE DATE GRANTED OPTIONS GRANTED
- --------------------------------------------------------------------------------
<S> <C> <C>
$2.00 6/30/98 10,114
- --------------------------------------------------------------------------------
$2.00 7/31/98 18,590
- --------------------------------------------------------------------------------
$2.00 8/30/98 46,312
- --------------------------------------------------------------------------------
$2.00 9/30/98 82,161
- --------------------------------------------------------------------------------
$2.00 10/31/98 208,445
- --------------------------------------------------------------------------------
$2.00 11/30/98 24,402
- --------------------------------------------------------------------------------
$2.00 12/31/98 12,950
- --------------------------------------------------------------------------------
</TABLE>
Note: All of the options granted and exercise prices on Schedule A are post the
9/30/98 stock split.
<PAGE>
EXHIBIT 10.13
GLOBECOMM, INC.
1996 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the 1996 Stock Option Plan (the "Plan") is to provide an
incentive to selected directors, officers and employees of GlobeComm, Inc., and
any subsidiaries of GlobeComm, Inc. (collectively, the "Company"), to acquire a
proprietary interest in the Company, to continue as directors, officers and
employees and to increase their efforts on behalf of the Company.
2. THE PLAN.
The Plan provides for the grant of Options to acquire shares of the
Company's Class A common stock, par value $.01 (the "Stock"). Options granted
under the plan may be either (i) options intended to qualify as incentive stock
options (the "Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or (ii) options to be
treated as non-qualified stock options (the "Non-Qualified Options") within the
meaning of the Code. (Collectively, the Incentive Stock Options and the
Non-Qualified Options are referred to as the "Options.")
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board"); however, the Board may designate a committee (the "Committee")
composed of one or more of its members to operate and administer the Plan in its
stead. A member of the Board shall be ineligible to receive an Incentive Stock
Option under the Plan unless he is an officer of the Company.
(b) The Board or Committee shall have plenary authority in its
discretion, subject only to the express provisions of the Plan and, in reference
to the Incentive Stock Options, of Code Section 422;
(i) to select the eligible persons who shall be granted
Options (the "Grantees"), the number of Shares subject to each Option and terms
of the Option granted to each Grantee, provided that, in making its
determination, the Board or Committee shall consider the position and
responsibilities of the employee, the nature and value to the Company, of his or
her services and accomplishments, the employee's present and potential
contribution to the success of the Company and any other factors that the Board
or Committee may deem relevant.
(ii) to determine the dates of the Option grants;
(iii) to prescribe the form of the instruments evidencing
Options;
<PAGE>
(iv) to adopt, amend and rescind rules and regulations for the
administration of the Plan and for its own acts and proceedings;
(v) to decide all questions and settle all controversies and
disputes of general applicability that may arise in connection with the Plan;
and
(vi) to amend certain terms of the Plan as provided in Section
9.
All decisions, determinations and interpretations with respect to the foregoing
matters shall be made by the Board or Committee and shall be final and binding
upon all persons.
(c) EXCULPATION. No member of the Board or Committee shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under it unless such action or failure to take action
constitutes self-dealing, wilful misconduct or recklessness; provided, however,
that the provisions of this subsection shall not apply to the responsibility or
liability of a director pursuant to any criminal statute or to the liability of
a director for the payment of taxes pursuant to local, state or federal law.
(d) INDEMNIFICATION. Each member of the Board or Committee shall be
entitled without further act on his part or her part to indemnity from the
Company to the fullest extent provided by applicable law and the Company's
Certificate of Incorporation or Bylaws in connection with or arising out of any
action, suit or proceeding with respect to the administration of the Plan or the
granting of Options under it in which he or she may be involved by reason of
being or having been a member of the Board or Committee at the time of the
action, suit or proceeding.
(e) DELEGATION. The Board or Committee may delegate authority to an
officer of the Company to grant such Options to such Grantees at the discretion
of the appointed officers; provided, however, that the appointed officer shall
have no authority to grant Options in units greater than 50,000 without approval
of the Board or Committee.
4. EFFECTIVENESS AND TERMINATION OF THE PLAN.
The Plan shall become effective as of April 23, 1996, the date of its
adoption by the Board or Committee, provided that the Plan is approved by the
stockholders of the Company within one year of its adoption. Any Option
outstanding under the Plan at the time of termination under the Plan shall
remain in effect in accordance with its terms and conditions and those of the
Plan. The Plan shall terminate on the earliest of:
(a) April 23, 2006; or
(b) the date when all shares of Stock reserved for issuance under the
Plan shall have been acquired through exercise of Options granted under the
Plan; or
(c) such earlier date as the Board or Committee may determine.
<PAGE>
5. THE STOCK.
The aggregate number of shares of Stock issuable under the Plan shall
be five hundred thousand shares (500,000) or the number and kinds of shares of
capital stock or other securities substituted for the Stock as provided in
Section 8. The aggregate number of shares of Stock issuable under the Plan may
be set aside out of the authorized but unissued shares of Stock not reserved for
any other purpose or out of shares of Stock held in or acquired for the treasury
of the Company. All shares of Stock subject to an Option that terminates
unexercised for any reason may thereafter be subjected to a new Option under the
Plan.
6. OPTION AGREEMENT.
Each Grantee shall enter into a written agreement with the Company
setting forth the terms and conditions of the Option issued to the Grantee,
consistent with the Plan. The form of agreement to evidence Options may be
established at any time or from time to time by the Board or Committee. No
Grantee shall have rights in any Option unless and until a written option
agreement is entered into with the Company.
7. TERMS AND CONDITIONS OF OPTIONS.
Options may be granted by the Board or Committee at any time and from
time to time prior to the termination of the Plan. Except as hereinafter
provided, Options granted under the Plan shall be subject to the following terms
and conditions:
(a) GRANTEES. The Grantees shall be those employees of the Company
(including officers and directors) and any subsidiaries of the Company, selected
by the Board or Committee, provided that no Incentive Stock Options shall be
granted to (i) any person owning Stock or other capital stock in the Company
possessing more than 10% of the total combined voting power of all classes of
capital stock of the Company, unless such Grantee meets the requirements of 7(b)
and 7(e); or, (ii) any director who is not an officer. The maximum number of
Options which may be granted to a Grantee within a calendar year is 1,000,000
shares of the Company's Stock.
(b) PRICE. The exercise price of an Option shall be no less than the
fair market value of the Stock, without regard to any restriction, at the time
the Option is granted. If a Grantee owns more than 10% of the total combined
voting power of all classes of stock of the Company, the share price of any
Incentive Stock Options granted to such individual shall be 110% of the fair
market value of the Stock. The Board or Committee shall establish procedures to
determine the fair market value of the Stock.
(c) PAYMENT FOR STOCK. The exercise price of an Option shall be paid in
full at the time of the exercise in (i) cash, or (ii) by certified check payable
to the Company, or (iii) by other mode of payment as the Board or Committee may
approve.
(d) LIMITATION. Notwithstanding any provision of the Plan to the
contrary, an Option
<PAGE>
shall not be treated as an Incentive Stock Option to the extent to which the
aggregate fair market value (determined as of the time an Incentive Stock Option
is granted) of Stock for which Incentive Stock Options are exercisable for the
first time buy a Grantee during any calendar year exceeds $100,000.
(e) DURATION AND EXERCISE OF OPTIONS. Options may be exercised for
terms of up to but not exceeding ten years from the date of grant. Subject to
the foregoing, Options shall be exercisable at the times and in the amounts (up
to the full amount thereof) determined by the Board or Committee at the time of
grant. If an Option granted under the Plan is exercisable in installments the
Board or Committee shall determine what events, if any, will make it subject to
acceleration. If an Incentive Stock Option is granted to an employee who owns
more than 10% of the combined voting power of all classes of stock of the
Company, the Incentive Stock Options must be exercised within 5 years.
(f) TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option shall be set forth in the agreement
entered into between the Company and the Grantee.
(g) TRANSFERABILITY OF OPTION. No Option shall be transferable except
by will or the laws of descent and distribution. An Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
(h) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Board or
Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
thereof. Notwithstanding the foregoing, however, no modification of an Option
shall, without the consent of the Grantee, alter or impair any rights or
obligations under any Option theretofore granted under the Plan or adversely
affect the status of an Incentive Stock Option.
(i) OTHER TERMS AND CONDITIONS. Option agreements may contain any other
provision not inconsistent with the Plan that the Board or Committee deems
appropriate.
8. ADJUSTMENT FOR CHANGES IN THE STOCK.
(a) In the event the shares of Stock, as presently constituted, shall
be changed into or exchanged for a different number or kind of shares or other
securities of the Company (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise), then there shall be substituted for or added to each share of
Stock theretofore or thereafter subject to an Option the number and kind of
shares of capital stock or other securities into, which each outstanding share
of Stock shall be changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be. The price and
other terms of outstanding Options shall also be appropriately amended to
reflect the foregoing events. In the event there shall be any other change in
the number or kind of outstanding shares of the Stock, or of any capital stock
or other securities into
<PAGE>
which the Stock shall have been changed or for which it shall have been
exchanged, if the Board or Committee shall, in its sole discretion, determine
that the change equitably requires an adjustment in any Option theretofore
granted or which may be granted under the Plan, then adjustments shall be made
in accordance with its determination.
(b) Fractional shares resulting from any adjustment in Options pursuant
to this Section 8 may be settled in cash or otherwise as the Board or Committee
shall determine. Notice of any adjustment shall be given by the Company to each
holder of an Option that shall have been so adjusted, and the adjustment
(whether or not notice is given) shall be effective and binding for all purposes
of the plan.
(c) Notwithstanding Section 8(a), the Board or Committee shall have the
power, in the event of the disposition of all or substantially all of the assets
of the Company, or the dissolution of the Company, or the merger or
consolidation of the Company, or the making of a tender offer to purchase all or
a substantial portion of outstanding Stock of the Company, to amend all
outstanding Options (upon such conditions as it shall deem fit) to (i) permit
the exercise of Options prior to the effective date of the transaction and to
terminate all unexercised Options as of that date, or (ii) require the
forfeiture of all Options, provided the Company pays to each Grantee the excess
of the fair market value of the Stock subject to the Option (determined in
accordance with Section 7(b)) over the exercise price of the Option, or (iii)
make any other provisions that the Board or Committee deems equitable.
9. AMENDMENT OF THE PLAN.
The Board or Committee may amend the Plan, may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any Option
in the manner and to the extent deemed desirable to carry out the Plan without
action on the part of the stockholders of the Company; provided, however, that,
except as provided in Section 8 and this Section 9, unless the stockholders of
the Company shall have first approved thereof (i) the total number of shares of
Stock subject to the Plan shall not be increased, (ii) no Option shall be
exercisable more than ten years after the date it is granted, (iii) the
expiration date of the Plan shall not be extended and (iv) no amendment shall
permit the exercise price of any Option to be less than the fair market value of
the Stock at the time of grant, increase the number of shares of Stock to be
received on exercise of an Option, materially increase the benefits accruing to
a Grantee under an Option or modify the eligibility requirements for
participation in the Plan.
10. INTERPRETATION AND CONSTRUCTION.
The interpretation and construction of any provision of the Plan by the
Board or Committee shall be final, binding and conclusive for all purposes.
11. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Stock pursuant to
this Plan will be used for general corporate purposes.
<PAGE>
12. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Grantee
to exercise an Option.
13. PLAN NOT A CONTRACT OF EMPLOYMENT.
The Plan is not a contract of employment, and the terms of employment
of any Grantee shall not be affected in any way by the Plan or related
instruments except as specifically provided therein. The establishment of the
Plan shall not be construed as conferring any legal rights upon any Grantee for
a continuance of employment; nor shall it interfere with the right of the
Company to discharge Grantee.
14. EXPENSE OF THE PLAN.
All of the expenses of administering the Plan shall be paid by the
Company.
15. COMPLIANCE WITH APPLICABLE LAW.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates for shares of
Stock issuable upon exercise of an Option unless and until the Company is
advised by its counsel that the issuance and delivery of the certificates is in
compliance with all applicable laws, regulations of government authorities and
the requirements of any exchange upon which shares of stock are traded. The
Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to take
any other action in order to cause the issuance and delivery of certificates to
comply with any of those laws, regulations or requirements. The Board or
Committee may require, as a condition of the issuance and delivery of
certificates and in order to ensure compliance with those laws, regulations and
requirements, that the Grantee make such covenants, agreements and
representations as the Board or Committee, in its sole discretion, deems
necessary or desirable. Each Option shall be subject to the further requirement
that if at any time the Board or Committee shall determine in its discretion
that the listing or qualification of the Shares of Stock subject to the Option,
under any securities exchange requirements or under any applicable law, or the
consent or approval of any regulatory body, is necessary in connection with the
granting of the Option or the issuance of stock thereunder, the Option may not
be exercised in whole or in part unless the listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board or Committee.
16. GOVERNING LAW.
Except to the extent preempted by federal law, this Plan shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware.
<PAGE>
EXHIBIT 10.14
GLOBECOMM, INC.
1997 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the 1997 Stock Option Plan (the "Plan") is to provide an
incentive to selected directors, officers and employees of GlobeComm, Inc., and
any subsidiaries of GLOBECOMM, Inc. (collectively, the "Company"), to acquire a
proprietary interest in the Company, to continue as directors, officers and
employees and to increase their efforts on behalf of the Company.
2. THE PLAN.
The Plan provides for the grant of Options to acquire shares of the
Company's Class A common stock, par value $.01 (the "Stock"). Options granted
under the plan may be either (i) options intended to qualify as incentive stock
options (the "Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or (ii) options to be
treated as non-qualified stock options (the "Non-Qualified Options") within the
meaning of the Code. (Collectively, the Incentive Stock Options and the
Non-Qualified Options are referred to as the "Options.")
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board"); however, the Board may designate a committee (the "Committee")
composed of one or more of its members to operate and administer the Plan in its
stead. A member of the Board shall be ineligible to receive an Incentive Stock
Option under the Plan unless he is an officer of the Company.
(b) The Board or Committee shall have plenary authority in its
discretion, subject only to the express provisions of the Plan and, in reference
to the Incentive Stock Options, of Code Section 422;
(i) to select the eligible persons who shall be granted
Options (the "Grantees"), the number of Shares subject to each Option and terms
of the Option granted to each Grantee, provided that, in making its
determination, the Board or Committee shall consider the position and
responsibilities of the employee, the nature and value to the Company, of his or
her services and accomplishments, the employee's present and potential
contribution to the success of the Company and any other factors that the Board
or Committee may deem relevant.
(ii) to determine the dates of the Option grants;
(iii) to prescribe the form of the instruments evidencing
Options;
<PAGE>
(iv) to adopt, amend and rescind rules and regulations for the
administration of the Plan and for its own acts and proceedings;
(v) to decide all questions and settle all controversies and
disputes of general applicability that may arise in connection with the Plan;
and
(vi) to amend certain terms of the Plan as provided in Section
9.
All decisions, determinations and interpretations with respect to the foregoing
matters shall be made by the Board or Committee and shall be final and binding
upon all persons.
(c) EXCULPATION. No member of the Board or Committee shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under it unless such action or failure to take action
constitutes self-dealing, wilful misconduct or recklessness; provided, however,
that the provisions of this subsection shall not apply to the responsibility or
liability of a director pursuant to any criminal statute or to the liability of
a director for the payment of taxes pursuant to local, state or federal law.
(d) INDEMNIFICATION. Each member of the Board or Committee shall be
entitled without further act on his part or her part to indemnity from the
Company to the fullest extent provided by applicable law and the Company's
Certificate of Incorporation or Bylaws in connection with or arising out of any
action, suit or proceeding with respect to the administration of the Plan or the
granting of Options under it in which he or she may be involved by reason of
being or having been a member of the Board or Committee at the time of the
action, suit or proceeding.
(e) DELEGATION. The Board or Committee may delegate authority to an
officer of the Company to grant such Options to such Grantees at the discretion
of the appointed officers; provided, however, that the appointed officer shall
have no authority to grant Options in units greater than 50,000 without approval
of the Board or Committee.
4. EFFECTIVENESS AND TERMINATION OF THE PLAN.
The Plan shall become effective as of April 23, 1997, the date of its
adoption by the Board or Committee, provided that the Plan is approved by the
stockholders of the Company within one year of its adoption. Any Option
outstanding under the Plan at the time of termination under the Plan shall
remain in effect in accordance with its terms and conditions and those of the
Plan. The Plan shall terminate on the earliest of:
(a) April 23, 2007; or
(b) the date when all shares of Stock reserved for issuance under the
Plan shall have been acquired through exercise of Options granted under the
Plan; or
(c) such earlier date as the Board or Committee may determine.
<PAGE>
5. THE STOCK.
The aggregate number of shares of Stock issuable under the Plan shall
be one million seven hundred fifty thousand shares (1,750,000) or the number and
kinds of shares of capital stock or other securities substituted for the Stock
as provided in Section 8. The aggregate number of shares of Stock issuable under
the Plan may be set aside out of the authorized but unissued shares of Stock not
reserved for any other purpose or out of shares of Stock held in or acquired for
the treasury of the Company. All shares of Stock subject to an Option that
terminates unexercised for any reason may thereafter be subjected to a new
Option under the Plan.
6. OPTION AGREEMENT.
Each Grantee shall enter into a written agreement with the Company
setting forth the terms and conditions of the Option issued to the Grantee,
consistent with the Plan. The form of agreement to evidence Options may be
established at any time or from time to time by the Board or Committee. No
Grantee shall have rights in any Option unless and until a written option
agreement is entered into with the Company.
7. TERMS AND CONDITIONS OF OPTIONS.
Options may be granted by the Board or Committee at any time and from
time to time prior to the termination of the Plan. Except as hereinafter
provided, Options granted under the Plan shall be subject to the following terms
and conditions:
(a) GRANTEES. The Grantees shall be those employees of the Company
(including officers and directors) and any subsidiaries of the Company, selected
by the Board or Committee, provided that no Incentive Stock Options shall be
granted to (i) any person owning Stock or other capital stock in the Company
possessing more than 10% of the total combined voting power of all classes of
capital stock of the Company, unless such Grantee meets the requirements of 7(b)
and 7(e); or, (ii) any director who is not an officer. The maximum number of
Options which may be granted to a Grantee within a calendar year is 1,000,000
shares of the Company's Stock.
(b) PRICE. The exercise price of an Option shall be no less than the
fair market value of the Stock, without regard to any restriction, at the time
the Option is granted. If a Grantee owns more than 10% of the total combined
voting power of all classes of stock of the Company, the share price of any
Incentive Stock Options granted to such individual shall be 110% of the fair
market value of the Stock. The Board or Committee shall establish procedures to
determine the fair market value of the Stock.
(c) PAYMENT FOR STOCK. The exercise price of an Option shall be paid in
full at the time of the exercise in (i) cash, or (ii) by certified check payable
to the Company, or (iii) by other mode of payment as the Board or Committee may
approve.
<PAGE>
(d) LIMITATION. Notwithstanding any provision of the Plan to the
contrary, an Option shall not be treated as an Incentive Stock Option to the
extent to which the aggregate fair market value (determined as of the time an
Incentive Stock Option is granted) of Stock for which Incentive Stock Options
are exercisable for the first time buy a Grantee during any calendar year
exceeds $100,000.
(e) DURATION AND EXERCISE OF OPTIONS. Options may be exercised for
terms of up to but not exceeding ten years from the date of grant. Subject to
the foregoing, Options shall be exercisable at the times and in the amounts (up
to the full amount thereof) determined by the Board or Committee at the time of
grant. If an Option granted under the Plan is exercisable in installments the
Board or Committee shall determine what events, if any, will make it subject to
acceleration. If an Incentive Stock Option is granted to an employee who owns
more than 10% of the combined voting power of all classes of stock of the
Company, the Incentive Stock Options must be exercised within 5 years.
(f) TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option shall be set forth in the agreement
entered into between the Company and the Grantee.
(g) TRANSFERABILITY OF OPTION. No Option shall be transferable except
by will or the laws of descent and distribution. An Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
(h) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Board or
Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
thereof. Notwithstanding the foregoing, however, no modification of an Option
shall, without the consent of the Grantee, alter or impair any rights or
obligations under any Option theretofore granted under the Plan or adversely
affect the status of an Incentive Stock Option.
(i) OTHER TERMS AND CONDITIONS. Option agreements may contain any other
provision not inconsistent with the Plan that the Board or Committee deems
appropriate.
8. ADJUSTMENT FOR CHANGES IN THE STOCK.
(a) In the event the shares of Stock, as presently constituted, shall
be changed into or exchanged for a different number or kind of shares or other
securities of the Company (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise), then there shall be substituted for or added to each share of
Stock theretofore or thereafter subject to an Option the number and kind of
shares of capital stock or other securities into, which each outstanding share
of Stock shall be changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be. The price and
other terms of outstanding Options shall also be appropriately
<PAGE>
amended to reflect the foregoing events. In the event there shall be any other
change in the number or kind of outstanding shares of the Stock, or of any
capital stock or other securities into which the Stock shall have been changed
or for which it shall have been exchanged, if the Board or Committee shall, in
its sole discretion, determine that the change equitably requires an adjustment
in any Option theretofore granted or which may be granted under the Plan, then
adjustments shall be made in accordance with its determination.
(b) Fractional shares resulting from any adjustment in Options pursuant
to this Section 8 may be settled in cash or otherwise as the Board or Committee
shall determine. Notice of any adjustment shall be given by the Company to each
holder of an Option that shall have been so adjusted, and the adjustment
(whether or not notice is given) shall be effective and binding for all purposes
of the plan.
(c) Notwithstanding Section 8(a), the Board or Committee shall have the
power, in the event of the disposition of all or substantially all of the assets
of the Company, or the dissolution of the Company, or the merger or
consolidation of the Company, or the making of a tender offer to purchase all or
a substantial portion of outstanding Stock of the Company, to amend all
outstanding Options (upon such conditions as it shall deem fit) to (i) permit
the exercise of Options prior to the effective date of the transaction and to
terminate all unexercised Options as of that date, or (ii) require the
forfeiture of all Options, provided the Company pays to each Grantee the excess
of the fair market value of the Stock subject to the Option (determined in
accordance with Section 7(b)) over the exercise price of the Option, or (iii)
make any other provisions that the Board or Committee deems equitable.
9. AMENDMENT OF THE PLAN.
The Board or Committee may amend the Plan, may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any Option
in the manner and to the extent deemed desirable to carry out the Plan without
action on the part of the stockholders of the Company; provided, however, that,
except as provided in Section 8 and this Section 9, unless the stockholders of
the Company shall have first approved thereof (i) the total number of shares of
Stock subject to the Plan shall not be increased, (ii) no Option shall be
exercisable more than ten years after the date it is granted, (iii) the
expiration date of the Plan shall not be extended and (iv) no amendment shall
permit the exercise price of any Option to be less than the fair market value of
the Stock at the time of grant, increase the number of shares of Stock to be
received on exercise of an Option, materially increase the benefits accruing to
a Grantee under an Option or modify the eligibility requirements for
participation in the Plan.
10. INTERPRETATION AND CONSTRUCTION.
The interpretation and construction of any provision of the Plan by the
Board or Committee shall be final, binding and conclusive for all purposes.
11. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Stock pursuant to
this Plan will
<PAGE>
be used for general corporate purposes.
12. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Grantee
to exercise an Option.
13. PLAN NOT A CONTRACT OF EMPLOYMENT.
The Plan is not a contract of employment, and the terms of employment
of any Grantee shall not be affected in any way by the Plan or related
instruments except as specifically provided therein. The establishment of the
Plan shall not be construed as conferring any legal rights upon any Grantee for
a continuance of employment; nor shall it interfere with the right of the
Company to discharge Grantee.
14. EXPENSE OF THE PLAN.
All of the expenses of administering the Plan shall be paid by the
Company.
15. COMPLIANCE WITH APPLICABLE LAW.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates for shares of
Stock issuable upon exercise of an Option unless and until the Company is
advised by its counsel that the issuance and delivery of the certificates is in
compliance with all applicable laws, regulations of government authorities and
the requirements of any exchange upon which shares of stock are traded. The
Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to take
any other action in order to cause the issuance and delivery of certificates to
comply with any of those laws, regulations or requirements. The Board or
Committee may require, as a condition of the issuance and delivery of
certificates and in order to ensure compliance with those laws, regulations and
requirements, that the Grantee make such covenants, agreements and
representations as the Board or Committee, in its sole discretion, deems
necessary or desirable. Each Option shall be subject to the further requirement
that if at any time the Board or Committee shall determine in its discretion
that the listing or qualification of the Shares of Stock subject to the Option,
under any securities exchange requirements or under any applicable law, or the
consent or approval of any regulatory body, is necessary in connection with the
granting of the Option or the issuance of stock thereunder, the Option may not
be exercised in whole or in part unless the listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board or Committee.
16. GOVERNING LAW.
Except to the extent preempted by federal law, this Plan shall be
construed and enforced
<PAGE>
in accordance with, and governed by, the laws of the State of Delaware.
<PAGE>
EXHIBIT 10.15
MAIL.COM, INC.
1998 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the 1998 Stock Option Plan (the "Plan") is to provide an
incentive to selected directors, officers and employees of Mail.com, Inc., and
any subsidiaries of Mail.com, Inc. (collectively, the "Company"), to acquire a
proprietary interest in the Company, to continue as directors, officers and
employees and to increase their efforts on behalf of the Company.
2. THE PLAN.
The Plan provides for the grant of Options to acquire shares of the
Company's Class A common stock, par value $.01 (the "Stock"). Options granted
under the plan may be either (i) options intended to qualify as incentive stock
options (the "Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or (ii) options to be
treated as non-qualified stock options (the "Non-Qualified Options") within the
meaning of the Code. (Collectively, the Incentive Stock Options and the
Non-Qualified Options are referred to as the "Options.")
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board"); however, the Board may designate a committee (the "Committee")
composed of one or more of its members to operate and administer the Plan in its
stead. A member of the Board shall be ineligible to receive an Incentive Stock
Option under the Plan unless he is an officer of the Company.
(b) The Board or Committee shall have plenary authority in its
discretion, subject only to the express provisions of the Plan and, in reference
to the Incentive Stock Options, of Code Section 422;
(i) to select the eligible persons who shall be granted
Options (the "Grantees"), the number of Shares subject to each Option and terms
of the Option granted to each Grantee, provided that, in making its
determination, the Board or Committee shall consider the position and
responsibilities of the employee, the nature and value to the Company, of his or
her services and accomplishments, the employee's present and potential
contribution to the success of the Company and any other factors that the Board
or Committee may deem relevant.
(ii) to determine the dates of the Option grants;
(iii) to prescribe the form of the instruments evidencing
Options;
(iv) to adopt, amend and rescind rules and regulations for the
administration of the
<PAGE>
Plan and for its own acts and proceedings;
(v) to decide all questions and settle all controversies and
disputes of general applicability that may arise in connection with the Plan;
and
(vi) to amend certain terms of the Plan as provided in Section
9.
All decisions, determinations and interpretations with respect to the foregoing
matters shall be made by the Board or Committee and shall be final and binding
upon all persons.
(c) EXCULPATION. No member of the Board or Committee shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under it unless such action or failure to take action
constitutes self-dealing, wilful misconduct or recklessness; provided, however,
that the provisions of this subsection shall not apply to the responsibility or
liability of a director pursuant to any criminal statute or to the liability of
a director for the payment of taxes pursuant to local, state or federal law.
(d) INDEMNIFICATION. Each member of the Board or Committee shall be
entitled without further act on his part or her part to indemnity from the
Company to the fullest extent provided by applicable law and the Company's
Certificate of Incorporation or Bylaws in connection with or arising out of any
action, suit or proceeding with respect to the administration of the Plan or the
granting of Options under it in which he or she may be involved by reason of
being or having been a member of the Board or Committee at the time of the
action, suit or proceeding.
(e) DELEGATION. The Board or Committee may delegate authority to an
officer of the Company to grant such Options to such Grantees at the discretion
of the appointed officers; provided, however, that the appointed officer shall
have no authority to grant Options in units greater than 80,000 without approval
of the Board or Committee.
4. EFFECTIVENESS AND TERMINATION OF THE PLAN.
The Plan shall become effective as of October 5, 1998, the date of its
adoption by the Board or Committee, provided that the Plan is approved by the
stockholders of the Company within one year of its adoption. Any Option
outstanding under the Plan at the time of termination under the Plan shall
remain in effect in accordance with its terms and conditions and those of the
Plan. The Plan shall terminate on the earliest of:
(a) October 5, 2008; or
(b) the date when all shares of Stock reserved for issuance under the
Plan shall have been acquired through exercise of Options granted under the
Plan; or
(c) such earlier date as the Board or Committee may determine.
5. THE STOCK.
<PAGE>
The aggregate number of shares of Stock issuable under the Plan shall
be one million five hundred thousand shares (1,500,000) or the number and kinds
of shares of capital stock or other securities substituted for the Stock as
provided in Section 8. The aggregate number of shares of Stock issuable under
the Plan may be set aside out of the authorized but unissued shares of Stock not
reserved for any other purpose or out of shares of Stock held in or acquired for
the treasury of the Company. All shares of Stock subject to an Option that
terminates unexercised for any reason may thereafter be subjected to a new
Option under the Plan.
6. OPTION AGREEMENT.
Each Grantee shall enter into a written agreement with the Company
setting forth the terms and conditions of the Option issued to the Grantee,
consistent with the Plan. The form of agreement to evidence Options may be
established at any time or from time to time by the Board or Committee. No
Grantee shall have rights in any Option unless and until a written option
agreement is entered into with the Company.
7. TERMS AND CONDITIONS OF OPTIONS.
Options may be granted by the Board or Committee at any time and from
time to time prior to the termination of the Plan. Except as hereinafter
provided, Options granted under the Plan shall be subject to the following terms
and conditions:
(a) GRANTEES. The Grantees shall be those employees of the Company
(including officers and directors) and any subsidiaries of the Company, selected
by the Board or Committee, provided that no Incentive Stock Options shall be
granted to (i) any person owning Stock or other capital stock in the Company
possessing more than 10% of the total combined voting power of all classes of
capital stock of the Company, unless such Grantee meets the requirements of 7(b)
and 7(e); or, (ii) any director who is not an officer. The maximum number of
Options which may be granted to a Grantee within a calendar year is 1,000,000
shares of the Company's Stock.
(b) PRICE. The exercise price of an Option shall be no less than the
fair market value of the Stock, without regard to any restriction, at the time
the Option is granted. If a Grantee owns more than 10% of the total combined
voting power of all classes of stock of the Company, the share price of any
Incentive Stock Options granted to such individual shall be 110% of the fair
market value of the Stock. The Board or Committee shall establish procedures to
determine the fair market value of the Stock.
(c) PAYMENT FOR STOCK. The exercise price of an Option shall be paid in
full at the time of the exercise in (i) cash, or (ii) by certified check payable
to the Company, or (iii) by other mode of payment as the Board or Committee may
approve.
(d) LIMITATION. Notwithstanding any provision of the Plan to the
contrary, an Option shall not be treated as an Incentive Stock Option to the
extent to which the aggregate fair market
<PAGE>
value (determined as of the time an Incentive Stock Option is granted) of Stock
for which Incentive Stock Options are exercisable for the first time buy a
Grantee during any calendar year exceeds $100,000.
(e) DURATION AND EXERCISE OF OPTIONS. Options may be exercised for
terms of up to but not exceeding ten years from the date of grant. Subject to
the foregoing, Options shall be exercisable at the times and in the amounts (up
to the full amount thereof) determined by the Board or Committee at the time of
grant. If an Option granted under the Plan is exercisable in installments the
Board or Committee shall determine what events, if any, will make it subject to
acceleration. If an Incentive Stock Option is granted to an employee who owns
more than 10% of the combined voting power of all classes of stock of the
Company, the Incentive Stock Options must be exercised within 5 years.
(f) TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option shall be set forth in the agreement
entered into between the Company and the Grantee.
(g) TRANSFERABILITY OF OPTION. No Option shall be transferable except
by will or the laws of descent and distribution. An Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
(h) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Board or
Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
thereof. Notwithstanding the foregoing, however, no modification of an Option
shall, without the consent of the Grantee, alter or impair any rights or
obligations under any Option theretofore granted under the Plan or adversely
affect the status of an Incentive Stock Option.
(i) OTHER TERMS AND CONDITIONS. Option agreements may contain any other
provision not inconsistent with the Plan that the Board or Committee deems
appropriate.
8. ADJUSTMENT FOR CHANGES IN THE STOCK.
(a) In the event the shares of Stock, as presently constituted, shall
be changed into or exchanged for a different number or kind of shares or other
securities of the Company (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise), then there shall be substituted for or added to each share of
Stock theretofore or thereafter subject to an Option the number and kind of
shares of capital stock or other securities into, which each outstanding share
of Stock shall be changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be. The price and
other terms of outstanding Options shall also be appropriately amended to
reflect the foregoing events. In the event there shall be any other change in
the number or kind of outstanding shares of the Stock, or of any capital stock
or other securities into which the Stock shall have been changed or for which it
shall have been exchanged, if the Board
<PAGE>
or Committee shall, in its sole discretion, determine that the change equitably
requires an adjustment in any Option theretofore granted or which may be granted
under the Plan, then adjustments shall be made in accordance with its
determination.
(b) Fractional shares resulting from any adjustment in Options pursuant
to this Section 8 may be settled in cash or otherwise as the Board or Committee
shall determine. Notice of any adjustment shall be given by the Company to each
holder of an Option that shall have been so adjusted, and the adjustment
(whether or not notice is given) shall be effective and binding for all purposes
of the plan.
(c) Notwithstanding Section 8(a), the Board or Committee shall have the
power, in the event of the disposition of all or substantially all of the assets
of the Company, or the dissolution of the Company, or the merger or
consolidation of the Company, or the making of a tender offer to purchase all or
a substantial portion of outstanding Stock of the Company, to amend all
outstanding Options (upon such conditions as it shall deem fit) to (i) permit
the exercise of Options prior to the effective date of the transaction and to
terminate all unexercised Options as of that date, or (ii) require the
forfeiture of all Options, provided the Company pays to each Grantee the excess
of the fair market value of the Stock subject to the Option (determined in
accordance with Section 7(b)) over the exercise price of the Option, or (iii)
make any other provisions that the Board or Committee deems equitable.
9. AMENDMENT OF THE PLAN.
The Board or Committee may amend the Plan, may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any Option
in the manner and to the extent deemed desirable to carry out the Plan without
action on the part of the stockholders of the Company; provided, however, that,
except as provided in Section 8 and this Section 9, unless the stockholders of
the Company shall have first approved thereof (i) the total number of shares of
Stock subject to the Plan shall not be increased, (ii) no Option shall be
exercisable more than ten years after the date it is granted, (iii) the
expiration date of the Plan shall not be extended and (iv) no amendment shall
permit the exercise price of any Option to be less than the fair market value of
the Stock at the time of grant, increase the number of shares of Stock to be
received on exercise of an Option, materially increase the benefits accruing to
a Grantee under an Option or modify the eligibility requirements for
participation in the Plan.
10. INTERPRETATION AND CONSTRUCTION.
The interpretation and construction of any provision of the Plan by the
Board or Committee shall be final, binding and conclusive for all purposes.
11. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Stock pursuant to
this Plan will be used for general corporate purposes.
<PAGE>
12. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Grantee
to exercise an Option.
13. PLAN NOT A CONTRACT OF EMPLOYMENT.
The Plan is not a contract of employment, and the terms of employment
of any Grantee shall not be affected in any way by the Plan or related
instruments except as specifically provided therein. The establishment of the
Plan shall not be construed as conferring any legal rights upon any Grantee for
a continuance of employment; nor shall it interfere with the right of the
Company to discharge Grantee.
14. EXPENSE OF THE PLAN.
All of the expenses of administering the Plan shall be paid by the
Company.
15. COMPLIANCE WITH APPLICABLE LAW.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates for shares of
Stock issuable upon exercise of an Option unless and until the Company is
advised by its counsel that the issuance and delivery of the certificates is in
compliance with all applicable laws, regulations of government authorities and
the requirements of any exchange upon which shares of stock are traded. The
Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to take
any other action in order to cause the issuance and delivery of certificates to
comply with any of those laws, regulations or requirements. The Board or
Committee may require, as a condition of the issuance and delivery of
certificates and in order to ensure compliance with those laws, regulations and
requirements, that the Grantee make such covenants, agreements and
representations as the Board or Committee, in its sole discretion, deems
necessary or desirable. Each Option shall be subject to the further requirement
that if at any time the Board or Committee shall determine in its discretion
that the listing or qualification of the Shares of Stock subject to the Option,
under any securities exchange requirements or under any applicable law, or the
consent or approval of any regulatory body, is necessary in connection with the
granting of the Option or the issuance of stock thereunder, the Option may not
be exercised in whole or in part unless the listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board or Committee.
16. GOVERNING LAW.
Except to the extent preempted by federal law, this Plan shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware.
<PAGE>
Exhibit 10.16
MAIL.COM, INC.
1999 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Mail.com, Inc. 1999 Stock Option Plan (the "Plan")
is to provide for the grant of stock options as an incentive to selected
directors, officers, employees and consultants of Mail.com, Inc. (the "Company")
and any Subsidiary of the Company, to acquire a proprietary interest in the
Company, to continue as directors, officers, employees and consultants and to
increase their efforts on behalf of the Company.
2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Board " shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated thereunder.
(c) "Committee" shall mean the committee described in Section 3.
(d) "Company" shall mean Mail.com, Inc., a Delaware corporation,
and any successor corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(f) "Fair Market Value" means, as of any date, the value of
Stock or other property determined as follows:
(i) If the Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in THE WALL STREET JOURNAL or such other
source as the Committee deems reliable;
(ii) If the Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for
the Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the Stock,
or if Fair Market Value is in reference to property other than Stock,
the Fair Market Value thereof
<PAGE>
shall be determined in good faith by the Committee.
(g) "Grantee" shall mean an officer, director, employee or
consultant of the Company to whom an Option has been granted under the terms of
the Plan.
(h) "Incentive Stock Option" shall mean an option granted under
the Plan that is intended to meet the requirements of Section 422 of the Code or
any successor provision.
(i) "Nonemployee Director" shall mean a director of the Company
who is a "nonemployee director" within the meaning of Rule 16b-3.
(j) "Non-Qualified Stock Option" shall mean an option granted
under the Plan that is not intended to be an Incentive Stock Option.
(k) "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
(l) "Option Agreement" shall mean a written agreement between
the Company and a Grantee as described in Section 6.
(m) "Outside Director" shall mean a director of the Company who
is an "outside director" within the meaning of Section 162(m) of the Code.
(n) "Plan" shall mean this Mail.com, Inc. 1999 Stock Option
Plan, as amended from time to time.
(o) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation.
(p) "Stock" shall mean shares of Class A Common Stock, $.01 par
value, of the Company or such other securities or property as may become subject
to Options pursuant to an adjustment made under Section 8.
(q) "Subsidiary" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if each
of the corporations other than the last corporation in the unbroken chain owns
more than 50% of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
3. ADMINISTRATION.
(a) The Plan shall be administered by a committee (the "Committee")
designated by the Board. The Committee shall consist of at least two directors
and may consist of the entire Board; PROVIDED, HOWEVER, that (i) if the
Committee consists of less than the entire Board, each member shall be a
Nonemployee Director and (ii) to the extent necessary for an Option intended to
qualify as performance-based compensation under Section 162(m) of the Code to so
qualify,
<PAGE>
each member of the Committee shall be an Outside Director.
(b) The Committee shall have plenary authority in its discretion,
subject only to the express provisions of the Plan and, in reference to the
Incentive Stock Options, to Code Section 422:
(i) to select the Grantees, the number of shares of Stock subject
to each Option and terms of the Option granted to each Grantee
(including without limitation the period during which such Option can
be exercised and any restrictions on exercise), provided that, in
making its determination, the Committee shall consider the position and
responsibilities of the individual, the nature and value to the Company
of his or her services and accomplishments, the individual's present
and potential contribution to the success of the Company and any other
factors that the Committee may deem relevant.
(ii) to determine the dates of the Option grants;
(iii) to prescribe the form of the Option Agreements;
(iv) to adopt, amend and rescind rules and regulations for the
administration of the Plan and for its own acts and proceedings;
(v) to decide all questions and settle all controversies and
disputes of general applicability that may arise in connection with the
Plan; and
(vi) to modify or amend any outstanding Option as provided in
Section 7(h).
All decisions, determinations and interpretations with respect to the foregoing
matters shall be made by the Committee and shall be final and binding upon all
persons.
(c) DELEGATION. The Committee may delegate authority to an officer of
the Company to grant Options to Grantees who are not subject to the short-swing
profit rules of Section 16 of the Exchange Act and are not "covered employees"
whose compensation is subject to the deduction limit of Section 162(m) of the
Code, at the discretion of such appointed officer, provided, however, that the
appointed officer shall have no authority to grant Options in units greater than
80,000 without approval of the Committee.
(d) EXCULPATION. No member of the Board or Committee shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under it unless such action or failure to take action
constitutes self-dealing, willful misconduct or recklessness; provided, however,
that the provisions of this subsection shall not apply to the responsibility or
liability of a director pursuant to any criminal statute or to the liability of
a director for the payment of taxes pursuant to local, state or federal law.
(e) INDEMNIFICATION. Each member of the Board or Committee shall be
entitled without further act on his part or her part to indemnity from the
Company to the fullest extent provided
<PAGE>
by applicable law and the Company's Certificate of Incorporation or Bylaws in
connection with or arising out of any action, suit or proceeding with respect to
the administration of the Plan or the granting of Options under it in which he
or she may be involved by reason of being or having been a member of the Board
or Committee at the time of the action, suit or proceeding.
4. EFFECTIVENESS AND TERMINATION OF THE PLAN.
The Plan shall become effective as of May 1, 1999, the date of its
adoption by the Board, provided that the Plan is approved by the stockholders of
the Company within one year of its adoption. Any Option outstanding at the time
of termination of the Plan shall remain in effect in accordance with its terms
and conditions and those of the Plan. The Plan shall terminate on the earliest
of:
(a) May 1, 2009; or
(b) the date when all shares of Stock reserved for issuance under
Section 5 of the Plan shall have been acquired through exercise of Options
granted under the Plan; or
(c) such earlier date as the Board may determine.
5. THE STOCK.
The aggregate number of shares of Stock issuable under the Plan shall
be two million five hundred thousand shares (2,500,000) or the number and kinds
of shares of capital stock or other securities substituted for the Stock as
provided in Section 8. The aggregate number of shares of Stock issuable under
the Plan may be set aside out of the authorized but unissued shares of Stock not
reserved for any other purpose, or out of shares of Stock held in or acquired
for the treasury of the Company. All shares of Stock subject to an Option that
terminates unexercised for any reason may thereafter be subjected to a new
Option under the Plan.
6. OPTION AGREEMENT.
Each Grantee shall enter into an Option Agreement with the Company
setting forth the terms and conditions of the Option issued to the Grantee,
consistent with the Plan. The form of Option Agreement may be established at any
time or from time to time by the Committee. No Grantee shall have rights in any
Option unless and until an Option Agreement is entered into with the Company.
7. TERMS AND CONDITIONS OF OPTIONS.
Options may be granted by the Committee at any time and from time to
time prior to the termination of the Plan. Except as hereinafter provided,
Options granted under the Plan shall be subject to the following terms and
conditions:
(a) GRANTEES. The Grantees shall be those employees of the Company or
its Subsidiaries (including officers and directors), and those consultants to
the Company or its Subsidiares,
<PAGE>
selected by the Committee. No Incentive Stock Options shall be granted to (i)
any person owning Stock or other capital stock in the Company possessing more
than 10% of the total combined voting power of all classes of capital stock of
the Company, unless such Incentive Stock Option meets the requirements of 7(b)
and 7(e); or (ii) any director who is not an officer. The maximum number of
shares of Stock which may be issued pursuant to Options granted to a Grantee
within a calendar year is 1,000,000.
(b) PRICE. The exercise price of an Option shall be no less than the
Fair Market Value of the Stock, without regard to any restriction, at the time
the Option is granted. If a Grantee owns more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary, the
exercise price of any Incentive Stock Option granted to such individual shall be
110% of the Fair Market Value of the Stock.
(c) PAYMENT FOR STOCK. The exercise price of an Option shall be paid in
full at the time of the exercise in (i) cash, or (ii) by certified check payable
to the Company, or (iii) by other mode of payment as the Committee may approve.
(d) LIMITATION. Notwithstanding any provision of the Plan to the
contrary, an Option shall not be treated as an Incentive Stock Option to the
extent the aggregate fair market value (determined as of the time the Incentive
Stock Option is granted) of Stock for which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year exceeds
$100,000.
(e) DURATION AND EXERCISE OF OPTIONS. Options may be exercised for
terms of up to but not exceeding ten years from the date of grant. Subject to
the foregoing, Options shall be exercisable at the times and in the amounts (up
to the full amount thereof) determined by the Committee at the time of grant. If
an Option granted under the Plan is exercisable in installments the Committee
shall determine what events, if any, will make it subject to acceleration. The
term of an Incentive Stock Option granted to an employee who owns more than 10%
of the combined voting power of all classes of stock of the Company shall not
exceed 5 years.
(f) TERMINATION OF SERVICES. Upon the termination of a Grantee's
services for the Company or its Subsidiaries for any reason, Options held by the
Grantee may only be exercised to the extent and during the period, if any, set
forth in the Option Agreement.
(g) TRANSFERABILITY OF OPTION. No Option shall be transferable except
by will or the laws of descent and distribution. An Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
(h) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Committee may
modify, extend or renew outstanding Options granted under the Plan, or accept
the surrender of outstanding options (to the extent not theretofore exercised)
and authorize the granting of new Options in substitution thereof.
Notwithstanding the foregoing, however, no modification of an Option shall,
without the consent of the Grantee, alter or impair any rights or obligations
under any Option theretofore granted under the Plan or adversely affect the
status of an Incentive Stock Option.
<PAGE>
(i) OTHER TERMS AND CONDITIONS. Option Agreements may contain any other
provision not inconsistent with the Plan that the Committee deems appropriate.
8. ADJUSTMENT FOR CHANGES IN THE STOCK.
(a) In the event the shares of Stock, as presently constituted, shall
be changed into or exchanged for a different number or kind of shares or other
securities of the Company (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise), then there shall be substituted for or added to each share of
Stock theretofore or thereafter subject to an Option the number and kind of
shares of capital stock or other securities into, which each outstanding share
of Stock shall be changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be. The price and
other terms of outstanding Options shall also be appropriately amended to
reflect the foregoing events. In the event there shall be any other change in
the number or kind of outstanding shares of the Stock, or of any capital stock
or other securities into which the Stock shall have been changed or for which it
shall have been exchanged, if the Committee shall, in its sole discretion,
determine that the change equitably requires an adjustment in any Option
theretofore granted or which may be granted under the Plan, then adjustments
shall be made in accordance with its determination.
(b) Fractional shares resulting from any adjustment in Options pursuant
to this Section 8 may be settled in cash or otherwise as the Committee shall
determine. Notice of any adjustment shall be given by the Company to each holder
of an Option that shall have been so adjusted, and the adjustment (whether or
not notice is given) shall be effective and binding for all purposes of the
plan.
(c) Notwithstanding Section 8(a), the Committee shall have the power,
in the event of the disposition of all or substantially all of the assets of the
Company, or the dissolution of the Company, or the merger or consolidation of
the Company, or the making of a tender offer to purchase all or a substantial
portion of outstanding Stock of the Company, to amend all outstanding Options
(upon such conditions as it shall deem fit) to (i) permit the exercise of
Options prior to the effective date of the transaction and to terminate all
unexercised Options as of that date, or (ii) require the forfeiture of all
Options, provided the Company pays to each Grantee the excess of the Fair Market
Value of the Stock subject to the Option over the exercise price of the Option,
or (iii) make any other provisions that the Committee deems equitable.
9. AMENDMENT OF THE PLAN.
The Board may amend the Plan, may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option in the
manner and to the extent deemed desirable to carry out the Plan without action
on the part of the stockholders of the Company; provided, however, that, except
as provided in Section 8 and this Section 9, unless the stockholders of the
Company shall have first approved thereof (i) the total number of shares of
Stock subject to the Plan shall not be increased, (ii) no Option shall be
exercisable more than ten years after the date it is granted, (iii) the
expiration date of the Plan shall not be extended and (iv)
<PAGE>
no amendment shall permit the exercise price of any Option to be less than the
Fair Market Value of the Stock at the time of grant, increase the number of
shares of Stock to be received on exercise of an Option, materially increase the
benefits accruing to a Grantee under an Option or modify the eligibility
requirements for participation in the Plan.
10. INTERPRETATION AND CONSTRUCTION.
The interpretation and construction of any provision of the Plan by the
Committee shall be final, binding and conclusive for all purposes.
11. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Stock pursuant to
this Plan will be used for general corporate purposes.
12. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Grantee
to exercise an Option.
13. PLAN NOT A CONTRACT OF EMPLOYMENT.
Neither the Plan nor any Option Agreement is a contract of employment,
and the terms of employment of any Grantee shall not be affected in any way by
the Plan or related instruments except as specifically provided therein. The
establishment of the Plan shall not be construed as conferring any legal rights
upon any Grantee for a continuance of employment; nor shall it interfere with
the right of the Company (or its Subsidiary, if applicable) to discharge the
Grantee.
14. EXPENSE OF THE PLAN.
All of the expenses of administering the Plan shall be paid by the
Company.
15. COMPLIANCE WITH APPLICABLE LAW.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates for shares of
Stock issuable upon exercise of an Option unless and until the Company is
advised by its counsel that the issuance and delivery of the certificates is in
compliance with all applicable laws, regulations of government authorities and
the requirements of any exchange upon which shares of Stock are traded. The
Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to take
any other action in order to cause the issuance and delivery of certificates to
comply with any of those laws, regulations or requirements. The Committee may
require, as a condition of the issuance and delivery of certificates and in
order to ensure compliance with those laws, regulations and requirements, that
the Grantee make such covenants, agreements and representations as the
Committee, in its sole discretion, deems necessary or desirable. Each Option
shall be subject to the further requirement that if at any time the Committee
shall determine in its discretion that the listing or qualification of the
shares of
<PAGE>
Stock subject to the Option, under any securities exchange requirements or under
any applicable law, or the consent or approval of any regulatory body, is
necessary in connection with the granting of the Option or the issuance of Stock
thereunder, the Option may not be exercised in whole or in part unless the
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
16. GOVERNING LAW.
Except to the extent preempted by federal law, this Plan shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware.
<PAGE>
Exhibit 10.17
================================================================================
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
================================================================================
Agreement of Lease, made as of this 25th day of June 1996, between BRAUN
MANAGEMENT INC. of 160 Broadway, New York, NY AS AGENT FOR BOWLING GREEN
ASSOCIATES L.P. party of the first part, hereinafter referred to as OWNER, and
GLOBECOMM, INC., a Delaware corporation, with an office at 55 Broad Street, New
York, NY party of the second part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from
Owner Suite 660 (hereinafter the "Demised Premises") in the building known as 11
Broadway in the Borough of Manhattan, City of New York, for the term of Five
years See Paragraph 37.01 (or until such term shall sooner cease and expire as
hereinafter provided) to commence on the day of ______ nineteen hundred and
_____, and to end on the ___ day of ____ and See Paragraph 37.01 both dates
inclusive, at an annual rent rate of See Paragraph 37.02
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first ___ monthly installment(s) on the execution hereof (unless this
lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
Rent: 1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy 2. Tenant shall use and occupy demised premises for general and
executive offices for computer consultants and learned professionals, excluding
medical and for no other purpose.
Tenant Alterations:
3. Tenant shall make no changes in or to the demised premises of any
nature without Owner's prior written consent. Subject to the prior written
consent of Owner, and to the provisions of this article, Tenant, at Tenant's
expense, may make alterations, installations, additions or improvements which
are non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved in each instance by Owner. Tenant shall,
before making any alterations, additions, installations or improvements, at its
expense, obtain all permits, approvals and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner and Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may require. If any mechanic's lien is filled against the demised premises, or
the building of which the same forms a part, for work claimed to have been done
for, or materials furnished to, Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within thirty days thereafter,
at Tenant's expense, by payment or filing the bond required by law. All fixtures
and all paneling, partitions, railings and like installations, installed in the
premises at any time, either by Tenant or by Owner on Tenant's behalf, shall,
upon installation, become the property of Owner and shall remain upon and be
surrendered with the demised premises unless Owner, by notice to Tenant no later
than twenty days prior to the date fixed as the termination of this lease,
elects to relinquish Owner's right thereto and to have them removed by Tenant,
in which event the same shall be removed from the premises by Tenant prior to
the expiration of the lease, at Tenant's expense. Nothing in this Article shall
be construed to give Owner title to or to prevent Tenant's removal of trade
fixtures, moveable office furniture and equipment, but upon removal of any such
from the premises or upon removal of other installations as may be required by
Owner, Tenant shall immediately and at its expense, repair and restore the
premises to the condition existing prior to installation and repair any damage
to the demised premises or the building due to such removal. All property
permitted or required to be removed, by Tenant at the end of the term remaining
in the premises after Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained as Owner's property or may be removed from
the premises by Owner, at Tenant's expense.
Maintenance and Repairs:
4. Tenant shall, throughout the term of this lease, take good care
of the demised premises and the fixtures and appurtenances therein. Tenant shall
be responsible for all damage or injury to the demised premises or any other
part of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees which arise out of any work, labor, service or
equipment done for or supplied to Tenant or any subtenant or arising out of the
installation, use or operation of the property or equipment of Tenant or any
subtenant. Tenant shall also repair all damage to the building and the demised
premises caused by the moving of Tenant's fixtures, furniture and equipment.
Tenant shall promptly make, at Tenant's expense, all repairs in and to the
demised premises for which Tenant is responsible, using only the contractor for
the trade or trades in question, selected from a list of at least two
contractors per trade submitted by Owner. Any other repairs in or to the
building or the facilities and systems thereof for which Tenant is responsible
shall be performed by Owner at the Tenant's expense. Owner shall maintain in
good working order and repair the exterior and the structural portions of the
building, including the structural portions of its demised premises, and the
public portions of the building interior and the building plumbing, electrical,
heating and ventilating system (to the extent such systems presently exist)
serving the demised premises. Tenant agrees to give prompt notice of any
defective condition in the premises for which Owner may be responsible
hereunder. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or others making repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in and to the fixtures, appurtenances or equipment thereof. It is
specifically agreed that Tenant shall not be entitled to any setoff or reduction
of rent by reason of any failure of Owner to comply with the covenants of this
or any other article of this Lease. Tenant agrees that Tenant's sole remedy at
law in such instance will be by way of an action for damages for breach of
contract. The provisions of this Article 4 shall not apply in the case of fire
or other casualty which are dealt with in Article 9 hereof.
Window Cleaning:
5. Tenant will not clean nor require, permit, suffer or allow any
window in the demised premises to be cleaned from the outside in violation of
Section 202 of the Labor Law or any other applicable law or of the Rules of the
Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
Requirements of Law, Fire Insurance, Floor Loads:
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of the New York Board of Fire
Underwriters, Insurance Services Office, or any similar body which shall impose
any violation, order or duty upon Owner or Tenant with respect to the demised
premises, whether or not arising out of Tenant's use or manner of use thereof
(including Tenant's permitted use) or, with respect to the building if arising
out of Tenant's use or manner of use of the premises or the building (including
the use permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use of the
demised premises or method of operation therein, violated any such laws,
ordinances, orders, rules, regulations or requirements with respect thereto.
Tenant may, after securing Owner to
<PAGE>
Owner's satisfaction against all damages, interest, penalties and expenses,
including, but not limited to, reasonable attorney's fees, by cash deposit or by
surety bond in an amount and in a company satisfactory to Owner, contest and
appeal any such laws, ordinances, orders, rules, regulations or requirements
provided same is done with all reasonable promptness and provided such appeal
shall not subject Owner to prosecution for a criminal offense or constitute a
default under any lease or mortgage under which Owner may be obligated, or cause
the demised premises or any part thereof to be condemned or vacated. Tenant
shall not do or permit any act or thing to be done in or to the demised premises
which is contrary to law, or which will invalidate or be in conflict with public
liability, fire or other policies of insurance at any time carried by or for the
benefit of Owner with respect to the demised premises or the building of which
the demised premises form a part, or which shall or might subject Owner to any
liability or responsibility to any person or for property damage. Tenant shall
not keep anything in the demised premises except as now or hereafter permitted
by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating
Organization or other authority having jurisdiction, and then only in such
manner and such quantity so as not to increase the rate for fire insurance
applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that in
effect prior to the commencement of Tenant's occupancy. Tenant shall pay all
costs, expenses, fines, penalties, or damages, which may be imposed upon Owner
by reason of Tenant's failure to comply with the provisions of this article and
if by reason of such failure the fire insurance rate shall, at the beginning of
this lease or at any time thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder, for that portion of
all fire insurance premiums thereafter paid by Owner which shall have been
charged because of such failure by Tenant. In any action or proceeding wherein
Owner and Tenant are parties, a schedule or "make-up" of rate for the building
or demised premises issued by the New York Fire Insurance Exchange, or other
body making fire insurance rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of several items and charges in the
fire insurance rates then applicable to said premises. Tenant shall not place a
load upon any floor of the demised premises exceeding the floor load per square
foot area which it was designed to carry and which is allowed by law. Owner
reserves the right to prescribe the weight and position of all safes, business
machines and mechanical equipment. Such installations shall be placed and
maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's
judgement, to absorb and prevent vibration, noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or the
real property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor by any mortgagee, affecting any lease or the real property of
which the demised premises are a part. In confirmation of such subordination,
Tenant shall from time to time execute promptly any certificate that Owner may
request.
Property Loss, Damage Reimbursement Indemnity:
8. Owner or its agents shall not be liable for any damage to
property of Tenant or of others entrusted to employees of the building, nor for
loss of or damage to any property of Tenant by theft or otherwise, nor for any
injury or damage to persons or property resulting from any cause of whatsoever
nature, unless caused by or due to the negligence of Owner, its agents, servants
or employees. Owner or its agents will not be liable for any such damage caused
by other tenants or persons in, upon or about said building or caused by
operations in construction of any private, public or quasi public work. If at
any time any windows of the demised premises are temporarily closed, darkened or
bricked up (or permanently closed, darkened or bricked up, if required by law)
for any reason whatsoever including, but not limited to Owner's own acts, Owner
shall not be liable for any damage Tenant may sustain thereby and Tenant shall
not be entitled to any compensation therefor nor abatement or diminution of rent
nor shall the same release Tenant from its obligations hereunder nor constitute
an eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable attorneys
fees, paid suffered or incurred as a result of any breach by Tenant, Tenant's
agents, contractors, employees, invitees, or licensees, of any covenant or
condition of this lease, or the carelessness, negligence or improper conduct of
the Tenant, Tenant's agents, contractors, employees, invitees or licensees.
Tenant's liability under this lease extends to the acts and omissions of any
sub-tenant, and any agent, contractor, employee, invitee or licensee of any
sub-tenant. In case any action or proceeding is brought against Owner by reason
of any such claim, Tenant, upon written notice form Owner, will at Tenant's
expense, resist or defend such action or proceeding by counsel approved by Owner
in writing, such approval not to be unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) If the demised premises or any part thereof shall be damaged
by fire or other casualty, Tenant shall give immediate notice thereof to Owner
and this lease shall continue in full force and effect except as hereinafter set
forth. (b) If the demised premises are partially damaged or rendered partially
unusable by fire or other casualty, the damages thereto shall be repaired by and
at the expense of Owner and the rent and other items of additional rent, until
such repair shall be substantially completed, shall be apportioned from the day
following the casualty according to the part of the premises which is usable.
(c) If the demised premises are totally damaged or rendered wholly unusable by
fire or other casualty, then the rent and other items of additional rent as
hereinafter expressly provided shall be proportionately paid up to the time of
the casualty and thenceforth shall cease until the date when the premises shall
have been repaired and restored by Owner (or sooner reoccupied in part by Tenant
then rent shall be apportioned as provided in subsection (b) above), subject to
Owner's right to elect not to restore the same hereinafter provided. (d) If the
demised premises are rendered wholly unusable or (whether or not the demised
premises are damaged in whole or in part) if the building shall be so damaged
that Owner shall decide to demolish it or rebuild it, then, in any of such
events, Owner may elect to terminate this lease by written notice to Tentant,
given within 90 days after such fire or casualty, or 30 days after adjustment of
the insurance claim for such fire or casualty, whichever is sooner, specifying a
date for the expiration of the lease, which date shall not be more than 60 days
after the giving of such notice, and upon the date specified in such notice the
term of this lease shall expire as fully and completely as if such date were the
date set forth above for the termination of this lease and Tenant shall
forthwith quit, surrender and vacate the premises without prejudice however, to
Landlord's rights and remedies against Tenant under the lease provisions in
effect prior to such termination, and any rent owing shall be paid up to such
date and any payments of rent made by Tenant which were on account of any period
subsequent to such date shall be returned to Tenant. Unless Owner shall serve a
termination notice as provided for herein, Owner shall make the repairs and
restorations under the conditions of (b) and (c) hereof, with all reasonable
expedition, subject to delays due to adjustment of insurance claims, labor
troubles and causes beyond Owner's control. After any such casualty, Tenant
shall cooperate with Owner's restoration by removing from the premises as
promptly as reasonably possible, all of Tenant's salvageable inventory and
moveable equipment, furniture, and other property. Tenant's liability for rent
shall resume five (5) days after written notice from Owner that the premises are
substantially ready for Tenant's occupancy. (e) Nothing contained hereinabove
shall relieve Tenant from liability that may exist as a result of damage from
fire or other casualty. Notwithstanding the foregoing, including Owner's
obligations to restore under subparagraph (b) above, each party shall look first
to any insurance in its favor before making any claim against the other party
for recovery for loss or damage resulting from fire or other casualty, and to
the extent that such insurance is in force and collectible and to the extent
permitted by law. Owner and Tenant each hereby releases and waives all rights of
recovery with respect to subparagraphs (b), (d), and (e) above, against the
other or any one claiming through or under each of them by way of subrogation or
otherwise. The release and waiver herein referred to shall be deemed to include
any loss or damage to the demised premises and/or to any personal property,
equipment, trade fixtures, goods and merchandise located therein. The foregoing
release and waiver shall be in force only if both releasors' insurance policies
contain a clause providing that such a release or waiver shall not invalidate
the insurance. If, and to the extent, that such waiver can be obtained only by
the payment of additional premiums, then the party benefiting from the waiver
shall pay such premium within ten days after written demand or shall be deemed
to have agreed that the party obtaining insurance coverage shall be free of any
further obligation under the provisions hereof with respect to waiver of
subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's
furniture and/or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be obligated to
repair any damage thereto or replace the same. (f) Tenant hereby waives the
provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be
acquired or condemned by Eminent Domain for any public or quasi public use or
purpose, then and in that event, the term of this lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said lease and assigns to
Owner, Tenant's interest in any such award. Tenant shall have the right to make
an independent claim to the condemning authority for the value of Tenant's
moving expenses and personal property, trade fixtures and equipment, provided
Tenant is entitled pursuant to the terms of the lease to remove such property,
trade fixture and equipment at the end of the term and provided further such
claim does not reduce Owner's award.
Assignment, Mortgage, Etc.:
11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representative, successor and assigns, expressly covenants
that it shall not assign, mortgage or encumber this agreement, nor underlet, or
suffer or permit the demised premises or any part thereof to be used by others,
without prior written consent of Owner in each instance. Transfer of the
majority of the stock of a corporate Tenant or the majority partnership interest
of a partnership Tenant shall be deemed an assignment. If this lease be
assigned, or if the demised premises or any part thereof be underlet or occupied
by anybody other than Tenant, Owner may, after default by Tenant, collect rent
from the assignee, under-tenant or occupant, and apply the net amount collected
to the rent herein reserved but no such assignment, underletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, under-tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an assignment or underletting shall not in
any wise be construed to relieve Tenant from obtaining the express consent in
writing of Owner to any further assignment or underletting.
Electric Current:
12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
covenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised will overload such installations or interfere with
the use thereof by other tenants of the building. The change at any time of the
character of electric service shall in no wise make Owner liable or responsible
to Tenant, for any loss, damages or expenses which Tenant may sustain.
Access to Premises:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Owner may elect to perform. Tenant shall permit Owner to use and maintain
and replace pipes and conduits in and through the demised premises and to erect
new pipes and conduits therein provided they are concealed within the walls,
floor, or ceiling. Owner may, during the progress of any work in the demised
premises, take all necessary materials and equipment into said premises without
the same constituting an eviction nor shall the Tenant be entitled to any
abatement of rent while such work is in progress nor to any damages by reason of
loss of interruption of business or otherwise. Throughout the term hereof Owner
shall have the right to enter the demised premises at reasonable hours for the
purpose of showing the same to prospective purchasers or mortgagees of the
building, and during the last six months of the term for the purpose of showing
the
- ----------
Rider to be added if necessary.
<PAGE>
same to prospective tenants. If Tenant is not present to open and permit an
entry into the demised premises, Owner or Owner's agents may enter the same
whenever such entry may be necessary or permissible by master key or forcibly
and provided reasonable care is exercised to safeguard Tenant's property, such
entry shall not render Owner or its agents liable therefor, nor in any event
shall the obligations of Tenant hereunder be affected. If during the last month
of the term Tenant shall have removed all or substantially all of Tenant's
property therefrom Owner may immediately enter, alter, renovate or redecorate
the demised premises without limitation or abatement of rent, or incurring
liability to Tenant for any compensation and such act shall have no effect on
this lease or Tenant's obligations hereunder.
Vault, Vault Space, Area:
14. No vaults, vault space or area, whether or not enclosed or
covered, not within the property line of the building is leased hereunder,
anything contained in or indicated on any sketch, blue print or plan, or
anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant.
Occupancy:
15. Tenant will not at any time use or occupy the demised premised
in violation of the certificate of occupancy issued for the building of which
the demised premises are a part. Tenant has inspected the premises and accepts
them as is, subject to the riders annexed hereto with respect to Owner's work,
if any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (1) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtor; or (2) the making by
Tenant of an assignment or any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming through or under
Tenant, or by reason of any statute or order of the court, shall thereafter be
entitled to possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 16 shall be applicable only to the party
then owning Tenant's interest in this lease.
(b) it is stipulated and agreed that in the event of the termination
of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installments of rent becoming due hereunder after the date of termination and
the fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discontinued to the date of
termination at the rate of four percent (4%) per annum. If such premise or any
part thereof be re-let by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such re-letting
shall be deemend to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default:
17. (1) If Tenant defaults in fulfilling any of the covenants of
this lease other than the covenants for the payment of rent or additional rent;
or if the demised premises become vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if this lease be rejected under ss 235 of Title 11 of the U.S. Code (bankruptcy
code); or if Tenant shall fail to move into or take possession of the premises
within thirty (30) days after the commencement of the term of this lease, then,
in any one or more of such events, upon Owner serving a written fifteen (15)
days notice upon Tenant specifying the nature of said default and upon the
expiration of said fifteen (15) days, if Tenant shall have failed to comply with
or remedy such default, or if the said default or omission complained of shall
be of a nature that the same cannot be completely cured or remedied within said
fifteen (15) day period, and if Tenant shall not have diligently commenced
curing such default with such fifteen (15) day period, and shall not thereafter
with reasonable diligence and in good faith, proceed to remedy or cure such
default, then Owner may serve a written five (5) days' notice of cancellation
of this lease upon Tenant, and upon the expiration of said five (5) days this
lease and the term thereunder shall end and expire as fully and completely as if
the expiration of such five (5) day period were the day herein definitely fixed
for the end and expiration of this lease and the term thereof and Tenant shall
then quit and surrender the demised premises to Owner but Tenant shall remain
liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid: or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required:
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of any renewal or extension of this lease, Owner may cancel and terminate such
renewal or extension agreement by written notice.
Remedies of Owner and Waiver or Redemption:
18. In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or other wise, (a) the rent shall become due
thereupon and be paid up to the time of such re-entry, dispossess and/or
expiration, (b) Owner may re-let the premises or any part or parts thereof,
either in the name of Owner or otherwise, for a term or terms, which may at
Owner's option be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or
free rent or charge a higher rental than that in this lease, and/or (c) Tenant
or the legal representatives of Tenant shall also pay Owner as liquidated
damages for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and/or
covenanted to be paid and the net amount, if any, of the rents collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
lease. The failure of Owner to re-let the premises or any part or parts thereof
shall not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may incur in connection with re-letting, such as legal expenses,
reasonable attorney's fees, brokerage, advertising and for keeping the demised
premises in good order or for preparing the same for re-letting. Any such
liquidated damages shall be paid in monthly installments by Tenant on the rent
day specified in this lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights of Owner to
collect the deficiency for any subsequent month by a similar proceeding. Owner,
in putting the demised premises in good order or preparing the same re-rental
may, at Owner's option, make such alterations, repairs, replacements, and/or
decorations in the demised premises as Owner, in Owner's sole judgement,
considers advisable and necessary for the purpose of re-letting the demised
premises, and the making of such alterations, repairs, replacements, and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever
for failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as of re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Owner obtaining
possession of demised premises by reason of the violation by Tenant of any of
the covenants and conditions of this lease, or otherwise.
Fees and Expenses:
19. If Tenant shall default in the observance or performance of any
term or covenant on Tenant's part to be observed or performed under or by virtue
of any of the terms or provisions in any article of this lease, after notice if
required and upon expiration of any applicable grace period if any, (except in
any emergency), then, unless otherwise provided elsewhere in this lease, Owner
may immediately or at any time thereafter and without notice perform the
obligation of Tenant thereunder. If Owner, in connection with the foregoing or
in connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or incurs any obligations for the payments of money,
including but not limited to reasonable attorneys' fees, in instituting,
prosecuting or defending any action or proceeding then Tenant will reimburse
Owner for such sums so paid or obligations incurred with interests and costs.
The foregoing expenses incurred by reason of Tenant's default shall be deemed to
be additional rent hereunder and shall be paid by Tenant to Owner within ten
(10) days of rendition of any bill or statement to Tenant therefor. If Tenant's
lease term shall have expired at the time of making of such expenditures or
incurring of such obligations, such sums shall be recoverable by Owner, as
damages.
Building Alterations and Management:
20. Owner shall have the right at any time without the same
constituting an eviction and without incurring liability to Tenant therefor to
change the arrangement and/or location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets or other public part of the
building and to change the name, number or designation by which the building may
be known. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of the Owner by reason of inconvenience, annoyance
or injury to business arising from Owner or other Tenants making any repairs in
the building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
No Representations by Owner:
21. Neither Owner nor Owner's agents have made any representations
or promises with respect to the physical condition of the building, the land
upon which it is erected or the demised premises, the rents, leases, expenses of
operation or any other matter or thing affecting or related to the premises
except as herein expressly set forth and no rights, casements or licenses are
acquired by Tenant by implication or otherwise except as expressly set forth in
the provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties here to are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement
<PAGE>
hereafter made shall be ineffective to change, modify, discharge or effect an
abandonment of it in whole or in part, unless such executory agreement is in
writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.
End of Term:
22. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender to Owner the demised premises, broom
clean, in good order and condition, ordinary wear and damages which Tenant is
not required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this lease. If the
last day of the term of this Lease or any renewal thereof, falls on Sunday, this
lease shall expire at noon on the preceding Saturday unless it be a legal
holiday in which case it shall expire at noon on the preceding business day.
Quiet Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying
the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 31 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
Failure to Give Possession:
24. If Owner is unable to give possession of the demised premises on
the date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or for any other reason, Owner shall not be subject to any liability
for failure to give possession on said date and the validity of the lease shall
not be impaired under such circumstances, nor shall the same be construed in any
wise to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession or complete construction) until after Owner shall have given Tenant
written notice that the Owner is able to deliver possession in condition
required by this lease. If permission is given to Tenant to enter into the
possession of the demises premises or to occupy premises other than the demised
premises prior to the date specified as the commencement of the term of this
lease, Tenant covenants and agrees that such possession and/or occupancy shall
be deemed to be under all the terms, covenants, conditions and provisions of
this lease except the obligation to pay the fixed annual rent set forth in the
preamble to this lease. The provisions of this article are intended to
constitute "an express provision to the contrary" within the meaning of Section
223-a of the New York Real Property Law.
No Waiver:
25. The failure of the Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this lease or
of any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent and/or additional rent with knowledge of the breach of
any covenant of this lease shall not be deemed a waiver of such breach and no
provision of this lease shall be deemed to have been waived by Owner unless such
waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner
of a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement of any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Owner may accept such check or
payment without prejudice to Owner's right to recover the balance of such rent
or pursue any other remedy in this lease provided. No act or thing done by Owner
or Owner's agents during the term hereby demised shall be deemed an acceptance
of a surrender of said premises, and no agreement to accept such surrender shall
be valid unless in writing signed by Owner. No employee of Owner or Owner's
agent shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or surrender of the premises.
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of or in any way connected with this lease, the
relationship of Owner and Tenant, Tenant's use of or occupancy of said premises,
and any emergency statutory or any other statutory remedy. It is further
mutually agreed that in the event Owner commences any proceeding or action for
possession including a summary proceeding for possession of the premises, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding including a counterclaim under Article 4 except for statutory
mandatory counterclaims.
Inability to Perform:
27. This Lease and the obligation of Tenant to pay rent hereunder
and perform all of the other covenants and agreements hereunder on part of
Tenant to be performed shall in no wise be affected, impaired or excused because
Owner is unable to fulfill any of its obligations under this lease or to supply
or is delayed in supplying any services expressly or impliedly to be supplied or
is unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment,
fixtures, or other materials if Owner is prevented or delayed from so doing by
reason of strike or labor troubles or any cause whatsoever including, but not
limited to, government preemption or restrictions or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions which have been or are affected, either
directly or indirectly, by war or other emergency.
Bills and Notices:
28. Except as otherwise in this lease provided, a bill, statement,
notice or communication which Owner may desire or be required to give to Tenant,
shall be deemed sufficiently given or rendered if, in writing, delivered to
Tenant personally or sent by registered or certified mail addressed to Tenant at
the building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
Rider to be added if necessary.
Services Provided by Owners:
29. As long as Tenant is not in default under any of the covenants
of this lease beyond the applicable grace period provided in this lease for the
curing of such defaults, Owner shall provide: (a) necessary elevator facilities
on business days from 8 a.m. to 6 p.m. and have one elevator subject to call at
all other times; (b) heat to the demised premises when and as required by law,
on business days from 8 a.m. to 6 p.m.; (c) water for ordinary lavatory
purposes, but if Tenant uses or consumes water for any other purposes or in
unusual quantities (of which fact Owner shall be the sole judge), Owner may
install a water meter at Tenant's expense which Tenant shall thereafter maintain
at Tenant's expense in good working order and repair to register such water
consumption and Tenant shall pay for water consumed as shown on said meter as
additional rent as and when bills are rendered; (d) cleaning service for the
demised premises on business days at Owner's expense provided that the same are
kept in order by Tenant. If, however, said premises are to be kept clean by
Tenant, it shall be done at Tenant's sole expense, in a manner reasonably
satisfactory to Owner and no one other than persons approved by Owner shall be
permitted to enter said premises or the building of which they are a part for
such purpose. Tenant shall pay Owner the cost of removal of any of Tenant's
refuse and rubbish from the building; (e) If the demised premises are serviced
by Owner's air conditioning/cooling and ventilation system, air
conditioning/cooling will be furnished to tenant from May 15th through September
30th on business days (Mondays through Fridays, holidays excepted) from 8:00
a.m. to 6:00 p.m., and ventilation will be furnished on business days during the
aforesaid hours except when air conditioning/cooling is being furnished as
aforesaid. If Tenant requires air conditioning/cooling or ventilation for more
extended hours or on Saturdays, Sundays or on holidays, as defined under Owner's
contract with Operating Engineers Local 94-94A, Owner will furnish the same at
Tenant's expense.
RIDER to be added in respect to rates and conditions for such
additional service; (f) Owner reserves the right to stop services of the
heating, elevators, plumbing, air-conditioning, electric, power systems or
cleaning or other services, if any, when necessary by reason of accident or for
repairs, alterations, replacements or improvements necessary or desirable in the
judgment of Owner for as long as may be reasonably required by reason thereof.
If the building of which the demised premises are a part supplies manually
operated elevator service, Owner at any time may substitute automatic control
elevator service and proceed diligently with alterations necessary therefor
without in any wise affecting this lease or the obligation of Tenant hereunder.
Captions:
30. The Captions are inserted only as a matter or convenience and
for reference and in no way define, limit or describe the scope of this lease
nor the intent of any provisions thereof.
Definitions:
31. The term "office", or "offices", wherever used in this lease,
shall not be construed to mean premises used as a store or stores, for the sale
or display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised premises form
a part, so that in the event of any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser or
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner, hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "business days" as used in this lease shall exclude Saturdays,
Sundays and all days as observed by the State or Federal Government as legal
holidays and those designated as holidays by the applicable building service
union employees service contract or by the applicable Operating Engineers
contract with respect to HVAC service. Wherever it is expressly provided in this
lease that consent shall not be unreasonably withheld, such consent shall not be
unreasonably delayed.
Adjacent Excavation Shoring:
32. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations without
any claim for damages or indemnity against Owner, or diminution or abatement of
rent.
Rules and Regulations:
33. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations and such other and further reasonable Rules and Regulations as Owner
or Owner's agents may from time to time adopt. Notice of any additional rules or
regulations shall be given in such manner as Owner may elect. In case Tenant
disputes the reasonableness of any additional Rule or Regulation hereafter made
or adopted by Owner or Owner's agents, the parties hereto agree to submit the
question of the reasonableness of such Rule or Regulation for decision to the
New York office of the American Arbitration Association, whose determination
shall be final and conclusive upon the parties hereto. The right to dispute the
reasonableness of any additional Rule or Regulation upon Tenant's part shall be
deemed waived unless the same shall be asserted by service of a notice, in
writing upon Owner within fifteen (15) days after the giving of notice thereof.
Nothing
<PAGE>
in this lease contained shall be construed to impose upon Owner any duty or
obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, as against any other tenant and Owner shall not
be liable to Tenant for violation of the same by any other tenant, its servants,
employees, agents, visitors or licensees.
Security:
34. Tenant has deposited with Owner the sum of $6,250.00 as security for the
faithful performance and observance by Tenant of the terms, provisions and
conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sums as to
which Tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including but not limited to, any
damages or deficiency in the re-letting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be retired to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of which
the demised premises form a part, Owner shall have the right to transfer the
security to the vendee or lessee and Owner shall thereupon be released by Tenant
from all liability for the return of such security; and Tenant agrees to look to
the new Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Estoppel Certificate:
35. Tenant, at any time, and from time to time, upon at least 10 days' prior
notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any
other person, firm or corporation specified by Owner, a statement certifying
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), stating the dates to which the rent and additional
rent have been paid, and stating whether or not there exists any default by
Owner under this Lease, and, if so, specifying each such default.
Successors and Assigns:
36. The covenants, conditions and agreements contained in this lease shall bind
and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns. Tenant shall look only to Owner's estate
and interest in the land and building, for the satisfaction of Tenant's remedies
for the collection of a judgment (or other judicial process) against Owner in
the event of any default by Owner hereunder, and no other property or assets of
such Owner (or any partner, member, officer or director thereof, disclosed or
undisclosed), shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to this lease,
the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of
the demised premises.
- ----------
Space to be filled in or deleted.
See Rider - 10 Pages Annexed (Rider B)
<PAGE>
In Witness Whereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
BRAUN MANAGEMENT INC. AS AGENT FOR
BOWLING GREEN ASSOCIATES, L.P.
Witness for Owner: ---------------------------------------
By: /s/ [ILLEGIBLE]
- ---------------------------- ---------------------------------------
GLOBECOMM, INC.
Witness for Tenant: ---------------------------------------
By: /s/ [ILLEGIBLE]
- ---------------------------- ---------------------------------------
ACKNOWLEDGEMENTS
CORPORATE OWNER
STATE OF NEW YORK, ss.:
County of
On this day of , 19 , before me personally came ,
to me known, who being by me duly sworn, did depose and say that he resides in
; that he is the
of the corporation described in and which executed
the foregoing instrument, as OWNER; that he knows the seal of said corporation;
the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation, and that he
signed his name thereto by like order.
------------------------------------------
INDIVIDUAL OWNER
STATE OF NEW YORK ss.:
County of
On this day of , 19 , before me personally came
to be known and known to me to be the individual described in
and who, as OWNER, executed the foregoing instrument and acknowledged to me that
he executed the same.
------------------------------------------
CORPORATE TENANT
STATE OF NEW YORK, ss.:
County of
On this day of , 19 , before me personally came ,
to me known, who being by me duly sworn, did depose and say that he resides in
; that he is the
of the corporation described in and which executed
the foregoing instrument, as TENANT; that he knows the seal of said corporation;
the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation, and that he
signed his name thereto by like order.
------------------------------------------
INDIVIDUAL TENANT
STATE OF NEW YORK ss.:
County of
On this day of , 19 , before me personally came
to be known and known to me to be the individual described in
and who, as TENANT, executed the foregoing instrument and acknowledged to me
that he executed the same.
------------------------------------------
<PAGE>
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to
Owner making the within lease with Tenant, the undersigned guarantees to Owner,
Owner's successors and assigns, the full performance and observance of all the
covenants, conditions and agreements, therein provided to be performed and
observed by Tenant, including the "Rules and Regulations" as therein provided,
without requiring any notice of non-payment, non-performance, or non-observance,
or proof or notice, or demand, whereby to charge the undersigned therefor, all
of which the undersigned hereby expressly waives and expressly agrees that the
validity of this agreement and the obligations of the guarantor hereunder shall
in no wise be terminated, affected or impaired by reason of the assertion by
Owner against Tenant of any of the rights or remedies reserved to Owner pursuant
to the provisions of the within lease. The undersigned further covenants and
agrees that this guaranty shall remain and continue in full force and effect as
to any renewal, modification or extension of this lease and during any period
when Tenant is occupying the premises as a "statutory tenant." As further
inducement to Owner to make this lease and in consideration thereof, Owner and
the undersigned covenant and agree that in any action or proceeding brought by
either Owner or the undersigned against the other on any matters whatsoever
arising out of, under, or by virtue of the terms of this lease or of this
guarantee that Owner and the undersigned shall and do hereby waive trial by
jury.
Dated: 19
-------------------------------------- -----
- --------------------------------------------
Guarantor
- --------------------------------------------
Witness
- --------------------------------------------
Guarantor's Residence
- --------------------------------------------
Business Address
- --------------------------------------------
Firm Name
STATE OF NEW YORK ) ss.:
COUNTY OF )
On this day of , 19 , before me personally came ________________________
to me known and known to me to be the individual described in, and who executed
the foregoing Guaranty and acknowledged to me that he executed the same.
-------------------------------
Notary
[CLIP ART] IMPORTANT - PLEASE READ [CLIP ART]
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.
1. The sidewalks, entrances, driveways, passages, courts, elevators. vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by any
Tenant or used for any purpose other than for ingress or egress from the demised
premises and for delivery of merchandise and equipment in a prompt and efficient
manner using elevators and passageways designated for such delivery by Owner.
There shall not be used in any space, or in the public hall of the building,
either by any Tenant or by jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and
sideguards. If said premises are situated on the ground floor of the building,
Tenant thereof shall further, as Tenant's expense, keep the sidewalk and curb in
front of said premises clean and free from ice, snow, dirt and rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any window of
the building and no Tenant shall sweep or throw or permit to be swept or thrown
from the demised premises any dirt or other substances into any of the corridors
or halls, elevators, or out of the doors or windows or stairways of the building
and Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the demised premises, or permit or suffer the demised
premises to be occupied or used in a manner offensive or objectionable to Owner
or other occupants of the building by reason of noise, odors, and/or vibrations,
or interfere in any way with other Tenants or those having business therein, nor
shall any bicycles, vehicles, animals, fish, or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of the
building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premise if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation or the foregoing by any Tenant,
Owner may remove same without any liability, and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part of the
demised premises or the building of which they form a part. No boring, cutting
or stringing of wires shall be permitted except with the prior written consent
of Owner, and as Owner may direct. No Tenant shall lay linoleum, or other
similar floor covering, so that the same shall come in direct contact with the
floor of the demised premises, and, if linoleum or other similar floor covering
is desired to be used an interlining of builder's deadening felt shall be first
affixed to the floor, by a paste or other material, soluble in water, the use of
cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of any
description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease or which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and each
Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building all persons who do not
present a pass to the building signed by Owner. Owner will furnish to persons
for whom any Tenant requests same in writing. Each Tenant shall be responsible
for all persons for whom he requests such pass and shall be liable to Owner for
all acts of such persons. Tenant shall not have a claim against Owner by reason
of Owner excluding from the building any person who does not present such pass.
11. Owner shall have the right to prohibit any advertising by any Tenant which
in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the demised
premises, any inflammable, combustible, explosive, or hazardous fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
13. If the building contains central air conditioning and ventilation, Tenant
agrees to keep all windows closed at all times and to abide by all rules and
regulations issued by Owner with respect to such services. If Tenant requires
air conditioning or ventilation after the usual hours, Tenant shall give notice
in writing to the building superintendent prior to 3:00 p.m. in the case of
services required on week days, and prior to 3:00 p.m. on the day prior in case
of after hours service required on weekends or on holidays. Tenant shall
cooperate with Owner in obtaining maximum effectiveness of the cooling system by
lowering and closing venetian blinds and/or drapes and curtains when the sun's
rays fall directly on the windows of the demised premises.
14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky
matter, or fixtures into or out of the building without Owner's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures requires
special handling, all work in connection therewith shall comply with the
Administrative Code of the City of New York and all other laws and regulations
applicable thereto and shall be done during such hours as Owner may designate.
15. Refuse and Trash. (1) Compliance by Tenant. Tenant covenants and agrees, at
its sole cost and expense, to comply with all present and future laws, orders,
and regulations of all state, federal, municipal, and local governments,
departments, commissions and boards regarding the collection, sorting,
separation and recycling of waste products, garbage, refuse and trash. Tenant
shall sort said separate such waste products, garbage, refuse and trash into
such categories as provided by law. Each separately sorted category of waste
products, garbage, refuse and trash shall be placed in separate receptacles
reasonably approved by Owner. Such separate receptacles may, at Owner's option,
be removed from the demised premises in accordance with a collection schedule
prescribed by law. Tenant shall remove, or cause to be removed by a contractor
acceptable to Owner, at Owner's sole discretion, such items as Owner may
expressly designate. (2) Owner's Rights in Event of Noncompliance. Owner has the
option to refuse to collect or accept from Tenant waste products, garbage,
refuse or trash (a) that is not separated and sorted as required by law or (b)
which consists of such items as Owner may expressly designate for Tenant's
removal, and to require Tenant to arrange for such collection at Tenant's sole
cost and expense, utilizing a contractor satisfactory to Owner. Tenant shall pay
all costs, expenses, fines, penalties, or damages that may be imposed on Owner
or Tenant by reason of Tenant's failure to comply with the provisions of this
Building Rule 15, and, at Tenant's sole cost and expense, shall indemnify,
defend and hold Owner harmless (including reasonable legal fees and expenses)
from and against any actions, claims and suits arising from such noncompliance,
utilizing counsel reasonably satisfactory to Owner.
Address 11 Broadway
Premises Suite 660
================================================================================
BRAUN MANAGEMENT INC. AS AGENT FOR
BOWLING GREEN ASSOCIATES, L.P.
TO
GLOBECOMM, INC.
================================================================================
STANDARD FORM OF
[GRAPHIC] Office [GRAPHIC]
Lease
The Real Estate Board of New York, Inc.
(C) Copyright 1994. All rights Reserved.
Reproduction in whole or in
part prohibited.
================================================================================
Dated June 25, 1996
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Rider B
RIDER ATTACHED TO AND MADE A PART OF OFFICE LEASE BY
AND BETWEEN BRAUN MANAGEMENT INC. OF 160 BROADWAY,
NEW YORK, NY AS AGENT FOR BOWLING GREEN ASSOCIATES, L.P.
("Landlord")
and GLOBECOMM, INC., ("Tenant")
37.01. The term of this Lease shall begin on July 1, 1996 (the "Term
Commencement Date"). The term of the Lease shall expire (The "Expiration Date")
June 30, 2001 except as provided for in Article 48.
37.02. The rent (the "Base Rent" or "Fixed Rent") which Tenant agrees to
pay in advance monthly installments shall be due and payable on the first day of
each and every calendar month beginning on the term Commencement Date continuing
through the lease term and shall be paid at the following rates:
For the two years and six months July 1, 1996 to December 31, 1998 at the
rate of THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($37,500.00) per annum,
payable in equal monthly installments of THREE THOUSAND ONE HUNDRED TWENTY
FIVE DOLLARS ($3,125.00).
For the two years and six months January 1, 1999 to June 30, 2001 at the
rate of FORTY TWO THOUSAND FIVE HUNDRED DOLLARS ($42,500.00) per annum,
payable in equal monthly installments of THREE THOUSAND FIVE HUNDRED FORTY
ONE DOLLARS AND SIXTY SEVEN CENTS ($3,541.67).
37.03. Tenant shall accept the Premises in "as is" condition except
Landlord shall, at or about the the Term Commencement Date, at Landlord's
expense, clean and dust Premises to "broom clean" condition, clean existing
carpeting in Premises and carpeting adjacent to bathroom on floor in public
corridor, clean bathroom and make bathroom fixtures operable, clean and repair
windows of Premises, clean existing Venetian blinds and remove or enclose
existing exposed wiring. On or about the first anniversary of the Term
Commencement Date Landlord will paint walls and trim of the Premises in color to
be selected by Tenant from Landlord's standard paint chart.
37.05. Provided Tenant has duly performed all of the terms and conditions
of this Lease on its part to be performed, and all Base Rent and additional
rents then accruing and due pursuant to this Lease shall then have been paid in
full, Tenant shall receive as a concession from the Landlord the privilege of
not paying the monthly installments of Base Rent which shall become due on July
1, 1997, August 1, 1997 and September 1, 1997.
38.01. As used in this Article the words and terms which follow mean and
include the following:
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(a) "Tax Year" shall mean each period of twelve months, commencing on the
first day of July of each such period, in which occurs any part of the term of
this Lease or such other fiscal year as hereafter may be duly adopted as the
fiscal year for real estate tax purposes of the City of New York.
(b) "Operation Year" shall mean each calendar year, subsequent to the
calendar year 1996 in which occurs any part of the term of this Lease.
(c) "Tenant's Proportionate Share" shall mean sixty three hundredths of
one percent (.63%).
(d) "Area of the Premises" shall mean the rentable square foot area of the
Demised Premises (which the parties have agreed shall be 2,500 square feet for
the purposes of this Article).
(e) "Real Estate Tax" shall mean any and all taxes and assessments
(including, without limitation, special and extraordinary assessments) imposed
upon the Building(s) and the Land(s) of which the Demised Premises forms a part.
If there is a change in the method of taxation which results in any franchise,
income, rent, profit or other tax, however designated, being levied against
Landlord and/or the owner of the Land(s) and Building(s) in substitution of, or
in addition to any Real Estate Tax, in whole or in part, such tax or taxes shall
be considered to be a Real Estate Tax for the purposes hereof.
(f) "Real Estate Tax Base" shall mean the Real Estate Taxes for the one
fiscal period (i.e., July 1 to June 30) of 1996/97.
(g) "Hourly Wage Rate" as respects any Operation Year shall mean the
minimum hourly wage prescribed to be paid to the workers described below,
appropriately adjusted from time to time to reflect changes in fringe benefits
required by law or by applicable labor agreements and computed on an hourly
basis, in major office buildings (hereinafter called "Class A Office Buildings")
and in effect as of January 1 in such Operation Year (or if such rate and/or
benefits shall be subject to change during an Operation Year then the average
thereof for such Operation Year as reasonably estimated or calculated by
Landlord) pursuant to an agreement between the Realty Advisory Board on Labor
Relations, Incorporated (or any successor thereto) and Local 32B of the Service
Employees International Union, AFL-CIO (or any successor thereto) covering the
wage rates of those workers classified as "Others" (or any successor or
equivalent designation) in Class A Office Buildings which said minimum hourly
wage rates shall be computed on the basis of the total weekly amount required to
be paid to said workers in the Building for regular work weeks (exclusive of any
overtime or premium pay work in such regular work weeks.) Such total weekly
amounts shall be inclusive of all payments or benefits of every nature and kind
(including those required to be paid by the employer directly to the taxing
authorities or others on account of the employment) such as, without limiting
the generality of the foregoing, social security, unemployment and all other
similar taxes, holiday and vacation pay, incentive pay, accident, health and
welfare insurance programs, pension plans, guarantee pay plans and supplemental
unemployment benefit programs, and fringe benefits, payments, plans or programs
of a similar or dissimilar nature, irrespective of whether they may be required
or provided for in any applicable law or regulation or otherwise. If there is no
such agreement in effect as of any such January 1 by which the Hourly Wage Rate
is determinable, computations and payments
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shall thereupon be made upon the basis of the Hourly Wage Rate being paid by the
Landlord or by the contractor performing the cleaning services for Landlord on
such January 1 for porters or cleaners, as the case may be, and appropriate
retroactive adjustment shall thereafter be made when the Hourly Wage Rate paid
on such January 1 pursuant to such agreement for said workers is finally
determined and provided further that if as of the last day of such Operation
Year no such agreement covering the January 1 occurring in such Operation Year
shall have been in effect, the Hourly Wage Rate paid by the landlord or by the
contractor performing the cleaning services for landlord on such January 1 for
porters and cleaners shall be for all purposes hereof deemed to be such Hourly
Wage Rate prescribed by such agreement between said Board (or any successor
thereto) and said Union (or any successor thereto) for such Operation Year. It
is understood that the definitions set forth in this paragraph and related
definitions set forth elsewhere in this Article are designed to provide an
escalation index only, and no express or implied representation is made that the
additional rental derived from such index will bear any relationship to actual
operating expenses of Landlord.
(h) "Labor Rate" for any Operation Year shall mean the Hourly Wage Rate
for workers classified as "Others."
(i) "Base Labor Rate" shall mean the Labor Rate for the calendar year
1996.
(j) "Escalation Statement" shall mean statement in writing signed by
landlord, setting forth the amount payable by Tenant for a specified Tax Year or
Operation Year (as the case may be) pursuant to this Article.
38.02. If the Real Estate Taxes for any Tax Year shall be greater than the
Real Estate Tax Base, Tenant shall pay the Landlord as additional rent for the
Demised Premises for such Tax Year an amount equal to Tenant's Proportionate
Share of the difference between Real Estate Taxes for such Tax Year and the Real
Estate Tax Base.
38.02.1. In no event shall the additional rent under Article 38.02 be
increased in any Tax Year in excess of $1,000 per annum over that of the prior
Tax Year on a cumulative basis (hereinafter "CAP"). For example, assuming
Tenant's Proportionate Share of Real Estate Taxes in 1997/98 exceeds Tenant's
Proportionate Share of the Real Estate Tax Base 1996/97 by $1,250 in 1998/99 by
$1,750. and in 1999/2000 by $3,750, the additional rents (a.r.) resulting from
application of Article 38.02 will be as follows:
Tax Real Estate Tax
Year Escalation Before Cap CAP
---- --------------------- ---
1997/98 $1,250 a.r. = $1,000
1998/99 a.r. = $1,750 $2,000
1999/2000 $3,750 a.r. = $3,000
38.03. If the Labor Rate for any Operation Year shall be greater than the
Base Labor Rate, Tenant shall pay to Landlord as additional rent for the Demised
Premises for such Operation Year
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an amount equal to the product obtained by multiplying the Area of the Premises
by the number of cents (including any fraction of a cent) by which the Labor
Rate for such Operation Year exceeds the Base Labor Rate.
38.03.1. In no event shall the additional rent under Article 38.03 be
increased in any Operation Year in excess of $1,250 dollars per annum over that
of the prior Operation Year on a cumulative basis (hereinafter "CAP"). For
example, assuming that, in 1997 the Labor Rate exceeds the Base Labor Rate by
$.60, in 1998 by $.90 and in 1999 by $1.80, the additional rents (a.r.)
resulting from application of Article 38.03 will be as follows:
ANNUAL LABOR
RATE ESCALA-
OPERATION AREA OF LABOR RATE TION BEFORE
YEAR PREMISES X DIFFERENTIAL CAP CAP
- ---- -------- ------------ --- ---
1997 2,500' X $.60 $1,500 a.r. = $1,250
1998 2,500" X $.90 a.r. = $2,250 $2,500
1999 2,500' X $1.80 $4,500 a.r. = $3,750
38.04. Any such adjustment payable by reason of the provisions of Section
38.02 hereof shall be payable within fifteen (15) days after Landlord shall
furnish to Tenant an Escalation Statement with respect to Real Estate Taxes for
any Tax Year.
38.05. Any such adjustment payable by reason of the provisions of Section
38.03 shall commence as of the first day of the relevant Operation Year and,
after Landlord shall furnish Tenant with an Escalation Statement relating to
such Operation Year, all monthly installments of rental shall reflect
one-twelfth of the annual amount of such adjustment until a new adjustment
becomes effective pursuant to the provisions of this Article, provided however,
that if said Escalation Statement is furnished to Tenant after the commencement
of such Operation Year, there shall be promptly paid by Tenant to Landlord, an
amount equal to the portion of such adjustment allocable to the part of such
Operation Year which shall have elapsed prior to the first day of the calendar
month next succeeding the calendar month in which said Escalation Statement is
furnished to Tenant.
38.06. In the event (i) that the date of the expiration or other
termination of this Lease shall be a day other than the last day of a Tax Year
or an Operation Year, or (ii) of any increase or decrease in the Area of the
Demised Premises (as may be provided herein), then in each such event in
applying the provisions of this Article with respect to any Tax year or
Operation Year in which such event shall have occurred, appropriate adjustments
shall be made to reflect the occurrence of such event on a basis consistent with
the principles underlying the provisions of this Article taking into
consideration: (a) the portion of such Tax Year or Operation Year which shall
have elapsed prior to the date of such expiration or termination; or (b) in the
case of any such increase or decrease, the portion of the Demised Premises to
which the same relate. Similarly, if the term of this Lease shall begin or end
on a date which is not the first (with respect to term commencement) or the last
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(with respect to expiration or termination) day of a calendar month, appropriate
adjustments shall be made to Fixed Rent and additional rent for the first or
last month of the term, as the case may be, to reflect the portion of a month
falling within the term of this Lease. However, nothing contained herein shall
relieve Tenant of liability for all Fixed Rent and additional rent which would
have been due following termination for Tenant's default.
38.07. Payments shall be made pursuant to this Article notwithstanding the
fact that an Escalation Statement is furnished to Tenant after the expiration of
the term of this Lease.
38.08. In case the Real Estate Taxes for any Tax Year or part thereof
shall be reduced before Tenant shall have paid Tenant's Proportionate Share of
any excess thereof in respect of such Tax year pursuant to Section 38.02 hereof,
the Real Estate Taxes for such Tax Year shall be deemed to include any expenses,
including counsel fees, incurred by Landlord in connection with reducing the
assessed valuation and/or in obtaining such reduction.
38.09. In case the Real Estate Taxes for any Tax Year or part thereof
shall be reduced after Tenant shall have paid Tenant's Proportionate Share of
any excess thereof in respect of such Tax Year pursuant to Section 38.02 hereof,
Tenant shall be entitled to receive Tenant's Proportionate Share of such
reduction after Landlord's receipt of a refund or credit for said reduction,
provided, however, that the Real Estate Taxes for such Tax Year shall be deemed
to include any expenses, including counsel fees, incurred by Landlord in
connection with obtaining said reduction.
39.01. Landlord will furnish electricity to the Tenant through presently
installed electrical facilities for Tenant's reasonable use of lighting,
electrical appliances and other equipment, and in consideration thereof Tenant
agrees that the rent reserved in the within Lease shall be increased by a sum
effective as of the commencement of this Lease of $6,250.00 per annum, payable
in equal installments of $520.83 per month. In the event the Landlord believes
that the electricity cost is at any time greater than the aforementioned sum (or
such additional rent for electricity as may hereafter be determined), the Tenant
agrees that an independent electrical consultant, selected by the Landlord, may
make a survey of the electrical equipment consuming electricity located inside
and outside the Demised Premises (but equipment located outside, e.g. air
conditioners, shall be included only to the extent that the same serve the
Demised Premises) to determine the increase in rent due to electricity
("Landlord's Survey"). The Tenant agrees to pay the new electricity rent charge
as determined by the electrical consultant effective as of the date of the
Landlord's Survey. In the event Tenant is unwilling to accept the findings of
Landlord's Survey Tenant may, at Tenant's sole cost and expense engage an
independent electrical consultant of Tenant's choice to conduct a survey
("Tenant's Survey"). If Tenant's Survey diverges from Landlord's Survey by more
than 5% the two electrical consultants shall choose a third consultant who shall
conduct a survey, whose expense shall be borne equally by Landlord and Tenant.
The conclusions of the third consultant shall be binding upon the parties.
Further, if the Landlord's electric rates or charges of any kind imposed thereon
by the public utility corporation serving the area where the building is located
are increased or if there shall be any increase in sales, excise or any similar
tax imposed on electrical consumption, the additional charge for electricity
shall be increased to reflect such increases without a survey.
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39.02. In the event Tenant shall be in default of its obligations to pay
Base Rent or additional rent Landlord reserves the right to discontinue
furnishing electric current to Tenant at any time upon not less than thirty (30)
days' written notice to Tenant. If Landlord exercises such right of termination,
this Lease shall continue in full force and effect and shall be unaffected
thereby except the Tenant's liability for additional rent provided for in this
Article shall terminate as of the date of discontinuance of the supplying of
electric current. If Landlord so discontinues furnishing electric current to
Tenant, Tenant shall make application directly to the public utility serving the
area in which the building is located and Landlord shall permit its wires and
conduits to the extent available and safely capable to be used for such purpose.
40. All taxes, charges, costs and expenses which the Tenant is required to
pay under any terms of this Lease, together with all interest and penalties that
may accrue thereon, in the event of the Tenant's failure to pay such amounts and
all damages, costs and expenses which the Landlord may incur by reason of any
default of the Tenant or failure on the Tenant's part to comply with the terms
of this Lease, shall be deemed to be additional rent and, in the event of
nonpayment by the Tenant, the Landlord shall have all the rights and remedies
with respect thereto as the Landlord has for the nonpayment of the fixed rent.
If Landlord does not receive full payment for rent (i.e., Fixed Rent and/or
additional rent) within ten (10) days after the date on which payment is due,
Tenant shall be liable to Landlord for interest on late payments at a rate equal
to one percent above the prime lending rate then in effect for loans of
Citibank, N.A. (or its successor) in the State of New York, which shall accrue
on a daily basis from the date on which the payment was due to the date on which
Landlord collects payment in full. However, if the collection of interest at the
rate specified herein would be usurious or otherwise unenforceable, interest on
late payments shall accrue at the highest lawful rate.
41.01. If the Landlord or any successor in interest shall be an
individual, joint venture, Tenants-in-common, firm or partnership, general or
limited, there shall be no personal liability on such individual or on the
members of such joint venture, tenants-in-common, firm or partnership in respect
to any of the covenants or conditions of this Lease. The Tenant shall look
solely to the equity of the Landlord in the property for the satisfaction of the
remedies of the Tenant in the event of a breach by the Landlord of any of the
covenants or conditions of this Lease.
41.02. Each party agrees, at any time and from time to time, as requested
by the other party, upon not less than ten (10) days' prior notice, to execute
and deliver to the other a statement certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as modified and stating the modifications),
certifying the dates to which the Fixed Rent and additional rent have been paid,
and stating whether or not, to the best knowledge of the signer, the other party
is in default in performance of any of its obligations under this Lease, and, if
so, specifying each such default of which the signer may have knowledge, it
being intended that any such statement delivered pursuant hereto may be relied
upon by others with whom the party requesting such certificate may be dealing.
42. All notices required herein shall be in writing, addressed to Landlord
and Tenant at the addresses set forth herein, except after Tenant has commenced
occupancy of the Demised Premises, notices shall be sent to the Demised Premises
and shall be delivered personally or sent by certified
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mail, return receipt requested. The date of delivery or mailing shall be deemed
to be the date on which notice is given. Either party may change the address to
which notices to it are to be sent on seven (7) days prior notice.
43. Tenant warrants to Landlord that no real estate agent or broker except
BRAUN MANAGEMENT INC. and RUDES REALTY COMPANY, INC. brought about this Lease
and agrees to indemnify and defend Landlord on demand against all claims made by
(other) brokers and agents for fees or commissions with respect to this Lease
arising from Tenant's acts.
44. Landlord shall be entitled to cancel this Lease for the purpose of
actually demolishing the Building on at least ninety (90) days prior written
notice thereof, and this Lease shall come to an end on the date in such notice
specified with the same force and effect as if such date were the date herein
specified for the expiration hereof and the rent, including any additional rent
provided for under this Lease, shall be apportioned and adjusted as of the
effective date of such cancellation.
45. Landlord shall be entitled to relocate the Tenant to any other
substantial, similar or superior space in the Building for any reason whatsoever
on at least sixty (60) days prior written notice thereof, and the Tenant shall
remove peacefully from the premises which it is occupying on the date specified
in such notice, provided that Tenant's reasonable costs of relocation shall be
paid for by Landlord.
46.01. Article 11 of this Lease is modified to the following extent. If
Tenant shall desire to assign this Lease or sublet the leased premises, in whole
or in part, Landlord will not unreasonably withhold or delay its prior written
consent thereto provided:
A. Tenant shall give Landlord prior notice ("Tenant's Notice") of its
desire to assign this Lease or sublet all, or any portion of the Demised
Premises. Tenant's Notice must be given to Landlord at least sixty (60) days,
but not more than one hundred twenty (120) days prior to the date on which the
assignment would become effective, or at least sixty (60) days, but not more
than one hundred twenty (120) days prior to the date on which the term of the
sublease would start. Tenant's Notice shall include a duplicate copy of the
assignment or sublease, if one has already been executed (but such execution
must be subject to Landlord's consent as herein provided) or, if the assignment
or sublease has not yet been executed, Tenant's Notice shall identify the
proposed assignee or subtenant and shall contain a copy of the proposed
assignment or sublease which conforms in all material respects to the one that
Tenant wants Landlord to consent to.
B. An assignment shall include an assumption by the assignee, from and
after the effective date of such assignment, of the performance and observance
of all of the covenants and conditions in this Lease contained on Tenant's part
to be performed and observed as if the assignee had executed this Lease as the
original Tenant. A sublease shall specify that it is subject to this Lease and
that the premises to be sublet shall be used solely for the same use permitted
hereunder for Tenant. No sublease (for all or part of the Demised Premises) or
assignment of this Lease shall permit further assignment or subletting (in whole
or in part) without the prior written consent of Landlord in each instance.
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C. If Tenant shall give Tenant's Notice of a desire to assign this Lease,
or to sublet all or part of the premises hereby leased, Landlord shall be
entitled to cancel this Lease on at least sixty (60) days', but not more than
one hundred twenty (120) days', prior notice thereof, and this Lease shall come
to an end on the date in such notice specified, with the same force and effect
as if such date were the date herein specified for the expiration hereof, and
the rent (i.e., Base Rent and additional rent) provided for under this Lease
shall be apportioned and adjusted as of the effective date of such cancellation.
Landlord's notice of cancellation may be given at any time following Landlord's
receipt of Tenant's Notice and Landlord's right of cancellation may be
reasserted during the balance of the term of this Lease with respect to
subsequent assignment or sublease without regard to whether or not Landlord's
consent was given to any prior assignment of this Lease or sublease for all or
any portion of the demised premises. Landlord's acceptance of rent shall not
constitute the waiver of any of Landlord's rights.
D. Whenever Tenant shall claim under this Article or any other part of
this Lease that Landlord has unreasonably withheld or delayed its consent to
some request of Tenant, Tenant shall have no claim for damages by reason of such
alleged withholding or delay, and Tenant's sole remedies therefor shall be a
right to compel arbitration of the matter in dispute or to obtain specific
performance, but in any event without recovery of damages;
E. Tenant shall have no right to sublet (in whole or in part) or to assign
if it is in material breach of this Lease. No assignment of this Lease and no
sublease for all or any part of the Demised Premises shall relieve Tenant of
liability to Landlord for breach of this Lease.
F. In the event that the monthly rental which Tenant receives from a
sublease for all or any portion of the Demised Premises permitted hereunder is
greater than a sum equal to the percentage of the total area of the Demised
Premises which is sublet multiplied by Tenant's rent (i.e., Base Rent and
additional rent) per month, then fifty (50%) percent of the difference between
said sums shall be paid to Landlord each month as additional rent. Any and all
consideration required to be paid to Tenant by an assignee in connection with an
assignment permitted hereunder shall be paid to Landlord by Tenant as additional
rent.
G. No subtenant or assignee shall be: an employment agency, a governmental
or quasi-governmental organization; a non-for-profit corporation or
organization; a current tenant, subtenant or occupant of the Building; or a
prospective tenant who is negotiating with Landlord for space in the Building.
H. Anything contained in this Article to the contrary notwithstanding,
Landlord shall not be required to consent to any sublease which provides for a
Base Rent per square foot per annum that is less than the quotient derived from
adding Tenant's Base Rent per annum plus additional rent per annum being paid by
Tenant pursuant to Article 38 at the time in question and dividing such sum by
the Area of the Premises.
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46.02. Landlord shall be entitled to injunctive relief to enforce the
provisions of this Article and the parties agree that irreparable injury in the
form of damages to Landlord that are large, irreversible and difficult to
precisely evaluate shall be deemed to result from the breach of the provisions
of this Article by Tenant.
46.03. Tenant shall not be a subtenant or an assignee pursuant to any
assignment or sublease whatsoever which relates to space in the building of
which the Demised Premises forms a part.
47.01. Subject to the provisions of this Article, this lease may be
assigned, or the Demised Premises may be sublet, in whole or in part, to any
corporation which shall be an affiliate, subsidiary, or successor of Tenant,
provided that Landlord is given prior notice of such assignment or subletting,
and provided further that the Base Rent per square foot per annum to be paid by
the sublessee pursuant to any sublease permitted under this Article shall not be
less than the quotient derived by dividing the Base Rent per annum set forth in
this Lease by the Area of the Premises.
47.02. As used in this Article "subsidiary", "affiliate" and "successor"
of Tenant shall mean the following:
(a) An "affiliate" shall mean any corporation which controls Tenant, is
controlled by Tenant or is under common control with Tenant. For
this purpose, "control" shall mean the possession of the power to
direct or cause the direction of the management and policies of such
corporation, whether through ownership of voting securities or by
contract or otherwise.
(b) A "subsidiary" shall mean any corporation not less than fifty-one
percent (51%) of whose outstanding stock shall at the time be owned
by Tenant.
(c) A "successor" shall mean:
(i) A corporation into which or with which Tenant is merged or
consolidated, in accordance with applicable statutory
provisions for merger or consolidation of corporations,
provided that by operation of law or by effective provisions
contained in the instruments of merger or consolidation the
liabilities of the corporations participating in such merger
or consolidation are assumed by the corporation surviving such
merger or created by such consolidation, or
(ii) A corporation acquiring this Lease and the term hereby demised
and a substantial portion or all of the property and assets of
Tenant, provided that such corporation shall have a positive
(as opposed to a negative) net worth immediately after such
acquisition and such net worth is not less than Tenant's net
worth immediately prior to such acquisition.
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47.03. Acquisition by Tenant of a substantial portion of the assets,
together with the assumption of all or substantially all of the obligations and
liabilities of any corporation shall be deemed a merger of such corporation into
Tenant.
47.04. An assignment of this Lease or a sublease relating to all or part
of the Demised Premises pursuant to this Article shall not relieve Tenant of
liability to Landlord for breach of this Lease. Tenant shall not enter into an
assignment or sublease of any kind while Tenant is in default under this Lease.
Tenant shall furnish Landlord, on demand, with such documents and information as
Landlord may reasonably require to substantiate relationships, conditions and
transactions described in this Article. No sublease for all or part of the
Demised Premises and no assignment of this Lease shall permit further assignment
or the subletting of all or part of the Demised premises without Landlord's
prior written consent in each instance. Landlords acceptance of rent shall not
constitute Landlord's waiver of any of its rights.
48. Tenant shall have the privilege of canceling this Lease effective
the day preceding the first anniversary of the Term Commencement Date, on not
less than sixty (60) days prior notice to Landlord, and the Lease shall expire
upon that day as if that day were the day that the Lease were to end by its
original term.
49. In addition to Article 2, Landlord warrants that Tenant may use the
premises for computer hardware and digital storage service twenty four hours per
day, seven days per week.
50. Anything in Article 3. to the contrary notwithstanding, Tenant may
make minor alterations and add air conditioning units, alarms and communication
lines providing same do not adversely affect the Building systems.
51. Anything in Paragraph 29(c) to the contrary notwithstanding Landlord
will furnish air conditioning to the Premises if required by Tenant during the
air conditioning season at hours supplementary to those set forth in Paragraph
29(c).
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AMENDMENT AGREEMENT
The parties to this Agreement as of January 2, 1997 are: BRAUN MANAGEMENT
INC., as agent for BOWLING GREEN ASSOCIATES, L.P., ("Landlord") and GLOBECOMM,
INC., ("Tenant").
WHEREAS, Landlord and Tenant entered into a certain lease agreement dated
June 25, 1996 (hereinafter, the "Lease") which provides inter alia for Tenant to
rent and occupy Suite 660 (the "Original Premises") at 11 Broadway, New York,
New York, and
WHEREAS, Landlord and Tenant desire to provide for the modification of the
Lease because Tenant desires to lease from Landlord approximately 720 square
feet of additional office space contiguous to the Original Premises,
(hereinafter, the "Additional Premises A and B"), the combined Original Premises
and Additional Premises A and B, (hereinafter, the "Demised Premises") as
further described in Exhibit I annexed;
NOW THEREFORE, in consideration of the mutual covenants herein, the
Landlord and Tenant. agree as follows:
1. The amendments to the Lease set forth herein are effective as of January
10, 1997 (the "Effective Date").
2. In Paragraph 37.02 provide that the Base Rent for the Demised Premises
shall be as follows:
From the Effective Date to December 31, 1998 at the rate of FORTY-EIGHT
THOUSAND THREE HUNDRED DOLLARS ($48,300.00) per annum, payable in equal
monthly installments of FOUR THOUSAND TWENTY-FIVE DOLLARS ($4,025.00)
except that for the month of January, 1997 the adjusted and proportional
Base Rent is THREE THOUSAND ONE HUNDRED TWENTY FIVE DOLLARS ($3,125.00)
From January 1, 1999 to June 30, 2001 the Base Rent shall be at the rate
of FIFTY FOUR THOUSAND SEVEN HUNDRED FORTY THOUSAND DOLLARS ($54,740.00)
per annum, payable in equal monthly installments of FOUR THOUSAND FIVE
HUNDRED SIXTY ONE DOLLARS AND SIXTY SEVEN CENTS ($4,561.67).
3. Tenant shall accept the Additional Premises A and B in "as is" condition,
except Landlord shall, according to Building Standards, at Landlord's
expense, perform the following work ("Landlord's Work") only in Additional
Premises B at or about the Effective Date:
i) Finish ceiling
ii) Carpet floors in style and color to be selected by Tenant from
Landlord's samples.
(iii) Open doorway between Original Premises and Additional Premises B.
4. In Paragraph 39.01 delete "$6,250.00" and "$520.83" and in their places
respectively insert "$8,050 and "$670.83".
5. REMOVED
1
<PAGE>
6. Paragraph 38.01 of the Lease is amended as follows:
In (c) add: "From the Effective Date Tenant's Proportionate Share shall be
eight tenths of one percent (.8%)."
In (d) add "From the Effective Date the Area of the Premises with respect
to the Additional Premises A and B is 720 square feet. The total rentable
square footage shall be 3,220 square feet for the purposes of this
Article."
7. Anything in the Lease and Amendment Agreement notwithstanding, in the
event Tenant shall exercise its option to cancel Lease as provided for in
Article 48 of the Lease, Tenant shall reimburse Landlord for the
unamortized portion of Landlord's Work as shall have been completed by
Landlord pursuant to Paragraph 3 of this Amendment Agreement.
8. Anything in the Lease and Amendment Agreement notwithstanding, in the
event Landlord shall lease other rental space on the sixth floor of the
East Wing of the Building of which the Demised Premises forms a part:
a) Landlord shall, at its cost and expense, close the existing glass
wall and door in Original Premises and open an entrance for Tenant
to have access to the Demised Premises.
b) At such time, at Landlord's option, Tenant will be required to lease
90 square feet of contiguous space ("Additional Premises C") in its
then "as is" condition at the Base Rent rate of ONE THOUSAND THREE
HUNDRED FIFTY DOLLARS ($1,350.00) per annum, which will be payable
in equal monthly installments of ONE HUNDRED TWELVE DOLLARS AND
FIFTY CENTS ($112.50) and added to the then current Base Rent..
c) At such time the escalations and electric charges shall be increased
proportionately.
9. In all other respects the Lease shall remain the same.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.
BRAUN MANAGEMENT INC. AS AGENT FOR
BOWLING GREEN ASSOCIATES, L.P.
By: /s/ [ILLEGIBLE]
-------------------------------------
GLOBECOMM, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
2
<PAGE>
SECOND AMENDMENT AGREEMENT
The parties to this Agreement as of May 21, 1997 are: BRAUN MANAGEMENT
INC., as agent for BOWLING GREEN ASSOCIATES, L.P., ("Landlord") and GLOBECOMM,
INC., ("Tenant").
WHEREAS, Landlord and Tenant entered into a certain lease agreement dated
June 25, 1996 (hereinafter, the "Lease") which provides inter alia, for Tenant
to rent and occupy Suite 660 (the "Demised Premises") at 11 Broadway, New York,
New York, and
WHEREAS, the Lease was modified by Amendment Agreement between the parties
dated January 2, 1997 whereby Tenant leased from Landlord the rooms A and B in
Suite 650 (the "Additional Premises") and
WHEREAS, Landlord and Tenant desire to further modify the Lease and to
lease from Landlord approximately 280 square feet of additional office space in
Suite 650 not contiguous to the Demised Premises or to the Additional Premises
as further described as Room D ("the Second Additional Premises") in Exhibit 1
annexed;
NOW THEREFORE, in consideration of the mutual covenants herein, the
Landlord and Tenant agree as follows:
1. The amendments to the Lease set forth herein are effective June 1, 1997
(the "Effective Date").
2. The Annual Base Rent for the Demise Premises, Additional Premises and
Second Additional Premises (the "Combined Premises") is as follows:
From the Effective Date to December 31, 1998 at the rate of FIFTY TWO
THOUSAND FIVE HUNDRED DOLLARS ($52,500.00) per annum, payable in equal
monthly installments of FOUR THOUSAND THREE HUNDRED SEVENTY FIVE DOLLARS
($4,375.00).
For the two years and six months January 1, 1999 to June 30, 2001 at the
rate of FIFTY NINE THOUSAND FIVE HUNDRED DOLLARS ($59,500.00) per annum,
payable in equal monthly installments of FOUR THOUSAND NINE HUNDRED FIFTY
EIGHT DOLLARS AND THIRTY THREE CENTS ($4,958.33)
3. Tenant shall accept the Second Additional Premises in "as is" condition
except Landlord shall, at Landlord's expense, carpet Room D in style and
color to be selected by Tenant from Landlord's carpet samples ("Landlord's
Work").
4. In Paragraph 39.01 as amended delete "$8,050.00" and "670.83" and insert
"8,750.00" and 729.17" respectively.
5. In Paragraph 37.05 delete "July 1, 1997, August 1, 1997 and September 1,
1997" and in its place insert "March 1, 1998, April 1, 1998 and May 1,
1998."
6. Article 48 of the Original Lease is amended to provide that Tenant shall
also have the privilege of canceling the Lease effective February 28, 1998
under the same conditions as are otherwise in Article 48 provided.
<PAGE>
7. Anything herein to the contrary notwithstanding, Landlord shall have the
right for any reason whatsoever to recapture from Tenant the Second
Additional Premises on thirty (30) days notice to the Tenant and Tenant
shall promptly and peaceably remove therefrom on the date as specified in
Landlord's notice, and upon such removal, the Base Rent and additional
rent shall revert to the rates that prevailed before this Second Amendment
Agreement took effect.
8. Tenant shall not interfere with Landlord's use of those portions of Suite
650 not leased to Tenant.
9. In all other respects the Lease shall remain the same.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.
BRAUN MANAGEMENT INC. AS AGENT FOR
BOWLING GREEN ASSOCIATES, L.P.
By: /s/ [ILLEGIBLE]
-------------------------------------
GLOBECOMM, INC.
By: /s/ [ILLEGIBLE] 5/29/97
-------------------------------------
2
<PAGE>
THIRD AMENDMENT AGREEMENT
The parties to this Agreement as of August 1, 1997 are: BRAUN MANAGEMENT
INC., as agent for BOWLING GREEN ASSOCIATES, L.P., ("Landlord") and GLOBECOMM,
INC., ("Tenant").
WHEREAS, Landlord and Tenant entered into a certain lease agreement dated
June 25, 1996 (hereinafter, the "Lease") which provides inter alia, for Tenant
to rent and occupy Suite 660 (the "Demised Premises") at 11 Broadway, New York,
New York, and
WHEREAS, the Lease was modified by Amendment Agreement between the parties
dated January 2, 1997 and further modified by Second Amendment Agreement dated
May 21, 1997 whereby Tenant leased from Landlord Room D in Suite 650 (the
"Second Additional Premises") and
WHEREAS, Landlord and Tenant desire to further modify the Lease so as to
add approximately 1,000 square feet not contiguous to the Demised Premises, more
specifically described as Room C, consisting of ninety square feet; Room 2,
consisting of 216 square feet; Room 4, consisting of 278 square feet; Room 5,
consisting of 156 square feet; Room 6, consisting of 133 square feet; and Room 7
consisting of 127 square feet ("the Third Additional Premises") as described in
Exhibit A annexed;
NOW THEREFORE, in consideration of the mutual covenants herein, the
Landlord and Tenant. agree as follows:
1. The amendments to the Lease set forth herein are effective as of August 1,
1997 (the "Effective Date").
2. The Annual Base Rent for the Demised Premises, and Third Additional
Premises (the "Combined Premises") is as follows:
From the Effective Date to December 31, 1998 at the rate of SIXTY SEVEN
THOUSAND FIVE HUNDRED DOLLARS ($67,500.00) per annum, payable in equal
monthly installments of FIVE THOUSAND SIX HUNDRED TWENTY FIVE DOLLARS
($5,625.00).
For the two years and six months January 1, 1999 to June 30, 2001 at the
rate of SEVENTY SIX THOUSAND FIVE HUNDRED DOLLARS ($76,500.00) per annum,
payable in equal monthly installments of SIX THOUSAND THREE HUNDRED
SEVENTY FIVE DOLLARS ($6,375.00).
3. Tenant shall accept the Third Additional Premises in "as is" condition
except Landlord shall, at Landlord's expense, perform the following work
("Landlord's Work") at or about the Effective Date:
1. Construct archway at entrance of Room #C
2. Construct a wall in Room #2.
<PAGE>
4. In 38.01 delete (c) and (d) and in their place insert the following:
"(c) "Tenant's Proportionate Share" shall mean one and thirteen
hundredths of one percent (1.13%)
(d) "Area of the Premises" shall mean the rentable square foot area of
the Demised Premises (which the parties have agreed shall be 4,500
square feet.)"
5. In Paragraph 3901 as amended delete "$8,750.00" and "$729.17" and insert
"$11,250.00" and "$937.50" respectively.
6. Anything herein to the contrary notwithstanding, Landlord shall have the
right for any reason whatsoever to recapture from Tenant the entire
Combined Premises or any part thereof on thirty (30) days notice to the
Tenant and Tenant shall promptly and peaceably remove therefrom on the
date as specified in Landlord's notice, and upon such removal, the Base
Rent and additional rent shall revert to the rates that prevailed before
this Third Amendment Agreement took effect.
7. Tenant shall, upon execution hereof pay an additional sum of $2,000.00 to
Landlord as additional Security under the Lease for a total Security of
$8,250.00.
8. In all other respects the Lease shall remain the same.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.
BRAUN MANAGEMENT INC. AS AGENT FOR
BOWLING GREEN ASSOCIATES, L.P.
By: /s/ [ILLEGIBLE]
-------------------------------------
GLOBECOMM, INC.
By: /s/ [ILLEGIBLE] 8/6/97
-------------------------------------
2
<PAGE>
FOURTH AMENDMENT AGREEMENT
The parties to this Agreement as of August 20, 1997 are: BRAUN MANAGEMENT
INC., as agent for BOWLING GREEN ASSOCIATES, L.P., ("Landlord") and GLOBECOMM,
INC., ("Tenant").
WHEREAS, Landlord and Tenant entered into a certain lease agreement dated
June 25, 1996 (hereinafter, the "Lease") which provides inter alia, for Tenant
to rent and occupy Suite 660 (the "Demised Premises") at 11 Broadway, New York,
New York, and
WHEREAS, the Lease was modified by Amendment Agreement between the parties
dated January 2, 1997, whereby Tenant leased from Landlord Rooms A and B
("Additional Premises A & B") and further modified by Second Amendment Agreement
dated May 21, 1997 whereby Tenant leased from Landlord Room D in Suite 650 (the
"Second Additional Premises") and further modified by Third Amendment Agreement
dated August 1, 1997 whereby Tenant leased from Landlord Room C, Room 2, Room 4,
Room 6 and Room 7 in Suite 650 (the "Third Additional Premises"); and all of the
above were described herein, collectively as (the "Combined Premises"), and
WHEREAS, Landlord and Tenant desire to further modify the Lease so as to
add approximately 2,700 square feet to the Combined Premises, more specifically
described as Rooms 8, 9, 10 and 11 in Suite 650, ("the Fourth Additional
Premises") as described in Exhibit A annexed;
NOW THEREFORE, in consideration of the mutual covenants herein, the
Landlord and Tenant, agree as follows:
1. The amendments to the Lease set forth herein are effective as of September
1, 1997 (the "Effective Date").
2. The Annual Base Rent for the Combined Premises, and the Fourth Additional
Premises (the "Amended Combined Premises") is as follows:
From the Effective Date to September 30, 1997 the rent will be EIGHT
THOUSAND FOUR HUNDRED FIFTY DOLLARS ($8,450.00).
From the October 1, 1997 to December 31, 1998 at the rate of ONE HUNDRED
EIGHT THOUSAND DOLLARS ($108,000.00) per annum, payable in equal monthly
installments of NINE THOUSAND DOLLARS ($9,000.00).
For the two years and six months January 1, 1999 to June 30, 2001 at the
rate of ONE HUNDRED TWENTY-TWO THOUSAND FOUR HUNDRED ($122,400.00) per
annum, payable in equal monthly installments of TEN THOUSAND TWO HUNDRED
DOLLARS ($10,200.00).
3. Tenant shall accept the Fourth Additional Premises in "as is" condition
except Landlord shall, at Landlord's sole cost and expense at or about the
commencement of the term according to Building Standards perform the
following work ("Landlord's Work"):
1. Remove wall between Room 10 and 11.
2. Carpet outside of bathroom and entrance.
3. Carpet one (1) room of the original space which has no carpet
4. Venetian blinds where needed.
<PAGE>
5. Go install a door in Room 2.
6. Carpet Room 8 where there's no carpet.
4. In 38.01 delete (c) and (d) and in their place insert the following:
"(c) "Tenant's Proportionate Share" shall mean one and eight tenths of
one percent (1.8%).
(d) "Area of the Premises" shall mean the rentable square foot area of
the Demised Premises which the parties have agreed shall be 7,200
square feet."
5. In Paragraph 39.01 as amended delete "$11,250.00 "and "$937.50" and insert
"$18,000.00" and "$1,500.00" respectively.
6. Anything herein to the contrary notwithstanding, Landlord shall have the
right for any reason whatsoever to recapture from Tenant the entire
Amended Combined Premises or any part thereof on thirty (30) days notice
to the Tenant and Tenant shall promptly and peaceably remove therefrom on
the date as specified in Landlord's notice, and upon such removal, the
Base Rent and additional rent shall thereafter be apportioned on a per
rental foot basis according to the rental rates prevailing in this Fourth
Amendment Agreement.
7. Tenant shall, upon execution hereof pay the sum of $1,950.00 to Landlord
as additional Security under the Lease for a total Security of $10,200.00.
8. Anything in the Lease and Amendment Agreement notwithstanding, in the
event Tenant shall exercise its option to cancel Lease as provided for in
Article 48 of the Lease, Tenant shall reimburse Landlord shall for the
unamortized portion of Landlord's Work as shall have been completed by
Landlord pursuant to Paragraphs 3 of the First, the Second, the Third
Amendment and Fourth Amendment Agreements.
9. In all other respects the Lease shall remain the same.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.
BRAUN MANAGEMENT INC. AS AGENT FOR
BOWLING GREEN ASSOCIATES, L.P.
By: /s/ [ILLEGIBLE]
-------------------------------------
GLOBECOMM, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
2
<PAGE>
EXHIBIT A
[GRAPHIC OMITTED]
<PAGE>
FIFTH AMENDMENT AGREEMENT
The parties to this Agreement as of February 3, 1998 are: BRAUN MANAGEMENT
INC. as agent for BOWLING GREEN ASSOCIATES, L.P., ("Landlord") and GLOBECOMM,
INC. ("Tenant").
WHEREAS, Landlord and Tenant entered into a certain lease agreement dated
June 25, 1996 (hereinafter, the "Lease") which provides inter alia, for Tenant
to rent and occupy Suite 660 (the "Demised Premises") at 11 Broadway, New York,
New York, and
WHEREAS, the Lease was modified by Amendment Agreement between the parties
dated January 2, 1997, whereby Tenant leased from Landlord Rooms A and B
("Additional Premises A & B") and further modified by Second Amendment Agreement
dated May 21, 1997 whereby Tenant leased from Landlord Room D in Suite 650 (the
"Second Additional Premises") and further modified by Third Amendment Agreement
dated August 1, 1997 whereby Tenant leased from Landlord Room C, Room 2, Room 4,
Room 6 and Room 7 in Suite 650 (the "Third Additional Premises"); and further
modified by Fourth Amendment Agreement dated August 20, 1997 whereby Tenant
leased from Landlord Rooms 8, 9, 10 and 11 in Suite 650 (the "Fourth Additional
Premises"), and all of the above were described herein, collectively as (the
"Combined Premises") and
WHEREAS, Landlord and Tenant desire to further modify the Lease so as to
add approximately 2,710 square feet to the Combined Premises, more specifically
described as all the remaining space in Suite 650, ("the Fifth Additional
Premises") as described in Exhibit A annexed.
NOW THEREFORE, in consideration of the mutual covenants herein, the
Landlord and Tenant, agree as follows:
1. The amendments to the Lease set forth herein are effective as of March 10,
1998 (the "Effective Date").
2. The Annual Base Rent for the Combined Premises, including the Fifth
Additional Premises (the "Amended Combined Premises") is as follows:
From the Effective Date to December 31, 1998 the rent will be ONE HUNDRED
FORTY-EIGHT THOUSAND SIX HUNDRED FIFTY DOLLARS ($148,650.00) per annum,
payable in equal monthly installments of TWELVE THOUSAND THREE HUNDRED
EIGHTY-SEVEN DOLLARS and FIFTY CENTS ($12,387.50). The Base Rent
installment for the Fifth Additional Premises for the period extending
from the Effective Date to March 31, 1998 is SEVEN THOUSAND NINE HUNDRED
SIXTY-THREE DOLLARS and THIRTY-EIGHT
1
<PAGE>
($7,963.38), which will be paid upon execution hereof.
From January 1, 1999 to the Expiration Date, the at the rate of ONE
HUNDRED SIXTY-EIGHT THOUSAND FOUR HUNDRED SEVENTY DOLLARS ($168,470.00)
per annum, payable in equal monthly installments of FOURTEEN THOUSAND
THIRTY-NINE DOLLARS and SEVENTEEN CENTS ($14,039.17).
3. Tenant shall accept the Fifth Additional Premises in "as is" condition
except Landlord shall, at Landlord's sole cost and expense at or about the
commencement of the term according to Building Standards perform the
following work ("Landlord's Work")
1. Provide and install carpeting to be selected by Tenant from
Landlord's standard samples in additional space only.
2. Paint walls and trim in color to be selected from Landlord's
standard paint chart in the additional space only.
3. Construct three (3) offices.
4. In 38.01 delete (c) and (d) and in their place insert the following:
"(c) "Tenant's Proportionate Share" shall mean two and thirty-four
hundredths of one percent (2.34%).
(d) "Area of the Premises" shall mean the rentable square foot area of
the Demised Premises which the parties have agreed shall be 9,910
square feet."
5. In Paragraph 39.01 as amended delete "$18,000.00" and "$1,500.00" and
insert "$24,775.00" and "$2,064.58" respectively.
6. Anything herein to the contrary notwithstanding, Landlord shall have the
right for any reason whatsoever to recapture from Tenant the entire
Amended Combined Premises or any part thereof on thirty (30) days notice
to the Tenant and Tenant shall promptly and peaceably remove therefrom on
the date as specified in Landlord's notice, and upon such removal, the
Base Rent and additional rent shall thereafter be apportioned on a per
rental foot basis according to the rental rates prevailing in this Fifth
Amendment Agreement.
7. Tenant shall, upon execution hereof pay the sum of $3,839.17 to Landlord
as additional Security under the Lease for a total Security of $14,039.17.
2
<PAGE>
8. Anything in the Lease and Amendment Agreement notwithstanding, in the
event Tenant shall exercise its option to cancel Lease as provided for in
Article 48 of the Lease, Tenant shall reimburse Landlord shall for the
unamortized portion of Landlord's Work as shall have been completed by
Landlord pursuant to Paragraphs 3 of the First, Second, Third, Fourth and
Fifth Amendment Agreements.
9. Article 48 of the Original Lease is amended to provide that Tenant shall
also have the privilege of canceling the Lease effective June 31, 1998
under the same conditions as are otherwise in Article 48 provided.
10. In all other respects the Lease shall remain the same.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.
BRAUN MANAGEMENT INC. AS AGENT FOR
BOWLING GREEN ASSOCIATES, L.P.
By: /s/ [ILLEGIBLE]
-------------------------------------
GLOBECOMM, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
3
<PAGE>
SIXTH AMENDMENT AGREEMENT
The parties to this Agreement as of May 21, 1998 are: BRAUN MANAGEMENT
INC., as agent for BOWLING GREEN ASSOCIATES, L.P., ("Landlord") and GLOBECOMM
INC., ("Tenant").
WHEREAS, Landlord and Tenant entered into a certain lease agreement dated
June 25, 1996 (hereinafter, the "Lease") which provides inter alia, for Tenant
to rent and occupy Suite 660 (the "Demised Premises") at 11 Broadway, New York,
New York, and
WHEREAS, the Lease was modified by Amendment Agreement between the parties
dated January 2, 1997, whereby Tenant leased from Landlord Rooms A and B
("Additional Premises A & B") and further modified by Second Amendment Agreement
dated May 21, 1997 whereby Tenant leased from Landlord Room D in Suite 650 (the
"Second Additional Premises") and further modified by Third Amendment Agreement
dated August 1, 1997 whereby Tenant leased from Landlord Room C, Room 2, Room 4,
Room 6 and Room 7 in Suite 650 (the "Third Additional Premises"); and further
modified by Fourth Amendment Agreement dated August 20, 1997 whereby Tenant
leased from Landlord Rooms 8, 9, 10 and 11 in Suite 650 (the "Fourth Additional
Premises"), and further modified by Fifth Amendment Agreement dated February 3,
1998 whereby Tenant leased from Landlord 2,710 square feet more specifically
described as all the remaining space in Suite 650 (the "Fifth Additional
Premises"), and all of the above were described to herein, collectively as (the
"Combined Premises") and
WHEREAS, Landlord and Tenant desire to further modify the Lease so as to
add the balance of the sixth floor consisting of approximately 9,300 square feet
(the "Sixth Additional Premises") which will then become part of the Combined
Premises, as further described in Exhibit A annexed; and
NOW THEREFORE, in consideration of the mutual covenants herein, the
Landlord and Tenant. agree as follows:
1. The amendments to the Lease set forth herein are effective as of June 1,
1998 (the "Effective Date").
2. The Base Rent for the Combined Premises, is as follows:
From the Effective Date to September 30, 1998 the Annual Base Rent will be
TWO HUNDRED EIGHTEEN THOUSAND FOUR HUNDRED DOLLARS ($218,400.00) per
annum, payable in equal monthly installments of EIGHTEEN THOUSAND TWO
HUNDRED DOLLARS ($18,200.00).
From October 1, 1998 to December 31, 1998 the Annual Base Rent will be TWO
HUNDRED EIGHTY EIGHT THOUSAND ONE HUNDRED FIFTY DOLLARS ($288,150.00),
payable in equal monthly payments of TWENTY FOUR THOUSAND TWELVE DOLLARS
AND FIFTY CENTS ($24,012.50).
1
<PAGE>
From January 1, 1999 to June 30, 2001 the annual Base Rent shall be THREE
HUNDRED TWENTY SIX THOUSAND FIVE HUNDRED SEVENTY DOLLARS ($326,570.00)
payable in equal monthly installments of TWENTY SEVEN THOUSAND TWO HUNDRED
FOURTEEN DOLLARS AND SEVENTEEN CENTS ($27,414.17).
3. Tenant shall accept the Sixth Additional Premises in "as is" condition
except Landlord shall, at Landlord's sole cost and expense at or about the
commencement of the term according to Building Standards perform the
following work in the Sixth Additional Premises only ("Landlord's Work"):
a. In the Southern half of the Building's West wing at or about the
Effective Date
i. Provide and install carpeting to be selected by Tenant from
Landlord's standard samples.
ii. Paint walls and trim in color to be selected from Landlord's
standard paint chart.
iii. Construct five (5) offices and three (3) doors (per plan
annexed as Exhibit A).
b. In the Northern half of the Building's West wing at or about October
1, 1998.
i. Provide and install carpeting to be selected by Tenant from
Landlord's standard samples.
ii. Paint walls and trim in color to be selected from Landlord's
standard paint chart.
iii. Construct ten (10) cubicles (per plan annexed as Exhibit A)
c. In the existing space 8:
i. Extend half-walls up to the ceiling.
ii. Provide and install doors in new partitions.
4. In 38.01 delete (c) and (d) and in their place insert the following:
c. "Tenant's Proportionate Share" shall mean four and fifty-four
hundredths of one percent (4.54%).
d. "Area of the Premises" shall mean the rentable square foot area of
the Demised Premises which the parties have agreed shall be 19,210
square feet."
5. In Paragraph 39.01 as amended delete "$24,775" and "$2,064.58" and insert
"$36,400.00" and "$3,033.33" respectively for the period June 1, 1998
through September 30, 1998 and insert "$48,025.00" and "$4,002.08"
respectively for the period October 1, 1998 through June 30, 2001.
6. Anything herein to the contrary notwithstanding, Landlord shall have the
right for any reason whatsoever to recapture from Tenant the entire
Combined Premises or any part thereof on sixty (60) days notice to the
Tenant and Tenant shall promptly and peaceably remove therefrom on the
date as specified in Landlord's notice, and upon such removal, the Base
Rent and additional rent shall thereafter be apportioned on a per rental
foot basis according to the rental rates prevailing in this Sixth
Amendment Agreement.
2
<PAGE>
7. Tenant shall, upon execution hereof remit the sum of $13,177.97 to
Landlord as additional Security under the Lease for a total Security of
$27,217.97.
8. Article 48 is deleted and in its place insert the following: "Tenant shall
have the privilege of canceling this lease effective September 30, 1999 on
not less than sixty (60) days prior written notice to Landlord and the
Lease shall expire on that day as if that day was the day that the Lease
was to expire upon by its original term. In the event Tenant shall
exercise its option to cancel Lease as hereinabove provided, Tenant shall
reimburse Landlord shall for the unamortized portion of Landlord's Work as
shall have been completed by Landlord pursuant to Paragraphs 3 of the
First, Second, Third, Fourth Fifth and Sixth Amendment Agreements.
9. Tenant may station a receptionist in the Northern half of the Sixth
Additional Premises on and after the Effective Date.
10. Anything in Paragraph 9 above to the contrary notwithstanding in the event
Tenant occupies the Northern half of the Building's West Wing for the
purpose of operation of its business before October 1, 1998, the Base Rent
applicable to the period October 1, 1998 to December 31, 1998 shall be
advanced to the date that such operation begins. Base Rent shall be
computed on a per diem basis if such occupancy occurs on any day other
than the first day of a calendar month.
11. In all other respects the Lease shall remain the same.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.
BRAUN MANAGEMENT INC. AS AGENT FOR
BOWLING GREEN ASSOCIATES, L.P.
By: /s/ M. Braun
--------------------------------
GLOBECOMM, INC.
By: /s/ Bob Helfant 6/2/98
--------------------------------
3
<PAGE>
Exhibit 10.18
[Letterhead of Spitfire Marketing Systems Inc.]
Spitfire Marketing Systems Inc.
650 FIFTH STREET, SUITE 405
SAN FRANCISCO, CA 94107
Phone (415) 442-5040 Fax (415) 442-5049
11 August 1998
To: Mr. Bob Helfant
iName, Inc.
New York, New York
Good morning, Bob:
This will confirm your acceptance of a sub-lease with Spitfire Marketing in San
Francisco for space at 650 Fifth Street/Suite 405 effective September 1, 1998.
(1) We will provide rental space in Quadrant B of Suite 405 (see attached
floor plan). The space is 710 square feet in the master suite.
(2) We will provide floor space/fully equipped conference room/telephone lines
and jacks for up to 4 lines. iName, Inc. is responsible for monthly
telephone usage, long distance.
(3) All utilities and maintenance/cleaning are included in the base monthly
rent.
(4) We will provide a separate fax number for iName, Inc will be billed for
their long distance faxes at regular phone rates. The fax machine and
copier is coded so accurate accounting will be provided on a monthly
basis. After usage of 2000 copies per month, a $35.00 per month copier fee
will be added to the billing.
(5) This lease is on a month-to-month basis. Thirty days notice must be
provided in writing to Spitfire Marketing upon vacating premises.
<PAGE>
- -2-
Spitfire Marketing Systems
iName, Inc. Lease Agreement
(6) iName, Inc. will add Spitfire to its general liability insurance.
(7) Upon fully executed lease agreement, Spitfire Marketing will provide DSL
telephone lines to all tenants. This will be fully operational 32 days
from date of this letter.
(8) The monthly rent will be $1100.00 per month. A deposit of $1100.00 per
months is also required to Spitfire Marketing Systems to secure this
agreement. Spitfire is waiving the last month's rent in lieu of reduced
deposit. Rent is due on the second of the month, with a five day grace
period. For the time period, until internet connectivity is established,
rent is $700.00 per month.
This agreement is effective:
By /s/ Bob Helfant 8/14/98
------------------------------------
Name, Inc./title/date
/s/ John Durham 8/14/98
- ------------------------------------
Spitfire Marketing/John Durham
Enclosure/floor plan
<PAGE>
Exhibit 10.19
EXECUTION COPY
TELEHOUSE 25 BROADWAY CENTER SPACE LICENSE
FOR ORIGINAL
GLOBECOMM, INC.
This Space License (the "License") made this 29th day of May, 1998, by and
between TELEHOUSE International Corporation of America, a Delaware corporation,
having an address at 7 Teleport Drive, Staten Island, New York, 10311
("TELEHOUSE") and Globecomm, Inc., a Delaware corporation, having an address at
11 Broadway, Suite 660, New York, NY 10004 ("Licensee").
W I T N E S S E T H:
WHEREAS, TELEHOUSE and Sony Corporation of America ("Sublandlord") have
entered into an agreement (the "Overlease") dated April 11, 1997, covering the
leasing of a portion of the 5th floor of an office building located at 25
Broadway, New York, New York, 10004 (25 Broadway, the "Building"). The Overlease
is subject to that certain lease as amended by First Amendment to Lease, dated
January 9, 1986 (collectively, the "Prime Lease"), between 25 Broadway Realty
Company, as landlord ("Prime Landlord"), and E.F. Hutton & Company, Inc.
predecessor in interest to Lehman Brothers Inc. ("Landlord"), as tenant, and
Sublease dated as of June 29, 1988, between E.F. Hutton & Company, Inc.,
predecessor in interest to Lehman Brothers Inc., as sublessor, and CBS Records,
Inc. (the "Prime Sublease"), predecessor in interest to Sublandlord as
sublessee, as amended by First Amendment to Sublease, dated as of August 28,
1996, covering the fifth floor of the Building.
WHEREAS, Licensee wishes to operate its computer and/or communications
systems located at the TELEHOUSE premises in the Building, and TELEHOUSE is
willing to grant to Licensee an exclusive license to use a portion of the
TELEHOUSE premises for such purposes under the terms and conditions contained
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained and for other good and valuable consideration, TELEHOUSE
and Licensee hereby agree as follows:
1. Use of Space. Licensee shall use a part of TELEHOUSE premise (the
"Space"), as shown in Exhibit A "Space Plan Specifications". The size of the
Space shall be approximately 800 square feet used solely for the installation
and operation of equipment as listed in Exhibit B "Equipment List", in
connection with Licensee's business, to the extent allowed in the Overlease.
Licensee covenants and agrees that Licensee shall not use the Space for any
other purposes whatsoever unless otherwise specifically authorized in writing by
TELEHOUSE. Licensee's use of the Space is to be conducted in accordance with all
security procedures adopted by TELEHOUSE.
2. Prohibited Uses. Licensee shall not at any time use or allow any person
to use the Space, or do or permit anything to be done or kept in or about the
Space that: (a) violates any certificate of occupancy in force for the Building;
(b) causes or is likely to cause damage to the Building or the Space, any
equipment, facilities or other systems therein; (c) constitutes a violation of
any Legal Requirement; (d) violates a requirement or condition of the standard
fire insurance policy issued for office or data processing buildings in the City
of New York or, in the absolute judgement of TELEHOUSE constitutes an
extra-hazardous condition; (e) constitutes a nuisance, annoyance or
inconvenience to other lessees, licensees or occupants of the Building or any
portion of the Space or interferes with or disrupts the use or occupancy of any
area of the Building or any portion of the Space by other lessees, licensees or
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occupants of the Building or the Space; (f) interferes with the computer or
telecommunications operations of the Building or the Space; (g) constitutes an
unlawful, immoral or objectionable occurrence or condition; or (h) violates any
provision of the Overlease.
3. Services Provided. TELEHOUSE shall provide certain support
(collectively, the "Services") for the Licensee's equipment installed in the
Space: (1) installation support ("Installation Services") including necessary
power connections, floor tile cutouts, equipment and terminal connections as
detailed in the Installation Support Work Description attached hereto as Exhibit
C and incorporated by reference herein; (2) conditioned environment with
controlled access, as shown in Exhibit A, including UPS backed electricity and
computer air conditioning, and (3) engineering support ("Engineering Services")
for the ordering, installation coordination and acceptance testing of
telecommunications facilities and services as detailed in the Engineering
Support Work Description attached hereto as Exhibit D and incorporated by
reference herein. Any additional services other than the Services thus defined
and the fees to be paid for such additional services are subject to written
amendment of this License upon mutual agreement between TELEHOUSE and Licensee.
Licensee acknowledges that TELEHOUSE may temporarily interrupt the Services for
the reasons of mandate by law, utility stoppage beyond its control, or
inspection and repair required to operate and maintain the plumbing, mechanical
and electrical systems of the Building. TELEHOUSE shall endeavor to provide
prior written notice to Licensee of such scheduled inspections and repairs.
4. Floor Load. Licensee shall not place a load upon any floor of the Space
which exceeds either the load per square foot which such floor was designed to
carry (80 lbs. per square foot) or that which is allowed by law. TELEHOUSE
reserves the right to prescribe the weight and position of all safes, business
machines and mechanical equipment.
5. Equipment Installation and Removal. Licensee shall provide the
equipment installation work. Prior to the expiration of this License, Licensee,
at its expense, shall remove from the Space, all of Licensee's property, and
Licensee shall repair any damage to the Space or the Building resulting from the
installation or removal of Licensee's property.
6. Term. The term of this License (the "Term") shall be three (3) years,
commencing June 15th, 1998 and end at noon on June 14th, 2001 (the "Termination
Date")
7. License Fees. Licensee shall pay to TELEHOUSE $10,667.00 per month
(License Fees) for the License granted and the Services provided hereunder by
TELEHOUSE. In addition, Licensee shall pay TELEHOUSE a one-time payment of
$20,000.00 for Installation Services as provided above.
Licensee understands that receipt of all one time installation fees and
pre-payment of one months license fee is required prior to TELEHOUSE commencing
Installation Services and Licensee being permitted access to the site or
delivery of lines and equipment. A one time fee of $500 per private line and
$100 per switched line applies for installation of communication circuits
wherein TELEHOUSE Engineering Support is utilized as per Exhibit D, (except for
circuits installed prior to Commencement Date). In addition to any fees
specified herein, Licensee shall also be responsible for the payment of sales
and/or use taxes, if any, imposed by any governmental authority or agency in
connection with the license granted here or services performed hereunder. Any
additional services, including additional equipment operation to be performed by
TELEHOUSE for Licensee which are not covered by this License and the
consideration to be paid by Licensee for such additional services shall be
subject to the mutual agreement of TELEHOUSE and Licensee and shall be set forth
in writing. In the event that Licensee fails to pay the License Fees set forth
in this Section 7 within ten days (10) after such payment is due, then Licensee
shall pay TELEHOUSE a late charge equal to 5% of such past due payment as an
agreed liquidated amount as compensation for TELEHOUSE's additional
administrative expense relating to such late payment.
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8. Power Usage Fees. Licensee agrees to pay for cost of actual power used
by Licensee's installed equipment ("Power Fees"). Such Power Fees will be based
on rates paid by TELEHOUSE for electrical power at the site and actual meter
readings for power panels providing power to Licensee's equipment.
9. Insurance. During the Term of this License, TELEHOUSE shall maintain
All Risk casualty insurance, covering the TELEHOUSE premises in the Building and
insuring such premises in the amount of its full replacement value. During the
Term, Licensee shall maintain, at its expense, All Risk casualty insurance
covering Licensee' property in the amount of their replacement value. During the
Term of this License, TELEHOUSE shall maintain public liability insurance
covering the TELEHOUSE premises in the Building and insuring against all hazards
and risks customarily insured against by persons operating data communications
buildings. Licensee, at its expense, shall maintain, at all times during the
Term of the License, comprehensive general liability insurance, written on an
occurrence basis with blanket contractual liability coverage, with respect to
use of the Space and operation of business therein, with combined single-limit
coverage of not less than One Million Five Hundred Thousand Dollars
($1,500,000). TELEHOUSE may increase the policy amount to be maintained by
Licensee under this Section 9 as TELEHOUSE deems necessary in order to maintain
adequate liability coverage.
TELEHOUSE International Corporation of America, Sony Corporation of
America, 25 Broadway Realty Company, and Lehman Brothers Inc., shall be
designated as additional insured on any insurance policy required by this
Section 9. Licensee shall deliver to TELEHOUSE certificates of insurance for the
insurance coverage required by this Section 9, in form reasonably satisfactory
to TELEHOUSE, issued by the insurance company or its authorized agent, on or
before the Commencement Date. All policies shall provide that they cannot be
cancelled or modified unless TELEHOUSE is given 30 days prior written notice of
such cancellation or modification.
10. Indemnity. Licensee shall indemnify and hold harmless TELEHOUSE
against all claims, suits, expenses, losses, liabilities or damages resulting
from any breach by Licensee of any material provision of this License or from
any negligence, gross negligence or willful misconduct of Licensee. TELEHOUSE
shall, subject of Section 11 below, indemnify and hold harmless Licensee against
all claims, suits, expenses, losses, liabilities or damages directly resulting
from a material breach by TELEHOUSE of any material provision of this License
due to gross negligence or willful misconduct of TELEHOUSE.
11. Limitation of Liability. Notwithstanding Section 10 above, in no event
shall TELEHOUSE be liable for (i) lost profits, lost information or any damages
to Licensee or any of Licensee's customers' business or property caused by any
error in judgement of, or any action taken or omitted by, TELEHOUSE, or any
interruption of the Services, unless such error, action, omission or
interruption constitutes or results from gross negligence or willful misconduct
of TELEHOUSE; or (ii) special, consequential or punitive damages as a result of
its performance or nonperformance of this License. TELEHOUSE shall not be liable
for any claims, suits, expenses, losses, liabilities or damages caused by
Licensee's failure to perform its responsibilities under this License or by
failure of TELEHOUSE to fulfill its obligations under this License due to causes
beyond its control, including, but not limited to, defects in computer and/or
communications systems provided by Licensee, acts of God, interruption of power
or other utilities, interruption of transportation or communication services,
acts of civil or military authority, national emergencies, or strike. Licensee
shall not be liable for its failure to perform its non-monetary obligations
hereunder due to causes beyond its control, including but not limited to,
defective telecommunication systems or equipment provided by Licensee, acts of
God, interruption of power or other utilities, interruption of transportation or
communication services, acts of civil or military authority, national
emergencies or strike. In the event TELEHOUSE is found to be liable for claims,
suits, expenses, losses, liabilities or damages pursuant to this Section 11,
TELEHOUSE's liability per wrongful action or inaction of TELEHOUSE shall be the
least of (a) the provable amount of actual damages directly incurred from such
action or inaction, or (b) in the case of services interruption, the amount of
the monthly fees paid by Licensee to TELEHOUSE prorated by the number of days in
which the Services are interrupted, or (c) the amount of the monthly fees paid
by Licensee to TELEHOUSE. In no event shall TELEHOUSE's
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liability be greater than the monthly fees it receives.
12. Confidentiality. Each party, for itself, its agents, employees and
representatives agrees that it will not divulge any confidential or proprietary
information which it receives from the other party, except as may be required in
the performance of the Services or the implementation of the project with
respect to which the Services are rendered; provided, however, that no liability
shall arise hereunder as a result of the dissemination of any information which
(i) was in the possession or control of one party prior to the date of
disclosure to that party by the other party hereunder, or (ii) was in the public
domain or enters the public domain through no improper act by the party to which
such information was disclosed or any of that party's agents or employees, or
(iii) was rightfully given to a party by a source independent of the other
party, and provided further, that each party shall be permitted to disclose any
information to the extent required by applicable law or governmental
authorities. Any report or other document prepared by TELEHOUSE in the
performance of the Services for use by Licensee shall be deemed to be
confidential information hereunder.
13. Binding Agreement; Assignment. This License shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that Licensee shall not be permitted to assign this License or
any interest herein without the prior written consent of TELEHOUSE, which
consent shall not be unreasonably withheld. Licensee shall not pledge, mortgage
or encumber this License or any interest herein and shall not (without the prior
written consent of TELEHOUSE) assign this License or any interest herein or
permit any other person or entity to occupy the TELEHOUSE Space. Licensee shall
reimburse TELEHOUSE on demand for any reasonable costs that may be incurred by
TELEHOUSE in connection with any proposed assignment. Notwithstanding any
assignment, Licensee will remain fully liable for the payment of fees and for
the performance of all the other obligations of Licensee contained in this
License. The consent by TELEHOUSE to any assignment shall not relieve Licensee
of the obligation to obtain the consent of TELEHOUSE to any future assignment.
14. Cooperation of Licensee. Licensee shall fully cooperate with TELEHOUSE
in connection with TELEHOUSE's performance of the Services. Licensee shall, with
reasonable promptness, provide all information reasonably required by TELEHOUSE
for its performance of the services, and shall make designated representatives
available for regular consultation at such times and places as TELEHOUSE shall
reasonably request.
15. No Agency Relationship Implied. It is acknowledged and agreed by
Licensee that TELEHOUSE performs the Services hereunder solely as an independent
contractor and that no joint venture, partnership, employment, agency or other
relationship is intended, accomplished or embodied in this License. TELEHOUSE
shall have the sole and exclusive right to supervise, manage, control and direct
its performance of this License.
16. Default.
(a) Failure to Pay Fees. In the event Licensee fails to pay monthly or
other fees within fifteen (15) days of TELEHOUSE's written notice to Licensee of
its failure to pay when due and demand for the immediate payment thereof,
TELEHOUSE may at its sole discretion take any or all of the following actions:
(i) prohibit Licensee's access to the Space; (ii) terminate Operational Services
to Licensee as defined in Exhibit C; (iii) restrict vendor access to work on
Licensee's equipment and/or circuits and (iv) terminate this License. In the
event Licensee fails to perform or comply with any other provision of this
License within ten (10) days of TELEHOUSE's written notice to Licensee of its
failure to so perform or comply, TELEHOUSE may terminate this License.
Additionally, in the event of Licensee's default under this License and failure
to cure such default within the time periods specified, Prime Landlord or
Landlord or Sublandlord may also terminate this License. Licensee shall in any
event remain fully liable for damages as provided by law and for all costs and
expenses incurred by TELEHOUSE on account of such default, including reasonable
attorneys' fees. Licensee's obligation to pay all fees and charges which have
been
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accrued shall survive any termination of this License.
(b) Early Termination. Licensee may elect early termination at the end of
the first or second year of the License Term. In the event of a termination of
this License by Licensee prior to the end of the Term, Licensee shall provide
TELEHOUSE written notification at least 60 days prior to effective date of such
early termination. Such termination must include payment of the penalty fee and
remaining monthly fees for that year. Written notification will be considered
invalid if not accompanied by such payment. Penalty fee for termination on the
first anniversary is one-time payment of $15,000.00; for termination at second
anniversary a one time payment of $7,000.00.
(c) Cross Default. In the event Licensee fails to observe and perform any
material provisions of any other license or lease agreement with TELEHOUSE, if
any, for space in the Building or in any other building in the TELEHOUSE complex
to be observed or performed by Licensee, where such failure continues beyond any
grace period set forth in such other license or lease agreement for the
remedying of such default, TELEHOUSE may, at its option, terminate this License.
17. Termination of License. If (a) TELEHOUSE exercises its right to
terminate the License pursuant to Section 16 above, or (b) Prime Landlord or
Landlord or Sublandlord terminates this License pursuant to Section 16 above, or
(c) the Term of the License shall expire and terminate, then in each such case,
Licensee shall immediately quit and peacefully surrender the portion of the
Space it occupies to TELEHOUSE, and TELEHOUSE may recover the Space, by summary
proceedings or any action or proceeding, and remove all occupants and property
from the Space. If the space is not surrendered upon the expiration or earlier
termination of the License, Licensee hereby indemnifies TELEHOUSE against loss,
cost, expense, damage, claim or liability, including reasonable attorneys fees,
resulting from delay by Licensee in so surrendering the space. Licensee's
obligations under this Section 17 shall survive the expiration or early
termination of the License.
18. Notices. All notices, reports, requests or other communications given
pursuant to this License shall be made in writing, shall be delivered by hand
delivery, fax, or overnight courier service, shall be deemed to have been duly
given when delivered, and shall be addressed as follows:
To Licensee: Globecomm, Inc.
11 Broadway
New York, NY 10004
Attn.: Bob Helfant, SVP
Phone: 212-425-4200 Ext. 10
Fax: 212-425-3487
To TELEHOUSE: TELEHOUSE International Corporation of America
7 Teleport Drive
Staten Island, NY 10311
Attention: Sales & Marketing Dept.
Fax: 718-355-2517
19. Governing Law. The rights and obligations of the parties under this
License shall be governed by and construed and enforced in accordance with the
laws of the State of New York without giving effect to conflicts of laws
provisions.
20. Entire Agreement. The License constitutes the entire agreement between
TELEHOUSE and Licensee with respect to the use of the Space and the Services,
and may be modified only by a written instrument signed by a duly authorized
officer on behalf of each party. No representation or statement not contained in
this License shall be binding upon TELEHOUSE as a warranty or otherwise.
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IN WITNESS WHEREOF, the parties hereto have duly executed this License as
of the day and year first above written.
TELEHOUSE International
Globecomm, Inc. Corporation of America
By /s/ Bob Helfant By /s/ Yasuhiro Shintani
------------------------- -------------------------
Name: Bob Helfant Name: Yasuhiro Shintani
Title: Senior Vice President Title: President
Attachments:
Exhibit A - Site Plan
Exhibit B - Licensee's Equipment List
Exhibit C - Installation Support Work
Exhibit D - Engineering Support Work
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EXHIBIT A
TELEHOUSE BROADWAY CENTER
SITE I (PARTIAL)
EXHIBIT A
GLOBECOMM SITE PLAN
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EXHIBIT B
INSTALLATION SUPPORT WORK
TELEHOUSE shall provide the following Installation Services:
Site Preparation
1. The location for each of twenty (20) equipment cabinets will be
provided with one, 20 amp circuit (UPS power) with two L5-20 IG
receptacles plus one floor tile cutout to Licensee's specification.
2. Security cage with key lock.
3. Removal of existing office and conference room.
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EXHIBIT C
EQUIPMENT LIST
(To Be Provided by Licensee)
<TABLE>
<CAPTION>
Cabinet Equipment Power Heat Size Weight
ID ID (Kva) (BTU) (HxWxD) (pounds)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
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EXHIBIT D
ENGINEERING SUPPORT WORK DESCRIPTION
Upon receipt of Licensee's written request and specifications, TELEHOUSE will
perform the following engineering coordination work on the Licensee's behalf:
1) provide competitive carrier pricing information*
2) submit line order to carrier designated by Licensee*
3) confirm carrier's order number and scheduled installation date
4) coordinate line installation by carrier
5) confirm line operation by end-to-end or other such testing procedures as
may be appropriate
6) accept line from carrier upon approval of Licensee.
7) coordinate equipment (CSU, DSU, mux, etc.) and cable installation
associated with new line installation*
8) coordinate and perform point to point or end to end BERT test from
equipment to equipment*
9) coordinate and perform programming of equipment*
* Optional services based on Licensee's request and specific configuration
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FIRST AMENDMENT TO TELEHOUSE BROADWAY CENTER CO-LOCATION LICENSE
between ORIGINAL
TELEHOUSE INTERNATIONAL CORPORATION OF AMERICA
and
INAME.COM (FORMERLY GLOBECOMM, INC.)
THIS FIRST AMENDMENT TO TELEHOUSE BROADWAY CENTER CO-LOCATION
LICENSE (this "Amendment") is made and entered into as of the 18 day of January,
1999, by and between TELEHOUSE International Corporation of America, a Delaware
corporation, with an address at 7 Teleport Drive, Staten Island, New York, 10311
("TELEHOUSE") and Iname.com (formerly Globecomm, Inc.), a Delaware corporation,
having an address at 11 Broadway, Suite 660, New York, NY 10004 ("Licensee").
W I T N E S S E T H:
WHEREAS, TELEHOUSE and Licensee have entered into a License dated as
of the 29th day of May, 1998 (the "License") granting Licensee a nonexclusive
license to use a portion of the TELEHOUSE premises at 25 Broadway to operate its
computer and/or communications systems,
WHEREAS, TELEHOUSE and Licensee mutually desire to complete the term
of the License and the Licensee wishes to operate under an alternate company
name during the remainder of the License term, and in order to accomplish that,
TELEHOUSE and Licensee mutually desire to amend the License, upon the terms and
conditions set forth in this Amendment;
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained and for other good and valuable consideration, TELEHOUSE
and Licensee hereby agree as follows:
1. Amendment of License.
Wherein the License a reference is made to the company name
Globecomm, Inc., such company name will be amended to read Iname.com.
2. Confirmation of License. Except as modified by this Amendment,
the License is and shall remain in full force and effect. TELEHOUSE and Licensee
hereby ratify and confirm all of the terms and provisions of the Licensee, as
amended hereby.
IN WITNESS WHEREOF, TELEHOUSE and Licensee have hereunto executed
this Amendment by their respective duly authorized representatives as of the day
and year first above written.
TELEHOUSE International
INAME.COM Corporation of America
By /s/ Bob Helfant By /s/ Yasuhiro Shintani
------------------------- -------------------------
Name: Bob Helfant Name: Yasuhiro Shintani
Title: Senior Vice President Title: President
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ORIGINAL
SECOND AMENDMENT TO TELEHOUSE BROADWAY CENTER SPACE LICENSE
between
TELEHOUSE INTERNATIONAL CORPORATION OF AMERICA
and
INAME.COM
THIS SECOND AMENDMENT TO TELEHOUSE BROADWAY CENTER SPACE LICENSE
(this "Amendment"), is made and entered into as of the 18 day of January, 1999,
by and between TELEHOUSE International Corporation of America, a Delaware
corporation, with an address at 7 Teleport Drive, Staten Island, New York, 10311
("TELEHOUSE") and Iname.com, a Delaware corporation, having an address at 11
Broadway, Suite 660, New York, NY 10004 ("Licensee").
W I T N E S S E T H:
WHEREAS, TELEHOUSE and Licensee have entered into a License dated as
of May 29, 1998 and as amended by First Amendment date December 04, 1998 (the
"License") granting Licensee a nonexclusive license to use a portion of the
TELEHOUSE premises at 25 Broadway to operate its computer and/or communications
systems,
WHEREAS, TELEHOUSE and Licensee mutually desire that Licensee
license additional space, and in order to accomplish that, TELEHOUSE and
Licensee mutually desire to amend the License, upon the terms and conditions set
forth in this Amendment;
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained and for other good and valuable consideration, TELEHOUSE
and Licensee hereby agree as follows:
1. Amendment of License.
a. Amendment of Section 1. Section 1, Use of Space, is hereby
amended by changing the second sentence beginning with the words "The size of
the Space shall be approximately 800 square feet", to read as follows:
Effective as of September 15, 1998, the size of the Space shall be
approximately 800 sq. ft and effective September 15, 1998, 1,120 square feet
used solely for the installation and operation of equipment as listed in Exhibit
B "Equipment List", in connection with Licensee's business, to the extend
allowed in the Overlease.
b. Amendment of Section 7. Section 7, License Fees, the first
sentence is hereby amended to read as follows:
"7. License Fees. Licensee shall pay to TELEHOUSE $10,667.00 per month,
and effective September 15, 1998 $14,934.00 per month (Licensee Fees), for the
License granted and the Services provided hereunder by TELEHOUSE.
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2. Confirmation of License. Except as modified by this Amendment, the License is
and shall remain in full force and effect. TELEHOUSE and Licensee hereby ratify
and confirm all of the terms and provisions of the Licensee, as amended hereby.
IN WITNESS WHEREOF, TELEHOUSE and Licensee have hereunto executed
this Amendment by their respective duly authorized representatives as of the day
and year first above written.
TELEHOUSE International
INAME.COM, INC. Corporation of America
By /s/ Bob Helfant By /s/ Yasuhiro Shintani
------------------------- -------------------------
Name: Bob Helfant Name: Yasuhiro Shintani
Title: Senior Vice President Title: President
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ORIGINAL
THIRD AMENDMENT TO TELEHOUSE BROADWAY CENTER SPACE LICENSE
between
TELEHOUSE INTERNATIONAL CORPORATION OF AMERICA
and
MAIL.COM
THIS THIRD AMENDMENT TO TELEHOUSE BROADWAY CENTER SPACE LICENSE
(this "Amendment"), is made and entered into as of the 9 day of March, 1999, by
and between TELEHOUSE International Corporation of America, a Delaware
corporation, with an address at 7 Teleport Drive, Staten Island, New York, 10311
("TELEHOUSE") and Mail.com, a Delaware corporation, having an address at 11
Broadway, Suite 660, New York, NY 10004 ("Licensee").
W I T N E S S E T H:
WHEREAS, TELEHOUSE and Licensee have entered into a License dated as
of May 29, 1998 and as amended by First Amendment dated January 18, 1999, the
Second Amendment dated January 18, 1999, and the Third Amendment dated March 3,
1999, (the "License") granting Licensee a nonexclusive license to use a portion
of the TELEHOUSE premises at 25 Broadway to operate its computer and/or
communications systems,
WHEREAS, TELEHOUSE and Licensee mutually desire that Licensee
license additional space, and in order to accomplish that, TELEHOUSE and
Licensee mutually desire to amend the License, upon the terms and conditions set
forth in this Amendment;
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained and for other good and valuable consideration, TELEHOUSE
and Licensee hereby agree as follows:
1. Amendment of License. Wherein the License a reference is made to the
company name Iname.Com (formerly Globecom), such company name will be amended to
read Mail.Com.
a. Amendment of Section 1. Section 1, Use of Space is hereby amended
by changing the second sentence beginning with the words "The size of the Space
shall be approximately 800 square feet", to read as follows:
"Effective as of September 15, 1998, the size of the Space shall be
approximately 800 sq. ft and effective September 15, 1998, 1,120 square feet
used solely for the installation and operation of equipment as listed in Exhibit
B "Equipment List", and effective April 1, 1999, the addition of space in Site
II, to accommodate eight (8) of the Licensee's equipment cabinets."
b. Amendment of Section 7. Section 7, License Fees, the first
sentence is hereby amended to read as follows:
"7. License Fees. Licensee shall pay to TELEHOUSE $10,667.00 per month,
and effective September 15, 1998 $14,934.00 per month (Licensee Fees), and
effective April 1, 1999, Licensee shall pay TELEHOUSE an additional $4,800.00
per month (License Fees) for eight (8) equipment cabinets".
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c. Amendment of Exhibit B. Exhibit B, Installation Work Support, is
amended as per the attached, revised Exhibit B.
2. Confirmation of License. Except as modified by this Amendment, the
License is and shall remain in full force and effect. TELEHOUSE and Licensee
hereby ratify and confirm all of the terms and provisions of the Licensee, as
amended hereby.
IN WITNESS WHEREOF, TELEHOUSE and Licensee have hereunto executed
this Amendment by their respective duly authorized representatives as of the day
and year first above written.
TELEHOUSE International
Mail.Com, Inc. Corporation of America
By /s/ Bob Helfant By /s/ Yasuhiro Shintani
------------------------- -------------------------
Name: Bob Helfant Name: Yasuhiro Shintani
Title: Senior Vice President Title: President
Attachments: Exhibit B - Installation Support Work
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EXECUTION COPY
EXHIBIT B
INSTALLATION SUPPORT WORK
TELEHOUSE shall provide the following installation Services related to cabinets
in Site II:
Site Preparation
1. The location for each of twenty (20) equipment cabinets were be provided
with one, 20 amp circuit (UPS power) with two L5-20 IG receptacles plus
one floor tile cutout to Licensee's specifications. The location for each
of eight (8) additional equipment cabinets, will be provided with one 30
amp circuit (UPS power) with two (2) L5-15 IG receptacles in R3 drip proof
panelatte with covers, plus one floor tile cutout to Licensee's
specification for $9,600.00.
2. Equipment
Power strips, sixteen (16)15 amp with L5-15 plugs, four (4)15 amp with
5-15 plugs.
Cost $110.00 x 20 = $2,200.00 plus tax.
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Exhibit 10.20
LEASE AGREEMENT
AGREEMENT of Lease, made on the 28 day of August, 1998 BY AND BETWEEN
55 MADISON ASSOCIATES, LLC, a New Jersey Limited Liability Company,
c/o Alexander Summer, L.L.C., having its principal office at East 80
Route 4, Paramus, New Jersey, hereinafter referred to as "Landlord"
AND
iName
having its principal office at
c/o Robert Helfant
11 Broadway
Suite 660
New York, New York 10004
hereinafter referred to as "Tenant"
W I T N E S S E T H:
That the Landlord does hereby lease to the Tenant and the Tenant does
hereby rent from the Landlord for the term and upon the rentals and other
conditions hereinafter specified, the premises, located on the realty more fully
described on Exhibit A hereof (subject to conditions of title shown on Exhibit
A), situated at 55 Madison Avenue, in the Town of Morristown, New Jersey, County
of Morris, and State of New Jersey.
SUMMARY PAGES OF LEASE AGREEMENT
Name and Address of Landlord:
55 Madison Associates, LLC
c/o Alexander Summer, L.L.C.
East 80 Route 4
Paramus, New Jersey 07652
Name and Address of Tenant:
iName
having its principal office at
c/o Robert Helfant
11 Broadway
Suite 660
New York, New York 10004
Description of Premises:
Portion of first floor of premises known as "55 Madison Avenue,
Morristown, New Jersey 07960" comprising approximately 2,400 rentable square
feet which includes a share of the common area.
Term of Lease:
Number of Years: Three (3) years
Commencing : September 15, 1998
Terminating : September 14, 2001
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Fixed or Base Rental:
Annual Rental $57,600.00
Monthly Rental: $ 4,800.00
Tenant Percentage Share: 2.77%
Base Year: For Operating Cost Escalation, Fuel, Water and Electric Cost
Escalation and Tax Escalation: 1998
Tenant's SIC Code:
Security Deposit: Two (2) month's rent
Parking Spaces: Eleven (11) spaces of which three (3) are assigned
Notices:
To Landlord: 55 Madison Associates, LLC
c/o Alexander Summer, L.L.C.
East 80 Route 4
Paramus, New Jersey 07652
To Tenant: iName
c/o Robert Helfant
11 Broadway
Suite 660
New York, New York 10004
With Copy to:
Brokers: Alexander Summer, L.L.C.
Use by Tenant: General Office Use
Right to Cancel After One (1) Year: Tenant shall have the right to cancel this
Lease upon three (3) months written notice to Landlord, at any time after twelve
(12) months from the Commencement Date of the Lease; i.e., after September 15,
1999. As a fee to Landlord for the right of Tenant to terminate this Lease after
one (1) year, Tenant shall pay to Landlord two (2) month's rent ($9,600.00),
payment to be paid along with the three (3) month notice to Landlord
aforementioned.
Tenant Takes Space "As Is". Tenant leases the premises in its "As Is" condition
as of the Commencement Date of the Lease. Landlord shall not be required to do
any work in the Premises.
THE ABOVE LETTING IS UPON THE ABOVE TERMS AS WELL AS THE FOLLOWING TERMS AND
CONDITIONS:
SECTION 1. TERM.
The term of the within Lease Agreement shall be for three (3) years,
commencing on September 15, 1998 ("Commencement Date") and terminating on
September 14, 2001. See Summary Pages.
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SECTION 2. RENTAL.
Tenant covenants and agrees to make payment to the Landlord as rent for
and during the term hereof without further demand therefor the fixed or base
rent as shown above, in monthly payments as shown above on the first day of each
month of the lease term, in advance.
SECTION 3. USE AND OCCUPANCY.
Tenant shall use and occupy the Premises as a general office for the
business of the Tenant named above and for no other purpose. See Summary Pages.
SECTION 4. COVENANT TO PAY RENT.
Tenant shall pay the base rent, and any additional rent as hereinafter
provided, to Landlord at Landlord's above-stated address, or at such other place
as Landlord may designate in writing, without demand and without counterclaim,
deduction or setoff.
SECTION 5. CARE AND REPAIR OF PREMISES.
Tenant shall commit no act of waste and shall take good care of the
Premises and the fixtures and appurtenances therein, and shall, in the use and
occupancy of the Premises, conform to all laws, orders and regulations of the
federal, state, county and municipal governments or any of their departments.
Landlord shall make all necessary repairs to the Premises, except where a repair
has been made necessary by misuse or neglect by Tenant or Tenant's agents,
servants, visitors or licensees not covered by insurance. All improvements made
by Tenant to the Premises, which are so attached to the Premises that they
cannot be removed without material injury to the Premises shall become the
property of Landlord upon installation. Not later than the last day of the term,
Tenant shall, at Tenant's expense, remove all of Tenant's personal property and,
at Tenant's option, those improvements made by Tenant which have not become the
property of Landlord, including trade fixtures, cabinet work, movable paneling,
partitions and the like; repair all injury done by or in connection with the
installation or removal of said property and improvements; and surrender the
Premises in as good condition as they were at the beginning of the term,
reasonable wear and damage by fire, the elements, casualty, or other cause not
due to the misuse or neglect by Tenant, Tenant's agents, servants, visitors or
licensees, excepted. Tenant need not be responsible for damage covered by
Landlord's insurance. All other property of Tenant remaining on the Premises
after the last day of the term of this Lease shall be conclusively deemed
abandoned and may be removed by Landlord, and Tenant shall reimburse Landlord
for the cost of such removal. Landlord may have any such property stored at
Tenant's risk and expense.
Section 6. ALTERATIONS, ADDITIONS OR IMPROVEMENTS.
Tenant shall have the right to make any non-structural alterations,
improvements and additions to the Premises at Tenant's sole cost and expense,
provided:
(a) Plans have been submitted to and approved in advance by Landlord,
which approval shall not be unreasonably withheld or delayed.
(b) All contractors and subcontractors have been approved in advance by
Landlord, which approval shall not be unreasonably withheld or delayed.
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(c) Prior to the commencement of any proposed alteration, addition or
improvement, Tenant shall furnish to Landlord Certificate of Workers'
Compensation Insurance covering all men to be employed in connection with said
alterations, additions or improvements, including those to be employed by all
contractors and subcontractors and of comprehensive public liability insurance
(including property damage) in which Landlord and its agents shall be named as
parties insured, which coverage shall be maintained by Tenant until completion
of all such work and which shall be in an amount of not less than One Million
($1,000,000.00) Dollars for Personal Injury, and One Million ($1,000,000.00)
Dollars for Property Damage; and
(d) All materials and equipment to be incorporated in the Premises as part
of said alterations, additions or improvements be new and first quality; and
(e) No such materials, equipment or work performed shall be subject to any
lien or encumbrance;
(f) All work shall comply fully with all applicable laws, ordinances and
regulations;
(g) All work shall be performed so as to insure proper maintenance of good
and harmonious labor relationships.
SECTION 7. ACTIVITIES INCREASING FIRE INSURANCE RATES.
Tenant shall not do or suffer anything to be done on the Premises which
will increase the rate of fire insurance on the Building. If as a result of
Tenant's operation, insurance rates increase, Tenant shall pay as additional
rent such increased insurance cost to Landlord.
SECTION 8. ABANDONMENT.
Tenant shall not, without first obtaining the written consent of the
Landlord, abandon the Premises, or allow the Premises to become vacant or
deserted for a period of more than forty-five (45) days.
SECTION 9. ASSIGNMENT OR SUBLEASE.
Tenant may not assign the within Lease or sublet the Premises except in
compliance with the following requirements:
ASSIGNMENT
A. In the event that the Tenant desires to assign the Lease and Premises
to any other party, all the terms and conditions of such assignment, including
any consideration to Tenant, and the proposed form of assignment and identity of
all parties, shall be communicated to the Landlord in writing not less than
thirty (30) days prior to the effective date of any such sublease or assignment,
and, the Landlord shall have the option, exercisable in writing to the Tenant,
within fifteen (15) days after receipt of such communication, to recapture the
within Lease and either (1) have such prospective assignee then become the sole
Tenant of Landlord under the Assignment; or (2) not accept the proposed
assignment. Assignment, as used herein shall mean an assignment of the Lease for
the balance of the term for the entire space.
B. In the event that the Landlord elects not to recapture the Lease as
hereinabove provided, the Tenant may nevertheless assign this Lease, subject to
the Landlord's written consent, upon fulfillment of the following terms and
conditions:
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(1) The Tenant shall provide to the Landlord the name and address
of the assignee.
(2) The assignee shall assume by written instrument, all of the
obligations of this Lease, and a copy of such assumption
agreement shall be furnished to the Landlord within ten (10)
days of its execution.
(3) The Tenant and each assignee shall be and remain liable for
the observance of all of the covenants and provisions of this
Lease, including, but not limited to the payment of rent
reserved herein, through the entire term of this Lease.
(4) Tenant shall hold Landlord harmless from any claims for
brokers' commissions in connection with the assignment.
SUBLET
If the Tenant wishes to enter into a sublease for a part of the premises
or for all of the premises for a part of the balance of the term, it shall first
obtain the written consent of the Landlord. The Tenant shall provide the
Landlord with a copy of the proposed sublease and all other documents required
by the Landlord. Landlord will have the absolute right to receive as a condition
to its consent to subletting, 100% of the excess of the sublet rent over the
rent being paid by Tenant under this Lease less Tenant's marketing expenses to
secure such subletting prorated over the term of the sublease for the sublet
portion of the premises.
SECTION 10. COMPLIANCE WITH RULES AND REGULATIONS.
Tenant shall observe and comply with the rules and regulations hereinafter
set forth in Exhibit B which are made a part hereto and with such further
reasonable rules and regulations as Landlord may prescribe provided such rules
and regulations shall apply to all office Tenants at the Building, excluding the
bank Tenant, on written notice to the Tenant, for the safety, care and
cleanliness of the Building and the comfort, quiet, and convenience of other
occupants of the Building. Tenant shall not place a load upon any floor of the
Premises exceeding the floor load of 50 pounds per square foot area which it was
designed to carry and which is allowed by law. Landlord reserves the right to
prescribe the weight and position of all safes, heavy business machines and
mechanical equipment. Such installations shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Landlord's judgment, to
absorb and prevent vibration, noise and annoyance.
SECTION 11. DAMAGES TO BUILDING.
A. If the Building is damaged by fire or any other cause to such extent
that the cost of restoration, as reasonably estimated by Landlord, will equal or
exceed twenty-five (25%) percent of the replacement value of the Building
(exclusive of foundations) just prior to the occurrence of the damage, then,
Landlord may give Tenant a notice of election to terminate this Lease. In such
event, this Lease shall be deemed to terminate on the thirtieth (30th) day after
the giving of said notice, and Tenant shall surrender possession of the Premises
within a reasonable time thereafter, and the base rent, and any additional rent,
shall be apportioned as of the date of said damage and any base or additional
rent paid for any period beyond said date shall be repaid to Tenant. If the cost
of restoration as estimated by Landlord shall amount to less than twenty-five
(25%) percent of said replacement value of the Building, or if, despite the
cost, Landlord does not elect to terminate this Lease, Landlord shall
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restore the Building and the Premises with reasonable promptness, subject to
delays beyond Landlord's control, and delays in the making of insurance
adjustments between Landlord and the insurance carrier, and Tenant shall have no
right to terminate this Lease. Landlord need not restore fixtures and
improvements owned by Tenant nor improvements installed by Tenant unless such
fixtures and improvements have become part of the Building and are owned by the
Landlord. Except as provided herein, there shall be no abatement of rent in the
event of a fire or other casualty.
B. In the event that 25 percent (25%) of the demised premises is
destroyed, either party may cancel this Lease by written notice to the other. To
the extent that the Premises or part thereof, is or are untenantable as a result
of a fire or other casualty, the rent shall be abated during such period.
SECTION 12. INSURANCE.
Tenant, at Tenant's own cost and expense shall maintain insurance
protecting and indemnifying the Landlord, Landlord's Managing Agent and Tenant
against any and all claims for injury or damage to persons or property or for
the loss of life or of property occurring upon, in or about the Premises, and
resulting from acts or omissions by Tenant, its employees, agents, contractors,
customers, and invitees; such insurance to afford minimum protection during the
term of this Lease of not less than $1,000,000.00 in respect of bodily injury or
death to any one person and not less than $1,000,000.00 in respect of any one
occurrence or accident, and not less than $500,000.00 for property damage.
All such insurance shall be effected under valid and enforceable policies
and shall contain a provision whereby the insurer agrees not to cancel the
insurance without 20-days' prior written notice to Landlord and Landlord's
Managing Agent. Landlord and Landlord's Managing Agent shall receive copies of
all policies and endorsements prior to or as soon as possible after the
effective date of same, provided the Landlord receives insurance certificates
for the interim.
The Tenant agrees to and shall hold and save harmless and indemnify the
Landlord and Landlord's Managing Agent from and for any and all payments,
expenses, costs, attorney's fees and from and for any and all claims and
liability for losses or damage to property or injuries to persons occasioned
wholly or in part by or resulting from any acts or omissions by the Tenant or
the Tenant's agents, employees, guests, licensees, invitees, subtenants,
assignees or successors, or for any cause or reason whatsoever arising out of or
by reason of the occupancy by the Tenant and the conduct of the Tenant's
business. The foregoing indemnity shall not extend to loss or damage to the
extent covered by the Landlord's hazard insurance coverage.
SECTION 13. WAIVERS OF SUBROGATION.
Each insurance policy carried by Landlord insuring the Premises against
loss by fire and causes covered by standard extended coverage, and each
insurance policy carried by Tenant and insuring the Premises and its fixtures
and contents against loss by fire, water and causes covered by standard extended
coverage, shall be written in a manner so as to provide that the insurance
company waives all right of recovery by way of subrogation against Landlord or
Tenant in connection with any loss or damage covered by such policy. Neither
party shall be liable to the other for any loss or damage caused by fire, water
or any of the risks encountered in standard extended coverage insurance,
provided such insurance was obtainable at the time of such loss or damage.
However, if such insurance policies cannot be obtained, or are obtainable only
by
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the payment of an additional premium charge above that charged by companies
carrying such insurance without such waiver of subrogation, the party
undertaking to carry such insurance shall have a period of ten (10) days after
the giving of such notice either to: (a) place such insurance in companies which
are reasonably satisfactory to the other party and will carry such insurance
with waiver of such subrogation, or (b) agree to pay such additional premium if
such policy is obtainable at additional cost; and if neither (a) nor (b) is
done, this Section shall be null and void for so long as either such insurance
cannot be obtained or the party in whose favor a waiver of subrogation is
desired shall refuse to pay the additional premium charge. If the release of
either Tenant or Landlord, as set forth in the second sentence of this Section,
shall contravene any law with respect to exculpatory agreements, the liability
of the party in question shall be deemed not released, but shall be deemed
secondary to the latter's insurer. Nothing herein contained shall be construed
to vary the force and effect of any provisions specifically limiting Landlord's
liability as contained in this Lease.
SECTION 14. EMINENT DOMAIN.
If Tenant's use of the Premises is materially affected due to the taking
by eminent domain of the Premises or any material part thereof or any estate
therein, or those parts of the parking specifically reserved to Tenant (unless
Landlord provides Tenant with equivalent substitute parking), then, in either
event, this Lease shall terminate on the date when title vests pursuant to such
taking. The rent, and any additional rent, shall be apportioned as of said
termination date and any base or additional rent paid for any period beyond said
date shall be repaid to Tenant. Tenant shall not be entitled to any part of the
award for such taking or any payment in lieu thereof, but Tenant may file a
claim for any taking of fixtures and improvements owned by Tenant which have not
become the Landlord's property, and for moving expenses. In the event of a
non-material partial taking which does not effect a termination of this Lease,
but does deprive Tenant of the use of a portion of the Premises, there shall be
an equitable reduction of the basic rent, and an equitable adjustment of the
Base Costs depending on the period for which and the extent to which the
Premises so taken are not reasonably usable for the purpose for which they are
leased hereunder.
SECTION 15. INSOLVENCY OF TENANT.
Either (a) the appointment of a trustee, receiver or liquidator to take
possession of all or substantially all of the assets of Tenant, or (b) a general
assignment by Tenant for the benefit of creditors, or (c) any action taken or
suffered by Tenant under any insolvency or bankruptcy act, shall constitute a
default of this Lease by Tenant, and Landlord may terminate this Lease
forthwith, and upon notice of such termination, Tenant's right to possession of
the Premises shall cease, and Tenant shall remain liable as hereinafter provided
in Section 16. Notwithstanding the foregoing, Tenant will have sixty (60) days
to dismiss any action taken against it and if such action is dismissed within
said period, the Tenant will not be in default.
SECTION 16. LANDLORD'S REMEDIES ON DEFAULT.
If Tenant defaults in the payment of rent, or additional rent, or defaults
in the performance of any of the other covenants or conditions hereof, Landlord
may, in addition to any other rights available to Landlord under the law
including but not limited to summary dispossess actions, give Tenant notice of
such default, and if Tenant does not cure any rent, or additional rent, default
within ten (10) days, after the giving of such notice (or if such other default
is of such nature that it cannot be completely cured
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within such period, if Tenant does not commence such curing within such ten (10)
days and thereafter proceed with reasonable diligence and in good faith to cure
such default), then Landlord may terminate this Lease on not less than twenty
(20) days notice to Tenant, and on the date specified in said notice, Tenant's
right to possession of the premises shall cease, and Tenant shall then quit and
surrender the Premises to Landlord, but Tenant shall remain liable as
hereinafter provided. Non-payment of rent as used herein includes non-payment of
additional rent items. If this Lease shall have been so terminated by Landlord,
Landlord may, at any time thereafter, resume possession of the Premises by any
lawful means and remove Tenant or other occupants and their effects.
SECTION 17. DEFICIENCY.
In any case where Landlord has recovered possession of the Premises by
reason of Tenant's default, Landlord may, at Landlord's option, occupy the
Premises or cause the Premises to be redecorated, altered, divided, consolidated
with other adjoining premises, or otherwise changed or prepared for reletting,
and may relet, the Premises or any part thereof as agent of tenant or otherwise,
for a term or terms to expire prior to, at the same time as, or subsequent to,
the original expiration date of this Lease, at Landlord's option, and receive
the rent therefor. Rent so received shall be applied first to the payment of
such expenses as Landlord may have incurred in connection with the recovery of
possession, redecorating, altering, dividing, consolidating with other adjoining
premises, or otherwise changing or preparing for reletting, and the reletting,
including brokerage and reasonable attorney's fees, and then to the payment of
damages in amounts equal to the rent hereunder and to the costs and expenses of
performance of the other covenants of Tenant as herein provided. Tenant agrees,
in any such case, whether or not Landlord has relet, to pay to the Landlord
damages equal to the base and additional rent and other sums herein agreed to be
paid by Tenant, less the net proceeds of the reletting, if any, as ascertained
from time to time, and the same shall be payable by Tenant on the several rent
days above specified. Tenant shall not be entitled to any surplus accruing as a
result of any such reletting. In reletting the Premises as aforesaid, Landlord
may grant rent concessions, and Tenant shall not be credited therewith. No such
reletting shall constitute a surrender and acceptance or be deemed evidence
thereof. If Landlord elects, pursuant hereto, actually to occupy and use the
Premises or any part thereof during any part of the balance of the term as
originally fixed or since extended, there shall be allowed against Tenant's
obligation for rent or damages as herein defined, during the period of
Landlord's occupancy, the reasonable value of such occupancy, not to exceed in
any event the basic and additional rent herein reserved and such occupancy shall
not be construed as a release of Tenant's liability hereunder.
Alternatively, in any case whether Landlord has recovered possession of
the Premises by reason of Tenant's default and has not relet the Premises or
elected to use the Premises in accordance with the preceding paragraph, Landlord
may, at Landlord's option, and at any time thereafter, and without notice or
other action by Landlord, and without prejudice to any other rights or remedies
Landlord may have hereunder or at law or equity, become entitled to recover from
Tenant, as damages for such breach, in addition to such other sums herein agreed
to be paid by Tenant, to the day of re-entry, expiration and/or dispossess an
amount equal to the excess, if any, of the rent and additional rents reserved in
this Lease from the date of such default to the date of expiration of the then
term demised over the then fair and reasonable rental value of the Premises for
the same period. Said damages shall become due and payable to Landlord
immediately upon such breach of this Lease and without regard to whether this
Lease be terminated or not, and if this lease be terminated, without regard to
the
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manner in which it is terminated. In the computation of such damages, the
difference between any installments of rent (base and additional) thereafter
becoming due and the fair and reasonable rental value of the Premises for the
period for which such installment was payable shall be discounted to the date of
such default at the rate of not more then ten (10%) percent per annum.
Tenant hereby waives all right of redemption to which Tenant or any person
claiming under Tenant might be entitled by any law now or hereafter in force.
Landlord's remedies hereunder are in addition to any remedy allowed by
law. Landlord reserves the right of re-entry in the event of any breach of
Tenant of any provisions of the Lease. Nothing contained herein will excuse the
Landlord from exercising reasonable efforts to attempt to mitigate damages.
SECTION 18. NO WAIVER OF COVENANTS OR CONDITIONS.
The failure of either party to insist on strict performance of any
covenant or condition hereof, or to exercise any option herein contained, shall
not be construed as a waiver of such covenant or condition or option in any
other instance. This Lease cannot be changed or terminated orally.
SECTION 19. SUBORDINATION OF LEASE.
This Lease shall be subject and subordinate to existing mortgages and to
any future mortgages, which may now or hereafter affect the real property to
which the Premises form a part, and also to all renewals, modifications,
consolidations, and replacements of said mortgages. Although no instrument or
act on the part of the Tenant shall be necessary to effectuate such
subordination, Tenant will, nevertheless, execute and deliver such further
instruments confirming such subordination of this Lease as may be desired by the
holders of said mortgages. If Tenant refuses to sign, such refusal shall be a
substantial breach of this Lease and shall entitle Landlord to cancel this
Lease. Tenant agrees to attorn to any Mortgagee in possession, if and when
required under the Mortgage and other security documents and the law.
SECTION 20. ADVANCE RENT AND SECURITY DEPOSIT.
A. Lessee shall pay upon execution hereof the first month's rent due to be
paid hereunder in advance, together with the security deposit shown on the
Summary Page.
B. The Lessee has this day deposited with the Lessor the sum shown above
as security for the payment of the rent hereunder and the full and faithful
performance by the Lessee of the covenants and conditions on the part of the
Lessee to be performed. Said sum shall be returned to the Lessee, without
interest, after the expiration of the term hereof, provided that the Lessee has
fully and faithfully performed all such covenants and conditions and is not in
arrears in rent. During the term hereof, the Lessor may, if the Lessor so
elects, have recourse to such security, to make good any default by the Lessee,
in which event the Lessee shall, on demand, promptly restore said security to
its original amount. Liability to repay said security to the Lessee shall run
with the reversion of title to said premises, whether any change in ownership
thereof be by voluntary alienation or as the result of judicial sale,
foreclosure or other proceedings or the exercise of a right of taking or entry
by any mortgagee. The Lessor shall assign or transfer said security, for the
benefit of the Lessee, to any subsequent owner or holder of the reversion of
title to said premises, in which case the assignee shall become liable for the
repayment thereof as herein provided, and the assignor shall be deemed to be
released by the Lessee from all liability to return
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such security. This provision shall be applicable to every alienation or change
in title and shall in no way be deemed to permit the Lessor to retain the
security after termination of the Lessor's ownership of the reversion of title.
The Lessee shall not mortgage, encumber or assign said security without the
written consent of the Lessor.
SECTION 21. RIGHT TO CURE TENANT'S BREACH.
If Tenant breaches any covenant or condition of this Lease, Landlord may,
on reasonable notice to Tenant (except that no notice need be given in case of
emergency), cure such breach at the expense of Tenant and the reasonable amount
of all expenses, including attorney's fees, incurred by Landlord in so doing
(whether paid by Landlord or not) shall be deemed additional rent payable on
demand.
SECTION 22. MECHANIC'S LIENS.
With regard to any work ordered by Tenant, Tenant shall, within fifteen
(15) days after notice from Landlord, discharge or satisfy by bonding or
otherwise, any mechanic's liens for materials or labor claimed to have been
furnished to the Premises on Tenant's behalf.
SECTION 23. NOTICES.
Any notice by either party to the other shall be in writing and shall be
deemed to have been duly given upon receipt or refusal only if sent by
registered mail or certified mail, return receipt requested, in a postpaid
envelope addressed or hand delivered, if to Tenant, at Tenant's address as set
forth above and if to Landlord, at Landlord's address as set forth above; or, to
either at such other address as Tenant or Landlord, respectively, may designate
in writing.
SECTION 24. RIGHT TO INSPECT AND REPAIR.
Landlord may enter the Premises but shall not be obligated to do so
(except as required by any specific provision of this Lease) at any reasonable
time on reasonable notice to Tenant, provided that the time of such planned
inspection does not interfere with the Tenant's business operations (except that
no notice need be given in case of emergency) for the purpose of inspection or
the making of such repairs, replacement, or additions, in, to, on and about the
Premises or the Building, as Landlord deems necessary or desirable. Tenant shall
have no claims or cause of action against Landlord by reason thereof. In no
event shall Tenant have any claims against Landlord for interruption to Tenant's
business, arising from such entry.
SECTION 25. INTERRUPTION OF SERVICES OR USE.
Interruption or curtailment of any service maintained in the Building, if
caused by strikes, mechanical difficulties, government pre-emption in connection
with a national emergency, conditions of supply and demand affected by any
governmental emergency or any causes beyond Landlord's control whether similar
or dissimilar to those enumerated shall not entitle Tenant to any claim against
Landlord including claims for resulting damages and specifically including
damage to computers or to any abatement in rent, and shall not constitute
constructive or partial eviction.
SECTION 26. CONDITIONS OF LANDLORD'S LIABILITY.
Tenant shall not be entitled to claim a constructive eviction from the
Premises unless Tenant shall have first notified Landlord in writing of the
condition or conditions giving rise thereto, and,
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if the complaints be justified, unless Landlord shall have failed within a
reasonable time, given the nature of the condition and the relevant
circumstances, after receipt of such notice to remedy, or commence and proceed
with due diligence or remedy such condition or conditions.
SECTION 27. RIGHT TO SHOW PREMISES.
Landlord may show the Premises to prospective purchasers and mortgagees,
and, during the twelve (12) months prior to termination of this Lease, to
prospective tenants, during business hours, on reasonable notice to Tenant.
SECTION 28. NO OTHER REPRESENTATIONS.
No representations or promises shall be binding on the parties hereto
except those representations and promises contained herein or in some future
writing signed by the party making such representation(s) or promise(s).
SECTION 29. QUIET ENJOYMENT.
Landlord covenants that if, and so long as, Tenant pays the rent, and any
additional rent as herein provided, and performs the covenants hereof, Tenant
shall peaceably and quietly have, hold and enjoy the Premises for the term
herein mentioned.
SECTION 30. ESTOPPEL.
Tenant shall, from time to time, on not less than ten (10) days prior
written notice by Landlord, execute, or acknowledge and deliver to Landlord a
written statement certifying if true that the Lease is unmodified and in full
force and effect, or that the Lease is in full force and effect as modified and
listing the instruments of modification; the date to which the rents and charges
have been paid; and, whether or not, to the best of Tenant's knowledge, Landlord
is in default hereunder, and if so, specifying the nature of the default. Tenant
shall have the right to request a similar statement from Landlord at any time.
It is intended that any such statement delivered pursuant to this Section may be
relied on by a prospective purchaser of Landlord's interest or mortgagee of
Landlord's interest or assignee of any mortgage of Landlord's interest in the
Building.
SECTION 31. HOLDOVER TENANCY.
If Tenant holds possession of the Premises after the term of this Lease,
Tenant shall thereupon be deemed a tenant from month to month under the
provisions of this Lease, however, at a rent equal to 200% of the Base Rent set
forth in the Lease.
SECTION 32. INTENTIONALLY OMITTED
SECTION 33. SERVICES TO BE PROVIDED BY LANDLORD.
(A) Landlord agrees to furnish the particular services, set forth on
Exhibit C attached hereto and made part hereof, and subject to the conditions
therein stated. Except as set forth in said Exhibit C, Tenant shall pay the cost
of all other services required by Tenant. Notwithstanding the requirements of
said Exhibit C, and except for Landlord's acts of gross negligence or wrongful,
wilful misconduct, Landlord shall not be liable for failure to furnish any of
the foregoing when such failure is caused by conditions beyond the control of
Landlord, including but not limited to acts of God, accidents, repairs or
strikes, such failure shall not constitute an eviction. Landlord shall not be
liable, under any circumstances, for loss of, or injury to, property, however
occurring, through or in connection with or incidental to
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the furnishing of or failure to furnish any of the services required by said
Exhibit C, or for any interruption to Tenant's business, however occurring.
(B) Landlord's Standard Electric Service (excluding Tenant's electric
service shown in Paragraph 34) shall, unless otherwise provided by agreement in
writing between the parties, include the electrical current for usual building
requirements, including elevator, lighting of halls, lobbies, rest rooms and
exterior, heating, ventilating and air-conditioning systems for the Premises and
the Building, from 8:00 a.m. to 6:00 p.m. on every day, Monday through Friday,
but excluding only those holidays set forth on Exhibit D attached hereto and at
additional cost to Tenant, at other times, provided, with respect to additional
service, Tenant shall notify and request the same twenty-four (24) hours in
advance.
SECTION 34. TENANT ELECTRICITY.
(A) Tenant shall pay to Landlord as additional rent for Tenant
Electricity Service the amounts calculated by sub-metering done for the Demised
Premises either monthly in advance (if Landlord estimates) or monthly in arrears
pursuant to sub- or master-meter reading. If the Demised Premises cannot be sub-
or master-metered, the Landlord agrees that it will have a professional survey
done to determine the electric usage and to have the rates applied therefor, and
the same will provide the basis for monthly billing to the Tenant, subject to
rate fluctuations, which will be reflected in subsequent bills. The Tenant will
be entitled to receive a copy of the survey and, if the Tenant is dissatisfied
with the survey, may obtain its own survey, and if the two surveyors fail to
agree, they will select a third surveyor, whose decision will be binding and
final upon all parties. Each party will bear their own survey costs, and the
cost of the third surveyor will be shared. The Tenant Electric Service which
Tenant shall receive and pay for consists of all electric service used within
the Demised Premises (except HVAC current) for Tenant's lighting and equipment.
In no event shall Tenant Electric Service include electrical current for any
computer installation or for any requirements needing greater than a 15-amp
line. Dedicated word processors and personal computers are permissible and shall
not be considered computer installations hereunder. All installations of
electrical fixtures, appliances and equipment within the Premises shall be
subject to Landlord's prior written approval which approval shall not be
unreasonably withheld or delayed. Landlord shall not be liable in any way to
Tenant for any failure or defect in the supply or character of electric energy
furnished to the Premises by reason of any requirement act or omission of the
public utility serving the Building with electricity or for any other reason.
Tenant shall pay for the reasonable cost to furnish and install all replacement
lighting tubes, lamps, bulbs and ballasts required in the Premises.
(B) In the event that the utility company that furnishes electric
energy to the Landlord, for supply to the Tenant, declines to continue
furnishing electric energy to Landlord for Tenant Electric Service, Landlord
reserves the right to discontinue furnishing Tenant Electric energy to Tenant at
any time, upon reasonable notice to Tenant, and from and after the effective
date of such termination, Landlord shall no longer be obligated to furnish
Tenant with Tenant Electric energy, provided, however, that such termination
date may be extended for a time reasonably necessary for Tenant to make
arrangement to obtain electric service directly from the public utility company
servicing the Building. If Landlord exercises such right of termination, this
Lease shall remain unaffected thereby and shall continue in full force and
effect, except that portion of the rent and additional rent for electric service
shall abate; and thereafter Tenant shall
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diligently arrange to obtain electric service directly from the utility company
servicing the Building and may utilize the then existing electric feeders,
risers and wiring serving the Premises to the extent available and safely
capable of being used for such purpose and only to the extent of Tenant's then
authorized connected loan. Landlord shall not be obligated to pay any part of
any cost required for Tenant's direct service.
SECTION 35. ADDITIONAL RENT.
It is expressly agreed that Tenant will pay, in addition to the Base
Rent provided in Section 2 above, additional rent to cover Tenant's
proportionate share of the increased cost to Landlord, for each of the
categories enumerated herein, over the "Base Costs" (as hereinafter defined) for
said categories.
A. Operating Cost Escalation. From and after the Base Year as same
is stated on the Summary Pages, if the Operating Costs incurred for the Building
in which the Premises are located, and Office Building Area (including parking
and landscaped and access areas), for any calendar year or proportionate part
thereof during the lease term or any renewal term shall be greater than the Base
Operating Costs then Tenant shall pay to the Landlord as additional rent its
proportionate share of all such Operating Costs in excess of Base Operating
Costs. Operating Costs shall include, by way of illustration and not of
limitation, personal property taxes, reasonable management fees actually charged
to the Owner, labor, charges for persons working at the Building for time spent
working at or on the Building (for management services, not for capital
improvements), including all wages and salaries, social security taxes, and
other taxes which may be levied against Landlord upon such wages and salaries,
supplies, repairs and maintenance, maintenance and service contracts, cost of
painting, wall and window washing, laundry and towel service, tools and
equipment (which are not required to be capitalized for federal income tax
purposes or in accordance with good accounting practices), fire and other
insurance, cost of electrical surveys, trash removal, lawn care, snow removal
and other items properly constituting direct out-of-pocket operating costs
according to standard accounting practices (herein collectively referred to as
the "Operating Costs), but not including depreciation of Building or equipment,
interest, mortgage debt service, income or excess profit taxes, costs of
maintaining the Landlord's corporate existence, franchise taxes, any
expenditures required to be capitalized for federal income tax purposes or in
accordance with good accounting practices or office expenses, or salaries of the
Landlord's executive officers, or fuel, utility and electric cost escalation
which is covered in subsection B post. As used in this Section 35, the Base
Operating Costs shall be the Operating Costs incurred during the Base Year shown
on the Summary Page (page 2) as reasonably and fairly adjusted, however, to
reflect any projections that are needed to compensate for vacancies in the
building during the Base Year or in any calendar year during the Term (or
Extended Term)---the projection to proceed on the premises as if at least 90% of
the rentable portion of the building were in fact occupied throughout the whole
year.
(B) Fuel, Utilities and Electric Cost Escalation (hereinafter
"Utilities and Energy") . If the Utility and Energy Costs, including any fuel
surcharges or adjustments with respect thereto, incurred for the Building in
which the Premises are located, and Office Building Area, for any calendar year
or proportionate part hereof, during the lease term, shall be greater than the
Base Utility and Energy Costs (adjusted proportionately for periods less than a
lease year), then Tenant shall pay to Landlord as additional rent, its
proportionate share of all such Utility and Energy Costs including increases for
Tenant Electric Service and Standard Electric Service. As used in this Section
35,
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the Base Utility and Energy Costs shall be the usage incurred for the Building
computed in the same manner as the base Operating Cost described in (A) above.
(C) Tax Escalation. If the Real Estate taxes for the Building and
Office Building Area at which the Premises are located for any calendar year,
including the first calendar year, or proportionate part thereof, during the
lease term, shall be greater than the Real Estate Taxes for the Base Year
(adjusted proportionately for periods less than a lease year), then Tenant shall
pay to Landlord as additional rent, its proportionate share of all such excess
real estate taxes. Tenant shall also pay to Landlord as additional rent its
proportionate share of all costs and fees including legal and appraisal fees
arising from real estate tax appeals pertaining to such excess real estate
taxes.
As used in this Section 35(C), the words and terms which follow mean
and include the following:
(1) "Base Real Estate Taxes" shall mean the final taxes for the Base
Year assessed against the land and building (designated as Lot 004 in Block 6601
on the current tax map of Morristown). If the Building is not fully assessed
for the Base Year or in any calendar year during the Term, the same shall be
projected as if fully assessed to determine the tax base for that year; fully
assessed shall contemplate an occupancy of 95 percent; if the projection so
determined varies from the full assessment finally determined by the taking
authorities, the parties shall readjust the taxes for the prior period covered
by the projected base.
(2) "Real Estate Taxes" shall mean the property taxes, special
charges and assessments imposed upon the Building and the land upon which it
stands, or upon the rent, as such payable to the Landlord. If due to a future
change in the method of taxation, any franchise, income or profit tax shall be
levied against Landlord in substitution for, or in lieu of, or in addition to,
any tax which would otherwise constitute a Real Estate Tax, such franchise,
income or profit tax shall be deemed to be Real Estate Tax for the purpose
hereof; conversely, any additional real estate tax hereafter imposed in
substitution for, or in lieu of any franchise, income or profit tax (which is
not in substitution for or in lieu of, or in addition to a Real Estate Tax as
hereinbefore provided) shall not be deemed a Real Estate Tax for the purposes
hereof; in such event, rental income from this Building will be considered the
sole source of income and a calculation to arrive at the Tenant's share shall
include all deductions for the Building.
(D) Apportionment Partial Years. Once the base costs are
established, in the event any lease period is less than twelve (12) months, then
the increased costs for the categories listed above shall be adjusted to equal
the proportion that said period bears to twelve (12) months, and Tenant shall
pay to Landlord as additional rent for such period, an amount equal to Tenant's
proportionate share of the excess for said period over the adjusted base with
respect to each of the aforesaid categories.
(E) Proportionate Share. Tenant's Proportionate Share of the
additional rent, as defined in Subparagraphs A, B and C hereof, shall be the
Tenant Percentage Share shown on the Summary Pages, which the parties agree is
the Tenant's share of the total additional rent items, which Proportionate Share
reflects the ratio of the gross square feet of the area rented to the Tenant as
compared with the total number of gross square feet of the rentable area of the
entire Building measured outside wall to outside wall. Landlord shall have the
right to make changes or revisions in the common areas of the Building or Office
building Area so as to provide additional leasing area.
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(F) Payment. At any time, and from time to time, after the
establishment of the Base Operating Costs for each of the categories referred to
above, Landlord shall advise the Tenant in writing of Tenant's proportionate
share with respect to each of the categories, as estimated for the next
succeeding twelve (12) month period or proportionate part thereof if the last
period prior to the Lease's termination is less than twelve (12) months), as
then known to the Landlord and thereafter. The Tenant shall pay as additional
rent, its proportionate share of these costs for the then current period
affected by such advice (as the same may be periodically revised by Landlord as
additional costs are incurred) in equal monthly installments, such new rates
being applied to any months for which the rental shall have already been paid
which are affected by the Operating Cost Escalation and/or Utility and Energy
Cost Escalation, and/or Tax Escalation Costs above referred to, as well as the
unexpired months of the current period, the adjustment for the then expired
months to be made at the payment of the next succeeding monthly rental all
subject to final adjustment at the expiration of each Lease Year as defined in
Subparagraph D hereof (or proportionate part thereof, if the last period prior
to the Lease's termination is less than twelve (12) months).
Notwithstanding anything herein contained to the contrary, in the
event the last period prior to the Lease's termination is less than twelve (12)
months, the Base Operating Costs shall be proportionately reduced to correspond
to the duration of said final period.
(G) Books and Records. For the protection of the Tenant, the
Landlord shall maintain books of account which shall be open to the Tenant and
its representatives, at all reasonable times so that the Tenant can determine
that such Operating, Utility and Energy and Tax costs have, in fact, been paid
or incurred. The books of account shall conclusively be presumed to be correct
one year from the day they are available for inspection by the Tenant, except
for such changes as have specifically been disputed in writing by Tenant. Any
disagreement with respect to any one or more of said charges if not
satisfactorily settled between the Landlord and the Tenant shall be referred by
either party to an independent certified public accountant to be mutually agreed
upon, and if such an accountant cannot be agreed upon, the American Arbitration
Association may be asked by either party to select an arbitrator whose decision
on the dispute will be final and binding upon both parties, who shall jointly
share any cost of such arbitration.
SECTION 36. WAIVER OF TRIAL BY JURY.
To the extent such waiver is permitted by law, the parties waive
trial by jury in any action or proceeding brought in connection with this Lease
or the Premises.
SECTION 37. LATE CHARGE.
Anything in this Lease to the contrary notwithstanding, Tenant shall
pay a "Late Charge" of five (5%) percent of any installment of rent or
additional rent due, which is paid more than ten (10) business day after the due
date thereof, to cover the extra expense involved in handling delinquent
payments.
SECTION 38. HEADINGS OF LEASE SECTIONS AND SUMMARY.
The headings which appear for the various sections set forth in
the within Lease and the Summary that appears at the beginning of the Lease are
for reference purposes only and shall not be used in any manner whatsoever in
interpreting the rights and obligations hereunder.
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SECTION 39. APPLICABILITY TO HEIRS AND ASSIGNS.
The provisions of this Lease shall apply to, bind and inure to the
benefit of Landlord and Tenant, and their respective heirs, successors, legal
representatives and assigns. It is understood that the term "Landlord" as used
in this Lease means only the owner, a mortgagee in possession or a term Tenant
of the Building, so that in the event of any sale of the Building or of any
lease thereof, or if a mortgagee shall take possession of the Premises, the
Landlord named herein shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder accruing thereafter, and it
shall be deemed without further agreement that the purchaser, the term Tenant of
the Building, or the mortgagee in possession has assumed and agreed to carry out
any and all covenants and obligations of the Landlord hereunder.
SECTION 40. LANDLORD'S LIABILITY FOR LOSS OF PROPERTY.
Landlord shall not be liable for any loss of property from any cause
whatsoever, including but not limited to theft or burglary from the Premises and
Tenant covenants and agrees to make no claim for any such loss at any time.
SECTION 41. BROKER.
Tenant and Landlord represent and warrant to each other that the Broker(s)
named on the Summary Pages is(are) the sole broker(s) with whom Tenant and
Landlord have negotiated in bringing about this Lease and Tenant and Landlord
agree to indemnify and hold the other harmless from any and all claims of other
brokers arising out of or in connection with the negotiation of or the entering
into this Lease by Landlord and Tenant, to the extent that their actions are
inconsistent with the representations and warranties made by them to the other
as herein contained. Landlord agrees to pay the broker named on the Summary
Pages a commission pursuant to separate agreement, and further does hereby
indemnify and save Tenant harmless from any and all claims that may be asserted
by said Broker against the Tenant for failure of the Landlord to comply with the
terms of the separate agreement. Tenant understands that one of the principals
of Landlord is also one of the principals of Alexander Summer, L.L.C.
SECTION 42. PERSONAL LIABILITY.
Notwithstanding anything to the contrary provided in this Lease, it is
specifically understood and agreed, such agreement being a primary consideration
for the execution of this Lease by Landlord, that there shall be absolutely no
personal liability on the part of the Landlord, its successors, assigns or any
mortgagee in possession (for the purposes of this Section, collectively referred
to as "Landlord"), with respect to any of the terms, covenants and conditions of
this Lease, and that Tenant shall look solely to the equity of Landlord in the
Building for the satisfaction of each and every remedy of Tenant in the event of
any breach by Landlord of any of the terms, covenants and conditions of this
Lease to be performed by Landlord, such exculpation of liability to be
absolutely and without any exceptions whatsoever.
SECTION 43. SIGNS AND ADVERTISING.
Tenant will not place or suffer to be placed or maintained on the exterior
of the Premises any additional sign or advertising matter, and will not place or
maintain any additional decoration, lettering or advertising matter on the glass
or other surface of any window or door or corridor wall of the Premises, without
first obtaining Landlord's written approval thereof; and Tenant further agrees
to maintain such sign, declaration, lettering, advertising
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matter or other thing as may be approved in good condition and repair at all
times and in compliance with applicable law.
SECTION 44. DELIVERY OF POSSESSION.
Landlord will not be responsible if he is unable to deliver possession on
the commencement date shown above. Landlord will use his best efforts to deliver
on the commencement date or as soon thereafter as possible and rent will be
abated on a daily basis until possession is delivered to Tenant. Delay in
deliver of possession will not lengthened the term of this Lease which will
terminate in any event on the termination date shown above.
SECTION 45. ISRA COMPLIANCE.
A. Tenant shall, at Tenant's own expense, comply with the Industrial Site
Recovery Act, N.J.S.A. 13:1K-6, et seq. and the regulations promulgated
thereunder ("ISRA") . Tenant shall, at Tenant's own expense, make all
submissions to, provide all information to, and comply with all requirements of,
the Bureau of Industrial Site Evaluation (the "Bureau") of the New Jersey
Department of Environmental Protection ("NJDEP"). Should the Bureau or any other
division of NJDEP determine that a cleanup plan be prepared and that a cleanup
be undertaken because of spills or discharges of hazardous substances or wastes
at the premises which occur during the term of this Lease, then Tenant shall, at
Tenant's own expense, prepare and submit the required plans and financial
assurances, and carry out the approved plans if such spills and discharges were
caused by Tenant or resulted from Tenant's operation. Tenant's obligations under
this paragraph shall arise if there is any closing, terminating or transferring
of operations of an industrial establishment at the premises pursuant to ISRA.
At no expense to Landlord, Tenant shall promptly provide all information
requested by Landlord for preparation of non-applicability affidavits and shall
promptly sign such affidavits when requested by Landlord. Tenant shall
indemnify, defend and save harmless Landlord from all fines, suits, procedures,
claims and actions of any kind arising out of or in any way connected with any
spills or discharges of hazardous substances or wastes at the Premises which
occur during the term of this Lease if such spills and discharges were caused by
Tenant or resulted from Tenant's operation; and from all fines, suits,
procedures, claims and actions of any kind arising out of Tenant's failure to
provide all information, make all submissions and take all actions required by
the ISRA Bureau or any other division of NJDEP. Tenant's obligations and
liabilities under this paragraph shall continue so long as Landlord remains
responsible for any spills or discharges of hazardous substances or wastes at
the premises which occur during the term of this Lease. Tenant's failure to
abide by the terms of this Paragraph shall be restrainable by injunction.
B. Tenant shall not (either with or without negligence) cause or permit
the escape, disposal or release of any biologically or chemically active or
other hazardous substances, or materials. Tenant shall not allow the storage or
use of such substances or materials in any manner not sanctioned by law or by
the highest standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the Project any such
materials or substances except to use in the ordinary course of Tenant's
business, and then only after written notice is given to Landlord of the
identity of such substances or materials. Without limitation, hazardous
substances and materials shall include those described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 9601 et seq., any applicable state or local laws and
the regulations adopted under these Acts. If any lender or governmental agency
shall ever
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reasonably require testing to ascertain whether or not there has been release of
hazardous materials, then the reasonable costs thereof shall be reimbursed by
Tenant to Landlord upon demand as additional charges if such requirement applies
to the Premises, provided that any such required testing is not in connection
with a sale or refinancing of the land or building, nor resulting from a spill,
discharge or release by the Landlord or other Tenants. In addition, Tenant shall
execute affidavits, representations and the like from time to time at Landlord's
request concerning Tenant's best knowledge and belief regarding the presence of
hazardous substances or materials on the Premises. In all events, Tenant shall
indemnify Landlord in the manner elsewhere provided in this Lease from any
release of hazardous materials on the Premises occurring while Tenant is in
possession, or elsewhere if caused by Tenant or persons acting under Tenant. The
within covenants shall survive the expiration or earlier termination of the
Lease term.
SECTION 46. PREPARATION OF LEASE NOT TO CONSTITUTE OFFER.
Preparation of the within Lease and submission to the Tenant do not
constitute an offer to Lease or an option to Lease. The within document shall be
of no force and effect unless and until the same is executed by both parties,
each receives a copy from the other, and the Tenant pays to the Landlord the
appropriate security deposit and advance rents and the checks for the same have
cleared through the Landlord's account.
IN WITNESS WHEREOF, the parties have hereunto caused these presents to be
signed by their proper corporate officers or representatives of the partnership,
as the case may be, on the day and year set forth at the heading of the within
Lease Agreement.
WITNESS: 55 MADISON ASSOCIATES, LLC, a
New Jersey Limited Liability
Company, Landlord
By: /s/ ILLEGIBLE
- --------------------------- ------------------------------
Operating Manager
WITNESS: iName, Tenant
By: /s/ Bob Helfant
- --------------------------- ------------------------------
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EXHIBIT A
<PAGE>
[ILLEGIBLE] of Morristown
[ILLEGIBLE] Lot Nos 3A, 4A, 13A, 14 Account No.
|_| No property tax identification number is available on the date of this Deed.
(Check box if applicable.)
Property. The property consists of the land and all the buildings and
structures on the land of the Town of Morristown, County of Morris and State of
New Jersey. The legal description is:
BEGINNING at a point in the southerly line of Madison Avenue, distance thereon
377.60 feet easterly from the intersection of the said south line of Madison
Avenue and the easterly line of Intestate Route [ILLEGIBLE] Ramp "G" (both lines
extended so to meet) and from thence running:
1. Along the westerly line of lands now or formerly of J.F. Zigari South 25
degrees, 31 minutes 13 seconds West, 439.82 feet to a point in the
northeasterly line of lands now or formerly of Parsons Village, thence
2. Along said northeasterly line of Parsons Village, North 35 degrees 40
minutes 15 seconds West, 71.39 feet to a point, thence
3. Along the southwesterly line of said Parsons Village, South 62 degrees, 03
minutes 12 seconds West, 71.39 feet to a point, thence
4. Along the southwesterly line of said Parsons Village, South 28 degrees 26
minutes 02 seconds East, 224.59 feet to a point, thence
5. Along the northwesterly line of Parsons Village and the northwesterly line
of lands now or formerly of C.J. Patricia Morel, [ILLEGIBLE]. et als),
South 77 degrees 22 minutes 45 seconds West, 284.64 feet to a point in
said easterly line of relocated South Street, thence "Charles J. Morel,
Jr., Inc. (erroneously shown as
6. Northerly along said easterly line of relocated South Street on a curve to
the left having a radius of 433.00 feet, an arc distance of 99.32 feet to
a point of reverse curvature, thence
7. Still along the same on a curve to the right having a radius of 135.53
feet, an arc distance of 75.17 feet to a point of tangency in said
easterly line of Ramp "G", thence
8. Along said easterly line of Ramp "G", North 15 degrees, 02 minutes 31
seconds East, 597.67 feet to a point of curvature, thence
9. On a curve to the right having a radius of 41.05 feet, an arc distance of
69.70 feet to a point of tangency in said southerly line of Madison
Avenue, thence
10. Along said southerly line of Madison Avenue, South 67 degrees 40 minutes
25 seconds East, 331.05 feet to the point and place of Beginning.
TOGETHER WITH rights of access to South Street contained in Book 2224,
[ILLEGIBLE] being in accordance with a survey dated September 14, 1971, revised
to November 29, 1982, made by Robert C. Edwards Assoc., Inc., John D. Harris
Land Surveyor.
Subject to slope rights contained in Deed Book 2026, page 182 and Deed
Book 2196, page 266; denial of direct access rights contained in Deed Book
2196, page 266; Utility Grant in Deed Book 2231, page 3; Ten-Foot wide Sanitary
Sewer Easement and Agreement respecting parking rights recited in Deed Book
2314, page [ILLEGIBLE] Terms of Easement in Deed Book 2224, page 272; further
SUBJECT to the rights or claims of parties in possission not shown by he public
[ILLEGIBLE] SUBJECT to a certain Agreement by and between Billing & Sons
Contracting Corp. and Charles J. Morel, Jr., Inc. dated February 2, 1974
respecting certain property rights and obligations. SUBJECT to such further
restrictions, covenants, reservations and easements of record, such [ILLEGIBLE]
of facts as may be disclosed by an accurate survey and inspection of the
premises; the rights of tenants and other parties in possession under recorded
or unrecorded Lease Agreements; all rights of the public, if any, in and to all
rights-of-way, streets, roads and highways traversing adjoining or abutting the
premises;
<PAGE>
EXHIBIT B
RULES AND REGULATIONS
1. Lessee shall not (a) obstruct or permit its employees, agents,
servants, invitees or licensees to obstruct, in any way, the sidewalks, entry
passages, corridors, halls, stairways or elevators of the Building, or use the
same in any way other than as a means of passage to and from the offices of
Lessee; (b) bring in, store, test or use any materials in the Building which
could cause a fire or an explosion or produce any fumes or vapor; (c) make or
permit any improper noises in the Building; (d) smoke in any elevator; throw
substances of any kind out of windows or doors, or down the passages of the
Building, or in the halls or passageways, sit on or place anything upon the
window sills; or (e) clean the windows.
2. Waterclosets and urinals shall not be used for any purpose other
than those for which they were constructed, and no sweepings, rubbish, ashes,
newspaper or any other substances of any kind shall be thrown into them. Waste
and excessive or unusual use of electricity or water is prohibited.
3. The windows, doors, partitions and lights that reflect or admit
light into the halls or other places of the Building shall not be obstructed. NO
SIGNS, ADVERTISEMENTS OR NOTICES SHALL BE INSCRIBED, PAINTED, AFFIXED OR
DISPLAYED IN, ON, UPON OR BEHIND ANY WINDOWS.
4. No contract of any kind with any supplier of towels, water, ice,
toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
paper, rubbish or garbage, or other like service shall be entered into by
Lessee, nor shall any vending machine of any kind be installed in the Building
without the prior written consent of Lessor.
5. When electric wiring of any kind is introduced, it must be
connected as directed by Lessor, and no stringing or cutting of wires will be
allowed, except with the prior written consent of Lessor, and shall be done only
by contractors approved by Lessor. The number and location of telephones,
telegraph instruments, electric appliances, call boxes, etc., shall be approved
by Lessor. No tenant shall lay floor covering so that the same shall be in
direct contact with the floor of the Premises; and if floor covering is desired
to be used, an interlining of builder's deadening felt shall be first affixed to
the floor by a paste or other material, the use of cement or other similar
adhesive material being expressly prohibited.
6. Lessor shall have the right to prescribe the weight, size and
position of all safes and other bulky or heavy equipment and all freight brought
into the Building by any tenant; and the time of moving the same in and out of
the Building. All such moving shall be done under the supervision of Lessor.
Lessor will not be responsible for loss or damage to any such equipment or
freight from any cause; but all damage done to the Building by moving or
maintaining any such equipment or freight shall be repaired at the expense of
Lessee. All safes shall stand on a base of such size as shall be designated by
Lessor. Lessor reserves the right to inspect all freight to be brought into the
Building and to exclude from the Building all freight which violates any of
these Rules and Regulations of the Lease of which these Rules and Regulations
are a part.
7. No machinery of any kind or articles of unusual weight or size
will be allowed in the Building, without the prior written consent of Lessor.
Business machines and mechanical
20
<PAGE>
equipment shall be placed and maintained by Lessee at Lessee's expense, in
settings sufficient, in Lessor's judgment, to absorb and prevent vibration,
noise and annoyance to other tenants.
8. No additional lock or locks shall be placed by Lessee on any door
in the Building, without the prior written consent of Lessor. Two keys will
initially be furnished to Lessee by Lessor; two additional keys will be supplied
to Lessee by Lessor, upon request, without charge; any additional keys requested
by Lessee shall be paid for by Lessee. Lessee, its agents and employees, shall
not have any duplicate key made and shall not change any lock. All keys to doors
and washrooms shall be returned to Lessor on or before the Termination Date,
and, in the event of a loss of any keys furnished, Lessee shall pay Lessor the
cost thereof.
9. Lessee shall not employ any person or persons for the purpose of
cleaning the Premises, without the prior written consent of Lessor, which shall
not be unreasonably withheld or delayed. Lessor shall not be responsible to
Lessee for any loss of property from the Premises however occurring, or for any
damage done to the effects of Lessee by janitors or any of its employees, or by
any other person or any other cause.
10. No bicycles, vehicles (except wheelchairs) or animals of any
kind shall be brought into or kept in or about the Premises.
11. The requirements of Lessee will be attended to only upon
application at the office of Lessor. Employees of Lessor shall not perform any
work for Lessee or do anything outside of their regular duties, unless under
special instructions from Lessor.
12. The Premises shall not be used for lodging or sleeping purposes,
and cooking therein is prohibited.
13. Lessee shall not conduct, or permit any other person to conduct,
any auction upon the Premises; manufacture or store goods, wares or merchandise
upon the Premises, without the prior written approval of Lessor, except the
storage of usual supplies and inventory to be used by Lessee in the conduct of
its business; permit the Premises to be used for gambling; make any unusual
noises in the Building; permit to be played any musical instrument in the
Premises; permit to be played any radio, television, recorded or wired music in
such a loud manner as to disturb or annoy other tenants; or permit any unusual
odors to be produced upon the Premises.
14. Lessee will be entitled to access to the building by master key
during non-business or overtime hours; it shall be Lessee's responsibility to
secure the premises at the non-business hours when Lessee enters or leaves the
building.
15. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, shades or screens shall be attached to or
hung in, or used in connection with, any window or door of the Premises, without
the prior written consent of Lessor. All blinds must be of a quality, type,
design, and color, and attached in a manner approved by Lessor.
16. Canvassing, soliciting and peddling in the Building are
prohibited, and Lessee shall cooperate to prevent the same.
17. There shall not be used in the Premises or in the Building
either by Lessee or by others in the delivery or receipt of merchandise,
supplies or equipment, any hand trucks except those equipped with rubber tires
and side guards. No hand trucks will be allowed in passenger elevators.
21
<PAGE>
18. Each tenant, before closing and leaving the Premises, shall
ensure that all windows are closed and all entrance doors locked.
19. Lessor shall have the right to prohibit any advertising by
Lessee which in Lessor's opinion tends to impair the reputation of the Building
or its desirability for offices, and upon written notice from Lessor, Lessee
shall refrain from or discontinue such advertising.
20. Lessor hereby reserves to itself any and all rights not granted
to Lessee hereunder, including, but not limited to, the following rights which
are reserved for Lessor's purposes in operating the Building: (a) the exclusive
right to the use of the name of the Building for all purposes, for himself or
anyone he might designate, except that Lessee may use the name as its business
address and for no other purpose; (b) the right to change the name or address of
the Building, without incurring any liability to Lessee for so doing; (c) the
right to install and maintain a sign or signs on the exterior of the Building;
(d) the exclusive right to use or dispose of the use of the roof of the
Building; (e) the right to limit the space on the directory of the Building
allotted to Lessee; (f) the right to grant to anyone the right to conduct any
particular business or undertaking in the Building.
21. Lessee shall list all articles to be taken from the Building
(other than those taken out in the usual course of business of Lessee) on
Lessee's letterhead, or a blank which will be furnished by Lessor. Such list
shall be presented at the office of the Building for approval before such
articles are taken from the Building.
22. Except as provided in paragraph 24, Lessee shall have the
non-exclusive right to use in common with Lessor and other tenants of the
Building and their employees and invitees the unassigned parking areas provided
by Lessor for the parking of passenger automobiles. Lessor may issue parking
permits, install a gate system, and impose any other system as Lessor deems
necessary for the use of the parking area. Lessee agrees that it and its
employees and invitees shall not park their automobiles in parking spaces
allocated to others by Lessor and shall comply with such rules and regulations
for use of the parking area as Lessor may from time to time prescribe. Lessor
shall not be responsible for any damage to or theft of any vehicle in the
parking area and shall not be required to keep parking spaces clear of
unauthorized vehicles or to otherwise supervise the use of the parking area.
Lessor reserves the right to change any existing or future parking area, roads
or driveways, and may make any repairs or alterations it deems necessary to the
parking area, roads and driveways and to temporarily revoke or modify the
parking rights granted to Lessee hereunder.
23. Lessee shall not use the Premises or permit the Premises to be
used for the sale of food or beverages.
24. This Lessee shall have the right to eleven (11) spaces of which
three (3) are assigned parking space to be designated by the Lessor. Additional
parking shall be on a nonexclusive unreserved basis.
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<PAGE>
Exhibit 10.21
DUPLICATE
MASTER LEASE AGREEMENT
Agreement No. L5340
LESSOR: LEASETEC CORPORATION, LEASETEC SYSTEMS Date June 20, 1996
CREDIT DIVISION, 75 Second Avenue, Needham Heights, MA 02194
LESSEE: (Full Legal Name) GlobeCom Inc., a __________________ corporation
STREET ADDRESS: 55 Broad Street, New York, NY 10004
BILLING ADDRESS: 11th Floor
TELEPHONE NO. (212) 378-4992
TERMS AND CONDITIONS OF LEASE
1. LEASE. (a) Lessor hereby leases to Lessee and Lessee leases from Lessor the
equipment described on the Schedules ("Equipment"), and Lessee further agrees to
pay all Software usage fees and charges for Services (as specified in the
Schedules). All replacements, parts, cables, repairs, additions and accessories
for or to the Equipment shall (whether or not purchased by Lessor) be considered
part of the Equipment for all purposes and (unless otherwise agreed) shall, upon
delivery to Lessee, become the property of the Lessor. Lessee represents that
all Equipment is being leased for commercial or business purposes only, and not
for personal, home, or family purposes.
(b) "Rental Start Date" means the date upon which the Equipment and
Software is delivered and determined by Lessor or its designees to be ready for
use at Lessee's location, or the date on which Services are first supplied,
whichever is earlier. "Schedule" means a schedule in the form of Exhibit A
hereto with all the blanks completed, signed by Lessor and Lessee and
incorporating by reference the terms and provisions of this Master Lease
Agreement ("Master Lease"). Each Schedule shall constitute a separate and
independent lease (a "Lease"); the original of such Lease shall consist of the
original, manually-signed Schedule and a true copy of the Master Lease.
"Stipulated Loss Value" means the amount determinable from the table attached to
or referenced in a Schedule; if there is no such table, there is no Stipulated
Loss Value. "System" means the Equipment, all software and documentation which
is delivered on or with the Equipment or is included on the Schedules
("Software") and all training, maintenance and support services identified on
the Schedules (the "Services"). The term "Software" also includes any software
and documentation produced in the performance of the Services and all
corrections, updates and revisions provided to Lessee for the Software.
Capitalized terms used but not defined herein shall mean and refer to the
corresponding items on the applicable Schedule.
2. TERM/RENTALS. The Lease shall commence with respect to the System described
on the Schedule upon the Rental Start Date and shall continue for the Rental
Term calculated from the first day of the month following the Rental Start Date.
Lessee agrees to execute a Delivery and Acceptance Certificate (in the form of
Exhibit B hereto) as of such Rental Start Date. For the Rental Term, Lessee
agrees to pay Lessor aggregate rentals equal to the sum of the Rental Payments
(including Advance Rental Payments), together with payments for any partial
month at the commencement of the Lease. If the Rental Start Date does not fall
on the first day of a month, the payment for the partial month at the
commencement of the Lease shall be a pro rata portion of the Rental Payment,
calculated on a 30-day basis. (If Rental Payments are payable quarterly under
the Schedule, the references herein to "month" shall mean "quarter" and the pro
rata calculation under the preceding sentence shall be on a 90-day basis.) The
first Rental Payment (together with Advance Rental Payments and payment for any
partial month at the commencement of the Lease) is due on the Rental Start Date,
and remaining Rental Payments are due on the succeeding Rental Payment Dates
specified in the applicable Schedule. Each Lease shall be a net lease; and
Lessee's obligation to pay all Rental Payments (which include rent for use of
the Equipment, Software usage fees, and charges for Services) and other sums
thereunder, shall be absolute and unconditional, and shall not be subject to any
abatement, reductions, set-off, defense, counterclaims, interruption, deferment
or recoupment, for any reason whatsoever. A late charge on any Rental Payments
or other sums due hereunder which are past due shall accrue at the rate of 18%
per annum, or if such rate exceeds the maximum rate allowed by law, then at such
maximum rate, and shall be payable on demand. The Lease may only be terminated
as expressly provided herein or in the applicable Schedule. A handling and
delivery charge to cover all transportation, rigging, drayage, packing,
installation and handling of the Equipment and Software to and from Lessor's or
the supplier's facilities shall be paid by Lessee.
3. WARRANTIES. Lessee acknowledges that it has made the selection of each item
included in the System based upon its own judgment and expressly disclaims any
reliance upon statements made by Lessor. LESSOR MAKES NO EXPRESS OR IMPLIED
WARRANTIES INCLUDING THOSE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE
WITH RESPECT TO THE SYSTEM AND HEREBY DISCLAIMS THE SAME. Lessor shall have no
liability for any damages, whether direct, indirect, general, special,
incidental, exemplary or consequential, incurred by Lessee as a result of any
defect or malfunction of the System. Lessee shall look solely to the suppliers
of the Equipment, Software and Services for any and all claims related to the
System. Lessee understands and agrees that neither the suppliers nor any
salesperson or other agent of any suppliers is an agent of Lessor. No
salesperson or agent of a supplier is authorized to waive or alter this Lease,
and no representation by a supplier shall in any way affect Lessee's duty to pay
the Rental Payments and perform its obligations under this Lease. Lessor hereby
assigns to Lessee, for and during the Rental Term, any warranty on the System
provided by the suppliers. Lessor and Lessee agree that all limitations on
remedies and liability contained in this Lease represent a reasonable allocation
of risks that is part of the fundamental bargain between the parties.
4. TITLE. Lessor and Lessee hereby confirm their intent that the Equipment shall
always remain and be deemed personal property even though it may become attached
or affixed to realty; that title to the Equipment shall remain in Lessor (or its
successors and assigns) exclusively; and that title in Software shall remain
with the supplier thereof and shall not pass to Lessee. Lessee's rights and
remedies with respect to Software are limited to its software license agreement
with the supplier. If requested by Lessor, Lessee will affix plates or markings
on the Equipment and Software indicating the interests of Lessor and its assigns
therein; and Lessee will not allow any other indicia of ownership or other
interest in the System to be placed thereon. Lessee shall not attempt to sell,
assign, grant a security interest in, sublet, pledge, hypothecate or otherwise
encumber or suffer a lien upon or against this Lease or any item or part of the
System.
5. ASSIGNMENT. (a) LESSEE AGREES THAT LESSOR MAY SELL, ASSIGN, GRANT A SECURITY
INTEREST IN, OR OTHERWISE TRANSFER ALL OR ANY PART OF ITS RIGHTS, TITLE AND
INTEREST IN THIS LEASE AND THE SYSTEM WITHOUT NOTICE TO OR CONSENT OF LESSEE.
Upon Lessors written notice to Lessee that this Lease, or the right of the
rental payments hereunder, have been assigned, Lessee shall, if requested, pay
directly to Lessor's assignee without abatement, deduction or set-off all
amounts which become due hereunder. Lessee waives and agrees it will not assert
against Lessor's assignee any counterclaim or set-off in any action for rent
under the Lease. Upon the assignment of this Lease, Lessor's assignee shall have
and be entitled to exercise any and all rights and remedies (but none of the
obligations) of Lessor hereunder, and all references herein to Lessor shall
include Lessor's assignee. Lessee acknowledges that any assignment or transfer
by Lessee does not materially change Lessee's duties or obligations under this
Lease nor materially increase the burdens or risks imposed on Lessee.
(b) LESSEE MAY NOT ASSIGN THIS LEASE OR SUBLEASE THE SYSTEM OR ANY PART
THEREOF WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED. In the event Lessee makes an assignment or
sublease (to which Lessor has consented). Lessee shall not thereby be relieved
of its duties and obligations hereunder, for which it shall remain fully
responsible and liable (independent of its assignee).
6. TAXES AND REGULATIONS. Lessee shall comply with all applicable federal,
state, local, foreign and international laws, regulations and orders relating to
this Lease and the use and operation of the Equipment and Software. Lessee
hereby assumes liability for, and shall pay when due, and on a net after-tax
basis shall indemnify and defend Lessor against, all federal, state, local,
foreign and international fees, taxes and governmental charges (including,
without limitation, interest and penalties) of any nature imposed upon or in any
way relating to Lessor, Lessee, any item or part of the System or this Lease,
except federal, state and local taxes on or measured by Lessor's net income
(other than any such tax which is in substitution for or relieves Lessee from
the payment of taxes it would otherwise be obligated to pay to or reimburse
Lessor for as herein provided). Applicable sales and use taxes will be added to
the Rental Payments unless Lessee provides evidence of direct payment authority
or an exemption certificate valid in the state in which the Equipment and/or
Software is installed. Other applicable taxes may be separately billed to Lessee
by Lessor and shall be due within thirty (30) days of the invoice date.
7. INDEMNIFICATION.(a) Lessee hereby assumes liability for, and shall pay when
due, and shall indemnify and defend Lessor against any and all liabilities,
losses, damages, claims and expenses (including reasonable attorney fees) in any
way relating to or arising out of this Master Lease, any Schedule or any item or
part of the System, including without limitation the manufacture, purchase,
ownership, shipment, transportation, delivery, installation, design, licensing,
leasing, possession, use, operation, maintenance, servicing, repair, storage and
return of the Equipment or Software. Lessee shall give Lessor prompt notice of
any occurrence, event or condition in connection with which Lessor may be
entitled to indemnification hereunder. The provisions of this Section 7 are in
addition to, and not in limitation of, the provisions of Section 6. The
indemnities contained herein shall survive the expiration of the Rental Term of
the Lease.
(b) This Lease has been entered into on the assumption that Lessor shall
be entitled to all deductions, credits, and other tax benefits as are provided
in the Internal Revenue Code of 1986, including amendments as may occur (the
"Code"), to an owner of property including, without limitation, depreciation
deductions and interest deductions with respect to any debt incurred to finance
the procurement of the System. If, as a result of any acts, omissions or
misrepresentations by Lessee or as a result of any changes in the Code
(including any changes in the Marginal corporate income tax rate), the
regulations issued thereunder or the administrative or judicial interpretations,
Lessor's projected after-tax economic return resulting from ownership and lease
of the Equipment hereunder is reduced, then Lessee's Rental Payments shall be
increased in an amount (based on
<PAGE>
Lessor's reasonable calculations) sufficient to provide the same net after-tax
economic return as if such acts or omissions or changes had not occurred.
Appropriate increases shall also be made in the applicable Stipulated Loss
Values (if any) for this Lease. In the event the Lessor's interest in the System
is sold or assigned by Lessor to another party, the net after-tax economic
returns considered shall be those of such transferee.
8. USE; MAINTENANCE; EXTENSIONS. (a) Lessee, at its expense, shall make all
necessary site preparations and cause the Equipment and Software to be operated
in accordance with any applicable supplier's manuals or instructions.
Notwithstanding any transfer or assignment by Lessor and provided Lessee is not
in default hereunder, Lessee shall have the right to quietly possess and use the
Equipment and Software as provided herein and receive the Services without
interference by Lessor, its assigns or any other third party claiming through or
under Lessor.
(b) Lessee shall effect and bear the expense of all necessary repair,
maintenance, operation and replacements required to be made to maintain the
Equipment and Software in good condition, reasonable wear and tear excepted.
Such obligations shall extend to repair or replacement of any partial loss or
damage to Equipment and Software regardless of the cause of such loss or damage.
Lessee shall obtain and keep in effect, at all times during the Rental Term (and
any renewal or extension thereof), maintenance service contracts covering the
Equipment and Software with the suppliers thereof or with suppliers of
maintenance services approved by Lessor, such approval not to be unreasonably
withheld. Except as otherwise provided herein for Services, all maintenance,
repair and replacement services shall be immediately paid for and discharged by
Lessee directly with the suppliers thereof to prevent the attachment of any lien
on the Equipment or Software for materials or services under applicable law.
(c) At the expiration of the Rental Term, upon notice given by Lessee at
least ninety (90) days prior thereto, (i) this Lease shall be extended or
renewed under the terms and conditions set forth herein for a period and rental
amount to be agreed, or (ii) if no such agreement is reached or such notice
specifies return of the Equipment and Software, then Lessee shall take the
actions concerning the Equipment and Software prescribed in Section 10. In the
absence of any notice as permitted by the preceding sentence, the Lease shall be
automatically extended on a month-to-month basis, until terminated (upon notice
by either party given at least ninety (90) days prior to the end of the month on
which the termination is to be effective) or until extended or renewed by
agreement of the parties.
(d) Until all Rental Payments and other amounts due under the Lease are
paid and either (i) the Equipment and Software are returned in the manner and
condition prescribed in Section 10 and (if requested by Lessor) the
certifications required under Section 10 are provided, or, if applicable, the
purchase option price is paid pursuant to Section 15, or (ii) a mutually agreed
renewal or extension of the Lease takes effect, Lessee agrees to continue paying
rent for the System in the amount of the applicable Rental Payments set forth in
the Schedule. Without limitation of the foregoing, such obligation to pay rent
shall continue for any period during which repairs are being performed (at
Lessee's expense) to place returned Equipment in the condition required under
Section 10.
9. INSURANCE/LOSS. (a) Lessee shall obtain prior to the Rental Start Date and
maintain throughout the Rental Term (and any renewal or extension thereof), at
its own expense, property damage and personal injury liability insurance and
insurance against loss or damage to the Equipment including, without limitation,
loss by fire (including so-called extended coverage), theft and such other risks
of loss as are customarily insured against on the types of Equipment leased
hereunder and by the types of business in which the Equipment will be used by
Lessee, in such amounts, in such form and with such insurers as shall be
satisfactory to Lessor, provided however, that the amount of insurance against
loss or damage to the Equipment shall not be less than the greater of the
replacement value of the Equipment, the original Equipment cost to Lessor, and
the applicable Stipulated Loss Value (if any) for this Lease. Each insurance
policy will name Lessee as an insured and Lessor as an additional insured or
loss payee thereof, and shall contain a clause requiring the insurer to give
Lessor at least 30 days prior written notice of any alterations in the terms of
such policy or of the cancellation thereof. Lessee shall furnish to Lessor a
certificate of insurance or other evidence satisfactory to Lessor that such
insurance coverage is in effect; provided, however, that Lessor shall be under
no duty either to ascertain the existence of or to examine such insurance policy
or to advise Lessee in the event such insurance coverage shall not comply with
the requirements hereof. Lessee further agrees to give Lessor prompt notice of
any damage to, or loss of, the Equipment or Software, or any part thereof.
(b) If any Equipment or Software are lost, stolen, destroyed or damaged
beyond repair for any reason, or in the event of condemnation, confiscation,
seizure or requisition of title to or use of such items, Lessee shall
promptly pay to Lessor the amounts specified in Section 12(a)(ii) for that
Equipment and Software and either the applicable pro rata portion of the
Stipulated Loss Value (if any) or, in the absence of such Stipulated Loss Value,
the amounts specified in Sections 12(a)(iv)(A) and (B) for that Equipment and
Software, less the net amount of the recovery, if any, received by Lessor from
insurance or otherwise for such loss or damage. Upon payment by Lessee as
aforesaid, Lessor will transfer to Lessee, without recourse or warranty, all of
Lessor's right, title and interest, if any, in that Equipment or Software.
10. INSPECTION, LOCATION AND RETURN. Lessor shall have the right, at all times,
to inspect the Equipment and Software during regular business hours, with
reasonable notice, and in compliance with Lessee's reasonable security
procedures. Lessee may move the Equipment and Software from the installation
address shown on the Schedule (or any other location for which Lessee has
complied with this provision) only if (i) the new location is within the
continental United States, and (ii) Lessee gives at least 30 days' prior written
notice of the relocation and provides UCC-1 financing statements or such other
documentation as Lessor reasonably requests to protect its interest in the
Equipment. Upon expiration or cancellation of the Rental Term or any extension
or renewal thereof, Lessee at its own risk and expense (i) will immediately
return the Equipment to Lessor in the same condition as when delivered, ordinary
wear and tear excepted, at such location as Lessor shall designate; (ii) will,
on request from Lessor, obtain from the supplier (or other maintenance service
supplier previously approved by Lessor) a certificate stating that the Equipment
and Software qualifies for continued maintenance service at the standard rates
and terms then in effect; and (iii) will immediately return any Software
(including all copies thereof) to Lessor or, if requested by Lessor, will supply
a certificate of destruction covering all copies of any Software.
11. EVENTS OF DEFAULT. An Event of Default shall occur hereunder if Lessee (i)
fails to pay any Rental Payment or other payment required hereunder when due and
such failure continues for a period of ten (10) days after written notice from
Lessor or (ii) fails to perform or observe any other covenant, condition or
agreement to be performed or observed by it hereunder or breaches any provision
contained herein or in any other document furnished Lessor in connection
herewith, and such failure or breach continues for a period of thirty (30) days
after written notice from Lessor, or (iii) without Lessor's consent, attempts to
assign this Lease or sell, transfer, encumber, part with possession, or sublet
any item or part of the System; or (iv) makes any representation or warranty
herein or in any document furnished by Lessee in connection herewith, which
shall have been materially false or inaccurate when made or at the time to which
such representation or warranty relates; or (v) shall commit an act of
bankruptcy or become insolvent or bankrupt or make an assignment for the benefit
or creditors or consent to the appointment of a trustee or receiver or either
shall be appointed for Lessee or for a substantial part of its property without
its consent, or bankruptcy reorganization, or insolvency proceedings shall be
instituted by or against Lessee, and if instituted against Lessee shall not be
vacated or dismissed within sixty (60) days. Any Event of Default shall be
deemed material and a substantial impairment of Lessor's interests for the
purposes of this Lease, the Uniform Commercial Code (as in effect in the state
in which the System is to be located during the term of the Lease and referred
to hereafter as the "UCC"), and any other applicable law.
12. REMEDIES. (a) Upon the occurrence of any Event of Default and at any time
thereafter, provided such Event of Default is then continuing, Lessor may, in
its discretion, do any one or more of the following: (i) cancel any or all
Leases which reference this Master Lease, upon notice to Lessee; (ii) recover
any accrued and unpaid Rental Payments and other amounts which are due and owing
under the Leases so cancelled on the Rental Payment Date immediately preceding
the date on which Lessor obtains possession of the Equipment and Software (or
such earlier date as judgment is entered in favor of Lessor) (the "Determination
Date"), plus late charges as specified in Section 2 for past due amounts; (iii)
if this Lease specifies a Stipulated Loss Value for the Equipment, with or
without canceling this Lease, recover (A) such Stipulated Loss Value as of the
Rental Payment Date immediately preceding the Determination Date, and (B) the
amount of any loss or reduction of tax benefits which Lessor anticipated it
would receive if the Lease continued for its full Rental Term; (iv) if no
Stipulated Loss Value is specified in this Lease, with or without canceling this
Lease, recover damages, not as a penalty, but herein liquidated for all purposes
in an amount equal to (A) the present value of all future Rental Payments
reserved in the Lease discounted to the Determination Date at a rate equal to
the then-current discount rate of the Federal Reserve Bank of San Francisco plus
one percent (1%), and (B) the present value of the Equipment's fair market value
at the expiration of the Rental Term as estimated by Lessor discounted at the
same rate as provided under Section 12(a)(iv)(A) above, and (C) the amount of
any loss or reduction of tax benefits which Lessor anticipated it would receive
if the Lease continued for its full Rental Term; (v) recover any amounts due
under any indemnity then determinable, plus late charges as specified in Section
2 for past due amounts; (vi) require that Lessee provide the return and if
requested by Lessor the certifications of the Equipment and Software in
accordance with Section 10 hereof; (vii) sell any or all of the Equipment at
public or private sale, or license any or all of the Software, with or without
notice to Lessee or advertisement, or otherwise dispose of, hold, use, operate,
lease to others or keep idle such Equipment or Software, all free and clear of
any rights of Lessee and without any duty to account to Lessee for such action
or inaction or for any proceeds with respect thereto; and
(viii) exercise any other right or remedy which may be available to it
under the UCC or other applicable law including the right to recover damages for
the breach hereof.
(b) In addition, Lessee shall be liable for and reimburse Lessor for all
reasonable and necessary legal fees and all commercially reasonable costs and
expenses incurred by Lessor as a result of the foregoing defaults or the
exercise of Lessor's remedies, including without limitation recovering
possession of the System, selling, licensing or leasing the System (including
broker's and sales representative's fees and commissions), and placing any
portion of the System in the condition and obtaining the certificates required
by Section 10 hereof. No remedy referred to in this Section is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lessor at law or in equity. No
express or implied waiver by Lessor of any default shall constitute a waiver of
any other default by Lessee, or a waiver of any of Lessor's rights.
13. LESSEE'S REPRESENTATIONS, WARRANTIES AND WAIVERS. Upon execution of the
Master Lease and each Schedule, Lessee warrants and represents the following:
(a) Lessee is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation. Lessee has full power and
authority and all necessary licenses and permits to carry on its business as
presently conducted, to own or hold under lease its properties and to enter into
this Master Lease and each Schedule and to perform its obligations thereunder;
and Lessee is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of its properties or
the nature of its business or the performance of its obligations under this
Master Lease and any Schedule requires such qualification.
<PAGE>
DUPLICATE
(b) The execution and delivery by Lessee of this Master Lease and each
Schedule and the performance by Lessee of its obligations thereunder have been
duly authorized by all necessary corporate action on the part of Lessee; and do
not and will not contravene the provisions of, or constitute a default (either
with or without notice or lapse of time, or both) under, or result in the
creation of any lien upon, the System or any property of Lessee under any
indenture, mortgage, contract or other instrument to which Lessee is a party or
by which Lessee or its properties is bound.
(c) No consent or approval of, giving of notice to, registration with, or
taking of any other action by, any state, federal, foreign or other governmental
commission, agency or regulatory authority or any other person or entity is
required for the consummation or performance by Lessee of the transactions
contemplated under this Master Lease and each Schedule.
(d) This Master Lease and each Schedule, when executed by Lessee,
constitute legal, valid and binding agreements of Lessee enforceable against
Lessee in accordance with their terms, except as limited by any bankruptcy,
insolvency, reorganization or other similar laws of general application
affecting the enforcement of creditor or Lessor rights.
(e) There are no actions, suits or proceedings pending or threatened
against or affecting Lessee or any property of Lessee in any court, before any
arbitrator of any kind or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(collectively "Governmental Body"), which, if adversely determined, would
materially adversely affect the business, financial condition, assets, or
operations of Lessee, or adversely affect the ability of Lessee to perform its
obligations under this Master Lease and each Schedule; and Lessee is not in
default with respect to any order of any court, arbitrator or Governmental Body
or with respect to any material loan agreement, debt instrument or contract with
a supplier or customer of Lessee, except as disclosed in writing to Lessor.
(f) Lessee has not taken and will not take any action or maintain any
position inconsistent with treating this Master Lease and each Schedule as a
valid leasehold interest in the Equipment.
(g) To the extent permitted by applicable law, Lessee hereby waives any
and all rights and remedies to: (i) cancel this Lease; (ii) repudiate this
Lease; (iii) reject the System; (iv) revoke acceptance of the System; (v)
recover damages from Lessor for any breaches of warranty or for any other
reason; (vi) claim a security interest in the System in Lessee's possession or
control for any reason; (vii) deduct from Rental Payments all or any part of any
claimed damages resulting from Lessor's default, if any, under this Lease, from
the provision of any Software license or Services by any third party, or from
any defect, failure or lack of performance in or by the System; (viii) accept
partial delivery of the System; (ix) "cover" by making any purchase, license or
lease of or contract to purchase, license or lease equipment or software in
substitution for any portion of the System designated to this Lease. (x) recover
any direct, general, special, incidental, indirect, exemplary or consequential
damages, for any reason whatsoever; and (xi) obtain specific performance,
replevin, detinue, sequestration, claim and delivery or the like for any portion
of the system identified to this Lease. To the extent permitted by applicable
law, Lessee also hereby waives any rights now or hereafter conferred by statute
or otherwise which may require Lessor to sell, license, lease or otherwise use
any item or part of the System in mitigation of Lessor's damages or which may
otherwise limit or modify any of Lessor's rights or remedies.
14. FINANCE LEASE. The parties agree that each Lease is a finance lease as
defined by Section 4-2.5-103(1)(g) of the UCC. Lessee acknowledges that (i)
Lessee has selected the supplier or suppliers of the System, and (ii) by this
provision Lessor has advised Lessee in writing that (A) Lessee may have rights
under the supply contract between Lessor and supplier, and (B) Lessee may
contact the supplier for a description of any such rights Lessee may have under
the supply contract.
15. PURCHASE OPTION. At the expiration of the Rental Term, Lessee shall, upon
written notice given at least ninety (90) days prior thereto, have the option to
purchase all (but not less than all) of the Equipment, having the same Rental
Term expiration date at the purchase option price indicated on its Schedule,
provided no Event of Default has occurred which is then continuing. If no
purchase option pricing is indicated on the Schedule for such Equipment, the
purchase price shall be its then fair market value. Fair market value, as
applied to a purchase option hereunder, shall be determined by Lessor based on
the price a willing buyer would pay and a willing seller would accept (neither
buyer nor seller being under compulsion to act) for the Equipment as installed
and in use, giving due consideration to its condition, utility, revenue
producing capability, and replacement cost. The purchase option price shall be
paid not later than the last day of the Rental Term. Software is not included
under this Section.
16. MISCELLANEOUS. (a) This Lease may not be amended except by a written
agreement signed by both Lessor and Lessee, and shall be binding upon and inure
to the benefit of the parties hereto, their permitted successors and assigns.
Any provision of the Lease which is unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof; and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction; provided,
however, that to the extent that the provisions of any such
applicable law can be waived, they are hereby waived by Lessee. Time is of the
essence with respect to this Lease. Lessee hereby expressly assumes liability
for and agrees to indemnify and defend and hold Lessor harmless from and against
any breach by Lessee of any representation, warranty or covenant made by Lessee
herein and in connection therewith to pay and reimburse Lessor for the payment
of any and all expenses, including reasonable attorney fees incurred by Lessor
in connection with or as the result of any such breach. The captions set forth
herein are for convenience only and shall not define or limit any of the terms
hereof. This Lease shall in all respects be governed by, and construed in
accordance with the laws of the state in which the System is to be located
during the term of the Lease, as applicable to contracts executed and to be
fully performed therein by residents thereof. LESSOR AND LESSEE WAIVE ALL RIGHTS
TO TRIAL BY JURY IN ANY LITIGATION ARISING FROM THIS LEASE. This Lease shall
become effective and binding on the parties, when the related Schedule is
accepted by Lessor.
(b) Any notices or demands required or permitted hereunder shall be
given to the parties in writing and by personal delivery, regular or certified
mail, facsimile or telegram at the address herein set forth or to such other
address as the parties may hereafter substitute by written notice given in the
manner prescribed in this Section. Such notices or demands shall be deemed given
upon receipt in the case of personal delivery and upon mailing or transmission
in the case of mail, facsimile or telegram.
(c) Lessee will promptly execute and deliver to Lessor such further
reasonable documents (including, but not limited to, financing statements) and
take such further reasonable action (such as obtaining landlord or mortgagee's
waiver and consent), as Lessor may request in order to more effectively carry
out the intent and purpose of this Lease or an assignment of Lessor's interest
herein. Lessee authorizes Lessor to sign (in Lessor's name, Lessee's name, or
both) and file any UCC financing statements (including continuation statements)
which Lessor deems necessary or appropriate to protect the interests of Lessor
and its assignees in the Equipment and the Lease.
(d) In the event Lessee fails to make any required payments
hereunder (for taxes, insurance, repairs or any other purpose) Lessor may,
without any obligation to do so and without waiving the Event of Default
resulting from such failure, make such payments which shall be immediately due
and payable by Lessee upon invoice by Lessor.
LESSEE:
LEASETEC CORPORATION,
Globe Com, Inc. LEASETEC SYSTEMS CREDIT DIVISION:
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- ------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
---------------------------- ----------------------------
Title: Senior Vice President Title: Operating Manager
------------------------------ ---------------------------
(Must be signed by officer duly authorized
to enter into this Lease on behalf of Lessee)
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L534000 TO MASTER LEASE AGREEMENT NO. L5340 DATED
June 20, 1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeCom, Inc. (herein called "Lessee")
Business Address: 55 Broad Street, 11th floor New York, NY 10004
Installation Address: Same
1. Rental Tern: 36 Months
2. Rental Payments: 12 Payments of $1,806.00
each, payable monthly ( ) or quarterly (X) (check
one) in advance
3. Rental Payment Dates: First day of each month ( ) or each quarter (X)
(check one)
4. Advance Rental Payments: Last n/a Rental payments shall be delivered to
Lessor on the Rental Start Date.
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached
Total: $19,855.95
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein.
LESSEE: GlobeCom, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
---------------------------- ------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
-------------------------- ----------------------------
Title: Senior Vice President Title: Operation Manager
------------------------- ----------------------------
<PAGE>
DUPLICATE
GlobeCom, INC. L EQUIPMENT LIST
- -------------- - --------------
QTY MODEL/VERSION/DESCRIPTION
- --- -------------------------
1 Ultra 1 Model 140 143 Mhz UltraSPARC-1, 17" TGX, 32MB, 1.05GB
1 1.05 GB Fast SCSI-2 Drive
1 Type 5 Country Kit (Unix)
1 Enterprise 1 Model 140 w/ (1) Yr On-Site Next-Day
Warranty 143mhz, 512KB Ext. Cache, 64MB, 2.1GB, Sun
CD4, Solaris Server Lic.
1 64MB SIMM Expansion (2 x 32MB)
1 2.1 GB Fast/Wide SCSI-2Drive, 7200 rpm
1 Sun Server US Power cord
1 Kingston EtherX 8 port stackable hub
1 Solaris 2.5 Server Media Kit
1 Solaris 2.5 Desktop Media Kit
Total Cost: $19,855.95
Initialed By: /s/ GM
-------------------
<PAGE>
DUPLICATE
ADDENDUM TO SYSTEM SCHEDULE NUMBER L5340-01
BETWEEN
LEASETEC SYSTEMS CREDIT CORPORATION ("LESSOR")
AND GLOBECOM, INC. CORPORATION
DATED JUNE 20, 1996
Any provisions of the Lease to the contrary notwithstanding, Lessor and Lessee
hereby amend said Lease Schedule Number as follows;
Add the following equipment:
(1) Cabinet 70 x 19 x 24 Frame for IBM Blue w/front trim & shelf rails
(1) 1400 VA UPS, Hot Swap Replaceable Batteries w/Smart Slot, Rackmountable
Cost: $1,290.00
The monthly lease payment is changed from $70.00 to $111.00. The total Equipment
Cost is changed from $2,218.00 to $3,508.00 All other terms and conditions of
the Lease shall remain in full force and effect
LESSEE: GLOBECOM, INC. LESSOR: LEASETEC SYSTEMS
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
--------------------------- ---------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
------------------------- -------------------------------
Title: Senior Vice President Title: Operation Manager
------------------------ ------------------------------
Date: 8/12/96 Date: 8/15/96
------------------------- -------------------------------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-01 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeCom, Inc. (herein called "Lessee")
Business Address: 11 Broadway, Suite 660, New York, NY 10004
Installation Address: Same
1. Rental Tern: 35 Months
2. Rental Payments: 35 Payments of $70.00
each, payable monthly (X) or quarterly ( ) (check
one) in advance
3. Rental Payment Dates: First day of each month (X) or each quarter ( )
(check one)
4. Advance Rental Payments: Last n/a Rental payments shall be delivered to
Lessor on the Rental Start Date.
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
1 1400 VA UPS, Hot Swap, Replaceable Batteries, W/Smart Slot, Rackmountable
1 Lattis Hub Model 2803 16 port 10 BaseT Workgroup Hub
1 Standard 10 Plug Strip W/15" Cord
5 Cabinet Parts Solid Flat Shelf for 19 X 24 frame
1 Cabinet 70 x 19 X 24 frame for IBM Blue
Total: $2,218.00
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein.
LESSEE: GlobeCom, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
--------------------------- ------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
------------------------- ----------------------------
Title: Senior Vice President Title: Operation Manager
------------------------ ---------------------------
<PAGE>
LEASETEC SYSTEMS CREDIT
November 25, 1996
Globecomm, Inc.
11 Broadway Suite 600
Attn: Accounts Payable
New York, NY 10004
Dear Sir/Madam:
Your company has recently entered into a lease agreement with Leasetec Systems
Credit. Enclosed you will find the following:
1. Invoice for lease payments from the rental start date forward. All
payments are due in advance as set out in the lease agreement. All
payments should be remitted to:
Leasetec Systems Credit
P.O. Box 371757
Pittsburgh, PA 15251-7757
2. Copy of the System Schedule Agreement and the Delivery and Acceptance
Certificate.
The commencement date for this schedule is September 1, 1996; therefore, your
first invoice is for the rental period 09/O1/96-09/30/96. The remaining invoices
are for your regular monthly billing. All future monthly invoices will be billed
approximately 40-45 days prior to the due date.
I look forward to working with you in the future. If you have any questions,
please contact either myself at ext. 372 or Chris Rowe at ext. 368.
Sincerely,
/s/ Maryanne Dugan
Maryanne Dugan
Customer Service Specialist
Enclosures
Leasetec Systems Credit, a division of Leasetec Corporation
1401 Pearl Street, Suite 200, Boulder, CO) 80302
(303) 443-8064 Fax (303) 443-1764
<PAGE>
LEASETEC SYSTEMS CREDIT
EXHIBIT B
DELIVERY AND ACCEPTANCE CERTIFICATE
MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20, 1996
SYSTEM SCHEDULE NO. L5340-01
Lessor: Leasetec Systems Credit Lessee: GlobeCom, Inc.
A Division of Leasetec Corporation 11 Broadway
75 Second Avenue New York, NY 10004
Needham Heights, MA 02194
Location of Equipment: Same
Lessee hereby acknowledges receipt and acceptance of the Equipment and Software
listed on the above referenced SYSTEM SCHEDULE and agrees the Equipment and
Software has been delivered and is ready for use under the terms of the above
referenced MASTER LEASE AGREEMENT.
LESSEE: GlobeComm, Inc.
BY: /s/ Eric Woodward
--------------------------------------
NAME: Eric Woodward
------------------------------------
TITLE: VP Systems
-----------------------------------
RENTAL START DATE: September 1, 1996
Leasetec Systems Credit, a division of Leasetec Corporation
191 Post Road West, Suite 50, Westport, CT 06880
(800) 924-5013 (203) 221-2658 Fax (203) 221-2678
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-02 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE
20,1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, Suite 660, New York, NY 10004
Lease Start Date: 1/1/97
Installation Address: Same
Billing Address: Same
1. Rental Term: 48 Months
1. Rental Payments: 48 Payments of $1,580.00
each. payable monthly (X ) or quarterly ( ) (check
one) in advance
3. Real Payment Dates: First day of each month (X) or each quarter ( )
(check one)
4. Advance Rental Payments: First and n/a Rental payments that shall be
delivered to Lessor upon Equipment Acceptance
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment Description
Total Cost $65,242.34
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7.TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Coporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
--------------------------- ------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
------------------------- ----------------------------
Title: President Title: Operation Mananger
------------------------ ---------------------------
<PAGE>
DUPLICATE
EQUIPMENT LIST L5340-02
QTY MODEL/VERSION/DESCRIPTION
- --- -------------------------
2 Sun Ultra Spare Processor Modules
1 Kingston 256 MB RAM SIMMS for E3000
1 E3000 CPU Memory Board
1 Maint. Incr. for systems with a 2nd CPU mem. Bd.
3 Copies of Visual C++ workshop
1 C++ Maintenance License
2 SUN Sparc 10 #S106-612-64-P95
1 Dual 60 MHZ Processors with 1 MB of cache each
2 64 MB RAM
2 2 GB Disk
1 Delivery charges
1 Phone System - Toshiba DK 280 Digital System
2 DKT 2010 SD Toshiba phones
1 DKT 2010 H Toshiba phones
1 PDKU
1 Replay Upgrade from 2 to 4 ports
6 DKT 2010 SD Toshiba phone
1 DKT 2010 H Toshiba phone
1 Labor & Installation
1 DK280 Medium System Common Control Unit
1 ACD Feature Option Key
1 4 CRKT L/S CO Line Interface Unit
1 4 CRKT L/S CO Line Interface Subassembly
1 Digital Announcer
1 Programming of System
1 System Cable Run + 3 Jacks
1 Expansion Cabinet
Total Cost: $65,242.34
Initialed By: J.C.
-------------------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-03 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, 6th Fl., New York, NY 10004
Installation Address: Same
Billing Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $2,060.00 each, payable monthly (X)
or quarterly ( ) (check one) in advance
3. Rental Payment Dates: First day of each month (X) or each quarter ( )
(check one)
4. Advance Rental Payments: Last n/a Rental payments shall be delivered to
Lessor on the Rental Start Date.
5.System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment List
Total $88,514.20
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Coporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
--------------------------- ------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
------------------------- ----------------------------
Title: Senior Vice President Title: Operation Mananger
------------------------ ---------------------------
<PAGE>
ORIGINAL
EQUIPMENT LIST L5340-03 GLOBECOMM, INC.
QTY MODEL/VERSION/DESCRIPTION
- --- -------------------------
1 Ultra Enterprise 3000: Server chassis, CPU Memory Board, 2 UltraSparc CPU
Mods, SBUS I/O board, 2.1 Internal F/W, 256 Memory Expansion Additional
Power cool
1 Ultra Enterprise 2 Model 1170, Base System, 167 Mhz, 64MB RAM, CDROM, 2.1
Gigabyte Internal
1 SPARCstorage Array Model 112, 6x2.1 GB 7200 RPM Drives, 25MB Fibre
Channel OM
1 TGX/17" Monitor Head
1 3-Fast Ethernet SBUS
1 Spare TGX Board
1 Annual Silver Support, Enterprise 3000, Enterprise CPU/MEM Brd.
SPARCstorage
Array
1 Shipping
Total Cost: $88,514.20
Initialed By: GM
-----
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE NO. L5340-04 TO MASTER LEASE AGREEMENT NO. L5354 DATED JUNE 20,
1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, 6th Floor, New York, NY 10004
Installation Address: Same
Billing Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $1,235.00
each, payable monthly (X) or quarterly ( ) (check
one) in advance
3. Rental Payment Dates: First day of each month (X) or each quarter ( )
(check one)
4. Advance Rental Payments: Last n/a Rental payments shall be delivered to
Lessor on the Rental Start Date.
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment List
Total: $52,301.00
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Coporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
--------------------------- ------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
------------------------- ----------------------------
Title: Senior Vice President Title: Operation Mananger
------------------------ ---------------------------
<PAGE>
ORIGINAL
EQUIPMENT LIST L5340-04 GLOBECOMM, INC.
QTY MODEL/VERSION/DESCRIPTION
- --- -------------------------
CISCO 7505
1 Cisco 7505 Base Chassis Unit
1 RSP 64 MB DRAM Upgrade
1 RSP 20 MB Flash Kit
1 Spare AC Power Supply
1 IOS 11.1.3 IP and VIP
1 1-Port FE 100BaseTX
CATALYST 5000
1 Catalyst 5000 Base Chassis Unit
1 Supervisory Engine
1 Power Supply
1 Redundant Power Supply
1 FE 100BaseTX Module-1
NETWORK MANAGEMENT ACCESSORIES
1 CiscoWorks Windows 2.0
1 Standard Router 11.1
1 7505 Hardware Install
1 7505 User Guide
1 Catalyst 5000 Config.
1 Catalyst 5000 Hardware
1 Catalyst 5000 User Guide
1 Catalyst 5000 Wiring
1 Special Order Docs
SUPPORT
1 Cisco 7505 SMARTnet
1 Catalyst 5001 SMARTnet
TOTAL COST: $52,301.00
INITIALED BY: GM
-----
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-05 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, 6th Floor, New York, NY 10004
Installation Address: Same
Billing Address: Same
1. Rental Term: 36 Months
2. Rental Payments: 36 Payments of $1,218.00
each, payable monthly (X) or quarterly ( ) (check
one) in advance
3. Rental Payment Dates: First day of each mouth (X) or each quarter ( )
(check one)
4.Advance Rental Payment: Last n/a Rental payments shall be delivered to
Lessor on the Rental Start Date.
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment Description
1 Oracle 7 Server License
1 New York Sales Tax
Total: $37,533.52
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): ( ) Fair Market Value
( ) 10% of Total Original Purchase Price
(X) $1.00
7.TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Coporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
--------------------------- ------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
------------------------- ----------------------------
Title: Senior Vice President Title: Operation Mananger
------------------------ ---------------------------
<PAGE>
DUPLICATE
LEASETEC SYSTEMS CREDIT
ADDENDUM TO SYSTEM SCHEDULE NUMBER L5340-05
BETWEEN
LEASETEC SYSTEMS CREDIT CORPORATION ("LESSOR")
AND GLOBECOMM, INC.
DATED JUNE 20, 1996
Any provisions of the Lease to the contrary notwithstanding, Lessor and Lessee
hereto amend said Lease Schedule Number as follows:
The total Equipment Cost is changed from $37,536.77 to $37,533.52. The monthly
lease payment is unchanged. All other terms and conditions of the Lease shall
remain in full force and effect.
LESSEE: GLOBECOMM, INC. LESSOR: LEASETEC SYSTEMS
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
--------------------------- ----------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
------------------------- --------------------------------
Title: President Title: Operation Manager
------------------------ -------------------------------
Date: 10/17/96 Date: 10/21/96
------------------------- --------------------------------
Leasetec Systems Credit, a division of Leasetec Corporation
291 Post Road West, Suite 50, Westport, CT 06880
(800) 924-5013 (203) 221-2636 Fax (203) 222-2678
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-06 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
Billing Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $242.00
each, payable monthly (X) or quarterly ( ) (check
one) in advance
3. Rental Payment Dates: First day of each month (X) or each quarter ( )
(check one)
4. Advance Rental Payments: Last n/a Rental payments shall be delivered to
Lessor on the Rental Start Date.
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
1 Exabyte 8900 SLCD external with
terminator and 5C512 Cable
1 Presario 4704 P133
1 17" P17 .270P Flatscreen Pan
2 Etherlink III Parallel Task1
1 CTX P120 16/1.2 8XCD 14.4 Fax
2 8MB 2x32-70 72 pin nonparity
1 15" 15SX1 Sony .250P 1280x10
1 Sales Tax
Total: $9,644.50
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
--------------------------- ------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
------------------------- ----------------------------
Title: President Title: Operation Mananger
------------------------ ---------------------------
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-07 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Lease Start Date: March 1, 1997
Rate: 10%
Installation Address: Same
Billing Address: Same
1. Rental Term: 36 Months
2. Rental Payments: 36 Payments of $1,680.00
each, payable monthly (X) or quarterly ( ) (check
one) in advance
3. Rental Payment Dates: First day of each month (X) or each quarter ( )
(check one)
4. Advance Rental Payments: First and n/a Rental payments shall be delivered to
Lessor upon Equipment Acceptance
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
1 Oracle Software sale/leaseback invoice #M1227961
1 New York Sales Tax ($3,974.03)
Total Cost: $52,144.63
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): ( ) Fair Market Value
( ) 10% of Total Original Purchase Price
(X) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only:
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-08 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE
20,1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Lease Start Date: March 1, 1997
Rate: 8 1/2%
Installation Address: Same
Billing Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $1,128.00
each, payable monthly (X) or quarterly ( ) (check
one) in advance
3. Rental Payment Dates: First day of each month (X) or each quarter ( )
(check one)
4. Advance Rental Payments: First and n/a Rental payments shall be delivered to
lessor upon Equipment Acceptance
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment Description
Total Cost $45,731.05
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7.TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only:
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
DUPLICATE
GLOBECOMM, INC. EQUIPMENT LIST L5340-08
QTY MODEL/VERSION/DESCRIPTION
- --- -------------------------
1 PC160 ATECH MT, 16, 1G, CD, 1V, 512K
1 Monitor 15" FCC OEM
1 LABTEC Speakers LCS-3210
1 32MB DIMM
1 Lattis Hub Model 2803 16 Port 10 BaseT Workgroup HUB W/AUI
4 Cabinet-Parts Solid Flat Shelf for 19 x 24 Frame
3 DKT 2010SD Telephone Add-On
3 Additional Jacks
1 Tape Drive Ditto 3200 Parallel Port Travan
4 3M Travan TR-3 Mini Data Cartridge
4 MEM PUSER SIMM 8 MB 2x32 60NS 72pin
1 Fast Ethernet Card
1 OPT TNT Disk 6*2GB/7200 FWSCSI
1 OPT Fibre Channel Optical Mod.
1 OPT SBUS Fibre Channel Adapter
1 2 Meter Fibre channel Cable
2 OPT INT Disk 2GB/7200 FWSCSI
1 P5/133 Gigabyte BestBuy (16MB, 256K) PCI Diamond Stealth 64 (2MB) D
1 P5/166 Professional MPEG (32MB, 512K) 8X
1 P5/166 M/M Hyper Speed (32MB, 512K) 8X
6 3rd Party 64MB SIMM
1 167MHZ UltraSparc 2 Module
4 64MB SIMM - Kingston
3 Sparc 10 base with 0 processor
3 Single Slot GX Buffer
3 16 inch Color monitor
3 sm50 SuperSparc Module
3 64 MB SIMM for a SS10
3 Seagate 1.05 GBYTE SCSI Disk
3 3 1/2 floppies
3 Type 5 Unix Keyboard
3 Sun 5 mouse
3 Type 5 mice pads
1 Cisco 4 port serial card
1 500 Ft. Teflon Cable
1 CSU - Carrier Service Unit ADC Kentrox D-Serv
1 Expansion Cabinet
1 Digital Station Interface Unit
2 Cable Runs w/3 RJ 11 off each
1 Programming
1 New York Sales Tax - $2,768.50
TOTAL COST: $45,731.05 Initialed By: J.C.
--------------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-09 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE
20,1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Lease Start Date: 6/1/97
Rate: 5.6%
Installation Address: Same
Billing Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $3,505.00
each, payable monthly (X) or quarterly ( ) (check
one) in advance
3. Rental Payment Dates: First day of each month (X) or each quarter ( )
(check one)
4. Advance Rental Payments: First payment shall be delivered to lessor upon
Equipment Acceptance
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment Description
Total Cost $150,316.60
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7.TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only:
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
ORIGINAL
GlobeComm, Inc., Equipment List L5340-09
- ----------------------------------------
QTY MODEL/VERSION/DESCRIPTION
- --- -------------------------
1 Server UE 4000 Base 2*PS
1 OPT INT CPU/MEM Bd for Enterprise
1 OPT INT BD for Enterprise
2 OPT Processor US 250MHZ/1MB
1 OPT Memory 256MB (8*32MB)
1 OPT INT Disk BD 4GB/7200 FWSCSI
1 OPT FIBRE Channel Optical Mod.
1 North American/Asia Power Cord Kit
1 Annual Support for Cabinet
1 Annual Support for CPU/Memory Board
1 Server UE3000 Base 1*PS
1 OPT INT CPU/MEM Bd. for Enterprise
1 Opt INT BD for Enterprise
2 Opt Processor US 250MHZ/1MB
1 Opt Memory 256MB (8*32MB)
2 Opt Int Disk 4.2GB/7200 FWSCSI
1 Opt Fibre Channel Optical Mod.
l North American/Asia Power Cord Kit
1 Annual Service for E3000 cabinet
1 Annual service for CPU Memory Board
2 Freight
Subtotal: $130,446.00
1 1400KVA Rackmount UPS w/Power Chute, Software and Smart Slot
1 Cabinet 70x19x24, Frame for IBM Blue
1 Standard 10 plug strip w/15 foot cord
2 Freight
Subtotal: $1,549.75
1 1 GBKit for E3000 8 128MB SIMMS
2 256 MB Kit for E3000 (8) 32MB SIMMS
1 Type 4 Mouse Pads
1 Freight
Subtotal: $18,320.85
Total Cost: $150,316.60
Initialed By: J.C.
-----------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-l0 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Leasee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Lease Start Date: 6/1/97
Rate: 10 1/2%
Installation Address: Same
1. Rental Term: 36 Months
2. Rental Payments: 36 Payments of $1,690.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each month (X) or each
quarter ( ) (check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor
upon Equipment Acceptance.
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
1 Oracle 7 Server License
1 New York Sales Tax ($3,974.03)
Total Cost: $52,144.00
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): ( ) Fair Market Value
( ) 10% of Total Original Purchase Price
(X) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only:
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-11 TO MASTER LEASE AGREEMENT NO. L5340 DATED
JUNE 20, 1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Leasee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 36 Months
2. Rental Payments: 36 Payments of $1,690.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each month (X) or each
quarterly ( ) (check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor
upon the Rental Start Date.
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
1 Oracle Software - Sale Leaseback invoice #G11003
1 New York Sales Tax ($3,974.03)
Total Cost: $52,144.00
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): ( ) Fair Market Value
( ) 10% of Total Original Purchase Price
(X) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only:
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-12 TO MASTER LEASE AGREEMENT NO. L5340 DATED
JUNE 20, 1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Leasee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $2,745.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each month (X) or each
quarter ( ) (check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor
upon the Rental Start Date.
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment Description - Sale Leaseback
Total Cost: $110,579.62
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only:
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
ORIGINAL
August 27, 1997
Leasetec Systems Credit
191 Post Road West, Suite 50
Westport, CT 06880
Attention: Marianne C. Howard
Jane Centrella
GlobeComm, Inc.
11 Broadway, Suite 550
New York, NY 10004
Dear Marianne:
The following is a listing of equipment we would like to put under lease:
1 Vendor-APS Technologies
-----------------------
Conner, DOS-2, SR2, EXPWR, *Recert
Conner, DOS-2, EXPWR, ASM, *Recert
ACC Kit. Dat. Tape, Ext, W/SW, MAC
CP.PWR Supply 512 Jager Micro
Warranty, 2 year $579.95
Cable, 25x50 SCSI 2FT.
Cable, 25x50 SCSI 2FT. $8.95
Special, 3pk Sony 120m Dat Tape $49.95
TAPE, 120M DDS 2 DAT, SONY
Cleaner, Dat head, Maxell $12.95
Shipping $31.43
2 Vendor-Power Computing
----------------------
PCP210NT/16X/1MC/32MB/4GBAV/4MB,VR $2,988.00
MONITOR 17" PCC OEM $629.00
3 Vendor-MacWarehouse
-------------------
32MB DIMM-80NS(166 PIN) $380.00
ADOBE Photoshop 4.0 Upgrade F/MAC CD-ROM $149.95
Shipping $3.00
4 Vendor-Teledynamics
-------------------
Cable $125.00
Expansion Card $265.00
8 2010-H
3 PDKU extensions
Base Cable
Extension Cable
<PAGE>
Power Supply
1 M-Block
1 Caddy Fastener
2 C.O. Cords
Programming $1,000.00
CA8CK $495.00
Tax $155.51
5 Vendor-Milkyway Networks
------------------------
Entry level Black Hole $4,615.00
10/5 First-Line Maintenance $1,066.00
Shipping $47.03
6 Vendor-Digital Network Associates, Inc.
---------------------------------------
VIP2-20 Versatile interface Processor 2, model $8,640.00
Shipping $35.86
7 Vendor-Anixter
--------------
Allied Telesyn 4 Port 10 Base-T, Micro-repeater,
1 AUI & 4 RJ45 Int. PWR Sup, VA*22 $432.00
Cabinet-parts solid flat shelf for 19 x 24 Frame $168.00
Cabinet-parts solid flat shelf for 19 x 24 Frame $188.00
1400VA Rackmount UPS w/powerchute plus
software & smart slot $775.00
Cabinet-70 x 19 x 24 Frame for IBM Blue w/
Front Trim & 4 shelf rails $515.00
Standard 10 plug strip w/ 15' cord $63.00
Sales Tax $196.70
Shipping $251.15
8 Vendor-Digital Network Associates, Inc.
---------------------------------------
1 Fast Ethernet port $2,880.00
VIP 4 Port 10 Base port Adapter $3,195.00
Catalyst 5000 12 10/100base-t, switching mod KJ45 $7,196.00
Shipping $75.00
Sales Tax $1,101.05
9 Vendor-Interactive Futures, Inc.
--------------------------------
2 OPT Int Dsk 6*4.2GB/7200 FWSCS $12,876.00
2 OPT Int Dsk 4.2GB/7200 FWSCSI $2,146.00
3 WSCC4.2 SP S1-UC ** Computer upgrade $830.00
1 OPT SBUS FSCSI ETHER(FSBE/S) $810.30
1 OPT SBUS FSCSI ETHERNET Controller $298.00
3 OPT FIBRE CHANNEL OPTICAL MOD $1,332.00
2 METER FIBRE CHANNEL CABLE $330.00
Shipping $235.00
Sales Tax $1,519.88
10 Vendor-Granger
--------------
<PAGE>
26M BTU Spot Cooler $4,241.75
Warm Air Flange $69.35
2' X 10' Duct $118.75
Portable Humidifier $161.50
Replacement Air Filter $9.91
Pump Kit $133.67
Sales Tax $390.63
11 Vendor-Computer Connection Of GNY, Inc.
---------------------------------------
2 Single Slot GX Buffer $750.00
1 Rack Mount Accessories Kit $150.00
3 Single Slot GX Buffer $1,050.00
Model 112 Storage Array $11,500.00
1 Sparc ten base w no processor
1 Single Slot GX Buffer
1 16" Color Monitor
1 sm61 SuperSparc Mod cpu-2360, cpu-2362, cpu-2707
2 3rd Party 64MB simm
1 2GB Baracude Seagate
1 type 5 keyboard
1 sun 5 mouse
1 type 5 mice pad
1 cable $3,645.00
Shipping $275.00
Sales Tax $1,410.34
12 Vendor-Computer Connection Of CNY, Inc.
---------------------------------------
1 Sparc ten base w no processor
2 sm50 SuperSparc Mod ss20 opt 1170 siso cpu 2708
2 3rd party 64MB Simm
1 238 Baracude Seagate
engineering cost $3,120.00
1 Sparc ten base w no processor
1 Single Slot GX Buffer
1 16" Color monitor
1 SM50 Supersparc Mod. Sm20 opt 1170 also cpu-2708
4 16 MB Simm for a S520 siso mem-2479. mem-1785
1 1GB Hard Drive
1 Type 5 Keyboard
1 Type 5 Mechanical Mouse & Pad
engineering cost $2,125.00
2 Sparc ten base w no processor
2 Single Slot GX Buffer
2 Sm50 Supersparc Mod ss20 opt 1170 also cpu 2708
2 16" Color monitor also mon-1113, mon-1159
2 3rd party 64MB Simm
2 Type 5 Keyboard
2 Type 5 Mechanical Mouse & Pad
engineering cost $4,580.00
<PAGE>
1 Sparc 5 110 Proc.
4 32Meg Simm for a S5
Type 5 Keyboard
Type 5 Mechanical Mouse & Pad
engineering cost
SEAGATE/CONNER 2GBQC 7200 RPM $3,360.00
Shipping $215.00
Sales Tax $1,087.76
13 Vendor-Power Computing
----------------------
PCP210NT/16X/1MC/32MB/4GB/ZIP/4MBV $2,930.00
Monitor 17" PCC OEM $429.00
14 Vendor-Comtrade
---------------
Intel Pentium/200 MMX CPU System, w built in Math
coprocessor, dual cooling fans and heat sink
Award Flash BIOS, Triton 430VX Chipset w 4 PCI Slots,
3ISA Slots
512K Fast Pipeline Brust Cache
32 MB EDO RAM 70ns, 72 pin SIMMS Slots
4.3GB Quantum 12ms PCI Enhanced IDE Hard Drive
PCI Local Bus Enhanced IDE Hard Drive Controller
Mitsumi 1.44MB 3 1/2" Floppy Drive
16 x MAX EIDE CD Rom Drive (1800kb/sec)
64 bit PCI Diamond Stealth 3D Graph (2MB EDO) Accelerator
17" MAG DX700T (Trinton CRT) Non-Interlaced, .26mm
PCI EtherExpress 10/100 Ethernet card (RJ 45)
Enhanced 104 key keyboard
Microsoft 400DPI High Resolution serial mouse
2 High Speed Serial, 1 Enhanced Parallel Ports
Microsoft Windows 95 installed w CD
Mid Tower Case w 7 Bays
One-Year on Site Service $5,550.00
Shipping $75.00
15 Vendor-Comtrade
---------------
Intel Pentium/166MMX CPU Sys, w built in Math coprocessor
dual cooling fans and heat sink
Award Flash BIOS, Triton 430VX Chipset w 4 PCI Slots,
3ISA Slots
512K Fast Pipeline Brust Cache
32MB EDO RAM 70ns, 72 pin SIMMS Slots
4.3GB Quantum 12ms PCI Enhanced IDE Hard Drive
PCI Local Bus Enhanced IDE Hard Drive Controller
Mitsumi 1.44MB 3 1/2" Floppy Drive
16x MAX EIDE CD Rom Drive (1800kb/sec)
64 bit PCI Diamond Stealth 3D Graphics (2MB EDO) Acceler
PCI EtherExpress 10/100 Ethernet card (RJ45)
<PAGE>
Enhanced 104 key keyboard
Microsoft Windows 95 installed w CD
Mid Tower Case w 7 bays
One-Year on Site Service $1,135.00
Shipping $85.00
16 Vendor-Misco
------------
Telco cable 4 PR LVL 6 Plenm $500.00
Shaxon single gang flush mount plate ivory $28.64
Shaxon Blank Insert-ivory $5.68
Shaxon Category 5 Snap-in Module insert $215.64
RJ-45 Round Cable 25' LEVL 5 $129.50
RJ-45 Round Cable 50' LEVL 5 $179.50
Shipping $42.25
17 Vendor-Teledynamics
-------------------
1 DKT 2020SD $225.00
3 DKT 2010SD $555.00
2 DKT 2010H $270.00
1 PDKU $365.00
6 System Jacks Run & Programming $850.00
Sales Tax $194.29
-------------
Total $110,579.62
Initialed By: JC
----------
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-l3 TO MASTER LEASE AGREEMENT NO. L5340 DATED
JUNE 20, 1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $2,095.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each (X) month or each
quarter ( ) (check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor
on the Rental Start Date.
5. System Description:
QTY: Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment Description
Total Cost: $86,628.16
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only:
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
GlobeComm, Inc. Equipment List L5340-13
DUPLICATE
October 3, 1997
Leasetec Systems Credit
191 Post Road West, Suite 50
Westport, CT 06880
Attention: Marianne C. Howard
Jane Centrella
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
Dear Marianne:
The following is a listing of equipment we would like to put under lease:
1 Vendor-Computer Connection Of GNY, Inc.
---------------------------------------
4 Ultra 2 Base Unit; Chassis, PS, CPU
8-200 MHZ Processor for Ultra 2
16-3rd Party 64MB Simm
Kingston
4-Seagate/Conner 2GBQC 7200 RPM
Engineering Cost $61,880.00
Sales Tax $5,105.10
Shipping $410.00
2 Vendor-Computer Connection Of GNY, Inc.
---------------------------------------
2-Sparc 5 110 PROC
4-32 Meg Simm for a S5
2-Seagate/Conner 2GBQC 7200 RPM
Engineering Cost $5,410.00
Sales Tax $446.33
Shipping $60.00
3 Vendor-Teledynamics
-------------------
2- 3PR 200 Ft. Voice Cable Run $300.00
6- RJ11C $60.00
Sales Tax $29.70
4 Vendor-Teledynamics
-------------------
Labor to move 4 telephones ext.'s and install 2 CPE TEL's $180.00
Sales Tax $14.85
5 Vendor-Misco America Inc.
-------------------------
15- Shaxon category 5 snap-in module insert 568B $89.85
<PAGE>
Shipping $11.28
6 Vendor-Anixter
--------------
5- H3117-LC 163033 Snap-in module, 8Wx8PxllO
EIA T568B Category 5 use with H3106 Frames $156.00
Sales Tax $13.74
Shipping $10.60
7 Vendor-Anixter
--------------
3- USF 1918 DS 60808703-02 Cabinet-Parts Solid Flat
Shelf for 19x24 Frame $126.00
Sales Tax $10.40
8 Vendor-Anixter
--------------
5- H3108-PB 154210 Snap-in Patch Panel Frame Kit
includes, mounting brackets,NA1,NA2,NA3,NA4,NA5
5- H3117-LC 163033 Snap-in module, 8Wx8PxllO
EIA T568B Category 5 use with H3108 Frames $329.35
Sales Tax $30.52
Shipping $40.55
9 Vendor-Anixter
--------------
1- 2803 145377 Lattis Hub Model 2803 16 Port 10 Baset
Workgroup Hub with/AUI $655.00
Sales Tax $55.69
Additional Sales Tax $127.85
Shipping $20.00
10 Vendor-Anixter
--------------
3- E-4978-19-7 123445 Cabinet- 70x19x24 Frame
for IBM Blue with Front Trim & 4 shelf rails $1,545.00
3- C10031 125207 Standard 10 Plug strip w/15' cord $189.00
Shipping $90.00
Sales Tax $150.48
11 Vendor-Anixter
--------------
3-SU1400RMNET 185609 1400VA Rackmount UPS w/
powerchute plus software & smart slot NA1,NA2,NA3 $2,325.00
Shipping $205.23
Sales Tax $208.74
12 Vendor-Interactive Futures, Inc.
--------------------------------
1- Legato network edition 4.2.6 for 10 client systems $5,100.00
1- Annual Support for Legato Network software $552.00
Shipping $30.00
Sales Tax $466.29
<PAGE>
12 Vendor-Interactive Futures, Inc.
--------------------------------
1-2 meter fibre channel cable $165.00
Sales Tax $13.61
shipping $15.00
--------------
Total $86,828.16
Sincerely,
/s/ Jane Centrella
Jane Centrella
GlobeComm, Inc.
Please wire payment instead of check. Wiring instructions are as follows:
Account Title: GlobeComm, Inc.
Address: 11 Broadway, Suite 660
New York, New York 10004
Account No.: 14809048
Bank ABA No: 021000089
Bank: Citibank, N A
Bank Address: 1 Broadway @ Battery Place
New York, New York 10004
(212)248-6802
Initialed By: J.C.
----------
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-l4 TO MASTER LEASE AGREEMENT NO. L5340 DATED
JUNE 20, 1996, BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $2,330.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each (X) month or each
quarter ( ) (check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor
on the Rental Start Date.
5. System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment Description
Total Cost: $94,943.47
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only: This System Schedule L5340-14 is not covered
by the Personal Guaranty of Gerald Gorman.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
GlobeComm, Inc. Equipment List L5340-14
DUPLICATE
November 13, 1997
Leasetec Systems Credit
191 Post Road West, Suite 50
Westport, CT 06880
Attention: Marianne C. Howard
Jane Centrella
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
Dear Marianne:
The following is a listing of equipment we would like to put under lease:
1 Vendor-Computer Connection Of CNY, Inc.
1 enterprise 3000 with chassis, P/S, Power Cooling Mod,
CPU, SBUS I/O BD, and clock board
2 250MHZ processor for enterprise 4000 with 1MB cache
Engineering Cost $37,890.00
Sales Tax $3,125.93
Shipping $150.00
2 Vendor-Computer Connection Of CNY, Inc.
8 32MB SIMMS, 501-2653's 256MB to be installed
in E3000 $2,000.00
Sales Tax $165.00
3 Vendor-TeleDynamics
Relocation of six telephones to existing jacks $90.00
<PAGE>
Sales Tax $7.43
4 Vendor-TeleDynamics
Create two voice mailboxes and re-program voicemail $90.00
for all phones except for three
Sales Tax $7.43
5 Vendor-TeleDynamics
2- Ten button handsfree digital telephone $250.00
1- Station digital interface unit, plus labor $365.00
Sales Tax $50.74
6 Vendor-Interactive Futures, Inc.
Resonate Dispatch Software and support for servers:
1- Scheduler Node $7,095.00
5- Server Node(2-4)
5- Server Node(2-4) $23,475.00
1- VIPs(3-10) $2,895.00
Qrtly- annual support on Model 112/114 $368.00
Shipping $25.00
Sales Tax $2,791.05
7 Vendor-Interactive Futures, Inc.
1-SOL 1.X Sidegrade CD DOC LI $300.00
Shipping $15.00
Sales Tax $24.75
Vendor-Interactive Futures, Inc.
12 OPT SBUS Fastethernet 2.0/SW $7,059.60
Shipping $200.00
Sales Tax $582.42
8 Vendor-Misco America Inc.
6- Tripp lite super 7 surge suppressor $93.00
15- Shaxon CAT. 5 UTP PATCH $58.50
10- Under desk draw $267.50
5- Mouse drawer $92.50
Shipping $119.08
9 Vendor-Misco America Inc.
10- Shaxon CAT. 5 UTP Patch Cable 7 Ft. Black $56.00
15- Shaxon CAT. 5 UTP Patch $129.00
Shipping $35.23
10 Vendor-Misco America Inc.
1- 110 Replacement Blade $9.95
10- Shaxon Cat. 5 UTP Patch Cable 3Ft. Black $40.00
15- Shaxon Cat. 5 UTP Patch Cable 3Ft. Red $60.00
<PAGE>
15- Shaxon Cat. 5 UTP Patch Cable 3Ft. Green $60.00
100- Telco cable 4 PR LVL 5 PLENM $30.00
Shipping $10.10
11 Vendor-Misco America Inc.
19- Surface mount insert box 37.81
Shipping 25.85
12 Vendor-Misco America Inc.
1- Shaxon surface mount insert box ivory 4 port $1.99
1- Punch down tool 110 $41.95
10- Shaxon single gang flush mount plate ivory $17.90
20- Shaxon category 5 snap-in module insert $119.80
30- Shaxon Blank Insert-Ivory $6.30
11- Shaxon surface mount insert box Ivory 4 Port $21.89
1000- Telco cable 4 PR LVL 5 PLENM $250.00
Shipping $61.91
13 Vendor-Krista Micro
1- Pentium II 440FX 233/3OOMHZ, ATX, 8slot MB $220.00
1- INTEL Pentium II-266MHZ w/5l2K MMX CPU $760.00
1- Pentium II 233/266MHZ CPU Cooling Fan Ball B. $11.10
2- 8 x 32-60ns 32MB Simm EDO 72 Pins w/o Parity $218.00
1- ATX Tower Case, 7 Bays 230W UL Power Supply $61.30
1- ESS 1868 sound card 16Bit PnP Full Duplex $14.60
1- Toshiba Int. XM6002 16X l25ms 256K IDE CD-ROM $72.50
1- Maxtor DM85120A 5.1GB lOms 256K 5400RPM IDE $330.00
1- Focus FK-6200S 104 Key w/Win 95 Key $17.60
1- 5Pin DIN-F to Mini 6Pin DIN-M K.B Adaptor(5C) $0.82
1- 2 Button PS/2 Mouse ZNIX OEM $7.15
1- Ethernet 32-Bit PCI Combo Coax/10BaseT Jumper $16.35
1- 8 Ohm 7 Watts x 2 Amplified Computer Speaker $10.89
1- Gooseneck Condenser Microphone, Stickbackmount $3.81
1- Adjustable Stereo Headset w/microphone retail $5.41
1- Computer Service Tool Kit $7.07
Shipping $38.80
14 1- Seagate ST19171N Barracuda 9.1GB U-SCSI Hd Dr $1,200.00
1- Pentium Triton TX 90/266 512K ATX Form Size $106.00
2- 256 X 16-6Ons EDO SOJ DRAM $5.84
1- INTEL Pentium 200MHZ CPU w/MMX $260.00
1- ATX Tower Case, 7 Bays 250W UL Power Supply $59.00
2- 8 x 32-60ns 32 MB SIMM EDO 72 Pins w/o parity $200.00
1- Mitsumi int. FX600 6X IDE CD-ROM $45.70
1- Maxtor DM8512OA 5.1GB 1Oms 256K 5400 RPM IDE $328.00
1- Focus FK-6200S 104 Key w/Win 95 Key $17.60
1- PCI 2MB Trident 9685 GUI MPEG 3-D 64 Bit PnP $30.00
2- 256 X l6-60ns EDO SOJ DRAM $5.84
1-2 Button PS/2 Mouse ZNIX OEM $6.50
<PAGE>
1- ESS 1868 Sound Card 16 Bit PnP Full Duplex $13.80
1- Ethernet 32-Bit PCI Combo Coax/10BaseT Jumper $16.35
1- 8 Ohm 7 Watts x 2 Amplified Computer Speaker $10.89
1- DB15 H.D. 2 Way Switch Box $5.36
2- 6Ft. DB15 H.D. M-M VGA Mid Cable w/Tms(14C) $2.74
1- 6 Ft. 5Pin DIN M-F keyboard Straight Cable(5C) $0.96
2- 6Ft. 6Pin Mini DIN M_F PS/2 K.B. Strght Cbl(6C) $2.32
1- Newpoint S75T 7 Outlet Surge RJ11 Per. Grade $18.60
2- 14Ft. UTP 4PR UL PVC Patch Cable Cat 5, Strand $4.96
1- Mouse Pad-Gray Color $0.57
1- Pentium 75/233MHZ CPU Ball Bearing Cooler Fan $4.56
1- Cooling Fan for Tower Cases, UL CSA $2.09
1- Teac 3.5" 1.44M Floppy Drive Off-White Color $21.00
Shipping $112.78
Total $94,943.47
Initialed By: /s/ JC
------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-15 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm. Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $553.00
each, payable monthly (X) or quarterly ( ) (check
one) in advance
3. Rental Payment Dates: First day of each (X) month or each quarter ( )
(check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor on the
Rental Start Date.
5. System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
3 1GB Kit for E3000 (8) 128MB SIMMS
Total Cost: $22,470.00
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only: This System Schedule L5340-15 is not covered
by the Personal Guaranty of Gerald Gorman.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-16 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $387.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each (X) month or each quarter ( )
(check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor on the
Rental Start Date.
5. System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
1 Cisco HSSI Interface Processor
2 Cisco 2511 Routers
4 Octal Cable with Male DB25 Connectors
2 OPT INT Disk 2GB/7200 FWSCSI
2 Freight
Total Cost: $15,673.56
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only: This System Schedule L5340-16 is not covered
by the Personal Guaranty of Gerald Gorman.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By /s/ Gary Millin By:
----------------------------- -----------------------------
Name: Gary Millin Name:
-------------------------- -----------------------------
Title: President Title
-------------------------- -----------------------------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-17 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $332.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each (X) month or each quarter ( )
(check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor on the
Rental Start Date.
5. System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
1 Best Power FE18K Ferrups UPS, 18KVA/15KW, 208 volts AC in,
208/120 volts AC out 60Hz
1 Break Before Make External Bypass Switch
1 Freight
Total Cost: $13,432.16
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only: This System Schedule L5340-16 is not covered
by the Personal Guaranty of Gerald Gorman.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
ORIGINAL
ADDENDUM TO SYSTEM SCHEDULE NUMBER L5430-17
BETWEEN
LEASETEC SYSTEMS CREDIT CORPORATION ("LESSOR")
AND GLOBECOMM, INC.
DATED JUNE 20, 1996
Any provisions of the Lease to the contrary notwithstanding, Lessor and Lessee
hereby amend said Lease Schedule Number as follows:
ADD THE FOLLOWING EQUIPMENT:
QTY Model/Description
- --- -----------------
1 Installation of UPS and Bypass Switch
Total Cost: $3,810.40
The Total Cost is changed from $13,432.16 to $17,242.56. The monthly lease
payment is changed from $332.00 to $430.00. All other terms and conditions of
the Lease shall remain in full force and effect.
Lessee: Lessor:
GLOBECOMM, INC. LEASETEC SYSTEMS CREDIT
a division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
DATE: 12/9/97 DATE: 12/10/97
-------------------------- -----------------------------
<PAGE>
DUPLICATE
ADDENDUM TO SYSTEM SCHEDULE NUMBER L5340-18 BETWEEN
LEASETEC SYSTEMS CREDIT CORPORATION ("LESSOR")
AND GLOBECOMM, INC. DATED JUNE 20, 1996
Any provisions of the Lease to the contrary notwithstanding, Lessor and Lessee
hereby amend said Lease Schedule Number as follows:
Delete the following equipment:
3 Ultra2 Base Unit, Chassis, PS, CPU
6 200 Mhz Processor for Ultra2
12 128MB SIMM for Ultra
24 MEM-24803RDU
6 2.1 Gbyte low profile 7200 rpm FSCSI Quick connect
1 Freight
Total Cost: $58,985.00
The Total Cost is changed from $70,705.00 to $11,720.00. The monthly lease
payment is changed from $1,680.00 to $285.00. All other terms and conditions of
the Lease shall remain in full force and effect.
Lessee: Lessor:
GLOBECOMM, INC. LEASETEC SYSTEMS CREDIT
a division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
DATE: 2/5/98 DATE: 2/06/98
-------------------------- -----------------------------
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-18 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $1,680.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each (X) month or each quarter ( )
(check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor on the
Rental Start Date.
5.System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment List
Total Cost: $70,705.00
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only: This System Schedule L5340-18 is not covered
by the Personal Guaranty of Gerald Gorman.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
DUPLICATE
GlobeComm, Inc. Equipment List L5340-18
QTY MODEL/VERSION/DESCRIPTION
- --- -------------------------
3 Ultra2 Base Unit, Chassis, PS, CPU
6 200 MHZ Processor for Ultra2
12 128MB SIMM for Ultra
24 MEM-24803RDU
6 2.1Gbyte low profile 7200 rpm FSCSI Quick Connect
14 128MB Kit for an E450(2) 64MB Kingston SIMMS
2 Freight
Total Cost: $70,705.00
Initialed By: /s/ J.C.
----------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-19 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $1,240.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each (X) month or each quarter ( )
(check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor on the
Rental Start Date.
5. System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment List
Total Cost: $52,098.94
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only: This System Schedule L5340-19 is not covered
by the Personal Guaranty of Gerald Gorman.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
ORIGINAL
GlobeComm, Inc. Equipment List L5340-19
QTY MODEL/VERSION/DESCRIPTION
- --- -------------------------
1 Server E450 250MHZ/256MB 4GB
1 OPT 250MHZ CPU W/1MB for E400
2 KTTS7001/.128
2 KTS7001/256
1 Solaris 2.X SV Media Kit CD 2.6
1 Annual Maintenance
1 Freight
2 Kingston KTS3001/256 memory for E450
1 Freight
Subtotal: $32,618.94
2 Sun Sparc 20 Model #S20S-T125-128-P95
2 Sun Sparc 20 Model #S20S-T125-256-P98
Subtotal: $19,480.00
Total Cost. $52,098.94
Initialed By: /s/ J.C.
-----------
<PAGE>
ORIGINAL
ADDENDUM TO SYSTEM SCHEDULE NUMBER L5340-19 BETWEEN
LEASETEC SYSTEMS CREDIT CORPORATION ("LESSOR")
AND GLOBECOMM, INC. DATED JUNE 20, 1996
Any provisions of the Lease to the contrary notwithstanding, Lessor and Lessee
hereby amend said Lease Schedule Number as follows:
Add the following equipment:
- ----------------------------
5 4.2GB disk for Ultra 2
5 9GB disk for Ultra2
10 Disk bracket for Ultra 2
Total Cost: $8,275.00
The Total Cost is changed from $52,098.94 to $60,373.94. The monthly lease
payment is changed from $1,240 to $1,435.00. All other terms and conditions of
the Lease shall remain in full force and effect.
Lessee: Lessor:
GLOBECOMM, INC. LEASETEC SYSTEMS CREDIT
a division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
DATE: 2/18/98 DATE: 2/19/98
-------------------------- -----------------------------
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-20 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $638.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each (X) month or each quarter ( )
(check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor on the
Rental Start Date.
5.System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
See Attached Equipment List
Total Cost: $25,717.47
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only: This System Schedule L5340-20 is not covered
by the Personal Guaranty of Gerald Gorman.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
ORIGINAL
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-21 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: GlobeComm, Inc. (herein called "Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $1,150.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each (X) month or each quarter ( )
(check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor on the
Rental Start Date.
5.System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
2 Server E450 250MHZ/256MB 4GB
2 OPT 250 MHZ CPU W/1MB for E400
12 Third Party 128MB Memory Expansion P/N KTS7001/128
2 North American/Asia PWR CRD KIT
2 Solaris 2.6 US SV Media Kit
1 Freight
Total Cost: $48,534.00
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only: This System Schedule L5340-21 is not covered
by the Personal Guaranty of Gerald Gorman.
LESSEE: GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By: /s/ Gary Millin By: /s/ Stephen F. [Illegible]
----------------------------- --------------------------------
Name: Gary Millin Name: Stephen F. [Illegible]
--------------------------- ------------------------------
Title: President Title: Operations Manager
-------------------------- -----------------------------
<PAGE>
DUPLICATE
Exhibit A
SYSTEM SCHEDULE
SYSTEM SCHEDULE NO. L5340-22 TO MASTER LEASE AGREEMENT NO. L5340 DATED JUNE 20,
1996 BETWEEN THE UNDERSIGNED PARTIES.
Lessor: Leasetec Corporation, Leasetec Systems Credit
division (herein called "Lessor")
Address: 75 Second Avenue, Needham Heights, MA 02194
Lessee: iName, Inc. f/k/a GlobeComm, Inc. (herein called
"Lessee")
Business Address: 11 Broadway, New York, NY 10004
Installation Address: Same
1. Rental Term: 48 Months
2. Rental Payments: 48 Payments of $6,013.00
each, payable monthly (X) or quarterly ( )
(check one) in advance
3. Rental Payment Dates: First day of each (X) month or each quarter ( )
(check one)
4. Advance Rental Payments: First payment shall be delivered to Lessor on the
Rental Start Date.
5.System Description:
QTY. Model/Version/Description Original Purchase Price
- ---- ------------------------- -----------------------
Sale/leaseback per the attached invoices: #0014193-IN, 0014176-IN, 0014332-IN,
0014288-IN, 0014343-IN, 0014166-IN,0013940-IN, 0013916-IN, 0013941-IN,
0014202-IN, 0014488-IN, 0014376-IN, 0014404-IN, 0014353-IN, 284458, 284297,
0014657-IN, 0014613-IN, 0014628-IN, 0014616-IN
Total Cost: $250,129.46
- --------------------------------------------------------------------------------
6. Purchase Option Price (check one): (X) Fair Market Value
( ) 10% of Total Original Purchase Price
( ) $1.00
7. TERMS AND CONDITIONS: The terms and conditions of the above-referenced Master
Lease Agreement are incorporated herein. In addition, the following attachments
apply to this System Schedule only: This System Schedule L5340-22 is not covered
by the Personal Guaranty of Gerald Gorman.
LESSEE: iName, Inc. f/k/a GlobeComm, Inc. LESSOR: Leasetec Systems Credit
A Division of Leasetec Corporation
By /s/ Debra McClister By /s/ Stephen F. Megihan
----------------------------- -------------------------------
Name: Debra McClister Name: Stephen F. Megihan
--------------------------- ------------------------------
Title: CFO Title: Operations Mgr.
-------------------------- -----------------------------
<PAGE>
Exhibit 10.22
R.C.C. FINANCE GROUP LTD.
1086 TEANECK ROAD SUITE 5C LEASE NO. __________
TEANECK, NEW JERSEY 07632
201-833-4480
(Hereinafter called "Lessor')
LEASE AGREEMENT
1.
GLOBECOMM, INC. NETWORK APPLIANCE
11 BROADWAY, SUITE 660 2770 SAN THOMAS EXPRESSWAY
NEW YORK, NY 10004 SANTA CLARA, CA 95051
(Hereinafter Called "Lessee") (Hereinafter Called
"Supplier')
Contact: GARY MILLIN Contact:
Telephone: 212-425-3477 Telephone: 408-367-3000
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION OF LEASED EQUIPMENT (Hereinafter Called "equipment")
- --------------------------------------------------------------------------------
THE ITEMS DESCRIBED ON EQUIPMENT SCHEDULE "A", WHICH IS ANNEXED
HERETO AND MADE A PART HEREOF.
- --------------------------------------------------------------------------------
2. TERMS OF RENTAL PAYMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Term of No. of Rentals Amount of Rental ADDITIONAL PROVISIONS:
Lease Rental Payable Payment In U.S. Currency
Paymts.
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
60 60 Monthly $9,223.00 EQUIPMENT LOCATION:
Months Plus all applicable taxes 11 BROADWAY, SUITE 660 NEW YORK NY 10004
- -------------------------------------------------------------------------------------------------------------
</TABLE>
3. ADVANCE RENTALS: Lessee shall pay the first month's and last one months'
rental in advance upon the execution of this Lease.
4. LEASING: Lessee hereby leases from Lessor, and Lessor hereby leases to
Lessee, in accordance with the terms, provisions, covenants and conditions of
this lease, the equipment described above and/or in Schedule "A", which is
annexed hereto and made a part hereof.
5. TERM AND RENT. The obligations under this lease shall begin upon the date the
Lessor orders the equipment to be leased hereunder and shall end upon the full
performance and/or observance of each and every term, provision, covenant and
condition set forth In this lease. The term of this lease, shall begin on the
day the first rental payment Is due and shall terminate on the last day of the
final rental payment period. Rental payments paid in advance upon execution of
this lease shall be deemed to have been earned by Lessor immediately upon
Lessor's receipt thereof and shall be applied immediately to satisfy Lessee's
obligations to make such payments hereunder. These payments shall not be
refundable to Lessee under any circumstances, including (without limitation) any
termination of this Lease for any reason prior to the end of its scheduled term
in accordance with the terms hereof. The first rental payment shall be due and
payable on the first day of the month succeeding delivery of all the equipment
and thereafter each payment of the rent shall be consecutively paid on the first
day of each payment period. In the event of the delivery of only a part of the
equipment, a pro rata portion of the rent shall be paid, until delivery of all
of the equipment. All rents shall be paid to Lessor at its address set forth
above, or as otherwise directed by Lessor in writing.
6. TIME. Time is hereby made of the essence of this lease and of each and of all
its terms, provisions, covenants and conditions.
THIS INSTRUMENT CONSTITUTES THE ENTIRE CONTRACT BETWEEN THE PARTIES HERETO, AND
NO REPRESENTATIONS, ORAL OR WRITTEN, SHALL CONSTITUTE AN AMENDMENT, MODIFICATION
OR TERMINATION HEREOF UNLESS SIGNED IN WRITING BY AN OFFICER OF THE LESSOR. THIS
LEASE AGREEMENT, WHICH CONSISTS OF THREE PAGES, IS NON-CANCELABLE AND
IRREVOCABLE AND IS SUBJECT TO THE TERMS, PROVISIONS, COVENANTS AND CONDITIONS
PRINTED ABOVE AND ON PAGE 2 AND PAGE 3 WHICH ARE MADE PART HEREOF AND WHICH
LESSEE, BY HIS EXECUTION BELOW AND INITIALING OF PAGE 2 AND PAGE 3, ACKNOWLEDGES
THAT LESSEE HAS READ AND AGREES TO.
IN WITNESS WHEREOF, THE LESSEE HAS HEREBY EXECUTED THIS LEASE THIS 7 DAY OF
JULY, 1998
ACCEPTED _______________, 19____ GLOBECOMM, INC.
R.C.C. FINANCE GROUP LTD. BY: /s/ Gary Millin PRESIDENT
----------------------------------
By______________________________ (Authorized Signature and Title)
Attest: /s/ [ILLEGIBLE]
------------------------------
Secretary of Corporation or Witness
(if not Corporation)
PAGE 1 OF 3 PAGE LEASE AGREEMENT (CONTINUED ON FOLLOWING PAGES)
<PAGE>
7. SELECTION OF EQUIPMENT; ACCEPTANCE; WARRANTIES; REPRESENTATIONS. Lessee
acknowledges that Lessee has selected both the equipment and the Supplier from
whom Lessor covenants to purchase the equipment at Lessee's request. Lessee
further acknowledges that Lessor has no expertise or special familiarity about
or with respect to the equipment and that Lessor did not participate in any way
in Lessee's selection of the equipment or of the Supplier. Lessee agrees to
accept the equipment if delivered in good repair, and to execute the delivery
receipt supplied by Lessor, as evidence thereof. Lessee agrees to hold Lessor
harmless from specific performance of this lease and from damages, if, for any
reason, the Supplier fails to deliver the equipment so ordered. Lessee agrees
that any delay in delivery of the equipment shall not affect the validity of
this lease. LESSEE AGREES THAT THE EQUIPMENT LEASED HEREUNDER IS LEASED "AS IS"
AND IS OF A SIZE, DESIGN AND CAPACITY SELECTED BY LESSEE AND THAT LESSEE IS
SATISFIED THAT THE SAME IS SUITABLE FOR LESSEE'S PURPOSE, AND THAT LESSOR HAS
MADE NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE SUITABILITY OR DURABILITY
OF SAID EQUIPMENT FOR THE PURPOSES AND USES OF LESSEE, OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT THERETO, INCLUDING
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Lessor hereby assigns, without recourse, to Lessee for and during the term of
this lease any applicable factory warranty covering the equipment leased
hereunder.
LESSEE ACKNOWLEDGES AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALESMAN,
EMPLOYEE, REPRESENTATIVE OR AGENT OF THE SUPPLIER IS AN AGENT OR REPRESENTATIVE
OF LESSOR, AND THAT NONE OF THE ABOVE ARE AUTHORIZED TO WAIVE OR ALTER ANY TERM,
PROVISION, COVENANT OR CONDITION OF THIS LEASE, OR MAKE ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO THIS LEASE OR THE EQUIPMENT LEASED HEREUNDER. Lessee
further acknowledges and agrees that Lessee, in executing this lease, has relied
solely upon the terms, provisions, covenants and conditions contained herein,
and any other statements, warranties or representations, if any, by the
supplier, or any salesman, employee, representative or agent of the supplier,
have not been relied upon, and shall not in any way affect Lessee's obligation
to pay the rent and otherwise perform as set forth in this lease.
THIS LEASE CONSTITUTES A NET LEASE AND LESSEE AGREES THAT ITS OBLIGATIONS
TO PAY ALL RENT AND OTHER SUMS PAYABLE HEREUNDER AND THE RIGHTS OF LESSOR AND
ITS ASSIGNEE IN AND TO SUCH RENT AND OTHER SUMS, ARE ABSOLUTE AND UNCONDITIONAL
AND ARE NOT SUBJECT TO ANY ABATEMENT, REDUCTION, SET OFF, DEFENSE, COUNTERCLAIM
OR RECOUPMENT DUE OR ALLEDGED TO BE DUE TO, OR BY REASON OF, ANY PAST, PRESENT
OR FUTURE CLAIMS WHICH LESSEE MAY HAVE AGAINST LESSOR, ANY ASSIGNEE, THE
MANUFACTURER OR SELLER OF THE EQUIPMENT, OR AGAINST ANY PERSON WHATSOEVER.
Lessee represents and warrants that: (a) The execution, delivery and
performance of the Lease Documents and compliance with the terms thereof do not
and will not contravene any law, governmental rule, regulation or order now
binding on Lessee, or the charter or by-laws of Lessee, or contravene the
provisions of, or constitute a default under, or result in the creation of any
lien or encumbrance upon the property of Lessee under, any indenture, mortgage,
contract or other agreement to which Lessee is a party or by which it or its
property is bound. (b) Each of the Lease Documents, when entered into, will
constitute legal, valid and binding obligations of Lessee enforceable against
Lessee, in accordance with the terms thereof, except as the enforceability
thereof may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws effecting the enforcement of creditors rights
generally. (c) There are no pending actions or proceedings to which Lessee is a
party, and there are no other pending or threatened actions or proceedings of
which Lessee has knowledge, before any court, arbitrator or administrative
agency which would adversely affect the financial condition of Lessee or its
ability to perform its obligations under the Lease Documents. Lessee has no
knowledge of any default under any obligation for borrowed money which would
have the same effect.
8. ERRORS IN ESTIMATED COST: As used in this paragraph "actual cost" means the
cost to Lessor of purchasing and delivering the equipment to Lessee, including
taxes, transportation charges, and all other expenses and charges. The amount of
each rental payment initially set forth above is based on the total cost of the
equipment as ordered by Lessor in its purchase order which is an estimate and
each shall be adjusted proportionately if the actual cost of the equipment
differs from said estimate. Lessee hereby authorizes Lessor to correct the
amount of each rental payment when the actual cost is known.
9. LOCATION, INSTALLATION AND USE OF EQUIPMENT. The equipment shall be delivered
to Lessee and installed by Lessee at Lessee's own expense, and thereafter kept
at the location specified above. Lessee shall not remove the equipment from the
aforementioned location without Lessor's prior written consent. Lessee shall use
the equipment in a careful and proper manner and shall comply with all laws,
regulations and ordinances relating to its possession, use and maintenance.
Lessee shall affix the labels supplied by Lessor, upon a visible place on each
item of equipment, and maintain the same on each. Lessor shall have the right
from time to time during reasonable business hours to enter upon the Lessee's
premises for the purpose of inspecting the equipment.
10. MAINTENANCE: Lessee shall, at Lessee's own expense, maintain the equipment
in good operating condition, repair and appearance, and protect same from
deterioration other than normal wear and tear. LESSEE SPECIFICALLY WAIVES ANY
OBLIGATION IMPOSED UPON LESSOR TO MAINTAIN AND/OR REPAIR THE EQUIPMENT.
Lessee shall only use the equipment in the regular course of Lessee's business
and within normal capacity. Lessee shall not make any modifications alterations
or additions to the equipment without the prior written consent of Lessor, and
then, all such modifications, alterations and additions shall belong to Lessor.
The equipment shall remain personal property at all times and Lessee shall not
so affix the equipment to realty so as to change its nature to real property
11. OWNERSHIP. The equipment is, and shall at all times be and remain, personal
property, and title thereto shall remain in Lessor exclusively, notwithstanding
that the equipment or any part thereof may now be, or hereafter become, in any
manner affixed or attached to, or embedded in, or permanently resting upon real
property. or any building thereon, or attached in any manner to that which is
permanent, by any means whatsoever. Upon the expiration or termination of this
lease Lessee shall, at Lessee's own expense, promptly return the equipment by
delivering it, packed and ready for shipment, to such place or carrier as Lessor
may specify in the same condition as received, reasonable wear and tear
expected. IT IS THE INTENT OF LESSEE AND OF LESSOR THAT THIS LEASE BE A TRUE
LEASE
12. LOSS OR DAMAGE. Lessee shall bear the entire risk of loss, theft,
destruction, damage or disrepair of the equipment or any part thereof for any
cause whatsoever. No such loss, damage, theft, destruction or disrepair of the
equipment shall relieve Lessee of the obligation to pay rent or from any other
obligation under this lease. In the event of any of the above, Lessee, at
Lessee's own expense and at Lessor's option, shall either (a) repair the
equipment, returning same to its previous condition, unless unrepairable; or (b)
replace same with like equipment of equivalent value, in good condition and
acceptable to Lessor, which shall becomethe property of the Lessor; or (c)
immediately pay Lessor all rent due and to become due under this lease or such
amounts as may be allocated by Lessor to specific items of equipment. All
proceeds of insurance received by Lessor as a result of such loss or damage
shall, where applicable, be applied toward the replacement or repair of the
equipment or the payment of the obligations of Lessee hereunder.
13. INSURANCE. Lessee shall keep the equipment insured against all risks of
loss, theft, or damage from every cause whatsoever for its full insurable value
with Lessor as loss payee, and, Lessee shall carry public liability insurance
insuring both Lessor and Lessee against damages and claims for personal injury,
death and property damage. All such insurance shall be in form, amount and with
companies satisfactory to Lessor. Each Policy of Insurance shall provide for 30
days prior written notice of cancellation or modification to Lessor. Lessee
shall pay all premiums for such insurance and shall deliver to Lessor the
policies of insurance or duplicates thereof, and such other evidence of coverage
satisfactory to Lessor. Lessee hereby irrevocably appoints Lessor as Lessee's
attorney in fact to make claim for, receive payment of, and execute and endorse
all documents, checks or drafts received in payment for loss or damage under any
such insurance policy. Lessee agrees if Lessee shall fail to procure, maintain
and pay for such insurance, Lessor shall have the right, but not the obligation,
to obtain such insurance on behalf of and at the expense of Lessee. In the event
Lessor does obtain such insurance, Lessee agrees to pay all costs thereof, with
the next rental payment.
---------------
INITIALS
/s/ [ILLEGIBLE]
---------------
PAGE 2 OF 3 PAGE LEASE AGREEMENT (CONTINUED ON FOLLOWING PAGE)
<PAGE>
14. INDEMNITY. Lessee shall, and does hereby, indemnify and save Lessor harmless
from any and all losses and/or liability, including, but not limited to STRICT
LIABILITY IN TORT, for funds advanced to Supplier, and for taxes, costs and
expenses, including reasonable attorneys' fees, arising out of the purchase,
ownership, location, installation, possession, leasing, renting, operation,
control, use, maintenance, repair, delivery and/or return of the equipment.
Lessee shall be credited with any proceeds received by Lessor from insurance
policies paid for or obtained by Lessee. The obligations of Lessee under this
paragraph shall continue indefinitely.
15. TAXES, FEES AND LIENS. Lessee shall pay all, or reimburse Lessor when
invoiced by Lessor for, charges, registration, permit and license fees,
assessments, taxes, interest and penalties (local, state and federal) which may
now or hereafter be imposed upon the ownership, leasing, rental, maintenance,
purchase, possession or use of the equipment, or upon this lease, or the rental
payments or any other sums due or to become due hereunder. Lessee shall not
rent, sublet, pledge, loan, mortgage, or attempt in any manner to dispose of the
equipment or to suffer any liens or legal process to be placed, incurred or
levied upon the same. Lessee shall immediately notify Lessor of the occurrence
of any of the above; shall pay all sums for taxes, fees, charges, assessments,
penalties and interest; and shall keep the equipment free of levies, liens and
encumbrances. In the event Lessee does not pay all sums specified above, Lessor
has the right, but not the obligation, to pay the same. If the Lessor shall so
pay any of the aforementioned, then the Lessee shall remit such amount with the
next installment of rent.
16. DEFAULT. If Lessee shall default in the payment of any rent or in the making
of any other payment hereunder when due, or in the payment when due of any
indebtedness of Lessee to Lessor arising independently of this lease, or in the
event of any default, breach or failure to perform or observe any terms,
provisions, covenants or conditions contained in this lease or in any other
lease or agreement between Lessor and Lessee, or if any proceeding in
bankruptcy, reorganization, receivership or insolvency shall be commenced by or
against Lessee or Lessee's property or assets, or if Lessee makes an
arrangement, extension or any assignment for the benefit of one or more of
Lessee's creditors, or if Lessee seeks relief under any other law providing for
the relief of debtors, or Lessee, if an individual, dies or is judicially
declared incompetent, or any of the above described events occur with respect to
any guarantor or any other party liable for payment or performance of this
lease, then, and in any of such events, if and to the extent permitted by
applicable law. Lessor shall have the right to exercise any one or more of the
remedies set forth below.
17. REMEDIES. Upon the happening of any one or more events of default set forth
above, Lessor shall have the right without notice or demand, to declare the
entire balance of rent due and to become due hereunder, together with such other
sums as may be due and payable hereunder, to be immediately due and payable,
whereupon the same shall become immediately due and payable; and/or commence an
action against Lessee for the total rental payments due and to become due under
this lease and for all other sums due or to become due hereunder; and/or without
demand or legal process to enter into the premises where the equipment may be
found and take possession of and remove same, whereupon all right of Lessee in
the equipment shall terminate absolutely; and/or retain all prior payments of
rent and of all other sums and the equipment; and/or retain all prior payments
of rent and of all other sums and sell the equipment at public or private sale
with or without notice to Lessee, at which sale Lessor may be purchaser, and the
proceeds of such sale less all expenses incurred by Lessor in connection
therewith, including, but not limited to retaking, storing, repairing,
reselling, delivering, commissions and reasonable attorney's fees will be
applied to the total rent due and to become due for the balance of the term of
this lease, and all other sums due or to become due hereunder, with Lessee
remaining liable for the balance thereof; and/or retain all prior payments of
rent and of all other sums and lease the equipment to another with or without
notice to Lessee and the proceeds of such leasing less all expenses incurred by
Lessor in connection therewith, including, but not limited to retaking,
repairing, delivering, commissions and reasonable attorneys' fees, will be
applied to the total rent due and to become due for the balance of the term of
this lease, and all other sums due or to become due hereunder, with Lessee
remaining liable for the balance thereof; and/or any other remedy in law and/or
equity incursor available to Lessor. Lessee shall be liable for all expenses and
costs Lessor may incur in connection with the enforcement of any of its remedies
herein, including all collection fees and reasonable attorneys' fees. If Lessee
shall fail to pay when due and any rental payment portion thereof or any other
sums due or to become due hereunder, Lessee shall pay Lessor a late charge of
ten percent (10%) per month of such rent or other sum, but not higher than the
maximum amount of interest allowed by law. All the remedies of Lessor hereunder
are cumulative and may, to the extent permitted by law, be exercised
concurrently or separately, and the exercise of any one remedy shall not be
deemed to be an election of such remedy or to preclude the exercise of any other
remedy. No failure on the part of the Lessor to exercise, and no delay in
exercising any right or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by Lessor of any right or remedy hereunder
preclude any other or further exercise of any partially exercised right or
remedy or any other right or remedy.
18. WAIVER OF NOTICE AND HEARING. LESSEE HEREIN WAIVES ANY AND ALL RIGHTS TO
NOTICE AND TO A HEARING WITH RESPECT TO THE RIGHT OF AND THE REPOSSESSION OF THE
EQUIPMENT BY LESSOR IN THE EVENT OF A DEFAULT HEREUNDER BY LESSEE. LESSEE AGREES
LESSOR MAY REPOSSESS SAID EQUIPMENT WITHOUT NOTICE AND WITHOUT A HEARING AND
WITHOUT OTHER LEGAL PROCESSES, AND LESSEE SPECIFICALLY WAIVES ANY RIGHT TO
NOTICE AND TO A HEARING AND TO OTHER LEGAL PROCESSES.
19. ASSIGNMENT. Without Lessor's prior written consent, Lessee shall not assign,
transfer, sublet, pledge, hypothecate or otherwise dispose of this lease or any
interest herein. Lessor may assign this lease in whole or in part, without
notice to Lessee, and such assignee shall have all of the rights but none of the
obligations of Lessor under this lease. Lessee shall recognize each such
assignment and covenants not to assert against the assignee any defense,
counterclaim or setoff that Lessee has or may hereafter have against Lessor, and
agrees to pay such rent and other payments due and to become due hereunder to
assignee.
20. LAWS GOVERNING LESSOR and LESSEE agree that this lease shall be deemed to
have been made in the State of California regardless of the order in which the
signatures of the parties shall be affixed hereto. Lessor and Lessee further
agree that this lease shall be interpreted, and the rights and liabilities of
the parties hereto determined in accordance with the laws of the State of
California except for local recording acts. For the purpose of resolving any
issue pertaining to conflict of laws, this lease shall be deemed to have been
executed in the State of California and all of the terms, provisions, covenants
and conditions contained in this lease is each to be deemed to be and be fully
performed and/or observed in the State of California. Lessee hereby agrees that
all actions or proceeding arising, directly or indirectly, from this lease shall
be litigated, at the option of Lessor, in courts having situs within the State
of California and Lessee hereby consents to the jurisdiction of any local, state
or federal court selected by Lessor that is located within the State of
California and agrees not to disturb such choice of Forum by Lessor.
21. ARBITRATION. At Lessor's sole election, Lessor may submit any matter arising
out of or relating to this transaction, including any claim, counterclaim,
setoff, or defense, to binding arbitration by the American Arbitration
Association in Marin County, California or any other site of our choice. The
decision and award of the arbitrator(s) shall be final and binding and may be
entered as rendered in any court having jurisdiction thereof.
22. MISCELLANEOUS. All obligations of the Lessee if more than one, shall be
joint and several. Lessee shall provide Lessor with a copy of Lessee's annual
financial statement within ninety (90) days after the close of Lessee's business
year. Lessee agrees to execute UCC-1 Financing Statements and all amendments
thereto and authorizes Lessor to file the same. Lessee authorizes Lessor to
execute and file UCC-1 Financing Statements and all amendments thereto without
the Lessee's signature being affixed thereon. Lessee grants to Lessor a specific
power of attorney for Lessor to execute and file on Lessee's behalf any
document, including, but not limited to, UCC-1 financing statement, and all
amendments thereto that Lessor deems necessary to perfect or protect Lessor's
interest in the equipment or pursuant to the uniform commercial code. Lessee
agrees to pay Lessor the costs of filing such UCC-1 Financing Statements and of
all amendments thereto. Lessee also authorizes Lessor to amplify the description
of the equipment and to correct any and all patent errors or omissions in the
typewritten or handwritten portions of this and all related documents. This
lease shall be binding upon the parties, their successors, legal representatives
and assigns and is a valid and subsisting legal instrument, and no provision
which may be deemed unenforceable shall in any way invalidate any other
provision or provisions, all of which shall remain in full force and effect. All
paragraph headings are inserted for reference purposes only and shall not affect
the interpretation or meaning of this agreement.
---------------
INITIALS
/s/ [ILLEGIBLE]
---------------
PAGE 3 OF 3 PAGE LEASE AGREEMENT
<PAGE>
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, That GLOBECOMM, INC., hereinafter called the
seller, in consideration of the sum of THREE HUNDRED SIXTY-SEVEN THOUSAND AND
00/100 --- Dollars ($367,000.00) to the seller paid, the receipt whereby hereof
is acknowledged, hereby does grant, bargain, sell, transfer and deliver unto
R.C.C. FINANCE GROUP LTD., hereinafter called the buyer, the following described
personal property now located at 11 BROADWAY, SUITE 660 NEW YORK, NY 10004 in
New York County, State of New York
THE ITEMS DESCRIBED ON EQUIPMENT SCHEDULE 'C', WHICH IS ANNEXED HERETO AND MADE
A PART HEREOF.
TO HAVE AND TO HOLD the same unto the said buyer and buyer's heirs, executors,
administrators, successors and assigns forever.
And the seller hereby covenants and agrees to and with the said buyer and to and
with the buyers successors in interest and assigns that seller is the owner of
the above described personal property; that the same is free from all
encumbrances; and that seller has a good right to sell the same; and that seller
will and seller's heirs, executors, administrators and successors shall warrant
and forever defend this sale against the lawful claims and demands of all
persons whomever.
In construing this bill of sale and where the context so requires, the singular
includes the plural and all grammatical changes shall be made so that this
instrument shall apply equally to individuals and to corporations.
IN WITNESS WHEREOF, the seller has hereunto executed this document; if the
undersigned seller is a corporation, it has caused its name to be signed and its
seal affixed by an officer or other person duly authorized to do so by order of
its board of directors.
Dated ____________ ,1998. GLOBECOMM, INC.
by: /s/ Gary Millin]
----------------------------------
(Corporate Seal)
STATE OF NY
------------
COUNTY OF Kings
----------
I, GARY MILLIN, being first duly sworn depose and say: that I am PRESIDENT of
GLOBECOMM, INC., the seller of the property described in the foregoing bill of
sale; that seller is the sole owner of said property; that the same has been
paid for in full and that as of this date said personal property and each and
every part thereof is free and clear of all liens, encumbrances and security
interests of any kind or nature
GLOBECOM, INC.
by: /s/ Gary Millin]
----------------------------------
Subscribed and sworn to before July 2, 1998
X /s/ Lena Circosta
------------------------------------
Notary Public for
--------------------
My commission expires
----------------
LENA CIRCOSTA
Notary Public State of New York
[ILLEGIBLE NUMBER]
Certified in Kings County
Commission Expires Sept. 30, 1999
<PAGE>
OPTION TO PURCHASE
ADDENDUM ANNEXED TO AND MADE PART OF LEASE AGREEMENT #_____, BY AND BETWEEN
R.C.C. FINANCE GROUP LTD. ("LESSOR") AND GLOBECOMM, INC. ("LESSEE")
Provided that Lessee shall have made all payments due under the above referenced
Lease and provided, further, that there is no default in compliance with any of
the terms or conditions thereof, Lessee shall have the option to purchase the
Equipment covered by and described in said Lease, in whole and not in part, in
its then condition and at its then location, on an "as-is, where is" basis, as
of the expiration date of said Lease.
This option is only exercisable by delivery of written notice to Lessor at least
thirty (30) days prior to the expiration date of said Lease, together with
delivery of payment of the full net cash price of said Equipment, plus
applicable taxes,
The net cash purchase price will be $1.00.
This Option to Purchase must be exercised no later than five (5) days prior to
the original expiration of the Lease Term. The original expiration of the Lease
Term shall be -60- months subsequent to the date Lessee executes an
"Acknowledgment and Acceptance of Delivery" for the Leased Equipment.
Time is of the essence of this option.
Any notice required by this Addendum shall be by U.S. Mail, Registered, Return
Receipt Requested.
LESSEE: GLOBECOMM, INC.
BY: /s/ Gary Millin PRESIDENT
---------------------------
(Name and Title)
DATE:
---------------------------
LESSOR: R.C.C. FINANCE GROUP LTD.
BY:
---------------------------
DATE:
---------------------------
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] ACORD(R) EVIDENCE OF PROPERTY INSURANCE DATE (MM/DD/YY)
07/01/98
-----------------
THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, IS IN
FORCE, AND CONVEYS ALL THE RIGHTS AND PRIVILEGES AFFORDED UNDER THE POLICY.
- --------------------------------------------------------------------------------
PRODUCER PHONE COMPANY
(A/C, No. Ext.):
------------------------------
Fabricant & Fabricant, Inc. Lumbermens Mutual Ins Co - Com:
1251 Old Northern Boulevard
Roslyn NY 11578
- -----------------------------------------
CODE: SUB CODE
- -----------------------------------------
AGENCY/
CUSTOMER ID #
- -----------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INSURED LOAN NUMBER POLICY NUMBER
SAT [ILLEGIBLE] 320-00
--------------------------------------------------------------------------
GlobeComm, Inc. EFFECTIVE DATE EXPIRATION DATE CONTINUED UNTIL
11 Broadway 10/31/97 10/31/98 |_| TERMINATED IF CHECKED
Suite 650 --------------------------------------------------------------------------
New York NY 10004 THIS REPLACES PRIOR EVIDENCE DATED:
- ------------------------------------------------------------------------------------------------------------
</TABLE>
PROPERTY INFORMATION
LOCATION/DESCRIPTION
- --------------------------------------------------------------------------------
COVERAGE INFORMATION
- --------------------------------------------------------------------------------
COVERAGE/PERIL 8/FORMS AMOUNT OF INSURANCE DEDUCTIBLE
- --------------------------------------------------------------------------------
LIMIT OF INSURANCE 367000 1000
- --------------------------------------------------------------------------------
REMARKS (Including Special Conditions)
- --------------------------------------------------------------------------------
CANCELLATION
THE POLICY IS SUBJECT TO THE PREMIUMS, FORMS, AND RULES IN EFFECT FOR EACH
POLICY PERIOD SHOULD THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE
ADDITIONAL INTEREST IDENTIFIED BELOW 10 DAYS WRITTEN NOTICE, AND WILL SEND
NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST,
IN ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW.
- --------------------------------------------------------------------------------
ADDITIONAL INTEREST
- --------------------------------------------------------------------------------
NAME AND ADDRESS |_| MORTGAGES |_| ADDITIONAL INSURED
|X| LOSS PAYEE |_|
RCC Finance Group Limited -----------------------------------------------
1085 Teaneck Rd.
Suite 5C -----------------------------------------------
Teaneck NJ 07665 AUTHORIZED REPRESENTATIVE
/s/ Robert S. Fabricant
- --------------------------------------------------------------------------------
ACORD 27 (3/95) (c) ACORD CORPORATION 1995
- --------------------------------------------------------------------------------
<PAGE>
R.C.C. FINANCE GROUP LTD.
================================================================================
Corp. Headquarters: 1086 TEANECK RD SUITE 5C o TEANECK, NJ 07666
o 201.833.4480 o Fax: 201.833.4174
Western Region: 55 South Lacumbre Road Santa Barbara, California 93105
805.964.6918
To: Agency
Name:___________________________________________________Date______________
Address: _________________________________________________Lease #_________
City:____________________________________ State:__________Zip: ___________
Phone No: _______________________________________Fax:_____________________
Attention:________________________________________________________________
From: GLOBECOMM, INC.
11 BROADWAY, SUITE 660
NEW YORK, NY 10004
Gentlemen:
We have entered into a lease agreement With R.C.C. FINANCE GROUP LTD., lessor,
which has been assigned to ___________________________________________________,
assignee, covering the equipment shown below.
The equipment location is:_________________________________________. This is a
net lease and we are responsible for the insurance cost. Please see that we have
immediate coverage and notify lessor and assignee at once in the form of a copy
of the insurance policy or Certificate of Insurance. If the latter is sent,
please include therein the standard 30 day notice of cancellation clause.
|X| Physical Damage: Insurance is to be provided for fire, theft,
extended coverage, vandalism and malicious
mischief for full value of the equipment. Lessor
and assignee are to be named as Loss Payees, as
their interest may appear.
|X| Liability: Coverage should be written with minimum limits of
$100,000/$300,000 for BODILY INJURY and $50,000
property damage. Lessor and assignee are to be
named Additional Insured parties.
|_| Titled Vehicle Limits: The minimum limits for each vehicle lease shall
be:
Bodily injury liability per individual $500,000.00
Bodily injury liability per accident $500,000.00
Property Damage liability $250,000.00
Fire, Theft and Comprehensive Full
EQUIPMENT TO BE INSURED: EQUIPMENT COST:
THE ITEMS DESCRIBED ON EQUIPMENT SCHEDULE 'A', $367,000.000
WHICH IS ANNEXED HERETO AND MADE A PART HEREOF.
If you have any questions, please do not hesitate to call the Insurance
Department at 201.833.4480
Thank you,
BY:_______________________________ DATE:_____________________
insurance
<PAGE>
EQUIPMENT SCHEDULE "A"
Schedule referred to in and made a part of agreement by and between R.C.C.
FINANCE GROUP LTD. as lessor and GLOBECOMM, INC. as lessee
EQUIPMENT LOCATION: 11 BROADWAY
NEW YORK, NY 10004
QTY DESCRIPTION SERIAL #
- -2- NETAPP F630 FILER INCLUDING BUT NOT LIMITED TO:
-1- NETWORK KIT, SHIPPING, RACK MOUNT UNIT, F520
-1- NETWORK SERVER, NETAPP F630, BASE CONFIGURATION
-1- NETWORK 512 MB ECC SYSTEM MEMORY FOR F6XX
-1- NETWORK NVRAM-2 ADAPTER WITH 32MB
-52- NETWORK 9 GB W ULTRASCSI DISK DRIVE FOR SHELF 2
-4- NETWORK DUAL STORAGESHELF 2, W/O DRIVES, FWD
-2- NETWORK DUAL CHANNEL WIDE/DIFF SCSI ADAPTER, F6XX
-1- NETWORK NFS SOFTWARE, NETAPP F520
-1- NETWORK 10/100 VBASE-T NETWORK INTERFACE
-1- 4-PORT 10/100 BASE-T NETWORK INTERFACE
-1- NETWORK DOC PACKAGE, F500, DATA ONTAP VERSION 4.3
-1- NETWORK FAST WIDE SCSI ADAPTER FOR TAPE, CONFIGD
- -2- BASIC SPARES KIT, NETAPP F630
- -2- STORAGE SHELF 2 BASIC SPARES KIT
INCLUDING, BUT NOT LIMITED TO, REPLACEMENT PARTS, SUBSTITUTIONS, ADDITIONS,
ACCESSORIES, AND PROCEEDS THEREOF.
This Schedule 'A' is attached to and made a part of R.C.C. FINANCE GROUP LTD.
lease #_________ and constitutes a true and accurate description of the
equipment.
R.C.C. FINANCE GROUP LTD. GLOBECOMM, INC.
(Lessor) (Lessee)
/s/ Gary Millin
- ------------------------------------- ---------------------------------
<PAGE>
CERTIFICATE OF AUTHORITY
FOR BILL OF SALE
R.C.C. FINANCE GROUP LTD.
1086 TEANECK ROAD
TEANECK, NEW JERSEY 07666
The undersigned certifies to R.C.C. FINANCE GROUP LTD. (RCC) that the
following resolution was duly adopted by the Board of Directors of GLOBECOMM,
INC., a corporation existing under the laws of ____________, at a meeting duly
held _______________________,19____,that the same has not been modified or
rescinded and is not in conflict with any provision of the charter, by-laws or
any agreement of said Corporation:
"RESOLVED that the sale of certain assets by this Corporation to RCC is
hereby approved, and any officer of this Corporation is authorized, in the
name and on behalf of this Corporation, to execute and deliver to RCC a
Bill of Sale covering such assets, at such price, and containing such
other terms and provisions, as may be approved by the officer executing
the same, his execution thereof to be deemed conclusive evidence of such
approval, and any officer for this Corporation is also authorized, in the
name and on behalf of this Corporation, to execute and deliver such
documents and take such other action as he may deem necessary or advisable
to effectuate and perform such Bill of Sale."
The undersigned further certifies that the officers of said Corporation and the
respective official positions held by them are:
President /s/ Gary Millin
- --------------------------------------------------------------------------------
Specimen Signature
Vice President
- --------------------------------------------------------------------------------
Specimen Signature
Treasurer
- --------------------------------------------------------------------------------
Specimen Signature
Secretary Gerry Gorman /s/ Gerry Gorman
- --------------------------------------------------------------------------------
Specimen Signature
Signed and sealed this ______ day of ____________, 19_____
(Corporate Seal) /s/ Gerry Gorman
--------------------------------------
Secretary
I, the undersigned, President of the corporation above named, do hereby certify
that the foregoing certificate is in all respects true and contains a true copy
of the resolutions adopted by the Board of Directors of said corporation.
/s/ Gary Millin
--------------------------------------
President
<PAGE>
EQUIPMENT SCHEDULE "C"
Schedule referred to in and made a part of agreement by and between R.C.C.
FINANCE GROUP LTD. as buyer and GLOBECOMM, INC. as seller.
EQUIPMENT LOCATION: 11 BROADWAY
NEW YORK, NY 10004
QTY DESCRIPTION SERIAL #
- -2- NETAPP F630 FILER INCLUDING BUT NOT LIMITED TO:
-1- NETWORK KIT, SHIPPING, RACK MOUNT UNIT, F520
-1- NETWORK SERVER, NETAPP F630, BASE CONFIGURATION
-1- NETWORK 512 MB ECC SYSTEM MEMORY FOR F6XX
-1- NETWORK NVRAM-2 ADAPTER WITH 32MB
-52- NETWORK 9 GB W ULTRASCSI DISK DRIVE FOR SHELF 2
-4- NETWORK DUAL STORAGESHELF 2, W/O DRIVES, FWD
-2- NETWORK DUAL CHANNEL WIDE/DIFF SCSI ADAPTER, F6XX
-1- NETWORK NFS SOFTWARE, NETAPP F520
-1- NETWORK 10/100 VBASE-T NETWORK INTERFACE
-1- 4-PORT 10/100 BASE-T NETWORK INTERFACE
-1- NETWORK DOC PACKAGE, F500, DATA ONTAP VERSION 4.3
-1- NETWORK FAST WIDE SCSI ADAPTER FOR TAPE, CONFIGD
- -2- BASIC SPARES KIT, NETAPP F630
- -2- STORAGE SHELF 2 BASIC SPARES KIT
This Schedule 'C' is attached to and made a part of Bill of Sale #__________
by and between R.C.C. FINANCE GROUP LTD. as Buyer and GLOBECOMM, INC. as
Seller and constitutes a true and accurate description of the equipment.
R.C.C. FINANCE GROUP LTD. GLOBECOMM, INC.
(Buyer) (Seller)
/s/ Gary Millin
- ----------------------------------- --------------------------------------
<PAGE>
CERTIFICATE OF AUTHORITY
FOR EQUIPMENT LEASE
R.C.C. FINANCE GROUP LTD.
1086 TEANECK ROAD
TEANECK, NEW JERSEY 07666
The undersigned certifies to R.C.C. FINANCE GROUP LTD. (RCC) that the
following resolution was duly adopted by the Board of Directors of GLOBECOMM,
INC., a corporation existing under the laws of _____________________ at a
meeting duly held on ____________,19____; that the same has not been modified or
rescinded and is not in conflict with any provision of the charter, bylaws, or
any agreement of said corporation:
"RESOLVED that the lease of certain equipment by this Corporation
from RCC is hereby approved, and any officer of this Corporation is
authorized, in the name and on behalf of this Corporation, to execute and
deliver to RCC a lease covering such equipment, at such rental, and
containing such other terms and provisions, as may be approved by the
officer executing the same, his execution thereof to be deemed conclusive
evidence of such approval, and any officer for this Corporation is also
authorized, in the name and on behalf of this Corporation, to execute and
deliver such documents and take such other action as he may deem necessary
or advisable to effectuate and perform such lease."
The undersigned further certifies that the duly elected officers and/or
authorized officials of said Corporation and the respective offices held by them
are:
President Gary Millin /s/ Gary Millin
- --------------------------------------------------------------------------------
Specimen Signature
Vice President
- --------------------------------------------------------------------------------
Specimen Signature
Treasurer
- --------------------------------------------------------------------------------
Specimen Signature
Secretary Gerry Gorman /s/ Gerry Gorman
- --------------------------------------------------------------------------------
Specimen Signature
Signed and sealed this ______ day of ____________, 19_____
(Corporate Seal) /s/ Gerry Gorman
--------------------------------------
Secretary
<PAGE>
I, the undersigned, President of the corporation above named, do hereby certify
that the foregoing certificate is in all respects true and contains a true copy
of the resolutions adopted by the Board of Directors of said corporation.
/s/ Gary Millin
--------------------------------------
President
<PAGE>
[BAR CODE OMITTED]
This Financing Statement is Presented to a Filing
Officer for filing pursuant to the Uniform Commercial code. 0093262000028000
- --------------------------------------------------------------------------------
No. of Additional
Sheets Presented: 3. |_| The Debtor is a transmitting utility.
- --------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and Address(es):
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
13-3787073
- --------------------------------------------------------------------------------
2. Secured Party(ies) Name(s) and Address(es)
R.C.C. Finance Group Ltd.
1086 Teaneck Road, Suite 5C
Teaneck, NJ 07666
13-3053144
- --------------------------------------------------------------------------------
4. For Filing Officer: Date, Time, No. Filing Office
- --------------------------------------------------------------------------------
5. This Financing Statement covers the following types (or items) of property:
The items described on Equipment Schedule 'A', which is annexed
hereto and made a part hereof.
|_| Products of the Collateral are also covered.
- --------------------------------------------------------------------------------
6. Assignee(s) of Secured Party and Address(es)
- --------------------------------------------------------------------------------
7. Filed With: NEW YORK
|_| The described crops are growing or to be grown on;*
|_| The described goods are or are to affixed to:*
|_| The lumber to be cut or minerals or the like
(including oil and gas) is on:*
*(Describe Real Estate Below)
- --------------------------------------------------------------------------------
8. Describe Real Estate Here: |_| This statements is to be indexed in
the Real Estate Records:
No. & Street Town or City County Section Block Lot
- --------------------------------------------------------------------------------
9. Name of a Record Owner
- --------------------------------------------------------------------------------
10. This statements is filed without the debtor's signature to perfect a
security interest in collateral (check appropriate box)
|_| under a security agreement signed by debtor authorizing secured party
to file this statement, or
|_| which is proceeds of the original collateral described above in which
a security interest was perfected, or
|_| acquired after a change of name, identity or corporate structure of the
debtor, or already subject to a security interest in another
jurisdiction:
|_| as to which the filing has lapsed, or
|_| when the collateral was brought into the state, or
|_| when the debtor's location was changed to this state.
GlobeComm, Inc. R.C.C. Finance Group, Ltd.
- ---------------------------------- ----------------------------------------
By /s/ Gary Millin By
- ---------------------------------- ----------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
(4) FILE COPY - DEBTOR(S)
STANDARD FORM - UCC 1 Approved by Secretary of State of New York
Prepared with UCC Direct for Windows Data File Services, Inc., P.O. Box 275,
Van Nuys, CA, 91408-0275 Tel (818) 909-2200
Return Acknowledgement To:
<PAGE>
[BAR CODE OMITTED]
This Financing Statement is Presented to a Filing
Officer for filing pursuant to the Uniform Commercial code. 0093262000028000
- --------------------------------------------------------------------------------
No. of Additional
Sheets Presented: 3. |_| The Debtor is a transmitting utility.
- --------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and Address(es):
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
13-3787073
- --------------------------------------------------------------------------------
2. Secured Party(ies) Name(s) and Address(es)
R.C.C. Finance Group Ltd.
1086 Teaneck Road, Suite 5C
Teaneck, NJ 07666
13-3053144
- --------------------------------------------------------------------------------
4. For Filing Officer: Date, Time, No. Filing Office
- --------------------------------------------------------------------------------
5. This Financing Statement covers the following types (or items) of property:
The items described on Equipment Schedule 'A', which is annexed
hereto and made a part hereof.
|_| Products of the Collateral are also covered.
- --------------------------------------------------------------------------------
6. Assignee(s) of Secured Party and Address(es)
- --------------------------------------------------------------------------------
7. Filed With: NEW YORK
|_| The described crops are growing or to be grown on;*
|_| The described goods are or are to affixed to:*
|_| The lumber to be cut or minerals or the like
(including oil and gas) is on:*
*(Describe Real Estate Below)
- --------------------------------------------------------------------------------
8. Describe Real Estate Here: |_| This statements is to be indexed in
the Real Estate Records:
No. & Street Town or City County Section Block Lot
- --------------------------------------------------------------------------------
9. Name of a Record Owner
- --------------------------------------------------------------------------------
10. This statements is filed without the debtor's signature to perfect a
security interest in collateral (check appropriate box)
|_| under a security agreement signed by debtor authorizing secured party
to file this statement, or
|_| which is proceeds of the original collateral described above in which
a security interest was perfected, or
|_| acquired after a change of name, identity or corporate structure of the
debtor, or already subject to a security interest in another
jurisdiction:
|_| as to which the filing has lapsed, or
|_| when the collateral was brought into the state, or
|_| when the debtor's location was changed to this state.
GlobeComm, Inc. R.C.C. Finance Group, Ltd.
- ---------------------------------- ----------------------------------------
By /s/ Gary Millin By
- ---------------------------------- ----------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
STANDARD FORM - UCC 1 Approved by Secretary of State of New York
Prepared with UCC Direct for Windows Data File Services, Inc., P.O. Box 275,
Van Nuys, CA, 91408-0275 Tel (818) 909-2200
Return Acknowledgement To:
<PAGE>
[BAR CODE OMITTED]
This Financing Statement is Presented to a Filing
Officer for filing pursuant to the Uniform Commercial code. 0093262000028000
- --------------------------------------------------------------------------------
No. of Additional
Sheets Presented: 3. |_| The Debtor is a transmitting utility.
- --------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and Address(es):
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
13-3787073
- --------------------------------------------------------------------------------
2. Secured Party(ies) Name(s) and Address(es)
R.C.C. Finance Group Ltd.
1086 Teaneck Road, Suite 5C
Teaneck, NJ 07666
13-3053144
- --------------------------------------------------------------------------------
4. For Filing Officer: Date, Time, No. Filing Office
- --------------------------------------------------------------------------------
5. This Financing Statement covers the following types (or items) of property:
The items described on Equipment Schedule 'A', which is annexed
hereto and made a part hereof.
|_| Products of the Collateral are also covered.
- --------------------------------------------------------------------------------
6. Assignee(s) of Secured Party and Address(es)
- --------------------------------------------------------------------------------
7. Filed With: NEW YORK
|_| The described crops are growing or to be grown on;*
|_| The described goods are or are to affixed to:*
|_| The lumber to be cut or minerals or the like
(including oil and gas) is on:*
*(Describe Real Estate Below)
- --------------------------------------------------------------------------------
8. Describe Real Estate Here: |_| This statements is to be indexed in
the Real Estate Records:
No. & Street Town or City County Section Block Lot
- --------------------------------------------------------------------------------
9. Name of a Record Owner
- --------------------------------------------------------------------------------
10. This statements is filed without the debtor's signature to perfect a
security interest in collateral (check appropriate box)
|_| under a security agreement signed by debtor authorizing secured party
to file this statement, or
|_| which is proceeds of the original collateral described above in which
a security interest was perfected, or
|_| acquired after a change of name, identity or corporate structure of the
debtor, or already subject to a security interest in another
jurisdiction:
|_| as to which the filing has lapsed, or
|_| when the collateral was brought into the state, or
|_| when the debtor's location was changed to this state.
GlobeComm, Inc. R.C.C. Finance Group, Ltd.
- ---------------------------------- ----------------------------------------
By /s/ Gary Millin By
- ---------------------------------- ----------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
(2) FILING OFFICER COPY - ACKNOWLEDGEMENT
STANDARD FORM - UCC 1 Approved by Secretary of State of New York
Prepared with UCC Direct for Windows Data File Services, Inc., P.O. Box 275,
Van Nuys, CA, 91408-0275 Tel (818) 909-2200
Return Acknowledgement To:
<PAGE>
[BAR CODE OMITTED]
This Financing Statement is Presented to a Filing
Officer for filing pursuant to the Uniform Commercial code. 0093262000028000
- --------------------------------------------------------------------------------
No. of Additional
Sheets Presented: 3. |_| The Debtor is a transmitting utility.
- --------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and Address(es):
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
13-3787073
- --------------------------------------------------------------------------------
2. Secured Party(ies) Name(s) and Address(es)
R.C.C. Finance Group Ltd.
1086 Teaneck Road, Suite 5C
Teaneck, NJ 07666
13-3053144
- --------------------------------------------------------------------------------
4. For Filing Officer: Date, Time, No. Filing Office
- --------------------------------------------------------------------------------
5. This Financing Statement covers the following types (or items) of property:
The items described on Equipment Schedule 'A', which is annexed
hereto and made a part hereof.
|_| Products of the Collateral are also covered.
- --------------------------------------------------------------------------------
6. Assignee(s) of Secured Party and Address(es)
- --------------------------------------------------------------------------------
7. Filed With: NEW YORK
|_| The described crops are growing or to be grown on;*
|_| The described goods are or are to affixed to:*
|_| The lumber to be cut or minerals or the like
(including oil and gas) is on:*
*(Describe Real Estate Below)
- --------------------------------------------------------------------------------
8. Describe Real Estate Here: |_| This statements is to be indexed in
the Real Estate Records:
No. & Street Town or City County Section Block Lot
- --------------------------------------------------------------------------------
9. Name of a Record Owner
- --------------------------------------------------------------------------------
10. This statements is filed without the debtor's signature to perfect a
security interest in collateral (check appropriate box)
|_| under a security agreement signed by debtor authorizing secured party
to file this statement, or
|_| which is proceeds of the original collateral described above in which
a security interest was perfected, or
|_| acquired after a change of name, identity or corporate structure of the
debtor, or already subject to a security interest in another
jurisdiction:
|_| as to which the filing has lapsed, or
|_| when the collateral was brought into the state, or
|_| when the debtor's location was changed to this state.
GlobeComm, Inc. R.C.C. Finance Group, Ltd.
- ---------------------------------- ----------------------------------------
By /s/ Gary Millin By
- ---------------------------------- ----------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
(1) FILING OFFICER COPY - NUMERICAL
STANDARD FORM - UCC 1 Approved by Secretary of State of New York
Prepared with UCC Direct for Windows Data File Services, Inc., P.O. Box 275,
Van Nuys, CA, 91408-0275 Tel (818) 909-2200
Return Acknowledgement To:
<PAGE>
[BAR CODE OMITTED]
This Financing Statement is Presented to a Filing
Officer for filing pursuant to the Uniform Commercial code. 0093262000028000
- --------------------------------------------------------------------------------
No. of Additional
Sheets Presented: 3. |_| The Debtor is a transmitting utility.
- --------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and Address(es):
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
13-3787073
- --------------------------------------------------------------------------------
2. Secured Party(ies) Name(s) and Address(es)
R.C.C. Finance Group Ltd.
1086 Teaneck Road, Suite 5C
Teaneck, NJ 07666
13-3053144
- --------------------------------------------------------------------------------
4. For Filing Officer: Date, Time, No. Filing Office
- --------------------------------------------------------------------------------
5. This Financing Statement covers the following types (or items) of property:
The items described on Equipment Schedule 'A', which is annexed
hereto and made a part hereof.
|_| Products of the Collateral are also covered.
- --------------------------------------------------------------------------------
6. Assignee(s) of Secured Party and Address(es)
- --------------------------------------------------------------------------------
7. Filed With: NEW YORK
|_| The described crops are growing or to be grown on;*
|_| The described goods are or are to affixed to:*
|_| The lumber to be cut or minerals or the like
(including oil and gas) is on:*
*(Describe Real Estate Below)
- --------------------------------------------------------------------------------
8. Describe Real Estate Here: |_| This statements is to be indexed in
the Real Estate Records:
No. & Street Town or City County Section Block Lot
- --------------------------------------------------------------------------------
9. Name of a Record Owner
- --------------------------------------------------------------------------------
10. This statements is filed without the debtor's signature to perfect a
security interest in collateral (check appropriate box)
|_| under a security agreement signed by debtor authorizing secured party
to file this statement, or
|_| which is proceeds of the original collateral described above in which
a security interest was perfected, or
|_| acquired after a change of name, identity or corporate structure of the
debtor, or already subject to a security interest in another
jurisdiction:
|_| as to which the filing has lapsed, or
|_| when the collateral was brought into the state, or
|_| when the debtor's location was changed to this state.
GlobeComm, Inc. R.C.C. Finance Group, Ltd.
- ---------------------------------- ----------------------------------------
By /s/ Gary Millin By
- ---------------------------------- ----------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
(1) FILING OFFICER COPY - NUMERICAL
STANDARD FORM - UCC 1 Approved by Secretary of State of New York
Prepared with UCC Direct for Windows Data File Services, Inc., P.O. Box 275,
Van Nuys, CA, 91408-0275 Tel (818) 909-2200
Return Acknowledgement To:
<PAGE>
[BAR CODE OMITTED]
This Financing Statement is Presented to a Filing
Officer for filing pursuant to the Uniform Commercial code. 0093262000028000
- --------------------------------------------------------------------------------
No. of Additional
Sheets Presented: 3. |_| The Debtor is a transmitting utility.
- --------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and Address(es):
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
13-3787073
- --------------------------------------------------------------------------------
2. Secured Party(ies) Name(s) and Address(es)
R.C.C. Finance Group Ltd.
1086 Teaneck Road, Suite 5C
Teaneck, NJ 07666
13-3053144
- --------------------------------------------------------------------------------
4. For Filing Officer: Date, Time, No. Filing Office
- --------------------------------------------------------------------------------
5. This Financing Statement covers the following types (or items) of property:
The items described on Equipment Schedule 'A', which is annexed
hereto and made a part hereof.
|_| Products of the Collateral are also covered.
- --------------------------------------------------------------------------------
6. Assignee(s) of Secured Party and Address(es)
- --------------------------------------------------------------------------------
7. Filed With: NEW YORK
|_| The described crops are growing or to be grown on;*
|_| The described goods are or are to affixed to:*
|_| The lumber to be cut or minerals or the like
(including oil and gas) is on:*
*(Describe Real Estate Below)
- --------------------------------------------------------------------------------
8. Describe Real Estate Here: |_| This statements is to be indexed in
the Real Estate Records:
No. & Street Town or City County Section Block Lot
- --------------------------------------------------------------------------------
9. Name of a Record Owner
- --------------------------------------------------------------------------------
10. This statements is filed without the debtor's signature to perfect a
security interest in collateral (check appropriate box)
|_| under a security agreement signed by debtor authorizing secured party
to file this statement, or
|_| which is proceeds of the original collateral described above in which
a security interest was perfected, or
|_| acquired after a change of name, identity or corporate structure of the
debtor, or already subject to a security interest in another
jurisdiction:
|_| as to which the filing has lapsed, or
|_| when the collateral was brought into the state, or
|_| when the debtor's location was changed to this state.
GlobeComm, Inc. R.C.C. Finance Group, Ltd.
- ---------------------------------- ----------------------------------------
By /s/ Gary Millin By
- ---------------------------------- ----------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
(2) FILING OFFICER COPY - ACKNOWLEDGEMENT
STANDARD FORM - UCC 1 Approved by Secretary of State of New York
Prepared with UCC Direct for Windows Data File Services, Inc., P.O. Box 275,
Van Nuys, CA, 91408-0275 Tel (818) 909-2200
Return Acknowledgement To:
<PAGE>
[BAR CODE OMITTED]
This Financing Statement is Presented to a Filing
Officer for filing pursuant to the Uniform Commercial code. 0093262000028000
- --------------------------------------------------------------------------------
No. of Additional
Sheets Presented: 3. |_| The Debtor is a transmitting utility.
- --------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and Address(es):
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
13-3787073
- --------------------------------------------------------------------------------
2. Secured Party(ies) Name(s) and Address(es)
R.C.C. Finance Group Ltd.
1086 Teaneck Road, Suite 5C
Teaneck, NJ 07666
13-3053144
- --------------------------------------------------------------------------------
4. For Filing Officer: Date, Time, No. Filing Office
- --------------------------------------------------------------------------------
5. This Financing Statement covers the following types (or items) of property:
The items described on Equipment Schedule 'A', which is annexed
hereto and made a part hereof.
|_| Products of the Collateral are also covered.
- --------------------------------------------------------------------------------
6. Assignee(s) of Secured Party and Address(es)
- --------------------------------------------------------------------------------
7. Filed With: NEW YORK
|_| The described crops are growing or to be grown on;*
|_| The described goods are or are to affixed to:*
|_| The lumber to be cut or minerals or the like
(including oil and gas) is on:*
*(Describe Real Estate Below)
- --------------------------------------------------------------------------------
8. Describe Real Estate Here: |_| This statements is to be indexed in
the Real Estate Records:
No. & Street Town or City County Section Block Lot
- --------------------------------------------------------------------------------
9. Name of a Record Owner
- --------------------------------------------------------------------------------
10. This statements is filed without the debtor's signature to perfect a
security interest in collateral (check appropriate box)
|_| under a security agreement signed by debtor authorizing secured party
to file this statement, or
|_| which is proceeds of the original collateral described above in which
a security interest was perfected, or
|_| acquired after a change of name, identity or corporate structure of the
debtor, or already subject to a security interest in another
jurisdiction:
|_| as to which the filing has lapsed, or
|_| when the collateral was brought into the state, or
|_| when the debtor's location was changed to this state.
GlobeComm, Inc. R.C.C. Finance Group, Ltd.
- ---------------------------------- ----------------------------------------
By /s/ Gary Millin By
- ---------------------------------- ----------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
STANDARD FORM - UCC 1 Approved by Secretary of State of New York
Prepared with UCC Direct for Windows Data File Services, Inc., P.O. Box 275,
Van Nuys, CA, 91408-0275 Tel (818) 909-2200
Return Acknowledgement To:
<PAGE>
[BAR CODE OMITTED]
This Financing Statement is Presented to a Filing
Officer for filing pursuant to the Uniform Commercial code. 0093262000028000
- --------------------------------------------------------------------------------
No. of Additional
Sheets Presented: 3. |_| The Debtor is a transmitting utility.
- --------------------------------------------------------------------------------
1. Debtor(s) (Last Name First) and Address(es):
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
13-3787073
- --------------------------------------------------------------------------------
2. Secured Party(ies) Name(s) and Address(es)
R.C.C. Finance Group Ltd.
1086 Teaneck Road, Suite 5C
Teaneck, NJ 07666
13-3053144
- --------------------------------------------------------------------------------
4. For Filing Officer: Date, Time, No. Filing Office
- --------------------------------------------------------------------------------
5. This Financing Statement covers the following types (or items) of property:
The items described on Equipment Schedule 'A', which is annexed
hereto and made a part hereof.
|_| Products of the Collateral are also covered.
- --------------------------------------------------------------------------------
6. Assignee(s) of Secured Party and Address(es)
- --------------------------------------------------------------------------------
7. Filed With: NEW YORK
|_| The described crops are growing or to be grown on;*
|_| The described goods are or are to affixed to:*
|_| The lumber to be cut or minerals or the like
(including oil and gas) is on:*
*(Describe Real Estate Below)
- --------------------------------------------------------------------------------
8. Describe Real Estate Here: |_| This statements is to be indexed in
the Real Estate Records:
No. & Street Town or City County Section Block Lot
- --------------------------------------------------------------------------------
9. Name of a Record Owner
- --------------------------------------------------------------------------------
10. This statements is filed without the debtor's signature to perfect a
security interest in collateral (check appropriate box)
|_| under a security agreement signed by debtor authorizing secured party
to file this statement, or
|_| which is proceeds of the original collateral described above in which
a security interest was perfected, or
|_| acquired after a change of name, identity or corporate structure of the
debtor, or already subject to a security interest in another
jurisdiction:
|_| as to which the filing has lapsed, or
|_| when the collateral was brought into the state, or
|_| when the debtor's location was changed to this state.
GlobeComm, Inc. R.C.C. Finance Group, Ltd.
- ---------------------------------- ----------------------------------------
By /s/ Gary Millin By
- ---------------------------------- ----------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured Party(ies)
(4) FILE COPY - DEBTOR(S)
STANDARD FORM - UCC 1 Approved by Secretary of State of New York
Prepared with UCC Direct for Windows Data File Services, Inc., P.O. Box 275,
Van Nuys, CA, 91408-0275 Tel (818) 909-2200
Return Acknowledgement To:
<PAGE>
R.C.C. FINANCE GROUP LTD.
1086 TEANECK ROAD SUITE 5C LEASE NO. 981052
TEANECK, NEW JERSEY 07632 ----------
201-833-4480
(Hereinafter called "Lessor")
LEASE AGREEMENT
1.
INAME, INC. SALE AND LEASE BACK
11 BROADWAY, SUITE 660
NEW YORK, NY 10004-1303
(Hereinafter Called "Lessee") (Hereinafter Called
"Supplier")
Contact: GARY MILLIN Contact:
Telephone: 212-425-3477 Telephone:
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION OF LEASED EQUIPMENT (Hereinafter Called "equipment")
- --------------------------------------------------------------------------------
THE ITEMS DESCRIBED ON EQUIPMENT SCHEDULE "A", WHICH IS ANNEXED
HERETO AND MADE A PART HEREOF.
- --------------------------------------------------------------------------------
2. TERMS OF RENTAL PAYMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Term of No. of Rentals Amount of Rental ADDITIONAL PROVISIONS:
Lease Rental Payable Payment In U.S. Currency
Paymts.
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
60 60 Monthly $7,613.00 EQUIPMENT LOCATION:
Months Plus all applicable taxes 11 BROADWAY, SUITE 660 NEW YORK, NY 10004
- -------------------------------------------------------------------------------------------------------------
</TABLE>
3. ADVANCE RENTALS: Lessee shall pay the first month's and last one months'
rental in advance upon the execution of this Lease.
4. LEASING: Lessee hereby leases from Lessor, and Lessor hereby leases to
Lessee, in accordance with the terms, provisions, covenants and conditions of
this lease, the equipment described above and/or in Schedule "A", which is
annexed hereto and made a part hereof.
5. TERM AND RENT. The obligations under this lease shall begin upon the date the
Lessor orders the equipment to be leased hereunder and shall end upon the full
performance and/or observance of each and every term, provision, covenant and
condition set forth in this lease. The term of this lease, shall begin on the
day the first rental payment is due and shall terminate on the last day of the
final rental payment period. Rental payments paid in advance upon execution of
this lease shall be deemed to have been earned by Lessor immediately upon
Lessor's receipt thereof and shall be applied immediately to satisfy Lessee's
obligations to make such payments hereunder. These payments shall not be
refundable to Lessee under any circumstances, including (without limitation) any
termination of this Lease for any reason prior to the end of its scheduled term
in accordance with the terms hereof. The first rental payment shall be due and
payable on the first day of the month succeeding delivery of all the equipment
and thereafter each payment of the rent shall be consecutively paid on the first
day of each payment period. In the event of the delivery of only a part of the
equipment, a pro rata portion of the rent shall be paid, until delivery of all
of the equipment. All rents shall be paid to Lessor at its address set forth
above, or as otherwise directed by Lessor in writing.
6. TIME. Time is hereby made of the essence of this lease and of each and of all
its terms, provisions, covenants and conditions.
THIS INSTRUMENT CONSTITUTES THE ENTIRE CONTRACT BETWEEN THE PARTIES HERETO, AND
NO REPRESENTATIONS, ORAL OR WRITTEN, SHALL CONSTITUTE AN AMENDMENT, MODIFICATION
OR TERMINATION HEREOF UNLESS SIGNED IN WRITING BY AN OFFICER OF THE LESSOR. THIS
LEASE AGREEMENT, WHICH CONSISTS OF THREE PAGES, IS NON-CANCELABLE AND
IRREVOCABLE AND IS SUBJECT TO THE TERMS, PROVISIONS, COVENANTS AND CONDITIONS
PRINTED ABOVE AND ON PAGE 2 AND PAGE 3 WHICH ARE MADE PART HEREOF AND WHICH
LESSEE, BY HIS EXECUTION BELOW AND INITIALING OF PAGE 2 AND PAGE 3, ACKNOWLEDGES
THAT LESSEE HAS READ AND AGREES TO.
IN WITNESS WHEREOF, THE LESSEE HAS HEREBY EXECUTED THIS LEASE THIS 30 DAY OF
DEC., 1998.
ACCEPTED DECEMBER 30, 1998 INAME, INC.
R.C.C. FINANCE GROUP LTD. BY: /s/ [ILLEGIBLE], EVP & CFO
----------------------------------
By /s/ [ILLEGIBLE] (Authorized Signature and Title)
---------------------------
Attest: /s/ [ILLEGIBLE]
------------------------------
Secretary of Corporation or Witness
(if not Corporation)
PAGE 1 OF 3 PAGE LEASE AGREEMENT (CONTINUED ON FOLLOWING PAGES)
<PAGE>
7. SELECTION OF EQUIPMENT; ACCEPTANCE; WARRANTIES; REPRESENTATIONS. Lessee
acknowledges that Lessee has selected both the equipment and the Supplier from
whom Lessor covenants to purchase the equipment at Lessee's request. Lessee
further acknowledges that Lessor has no expertise or special familiarity about
or with respect to the equipment and that Lessor did not participate in any way
in Lessee's selection of the equipment or of the Supplier. Lessee agrees to
accept the equipment if delivered in good repair, and to execute the delivery
receipt supplied by Lessor, as evidence thereof. Lessee agrees to hold Lessor
harmless from specific performance of this lease and from damages, if, for any
reason, the Supplier fails to deliver the equipment so ordered. Lessee agrees
that any delay in delivery of the equipment shall not affect the validity of
this lease. LESSEE AGREES THAT THE EQUIPMENT LEASED HEREUNDER IS LEASED "AS IS"
AND IS OF A SIZE, DESIGN AND CAPACITY SELECTED BY LESSEE AND THAT LESSEE IS
SATISFIED THAT THE SAME IS SUITABLE FOR LESSEE'S PURPOSE, AND THAT LESSOR HAS
MADE NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE SUITABILITY OR DURABILITY
OF SAID EQUIPMENT FOR THE PURPOSES AND USES OF LESSEE, OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT THERETO, INCLUDING
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Lessor hereby assigns, without recourse, to Lessee for and during the term of
this lease any applicable factory warranty covering the equipment leased
hereunder.
LESSEE ACKNOWLEDGES AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALESMAN,
EMPLOYEE, REPRESENTATIVE OR AGENT OF THE SUPPLIER IS AN AGENT OR REPRESENTATIVE
OF LESSOR, AND THAT NONE OF THE ABOVE ARE AUTHORIZED TO WAIVE OR ALTER ANY TERM,
PROVISION, COVENANT OR CONDITION OF THIS LEASE, OR MAKE ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO THIS LEASE OR THE EQUIPMENT LEASED HEREUNDER. Lessee
further acknowledges and agrees that Lessee, in executing this lease, has relied
solely upon the terms, provisions, covenants and conditions contained herein,
and any other statements, warranties or representations, if any, by the
supplier, or any salesman, employee, representative or agent of the supplier,
have not been relied upon, and shall not in any way affect Lessee's obligation
to pay the rent and otherwise perform as set forth in this lease.
THIS LEASE CONSTITUTES A NET LEASE AND LESSEE AGREES THAT ITS OBLIGATIONS
TO PAY ALL RENT AND OTHER SUMS PAYABLE HEREUNDER AND THE RIGHTS OF LESSOR AND
ITS ASSIGNEE IN AND TO SUCH RENT AND OTHER SUMS, ARE ABSOLUTE AND UNCONDITIONAL
AND ARE NOT SUBJECT TO ANY ABATEMENT, REDUCTION, SET OFF, DEFENSE, COUNTERCLAIM
OR RECOUPMENT DUE OR ALLEDGED TO BE DUE TO, OR BY REASON OF, ANY PAST, PRESENT
OR FUTURE CLAIMS WHICH LESSEE MAY HAVE AGAINST LESSOR, ANY ASSIGNEE, THE
MANUFACTURER OR SELLER OF THE EQUIPMENT, OR AGAINST ANY PERSON WHATSOEVER.
Lessee represents and warrants that: (a) The execution, delivery and
performance of the Lease Documents and compliance with the terms thereof do not
and will not contravene any law, governmental rule, regulation or order now
binding on Lessee, or the charter or by-laws of Lessee, or contravene the
provisions of, or constitute a default under, or result in the creation of any
lien or encumbrance upon the property of Lessee under, any indenture, mortgage,
contract or other agreement to which Lessee is a party or by which it or its
property is bound. (b) Each of the Lease Documents, when entered into, will
constitute legal, valid and binding obligations of Lessee enforceable against
Lessee, in accordance with the terms thereof, except as the enforceability
thereof may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws effecting the enforcement of creditors rights
generally. (c) There are no pending actions or proceedings to which Lessee is a
party, and there are no other pending or threatened actions or proceedings of
which Lessee has knowledge, before any court, arbitrator or administrative
agency which would adversely affect the financial condition of Lessee or its
ability to perform its obligations under the Lease Documents. Lessee has no
knowledge of any default under any obligation for borrowed money which would
have the same effect.
8. ERRORS IN ESTIMATED COST: As used in this paragraph "actual cost" means the
cost to Lessor of purchasing and delivering the equipment to Lessee, including
taxes, transportation charges, and all other expenses and charges. The amount of
each rental payment initially set forth above is based on the total cost of the
equipment as ordered by Lessor in its purchase order which is an estimate and
each shall be adjusted proportionately if the actual cost of the equipment
differs from said estimate. Lessee hereby authorizes Lessor to correct the
amount of each rental payment when the actual cost is known.
9. LOCATION, INSTALLATION AND USE OF EQUIPMENT. The equipment shall be delivered
to Lessee and installed by Lessee at Lessee's own expense, and thereafter kept
at the location specified above. Lessee shall not remove the equipment from the
aforementioned location without Lessor's prior written consent. Lessee shall use
the equipment in a careful and proper manner and shall comply with all laws,
regulations and ordinances relating to its possession, use and maintenance.
Lessee shall affix the labels supplied by Lessor, upon a visible place on each
item of equipment, and maintain the same on each. Lessor shall have the right
from time to time during reasonable business hours to enter upon the Lessee's
premises for the purpose of inspecting the equipment.
10. MAINTENANCE: Lessee shall, at Lessee's own expense, maintain the equipment
in good operating condition, repair and appearance, and protect same from
deterioration other than normal wear and tear. LESSEE SPECIFICALLY WAIVES ANY
OBLIGATION IMPOSED UPON LESSOR TO MAINTAIN AND/OR REPAIR THE EQUIPMENT.
Lessee shall only use the equipment in the regular course of Lessee's business
and within normal capacity. Lessee shall not make any modifications alterations
or additions to the equipment without the prior written consent of Lessor, and
then, all such modifications, alterations and additions shall belong to Lessor.
The equipment shall remain personal property at all times and Lessee shall not
so affix the equipment to realty so as to change its nature to real property
11. OWNERSHIP. The equipment is, and shall at all times be and remain, personal
property, and title thereto shall remain in Lessor exclusively, notwithstanding
that the equipment or any part thereof may now be, or hereafter become, in any
manner affixed or attached to, or embedded in, or permanently resting upon, real
property, or any building thereon, or attached in any manner to that which is
permanent, by any means whatsoever. Upon the expiration or termination of this
lease, Lessee shall, at Lessee's own expense, promptly return the equipment by
delivering it, packed and ready for shipment, to such place or carrier as Lessor
may specify in the same condition as received, reasonable wear and tear
expected. IT IS THE INTENT OF LESSEE AND OF LESSOR THAT THIS LEASE BE A TRUE
LEASE.
12. LOSS OR DAMAGE. Lessee shall bear the entire risk of loss, theft,
destruction, damage or disrepair of the equipment or any part thereof for any
cause whatsoever. No such loss, damage, theft, destruction or disrepair of the
equipment shall relieve Lessee of the obligation to pay rent or from any other
obligation under this lease. In the event of any of the above, Lessee, at
Lessee's own expense and at Lessor's option, shall either (a) repair the
equipment, returning same to its previous condition, unless unrepairable; or (b)
replace same with like equipment of equivalent value, in good condition and
acceptable to Lessor, which shall become the property of the Lessor; or (c)
immediately pay Lessor all rent due and to become due under this lease or such
amounts as may be allocated by Lessor to specific items of equipment. All
proceeds of insurance received by Lessor as a result of such loss or damage
shall, where applicable, be applied toward the replacement or repair of the
equipment or the payment of the obligations of Lessee hereunder.
13. INSURANCE. Lessee shall keep the equipment insured against all risks of
loss, theft, or damage from every cause whatsoever for its full insurable value,
with Lessor as loss payee, and, Lessee shall carry public liability insurance
insuring both Lessor and Lessee against damages and claims for personal injury,
death and property damage. All such insurance shall be in form, amount and with
companies satisfactory to Lessor. Each Policy of Insurance shall provide for 30
days prior written notice of cancellation or modification to Lessor. Lessee
shall pay all premiums for such insurance and shall deliver to Lessor the
policies of insurance or duplicates thereof, and such other evidence of coverage
satisfactory to Lessor. Lessee hereby irrevocably appoints Lessor as Lessee's
attorney in fact to make claim for, receive payment of, and execute and endorse
all documents, checks or drafts received in payment for loss or damage under any
such insurance policy. Lessee agrees if Lessee shall fail to procure, maintain
and pay for such insurance, Lessor shall have the right, but not the obligation,
to obtain such insurance on behalf of and at the expense of Lessee. In the event
Lessor does obtain such insurance, Lessee agrees to pay all costs thereof, with
the next rental payment.
14. INDEMNITY. Lessee shall, and does hereby, indemnify and save Lessor harmless
from any and all losses and/or liability, including, but not limited to STRICT
LIABILITY IN TORT, for funds advanced to Supplier, and for taxes, costs and
expenses, including reasonable attorneys' fees, arising out of the purchase,
ownership, location, installation, possession, leasing, renting, operation,
control, use, maintenance, repair, delivery and/or return of the equipment.
Lessee shall be credited with any proceeds received by Lessor from insurance
policies paid for or obtained by Lessee. The obligations of Lessee under this
paragraph shall continue indefinitely.
---------------
INITIALS
/s/ [ILLEGIBLE]
---------------
PAGE 2 OF 3 PAGE LEASE AGREEMENT (CONTINUED ON FOLLOWING PAGE)
<PAGE>
15. TAXES, FEES AND LIENS. Lessee shall pay all, or reimburse Lessor when
invoiced by Lessor for, charges, registration, permit and license fees,
assessments, taxes, interest and penalties (local, state and federal) which may
now or hereafter be imposed upon the ownership, leasing, rental, maintenance,
purchase, possession or use of the equipment, or upon this lease, or the rental
payments or any other sums due or to become due hereunder. Lessee shall not
rent, sublet, pledge, loan, mortgage, or attempt in any manner to dispose of the
equipment or to suffer any liens or legal process to be placed, incurred or
levied upon the same. Lessee shall immediately notify Lessor of the occurrence
of any of the above; shall pay all sums for taxes, fees, charges, assessments,
penalties and interest; and shall keep the equipment free of levies, liens and
encumbrances. In the event Lessee does not pay all sums specified above, Lessor
has the right, but not the obligation, to pay the same. If the Lessor shall so
pay any of the aforementioned, then the Lessee shall remit such amount with the
next installment of rent.
16. DEFAULT. If Lessee shall default in the payment of any rent or in the making
of any other payment hereunder when due, or in the payment when due of any
indebtedness of Lessee to Lessor arising independently of this lease, or in the
event of any default, breach or failure to perform or observe any terms,
provisions, covenants or conditions contained in this lease or in any other
lease or agreement between Lessor and Lessee, or if any proceeding in
bankruptcy, reorganization, receivership or insolvency shall be commenced by or
against Lessee or Lessee's property or assets, or if Lessee makes an
arrangement, extension or any assignment for the benefit of one or more of
Lessee's creditors, or if Lessee seeks relief under any other law providing for
the relief of debtors, or Lessee, if an individual, dies or is judicially
declared incompetent, or any of the above described events occur with respect to
any guarantor or any other party liable for payment or performance of this
lease, then, and in any of such events, if and to the extent permitted by
applicable law, Lessor shall have the right to exercise any one or more of the
remedies set forth below.
17. REMEDIES. Upon the happening of any one or more events of default set forth
above, Lessor shall have the right without notice or demand, to declare the
entire balance of rent due and to become due hereunder, together with such other
sums as may be due and payable hereunder, to be immediately due and payable,
whereupon the same shall become immediately due and payable; and/or commence an
action against Lessee for the total rental payments due and to become due under
this lease and for all other sums due or to become due hereunder; and/or without
demand or legal process to enter into the premises where the equipment may be
found and take possession of and remove same, whereupon all right of Lessee in
the equipment shall terminate absolutely; and/or retain all prior payments of
rent and of all other sums and the equipment; and/or retain all prior payments
of rent and of all other sums and sell the equipment at public or private sale
with or without notice to Lessee, at which sale Lessor may be purchaser, and the
proceeds of such sale less all expenses incurred by Lessor in connection
therewith, including, but not limited to retaking, storing, repairing,
reselling, delivering, commissions and reasonable attorney's fees will be
applied to the total rent due and to become due for the balance of the term of
this lease, and all other sums due or to become due hereunder, with Lessee
remaining liable for the balance thereof; and/or retain all prior payments of
rent and of all other sums and lease the equipment to another with or without
notice to Lessee and the proceeds of such leasing less all expenses incurred by
Lessor in connection therewith, including, but not limited to retaking,
repairing, delivering, commissions and reasonable attorneys' fees, will be
applied to the total rent due and to become due for the balance of the term of
this lease, and all other sums due or to become due hereunder, with Lessee
remaining liable for the balance thereof; and/or any other remedy in law and/or
equity available to Lessor. Lessee shall be liable for all expenses and costs
Lessor incurs or may incur in connection with the enforcement of any of its
remedies herein, including all collection fees and reasonable attorneys' fees.
If Lessee shall fail to pay when due and any rental payment portion thereof or
any other sums due or to become due hereunder, Lessee shall pay Lessor a late
charge of ten percent (10%) per month of such rent or other sum, but not higher
than the maximum amount of interest allowed by law. All the remedies of Lessor
hereunder are cumulative and may, to the extent permitted by law, be exercised
concurrently or separately, and the exercise of any one remedy shall not be
deemed to be an election of such remedy or to preclude the exercise of any other
remedy. No failure on the part of the Lessor to exercise, and no delay in
exercising any right or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by Lessor of any right or remedy hereunder
preclude any other or further exercise of any partially exercised right or
remedy or any other right or remedy.
18. WAIVER OF NOTICE AND HEARING. LESSEE HEREIN WAIVES ANY AND ALL RIGHTS TO
NOTICE AND TO A HEARING WITH RESPECT TO THE RIGHT OF AND THE REPOSSESSION OF THE
EQUIPMENT BY LESSOR IN THE EVENT OF A DEFAULT HEREUNDER BY LESSEE. LESSEE AGREES
LESSOR MAY REPOSSESS SAID EQUIPMENT WITHOUT NOTICE AND WITHOUT A HEARING AND
WITHOUT OTHER LEGAL PROCESSES, AND LESSEE SPECIFICALLY WAIVES ANY RIGHT TO
NOTICE AND TO A HEARING AND TO OTHER LEGAL PROCESSES.
19. ASSIGNMENT. Without Lessor's prior written consent, Lessee shall not assign,
transfer, sublet, pledge, hypothecate or otherwise dispose of this lease or any
interest herein. Lessor may assign this lease in whole or in part, without
notice to Lessee, and such assignee shall have all of the rights but none of the
obligations of Lessor under this lease. Lessee shall recognize each such
assignment and covenants not to assert against the assignee any defense,
counterclaim or setoff that Lessee has or may hereafter have against Lessor, and
agrees to pay such rent and other payments due and to become due hereunder to
assignee.
20. LAWS GOVERNING. LESSOR and LESSEE agree that this lease shall be deemed to
have been made in the State of California regardless of the order in which the
signatures of the parties shall be affixed hereto. Lessor and Lessee further
agree that this lease shall be interpreted, and the rights and liabilities of
the parties hereto determined in accordance with the laws of the State of
California except for local recording acts. For the purpose of resolving any
issue pertaining to conflict of laws, this lease shall be deemed to have been
executed in the State of California and all of the terms, provisions, covenants
and conditions contained in this lease is each to be deemed to be and be fully
performed and/or observed in the State of California. Lessee hereby agrees that
all actions or proceeding arising, directly or indirectly, from this lease shall
be litigated, at the option of Lessor, in courts having situs within the State
of California and Lessee hereby consents to the jurisdiction of any local, state
or federal court selected by Lessor that is located within the State of
California and agrees not to disturb such choice of Forum by Lessor.
21. ARBITRATION. At Lessor's sole election, Lessor may submit any matter arising
out of or relating to this transaction, including any claim, counterclaim,
setoff, or defense, to binding arbitration by the American Arbitration
Association in Marin County, California or any other site of our choice. The
decision and award of the arbitrator(s) shall be final and binding and may be
entered as rendered in any court having jurisdiction thereof.
22. UCC F1LINGS. Lessee agrees to execute UCC Financing Statements and all
amendments thereto and authorizes Lessor to file the same. Lessee authorizes
Lessor or its agents or assigns to execute and file UCC Financing Statements and
all amendments thereto without the Lessee's signature being affixed thereon.
Lessee grants to Lessor a specific power of attorney for Lessor to execute and
file on Lessee's behalf any document, including, but not limited to, UCC
financing statements and all amendments thereto that Lessor deems necessary to
perfect or protect Lessor's interest in the equipment or pursuant to the Uniform
Commercial Code. Lessee agrees to pay Lessor the costs of filing such UCC
Financing Statements and all amendments thereto. Lessee and Lessor intend this
transaction to be a True Lease, but if any court or tribunal, having power to
bind the Lessee or Lessor, should conclude that all or part of this transaction
is not a True Lease but is in the nature of a sale, consignment, or other
transaction, the Lessee and Lessor intend and the Lessee hereby grants a
continuing security interest in the equipment and proceeds from the sale, rent,
or other disposition of the equipment from the date of this agreement to secure
the payment of all Lessee's indebtedness to Lessor. No rights or remedies
referred to in Article 2A of the Uniform Commercial code will be conferred on
Lessee unless expressly granted in this Lease or a Schedule.
23. NOTICE. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of actual
receipt or three days after mailing if mailed postage prepaid by regular or
airmail to Lessor or Lessee, at the address set out on the face of this Lease
or, one day after it is sent by courier or facsimile transmission if receipt is
verified by the receiving party.
24. MISCELLANEOUS. All obligations of the Lessee if more than one, shall be
joint and several. Lessee shall provide Lessor with a copy of Lessee's annual
financial statement within ninety (90) days after the close of Lessee's business
year. Lessee also authorizes Lessor to amplify the description of the equipment
and to correct any and all patent errors or omissions in the typewritten or
handwritten portions of this and all related documents. This lease shall be
binding upon the parties, their successors, legal representatives and assigns
and is a valid and subsisting legal instrument, and no provision which may be
deemed unenforceable shall in any way invalidate any other provision or
provisions, all of which shall remain in full force and effect. All paragraph
headings are inserted for reference purposes only and shall not affect the
interpretation or meaning of this agreement.
---------------
INITIALS
/s/ [ILLEGIBLE]
---------------
PAGE 3 OF 3 PAGE LEASE AGREEMENT
<PAGE>
EQUIPMENT SCHEDULE "A"
Schedule referred to in and made a part of agreement by and between R.C.C.
FINANCE GROUP LTD. as buyer and INAME, INC. as lessee
EQUIPMENT LOCATION: 11 BROADWAY, SUITE 660
NEW YORK, NY 10004
QTY DESCRIPTION
- -1- PC CONNECTION ACERPOWER T9652WC II266/32MB/4.3/32X
- -1- PC CONNECTION EDO KIT 32MB (2-16MB EDO SIMMS)
- -1- PC CONNECTION ACER AW35 PRO WAVETABLE ENHANCED SOUND BOARD
- -5- PC CONNECTION 17-INCH OPTIQUEST V773 MONITOR
- -14- INTERACTIVE FC-AL 9.1GB 7200RPM 1.6IN DISK
- -1- INTERACTIVE NETWORK APPLIANCE F630 FILER
- -1- INTERACTIVE NFS SOFTWARE FOR F630 SW-F630-NFS
- -1- INTERACTIVE 512MB ECC SYS MEM FOR F630 X322-C
- -1- INTERACTIVE NVRAM-2 WITH 32MB X3253-C
- -2- INTERACTIVE DUAL STORAGE SHELF 2 X617
- -26- INTERACTIVE 9.0GB UW SCSI DISK DRIVE X219C
- -8- INTERACTIVE 11OV 180W POWER SUPPLY X603
- -1- INTERACTIVE DUAL CHANNEL DIFFERENTIAL SCSI ADAPTER X2019A
- -2- INTERACTIVE QUAD 10/100 BASET ADAPTER X1012B
- -1- INTERACTIVE REDUNDANT POWER SUPPLY X7006
- -1- INTERACTIVE POWER CORD KIT X800E
- -1- INTERACTIVE DIGITAL LINK T3 ACCESS MULTIPLEXER DSU WITH
DOWN-LOADABLE CODE AND 1 HSSI PORT
- -3- ANIXTER CABINET 70 X 19 X 24 FRAME FOR IBM BLUE W/ FRONT TRIM
& 4 SHELF RAILS
- -6- KRISTA MICRO SEAGATE CHEETAH ST19101W 9GB 10K RPM UW SCSI
- -15- KRISTA M1CRO SEAGATE ST34501W CHEETAH 4.5GB SCSIW 1OKRPM
- -1- KRISTA MICRO 16X72 128MB SDRAM DIMM PC-100 ECC
- -1- KRISTA MICRO MAXTOR DM91152D8 11.5GB 9M5 256K ULTRA IDE
- -3- KRISTA MICRO OPTIQUEST 17" V73 1280X1024 SVGA NI MONITOR
- -4- KRISTA MICRO 16 BIT ISA COMBO COAX/1OBASET ETHERNET CARD
- -2- KRISTA MICRO 32 BIT PCI COMBO COAX/ 10 BASET ETHERNET CARD
- -4- KRISTA MICRO TEAC CD532E 32X 85M5 128K IDE CD-ROM DRIVE
- -4- KRISTA MICRO TEAC 3.5" 1.44M FLOPPY DRIVE OFF-WHITE COLOR
- -15- KRISTA MICRO 7FT UTP 4PR UL PVC CAT5 STRANDED BLUE W/ BOOTS
- -6- KRISTA MICRO 8 0HM 7 WATTS X 2 AMPLIFIED COMPUTER SPEAKER
- -1- KRISTA MICRO MS INTELLI PS/2 1=1BOX (10 PACK)
- -100- KRISTA MICRO REMOVABLE RACK FOR SCSI-3 68PIN HARD DRIVES
- -5- KRISTA MICRO ETHERNET 5 PORT WORKGROUP LINKSYS HUB
- -6- KRISTA MICRO 17" VIEWSONIC G773 1280X 1024.26 MONITOR
- -6- KRISTA MICRO 4 X 64 32MB S-DRAM DIMM (168 PINS) W/EPROM
- -4- KRISTA MICRO 21" NEC MULTISYNC P1250+ 12800X1440 MONITOR
- -2- SOLUNET CISCO CATALYST 5000 10/100 BASE TX FAST ETHERNET SWITCHING
- -1- RIGHT NOW WEB LICENSE
- -1- BMC SOFTWARE SQL-BACKTRACK FOR ORACLE PERPETUAL LICENSE
- -1- INTERACTIVE OPT QUAD FASTETHERNET W/ SW
- -3- INTERACTIVE OPT SBUS SFE FWSCSI ADAPTER
- -5- INTERACTIVE OPT SVUS FASTETHERNET 2.0/ SW
- -4- DNA 1 PORT FAST ETHERNET 100BASE MODULE
- -1- DNA CISCO 7505 7-SLOT, 2 CYBUS 1RSP4, SINGLE POWER SUPPLY
- -2- DNA CISCO 7507 DUAL AC POWER SUPPLY OPTION
- -1- DNA 11.2.13 RSP1/RSP2/RSP4 IOS IP ON FEATURE SET
- -2- DNA HSSI INTERFACE PROCESSOR
- -2- DNA 20 VERSATILE INTERFACE PROCESSOR MODEL 40
- -1- DNA 1-PORT ATM ENHANCED DS3 PORT ADAPTER
- -2- DNA 24 PORT 10/100 SWITCHING MODULE
- -2- DNA 24 PORT 10/100 SWITCHING MODULE
- -2- DNA REDUNDENT POWER SUPPLY
- -2- DNA WS-C55OO CHAS, SUP III W/2 PORT MMF FEC UL, AC P/S
- -1- DNA VERSATILE INTERFACE PROCESSOR MODEL 15
- -1- DATA COMM POWER MAC G3/266MHZ 32MB/6.0GB HD/24XCD/ S/N: SXB8242LQCY5
INITIAL /s/ [ILLEGIBLE]
---------------
Page 1 of 2
<PAGE>
QTY DESCRIPTION
- -1- COMPUTER STORAGE ARRAY S/N: 535FOCDF
- -6- COMPUTER 4.2-GBYTE LOW PROFILE S/N: 68057, 03523, 69877, 03160, 70249,
27562
- -1- COMPUTER SPARC 20 BASE UNIT S/N:425F5812
- -2- COMPUTER ROSS DUAL 125 W/IMB CAC
- -8- COMPUTER 3RD PARTY 64MB SIMM
- -2- COMPUTER 2.1-GBYTE LOW PROFILE
- -2- COMPUTER 12 BAY SUN ENCLOSURE
- -10- COMPUTER SPARC 20 DRIVE BRACKET
- -1- COMPUTER SPARC 20 BASE UNIT
INCLUDING, BUT NOT LIMITED TO, REPLACEMENT PARTS, SUBSTITUTIONS, ADDITIONS,
ACCESSORIES, AND PROCEEDS THEREOF.
This Schedule 'A' is attached to and made a part of R.C.C. FINANCE GROUP LTD.
lease #981052 and constitutes a true and accurate description of the equipment.
R.C.C. FINANCE GROUP LTD. INAME, INC.
(Lessor) (Lessee)
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- -------------------------------- ----------------------------------------
Page 2 of 2
<PAGE>
BILL OF SALE # B981052
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, That INAME INC., hereinafter called the seller,
in consideration of the sum of THREE HUNDRED SIXTEEN THOUSAND FIVE HUNDRED AND
00/100 -- Dollars ($316,500.00) to the seller paid, the receipt whereby hereof
is acknowledged, hereby does grant, bargain, sell, transfer and deliver unto
R.C.C. FINANCE GROUP LTD., hereinafter called the buyer, the following described
personal property now located at 11 BROADWAY, SUITE 660 NEW YORK, NY 10004 in
New York County, State of New York
THE ITEMS DESCRIBED ON EQUIPMENT SCHEDULE 'C', WHICH IS ANNEXED HERETO AND MADE
A PART HEREOF.
TO HAVE AND TO HOLD the same unto the said buyer and buyer's heirs, executors,
administrators, successors and assigns forever.
And the seller hereby covenants and agrees to and with the said buyer and to and
with the buyers successors in interest and assigns that seller is the owner of
the above described personal property; that the same is free from all
encumbrances; and that seller has a good right to sell the same; and that seller
will and seller's heirs, executors, administrators and successors shall warrant
and forever defend this sale against the lawful claims and demands of all
persons whomever.
In construing this bill of sale and where the context so requires, the singular
includes the plural and all grammatical changes shall be made so that this
instrument shall apply equally to individuals and to corporations.
IN WITNESS WHEREOF, the seller has hereunto executed this document; if the
undersigned seller is a corporation, it has caused its name to be signed and its
seal affixed by an officer or other person duly authorized to do so by order of
its board of directors.
Dated DEC 30, 1998. INAME, INC.
------
by: /s/ D[ILLEGIBLE] McClister
----------------------------------
(Corporate Seal)
STATE OF NEW JERSEY
---------------
COUNTY OF BERGEN
----------
I, D. McClister, being first duly sworn depose and say: that I am EXEC VP & CFO
of INAME, INC., the seller of the property described in the foregoing bill of
sale; that seller is the sole owner of said property; that the same has been
paid for in full and that as of this date said personal property and each and
every part thereof is free and clear of all liens, encumbrances and security
interests of any kind or nature
INAME, INC.
by: /s/ D[ILLGEGIBLE] McClister
----------------------------------
Subscribed and sworn to before December 30, 1998
------------ --
X /s/ [ILLEGIBLE]
------------------------------------
Notary Public for
-------------------------
My commission expires
---------------------
[ILLEGIBLE]
Notary Public State of New Jersey
No. 2109965
Certified in Bergen County
Commission Expires March 20, 2003
<PAGE>
EQUIPMENT SCHEDULE "C"
Schedule referred to in and made a part of agreement by and between R.C.C.
FINANCE GROUP LTD. as buyer and INAME, INC. as seller.
EQUIPMENT LOCATION: 11 BROADWAY, SUITE 660
NEW YORK, NY 10004
QTY DESCRIPTION
- -1- PC CONNECTION ACERPOWER T9652WC II266/32MB/4.3/32X
- -1- PC CONNECTION EDO KIT 32MB (2-16MB EDO SIMMS)
- -1- PC CONNECTION ACER AW35 PRO WAVETABLE ENHANCED SOUND BOARD
- -5- PC CONNECTION 17-INCH OPTIQUEST V773 MONITOR
- -14- INTERACTIVE FC-AL 9.1GB 7200RPM 1.6IN DISK
- -1- INTERACTIVE NETWORK APPLIANCE F630 FILER
- -1- INTERACTIVE NFS SOFTWARE FOR F630 SW-F630-NFS
- -1- INTERACTIVE 512MB ECC SYS MEM FOR F630 X322-C
- -1- INTERACTIVE NVRAM-2 WITH 32MB X3253-C
- -2- INTERACTIVE DUAL STORAGE SHELF 2 X617
- -26- INTERACTIVE 9.0GB UW SCSI DISK DRIVE X219C
- -8- INTERACTIVE 11OV 180W POWER SUPPLY X603
- -1- INTERACTIVE DUAL CHANNEL DIFFERENTIAL SCSI ADAPTER X2019A
- -2- INTERACTIVE QUAD 10/100 BASET ADAPTER X1012B
- -1- INTERACTIVE REDUNDANT POWER SUPPLY X7006
- -1- INTERACTIVE POWER CORD KIT X800E
- -1- INTERACTIVE DIGITAL LINK T3 ACCESS MULTIPLEXER DSU WITH
DOWN-LOADABLE CODE AND 1 HSSI PORT
- -3- ANIXTER CABINET 70 X 19 X 24 FRAME FOR IBM BLUE W/ FRONT TRIM
& 4 SHELF RAILS
- -6- KRISTA MICRO SEAGATE CHEETAH ST19101W 9GB 10K RPM UW SCSI
- -15- KRISTA M1CRO SEAGATE ST34501W CHEETAH 4.5GB SCSIW 1OKRPM
- -1- KRISTA MICRO 16X72 128MB SDRAM DIMM PC-100 ECC
- -1- KRISTA MICRO MAXTOR DM91152D8 11.5GB 9MS 256K ULTRA IDE
- -3- KRISTA MICRO OPTIQUEST 17" V73 1280X1024 SVGA NI MONITOR
- -4- KRISTA MICRO 16 BIT ISA COMBO COAX/1OBASET ETHERNET CARD
- -2- KRISTA MICRO 32 BIT PCI COMBO COAX/ 10 BASET ETHERNET CARD
- -4- KRISTA MICRO TEAC CD532E 32X 85MS 128K IDE CD-ROM DRIVE
- -4- KRISTA MICRO TEAC 3.5" 1.44M FLOPPY DRIVE OFF-WHITE COLOR
- -15- KRISTA MICRO 7FT UTP 4PR UL PVC CAT5 STRANDED BLUE W/ BOOTS
- -6- KRISTA MICRO 8 0HM 7 WATTS X 2 AMPLIFIED COMPUTER SPEAKER
- -1- KRISTA MICRO MS INTELLI PS/2 1=1BOX (10 PACK)
- -100- KRISTA MICRO REMOVABLE RACK FOR SCSI-3 68PIN HARD DRIVES
- -5- KRISTA MICRO ETHERNET 5 PORT WORKGROUP LINKSYS HUB
- -6- KRISTA MICRO 17" VIEWSONIC G773 1280X 1024.26 MONITOR
- -6- KRISTA MICRO 4 X 64 32MB S-DRAM DIMM (168 PINS) W/EPROM
- -4- KRISTA MICRO 21" NEC MULTISYNC P1250+ 12800X1440 MONITOR
- -2- SOLUNET CISCO CATALYST 5000 10/100 BASE TX FAST ETHERNET SWITCHING
- -1- RIGHT NOW WEB LICENSE
- -1- BMC SOFTWARE SQL-BACKTRACK FOR ORACLE PERPETUAL LICENSE
- -1- INTERACTIVE OPT QUAD FASTETHERNET W/ SW
- -3- INTERACTIVE OPT SBUS SFE FWSCSI ADAPTER
- -5- INTERACTIVE OPT SVUS FASTETHERNET 2.0/ SW
- -4- DNA 1 PORT FAST ETHERNET 100BASE MODULE
- -1- DNA CISCO 7505 7-SLOT, 2 CYBUS 1RSP4, SINGLE POWER SUPPLY
- -2- DNA CISCO 7507 DUAL AC POWER SUPPLY OPTION
- -1- DNA 11.2.13 RSP1/RSP2/RSP4 IOS IP ON FEATURE SET
- -2- DNA HSSI INTERFACE PROCESSOR
- -2- DNA 20 VERSATILE INTERFACE PROCESSOR MODEL 40
- -1- DNA 1-PORT ATM ENHANCED DS3 PORT ADAPTER
- -2- DNA 24 PORT 10/100 SWITCHING MODULE
- -2- DNA 24 PORT 10/100 SWITCHING MODULE
- -2- DNA REDUNDENT POWER SUPPLY
- -2- DNA WS-C55OO CHAS, SUP III W/2 PORT MMF FEC UL, AC P/S
- -1- DNA VERSATILE INTERFACE PROCESSOR MODEL 15
- -1- DATA COMM POWER MAC G3/266MHZ 32MB/6.0GB HD/24XCD/ S/N: SXB8242LQCY5
INITIAL /s/ [ILLEGIBLE]
---------------
Page 1 of 2
<PAGE>
QTY DESCRIPTION
- -1- COMPUTER STORAGE ARRAY S/N: 535FOCDF
- -6- COMPUTER 4.2-GBYTE LOW PROFILE S/N: 68057, 03523, 69877, 03160, 70249,
27562
- -1- COMPUTER SPARC 20 BASE UNIT S/N:425F5812
- -2- COMPUTER ROSS DUAL 125 W/IMB CAC
- -8- COMPUTER 3RD PARTY 64MB SIMM
- -2- COMPUTER 2.1-GBYTE LOW PROFILE
- -2- COMPUTER 12 BAY SUN ENCLOSURE
- -10- COMPUTER SPARC 20 DRIVE BRACKET
- -1- COMPUTER SPARC 20 BASE UNIT
INCLUDING, BUT NOT LIMITED TO, REPLACEMENT PARTS, SUBSTITUTIONS, ADDITIONS,
ACCESSORIES, AND PROCEEDS THEREOF.
This Schedule 'C' is attached to and made a part of Bill of Sale #B981052 by and
between R.C.C. FINANCE GROUP LTD. as Buyer and INAME, INC. as Seller and
constitutes a true and accurate description of the equipment.
R.C.C. FINANCE GROUP LTD. INAME, INC.
(Buyer) (Seller)
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- --------------------------------- ----------------------------------------
<PAGE>
OPTION TO PURCHASE
ADDENDUM ANNEXED TO AND MADE PART OF LEASE AGREEMENT #981052, BY AND BETWEEN
R.C.C. FINANCE GROUP LTD. ("LESSOR") AND INAME, INC. ("LESSEE")
Provided that Lessee shall have made all payments due under the above referenced
Lease and provided, further, that there is no default in compliance with any of
the terms or conditions thereof, Lessee shall have the option to purchase the
Equipment covered by and described in said Lease, in whole and not in part, in
its then condition and at its then location, on an "as-is, where is" basis, as
of the expiration date of said Lease.
This option is only exercisable by delivery of written notice to Lessor at least
thirty (30) days prior to the expiration date of said Lease, together with
delivery of payment of the full net cash price of said Equipment, plus
applicable taxes.
The net cash purchase price will be $1.00.
This Option to Purchase must be exercised no later than five (5) days prior to
the original expiration of the Lease Term. The original expiration of the Lease
Term shall be -60- months subsequent to the date Lessee executes an
"Acknowledgment and Acceptance of Delivery" for the Leased Equipment.
Time is of the essence of this option.
Any notice required by this Addendum shall be by U.S. Mail, Registered, Return
Receipt Requested.
LESSEE: INAME, INC.
BY: /s/ [ILLEGIBLE], EVP & CFO
---------------------------
(Name and Title)
DATE: Dec 30, 98
---------------------------
LESSOR: R.C.C. FINANCE GROUP LTD.
BY:
---------------------------
DATE: 12/30/98
---------------------------
<PAGE>
ADDENDUM TO LEASE #981051 DATED 12/30/98 BY AND BETWEEN R.C.C. FINANCE GROUP
LTD. AS LESSOR AND INAME, INC. AS LESSEE
- --------------------------------------------------------------------------------
THE PARTIES HERETO HAVE ENTERED INTO THE ABOVE REFERENCED LEASE AGREEMENT. IN
RECOGN1TION OF THE INACCURACY OF THE TERMS OF SAID AGREEMENT, THE PARTIES HEREBY
WISH TO AMEND SAID LEASE AGREEMENT AS SET FORTH BELOW:
IN PARAGRAPH # 2, THE AMOUNT OF RENTAL PAYMENT IN U.S. CURRENCY IS CHANGED
FROM: $15,226.00 (PLUS ALL APPLICABLE TAXES)
TO: $ 7,613.00 (PLUS ALL APPLICABLE TAXES)
BY SIGNING THIS ADDENDUM, LESSEE ACKNOWLEDGES THE ABOVE CHANGES TO THE LEASE
AGREEMENT AND AUTHORIZES LESSOR TO MAKE SUCH CHANGES.
ALL OTHER TERMS & CONDITIONS OF SUBJECT LEASE REMAIN THE SAME
AGREED AND ACCEPTED
INAME, INC. ("LESSEE")
[ILLEGIBLE]
- -------------------------------------
R.C.C. FINANCE GROUP LTD. ("LESSOR")
[ILLEGIBLE]
- -------------------------------------
<PAGE>
R.C.C. FINANCE GROUP LTD.
1086 TEANECK ROAD SUITE 5C LEASE NO. 981051
TEANECK, NEW JERSEY 07632 ----------
201-833-4480
(Hereinafter called "Lessor")
LEASE AGREEMENT
1.
INAME, INC. SALE AND LEASE BACK
11 BROADWAY, SUITE 660
NEW YORK, NY 10004-1303
(Hereinafter Called "Lessee") (Hereinafter Called
"Supplier")
Contact: GARY MILLIN Contact:
Telephone: 212-425-3477 Telephone:
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION OF LEASED EQUIPMENT (Hereinafter Called "equipment")
- --------------------------------------------------------------------------------
THE ITEMS DESCRIBED ON EQUIPMENT SCHEDULE "A", WHICH IS ANNEXED
HERETO AND MADE A PART HEREOF.
- --------------------------------------------------------------------------------
2. TERMS OF RENTAL PAYMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Term of No. of Rentals Amount of Rental ADDITIONAL PROVISIONS:
Lease Rental Payable Payment In U.S. Currency
Paymts.
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
60 60 Monthly $15,266.00 EQUIPMENT LOCATION:
Months Plus all applicable taxes 11 BROADWAY, SUITE 660 NEW YORK, NY 10004
- -------------------------------------------------------------------------------------------------------------
</TABLE>
3. ADVANCE RENTALS: Lessee shall pay the first month's and last one months'
rental in advance upon the execution of this Lease.
4. LEASING: Lessee hereby leases from Lessor, and Lessor hereby leases to
Lessee, in accordance with the terms, provisions, covenants and conditions of
this lease, the equipment described above and/or in Schedule "A", which is
annexed hereto and made a part hereof.
5. TERM AND RENT. The obligations under this lease shall begin upon the date the
Lessor orders the equipment to be leased hereunder and shall end upon the full
performance and/or observance of each and every term, provision, covenant and
condition set forth in this lease. The term of this lease, shall begin on the
day the first rental payment is due and shall terminate on the last day of the
final rental payment period. Rental payments paid in advance upon execution of
this lease shall be deemed to have been earned by Lessor immediately upon
Lessor's receipt thereof and shall be applied immediately to satisfy Lessee's
obligations to make such payments hereunder. These payments shall not be
refundable to Lessee under any circumstances, including (without limitation) any
termination of this Lease for any reason prior to the end of its scheduled term
in accordance with the terms hereof. The first rental payment shall be due and
payable on the first day of the month succeeding delivery of all the equipment
and thereafter each payment of the rent shall be consecutively paid on the first
day of each payment period. In the event of the delivery of only a part of the
equipment, a pro rata portion of the rent shall be paid, until delivery of all
of the equipment. All rents shall be paid to Lessor at its address set forth
above, or as otherwise directed by Lessor in writing.
6. TIME. Time is hereby made of the essence of this lease and of each and of all
its terms, provisions, covenants and conditions.
THIS INSTRUMENT CONSTITUTES THE ENTIRE CONTRACT BETWEEN THE PARTIES HERETO, AND
NO REPRESENTATIONS, ORAL OR WRITTEN, SHALL CONSTITUTE AN AMENDMENT, MODIFICATION
OR TERMINATION HEREOF UNLESS SIGNED IN WRITING BY AN OFFICER OF THE LESSOR. THIS
LEASE AGREEMENT, WHICH CONSISTS OF THREE PAGES, IS NON-CANCELABLE AND
IRREVOCABLE AND IS SUBJECT TO THE TERMS, PROVISIONS, COVENANTS AND CONDITIONS
PRINTED ABOVE AND ON PAGE 2 AND PAGE 3 WHICH ARE MADE PART HEREOF AND WHICH
LESSEE, BY HIS EXECUTION BELOW AND INITIALING OF PAGE 2 AND PAGE 3, ACKNOWLEDGES
THAT LESSEE HAS READ AND AGREES TO.
IN WITNESS WHEREOF, THE LESSEE HAS HEREBY EXECUTED THIS LEASE THIS 30 DAY OF
DEC, 1998.
ACCEPTED DECEMBER 30, 1998 INAME, INC.
R.C.C. FINANCE GROUP LTD. BY: /s/ [ILLEGIBLE]
----------------------------------
By /s/ [ILLEGIBLE] (Authorized Signature and Title)
---------------------------
Attest: /s/ [ILLEGIBLE]
------------------------------
Secretary of Corporation or Witness
(if not Corporation)
PAGE 1 OF 3 PAGE LEASE AGREEMENT (CONTINUED ON FOLLOWING PAGES)
<PAGE>
7. SELECTION OF EQUIPMENT; ACCEPTANCE; WARRANTIES; REPRESENTATIONS. Lessee
acknowledges that Lessee has selected both the equipment and the Supplier from
whom Lessor covenants to purchase the equipment at Lessee's request. Lessee
further acknowledges that Lessor has no expertise or special familiarity about
or with respect to the equipment and that Lessor did not participate in any way
in Lessee's selection of the equipment or of the Supplier. Lessee agrees to
accept the equipment if delivered in good repair, and to execute the delivery
receipt supplied by Lessor, as evidence thereof. Lessee agrees to hold Lessor
harmless from specific performance of this lease and from damages, if, for any
reason, the Supplier fails to deliver the equipment so ordered. Lessee agrees
that any delay in delivery of the equipment shall not affect the validity of
this lease. LESSEE AGREES THAT THE EQUIPMENT LEASED HEREUNDER IS LEASED "AS IS"
AND IS OF A SIZE, DESIGN AND CAPACITY SELECTED BY LESSEE AND THAT LESSEE IS
SATISFIED THAT THE SAME IS SUITABLE FOR LESSEE'S PURPOSE, AND THAT LESSOR HAS
MADE NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE SUITABILITY OR DURABILITY
OF SAID EQUIPMENT FOR THE PURPOSES AND USES OF LESSEE, OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT THERETO, INCLUDING
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Lessor hereby assigns, without recourse, to Lessee for and during the term of
this lease any applicable factory warranty covering the equipment leased
hereunder.
LESSEE ACKNOWLEDGES AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALESMAN,
EMPLOYEE, REPRESENTATIVE OR AGENT OF THE SUPPLIER IS AN AGENT OR REPRESENTATIVE
OF LESSOR, AND THAT NONE OF THE ABOVE ARE AUTHORIZED TO WAIVE OR ALTER ANY TERM,
PROVISION, COVENANT OR CONDITION OF THIS LEASE, OR MAKE ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO THIS LEASE OR THE EQUIPMENT LEASED HEREUNDER. Lessee
further acknowledges and agrees that Lessee, in executing this lease, has relied
solely upon the terms, provisions, covenants and conditions contained herein,
and any other statements, warranties or representations, if any, by the
supplier, or any salesman, employee, representative or agent of the supplier,
have not been relied upon, and shall not in any way affect Lessee's obligation
to pay the rent and otherwise perform as set forth in this lease.
THIS LEASE CONSTITUTES A NET LEASE AND LESSEE AGREES THAT ITS OBLIGATIONS
TO PAY ALL RENT AND OTHER SUMS PAYABLE HEREUNDER AND THE RIGHTS OF LESSOR AND
ITS ASSIGNEE IN AND TO SUCH RENT AND OTHER SUMS, ARE ABSOLUTE AND UNCONDITIONAL
AND ARE NOT SUBJECT TO ANY ABATEMENT, REDUCTION, SET OFF, DEFENSE, COUNTERCLAIM
OR RECOUPMENT DUE OR ALLEDGED TO BE DUE TO, OR BY REASON OF, ANY PAST, PRESENT
OR FUTURE CLAIMS WHICH LESSEE MAY HAVE AGAINST LESSOR, ANY ASSIGNEE, THE
MANUFACTURER OR SELLER OF THE EQUIPMENT, OR AGAINST ANY PERSON WHATSOEVER.
Lessee represents and warrants that: (a) The execution, delivery and
performance of the Lease Documents and compliance with the terms thereof do not
and will not contravene any law, governmental rule, regulation or order now
binding on Lessee, or the charter or by-laws of Lessee, or contravene the
provisions of, or constitute a default under, or result in the creation of any
lien or encumbrance upon the property of Lessee under, any indenture, mortgage,
contract or other agreement to which Lessee is a party or by which it or its
property is bound. (b) Each of the Lease Documents, when entered into, will
constitute legal, valid and binding obligations of Lessee enforceable against
Lessee, in accordance with the terms thereof, except as the enforceability
thereof may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws effecting the enforcement of creditors rights
generally. (c) There are no pending actions or proceedings to which Lessee is a
party, and there are no other pending or threatened actions or proceedings of
which Lessee has knowledge, before any court, arbitrator or administrative
agency which would adversely affect the financial condition of Lessee or its
ability to perform its obligations under the Lease Documents. Lessee has no
knowledge of any default under any obligation for borrowed money which would
have the same effect.
8. ERRORS IN ESTIMATED COST: As used in this paragraph "actual cost" means the
cost to Lessor of purchasing and delivering the equipment to Lessee, including
taxes, transportation charges, and all other expenses and charges. The amount of
each rental payment initially set forth above is based on the total cost of the
equipment as ordered by Lessor in its purchase order which is an estimate and
each shall be adjusted proportionately if the actual cost of the equipment
differs from said estimate. Lessee hereby authorizes Lessor to correct the
amount of each rental payment when the actual cost is known.
9. LOCATION, INSTALLATION AND USE OF EQUIPMENT. The equipment shall be delivered
to Lessee and installed by Lessee at Lessee's own expense, and thereafter kept
at the location specified above. Lessee shall not remove the equipment from the
aforementioned location without Lessor's prior written consent. Lessee shall use
the equipment in a careful and proper manner and shall comply with all laws,
regulations and ordinances relating to its possession, use and maintenance.
Lessee shall affix the labels supplied by Lessor, upon a visible place on each
item of equipment, and maintain the same on each. Lessor shall have the right
from time to time during reasonable business hours to enter upon the Lessee's
premises for the purpose of inspecting the equipment.
10. MAINTENANCE: Lessee shall, at Lessee's own expense, maintain the equipment
in good operating condition, repair and appearance, and protect same from
deterioration other than normal wear and tear. LESSEE SPECIFICALLY WAIVES ANY
OBLIGATION IMPOSED UPON LESSOR TO MAINTAIN AND/OR REPAIR THE EQUIPMENT.
Lessee shall only use the equipment in the regular course of Lessee's business
and within normal capacity. Lessee shall not make any modifications alterations
or additions to the equipment without the prior written consent of Lessor, and
then, all such modifications, alterations and additions shall belong to Lessor.
The equipment shall remain personal property at all times and Lessee shall not
so affix the equipment to realty so as to change its nature to real property
11. OWNERSHIP. The equipment is, and shall at all times be and remain, personal
property, and title thereto shall remain in Lessor exclusively, notwithstanding
that the equipment or any part thereof may now be, or hereafter become, in any
manner affixed or attached to, or embedded in, or permanently resting upon, real
property, or any building thereon, or attached in any manner to that which is
permanent, by any means whatsoever. Upon the expiration or termination of this
lease, Lessee shall, at Lessee's own expense, promptly return the equipment by
delivering it, packed and ready for shipment, to such place or carrier as Lessor
may specify in the same condition as received, reasonable wear and tear
expected. IT IS THE INTENT OF LESSEE AND OF LESSOR THAT THIS LEASE BE A TRUE
LEASE.
12. LOSS OR DAMAGE. Lessee shall bear the entire risk of loss, theft,
destruction, damage or disrepair of the equipment or any part thereof for any
cause whatsoever. No such loss, damage, theft, destruction or disrepair of the
equipment shall relieve Lessee of the obligation to pay rent or from any other
obligation under this lease. In the event of any of the above, Lessee, at
Lessee's own expense and at Lessor's option, shall either (a) repair the
equipment, returning same to its previous condition, unless unrepairable; or (b)
replace same with like equipment of equivalent value, in good condition and
acceptable to Lessor, which shall become the property of the Lessor; or (c)
immediately pay Lessor all rent due and to become due under this lease or such
amounts as may be allocated by Lessor to specific items of equipment. All
proceeds of insurance received by Lessor as a result of such loss or damage
shall, where applicable, be applied toward the replacement or repair of the
equipment or the payment of the obligations of Lessee hereunder.
13. INSURANCE. Lessee shall keep the equipment insured against all risks of
loss, theft, or damage from every cause whatsoever for its full insurable value,
with Lessor as loss payee, and, Lessee shall carry public liability insurance
insuring both Lessor and Lessee against damages and claims for personal injury,
death and property damage. All such insurance shall be in form, amount and with
companies satisfactory to Lessor. Each Policy of Insurance shall provide for 30
days prior written notice of cancellation or modification to Lessor. Lessee
shall pay all premiums for such insurance and shall deliver to Lessor the
policies of insurance or duplicates thereof, and such other evidence of coverage
satisfactory to Lessor. Lessee hereby irrevocably appoints Lessor as Lessee's
attorney in fact to make claim for, receive payment of, and execute and endorse
all documents, checks or drafts received in payment for loss or damage under any
such insurance policy. Lessee agrees if Lessee shall fail to procure, maintain
and pay for such insurance, Lessor shall have the right, but not the obligation,
to obtain such insurance on behalf of and at the expense of Lessee. In the event
Lessor does obtain such insurance, Lessee agrees to pay all costs thereof, with
the next rental payment.
14. INDEMNITY. Lessee shall, and does hereby, indemnify and save Lessor harmless
from any and all losses and/or liability, including, but not limited to STRICT
LIABILITY IN TORT, for funds advanced to Supplier, and for taxes, costs and
expenses, including reasonable attorneys' fees, arising out of the purchase,
ownership, location, installation, possession, leasing, renting, operation,
control, use, maintenance, repair, delivery and/or return of the equipment.
Lessee shall be credited with any proceeds received by Lessor from insurance
policies paid for or obtained by Lessee. The obligations of Lessee under this
paragraph shall continue indefinitely.
---------------
INITIALS
/s/ [ILLEGIBLE]
---------------
PAGE 2 OF 3 PAGE LEASE AGREEMENT (CONTINUED ON FOLLOWING PAGE)
<PAGE>
15. TAXES, FEES AND LIENS. Lessee shall pay all, or reimburse Lessor when
invoiced by Lessor for, charges, registration, permit and license fees,
assessments, taxes, interest and penalties (local, state and federal) which may
now or hereafter be imposed upon the ownership, leasing, rental, maintenance,
purchase, possession or use of the equipment, or upon this lease, or the rental
payments or any other sums due or to become due hereunder. Lessee shall not
rent, sublet, pledge, loan, mortgage, or attempt in any manner to dispose of the
equipment or to suffer any liens or legal process to be placed, incurred or
levied upon the same. Lessee shall immediately notify Lessor of the occurrence
of any of the above; shall pay all sums for taxes, fees, charges, assessments,
penalties and interest; and shall keep the equipment free of levies, liens and
encumbrances. In the event Lessee does not pay all sums specified above, Lessor
has the right, but not the obligation, to pay the same. If the Lessor shall so
pay any of the aforementioned, then the Lessee shall remit such amount with the
next installment of rent.
16. DEFAULT. If Lessee shall default in the payment of any rent or in the making
of any other payment hereunder when due, or in the payment when due of any
indebtedness of Lessee to Lessor arising independently of this lease, or in the
event of any default, breach or failure to perform or observe any terms,
provisions, covenants or conditions contained in this lease or in any other
lease or agreement between Lessor and Lessee, or if any proceeding in
bankruptcy, reorganization, receivership or insolvency shall be commenced by or
against Lessee or Lessee's property or assets, or if Lessee makes an
arrangement, extension or any assignment for the benefit of one or more of
Lessee's creditors, or if Lessee seeks relief under any other law providing for
the relief of debtors, or Lessee, if an individual, dies or is judicially
declared incompetent, or any of the above described events occur with respect to
any guarantor or any other party liable for payment or performance of this
lease, then, and in any of such events, if and to the extent permitted by
applicable law, Lessor shall have the right to exercise any one or more of the
remedies set forth below.
17. REMEDIES. Upon the happening of any one or more events of default set forth
above, Lessor shall have the right without notice or demand, to declare the
entire balance of rent due and to become due hereunder, together with such other
sums as may be due and payable hereunder, to be immediately due and payable,
whereupon the same shall become immediately due and payable; and/or commence an
action against Lessee for the total rental payments due and to become due under
this lease and for all other sums due or to become due hereunder; and/or without
demand or legal process to enter into the premises where the equipment may be
found and take possession of and remove same, whereupon all right of Lessee in
the equipment shall terminate absolutely; and/or retain all prior payments of
rent and of all other sums and the equipment; and/or retain all prior payments
of rent and of all other sums and sell the equipment at public or private sale
with or without notice to Lessee, at which sale Lessor may be purchaser, and the
proceeds of such sale less all expenses incurred by Lessor in connection
therewith, including, but not limited to retaking, storing, repairing,
reselling, delivering, commissions and reasonable attorney's fees will be
applied to the total rent due and to become due for the balance of the term of
this lease, and all other sums due or to become due hereunder, with Lessee
remaining liable for the balance thereof; and/or retain all prior payments of
rent and of all other sums and lease the equipment to another with or without
notice to Lessee and the proceeds of such leasing less all expenses incurred by
Lessor in connection therewith, including, but not limited to retaking,
repairing, delivering, commissions and reasonable attorneys' fees, will be
applied to the total rent due and to become due for the balance of the term of
this lease, and all other sums due or to become due hereunder, with Lessee
remaining liable for the balance thereof; and/or any other remedy in law and/or
equity available to Lessor. Lessee shall be liable for all expenses and costs
Lessor incurs or may incur in connection with the enforcement of any of its
remedies herein, including all collection fees and reasonable attorneys' fees.
If Lessee shall fail to pay when due and any rental payment portion thereof or
any other sums due or to become due hereunder, Lessee shall pay Lessor a late
charge of ten percent (10%) per month of such rent or other sum, but not higher
than the maximum amount of interest allowed by law. All the remedies of Lessor
hereunder are cumulative and may, to the extent permitted by law, be exercised
concurrently or separately, and the exercise of any one remedy shall not be
deemed to be an election of such remedy or to preclude the exercise of any other
remedy. No failure on the part of the Lessor to exercise, and no delay in
exercising any right or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by Lessor of any right or remedy hereunder
preclude any other or further exercise of any partially exercised right or
remedy or any other right or remedy.
18. WAIVER OF NOTICE AND HEARING. LESSEE HEREIN WAIVES ANY AND ALL RIGHTS TO
NOTICE AND TO A HEARING WITH RESPECT TO THE RIGHT OF AND THE REPOSSESSION OF THE
EQUIPMENT BY LESSOR IN THE EVENT OF A DEFAULT HEREUNDER BY LESSEE. LESSEE AGREES
LESSOR MAY REPOSSESS SAID EQUIPMENT WITHOUT NOTICE AND WITHOUT A HEARING AND
WITHOUT OTHER LEGAL PROCESSES, AND LESSEE SPECIFICALLY WAIVES ANY RIGHT TO
NOTICE AND TO A HEARING AND TO OTHER LEGAL PROCESSES.
19. ASSIGNMENT. Without Lessor's prior written consent, Lessee shall not assign,
transfer, sublet, pledge, hypothecate or otherwise dispose of this lease or any
interest herein. Lessor may assign this lease in whole or in part, without
notice to Lessee, and such assignee shall have all of the rights but none of the
obligations of Lessor under this lease. Lessee shall recognize each such
assignment and covenants not to assert against the assignee any defense,
counterclaim or setoff that Lessee has or may hereafter have against Lessor, and
agrees to pay such rent and other payments due and to become due hereunder to
assignee.
20. LAWS GOVERNING. LESSOR and LESSEE agree that this lease shall be deemed to
have been made in the State of California regardless of the order in which the
signatures of the parties shall be affixed hereto. Lessor and Lessee further
agree that this lease shall be interpreted, and the rights and liabilities of
the parties hereto determined in accordance with the laws of the State of
California except for local recording acts. For the purpose of resolving any
issue pertaining to conflict of laws, this lease shall be deemed to have been
executed in the State of California and all of the terms, provisions, covenants
and conditions contained in this lease is each to be deemed to be and be fully
performed and/or observed in the State of California. Lessee hereby agrees that
all actions or proceeding arising, directly or indirectly, from this lease shall
be litigated, at the option of Lessor, in courts having situs within the State
of California and Lessee hereby consents to the jurisdiction of any local, state
or federal court selected by Lessor that is located within the State of
California and agrees not to disturb such choice of Forum by Lessor.
21. ARBITRATION. At Lessor's sole election, Lessor may submit any matter arising
out of or relating to this transaction, including any claim, counterclaim,
setoff, or defense, to binding arbitration by the American Arbitration
Association in Marin County, California or any other site of our choice. The
decision and award of the arbitrator(s) shall be final and binding and may be
entered as rendered in any court having jurisdiction thereof.
22. UCC F1LINGS. Lessee agrees to execute UCC Financing Statements and all
amendments thereto and authorizes Lessor to file the same. Lessee authorizes
Lessor or its agents or assigns to execute and file UCC Financing Statements and
all amendments thereto without the Lessee's signature being affixed thereon.
Lessee grants to Lessor a specific power of attorney for Lessor to execute and
file on Lessee's behalf any document, including, but not limited to, UCC
financing statements and all amendments thereto. that Lessor deems necessary to
perfect or protect Lessor's interest in the equipment or pursuant to the Uniform
Commercial Code. Lessee agrees to pay Lessor the costs of filing such UCC
Financing Statements and all amendments thereto Lessee and Lessor intend this
transaction to be a True Lease, but if any court or tribunal, having power to
bind the Lessee or Lessor, should conclude that all or part of this transaction
is not a True Lease but is in the nature of a sale, consignment, or other
transaction, the Lessee and Lessor intend and the Lessee hereby grants a
continuing security interest in the equipment and proceeds from the sale, rent,
or other disposition of the equipment from the date of this agreement to secure
the payment of all Lessee's indebtedness to Lessor. No rights or remedies
referred to in Article 2A of the Uniform Commercial code will be conferred on
Lessee unless expressly granted in this Lease or a Schedule.
23. NOTICE. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of actual
receipt or three days after mailing if mailed postage prepaid by regular or
airmail to Lessor or Lessee, at the address set out on the face of this Lease
or, one day after it is sent by courier or facsimile transmission if receipt is
verified by the receiving party.
24. MISCELLANEOUS. All obligations of the Lessee if more than one, shall be
joint and several. Lessee shall provide Lessor with a copy of Lessee's annual
financial statement within ninety (90) days after the close of Lessee's business
year. Lessee also authorizes Lessor to amplify the description of the equipment
and to correct any and all patent errors or omissions in the typewritten or
handwritten portions of this and all related documents. This lease shall be
binding upon the parties, their successors, legal representatives and assigns
and is a valid and subsisting legal instrument, and no provision which may be
deemed unenforceable shall in any way invalidate any other provision or
provisions, all of which shall remain in full force and effect. All paragraph
headings are inserted for reference purposes only and shall not affect the
interpretation or meaning of this agreement.
---------------
INITIALS
/s/ [ILLEGIBLE]
---------------
PAGE 3 OF 3 PAGE LEASE AGREEMENT
<PAGE>
EQUIPMENT SCHEDULE "A"
Schedule referred to in and made a part of agreement by and between R.C.C.
FINANCE GROUP LTD. as buyer and INAME, INC. as lessee
EQUIPMENT LOCATION: 11 BROADWAY, SUITE 660
NEW YORK, NY 10004
QTY DESCRIPTION
- -12- INTERACTIVE OPT 250MHZ CPU W/ 1 MB FOR E400
- -3- COMPUTER ULTRA 2 BASE UNIT; S/N: 635FOCCA 635F7778, 650F07D0
- -6- COMPUTER 200MHZ PROCESSOR FOR U
- -48- COMPUTER 64MB SIMMS FOR ULTRA
- -3- COMPUTER 4.2-GBYTE LOW PROFILE
- -2- COMPUTER ENTERPRISE 150 BASE
- -4- COMPUTER 64MB SIMM FOR SPARC 20
- -2- COMPUTER CREATOR GRAPHICS
- -10- COMPUTER DRIVE BRACKETS
- -2- COMPUTER FLOPPY FOR AN ULTRA
- -2- COMPUTER CD ROM SUN ULTRA
- -2- INTERACTIVE FCAL GBIC MODULE 100/MB/S
- -2- INTERACTIVE FCAL HUB 7 SLOT
- -4- INTERACTIVE 2 METER FIBRE CHANNEL CABLE
- -2- INTERACTIVE 15 METER FIBRE CHANNEL CABLE
- -2- INTERACTIVE OPT QUAD FASTETHERNET W/ SW
- -10- INTERACTIVE OPT INT DISK 9.1 GB/ 7200 FC-AL
- -1- INTERACTIVE SOLARIS 2.6 5/98 ENGLISH SVR
- -2- INTERACTIVE OPT 250MHZ CPU W/ 1 MB FOR E400
- -2- INTERACTIVE SPARCOMP. C/C++4.2 CD DOC LI
- -4- INTERACTIVE 45GB A5000
- -12- INTERACTIVE FC-AL 9.1GB 7200RPM 1.6IN DISK
- -4- INTERACTIVE A5000 CHASSIS INTERFACE BOARD
- -2- INTERACTIVE FCAL HUB 7 SLOT
- -10- INTERACTIVE FCAL GBIC MODULE 100MB/S
- -4- INTERACT1VE 2 METER FIBRE CHANNEL CABLE
- -2- INTERACTIVE FCAL 100MB/S SBUS HOST ADAPTER
- -2- INTERACTIVE 15 METER FIBRE CHANNEL CABLE
- -2- PC CONNECTION APPLE G3 128MB DIMM SYNCHR
- -1- PC CONNECTION POWERMAC G3 4MB SGRAM VIDE
- -1- PC CONNECTION ADOBE ILLUS 7MAC
- -1- PC CONNECTION ADOBE PSHOP 5 MAC
- -1- PC CONNECTION 17-INCH 200P5 MULTISCAN MO
- -1- PC CONNECTION POWERBOOK G3 292/64/8.0/20X56
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3 VOLT
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3 VOLT
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3VOLT
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION 32MB SDRAM 3.3 VLT
- -1- PC CONNECTION STYLUS COLOR 800N PRINTER
- -1- PC CONNECTION POWERMAC G3 4MB SGRAM VIDE
- -1- PC CONNECTION APPLE G3/266 MT 32/6.0/
- -1- PC CONNECTION POWERMAC G3/266 MT 32/6.0
- -1- PC CONNECTION APPLE G3 128MB DIMM SYNCHR
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3 VOLT
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3 VOLT
- -1- PC CONNECTION DESKPRO 2000 5200X/3200 MMX200/32/3.2
- -1- PC CONNECTION MARLOWCD 24X INTERNAL IDE CD-ROM
- -2- PC CONNECTION 17-lNCH OPTIQUEST V773 MONITOR
- -2- COMPUTER SPARC 20 BASE UNIT S/N: 04455, F4460
- -1- COMPUTER INT. FLOPPY FOR S20
- -5- COMPUTER E450 DRIVE BRACKET
- -1- COMPUTER SPARC 20 BASE UNIT S/N: F0C39
- -1- COMPUTER INT. FLOPPY FOR S20
- -6- COMPUTER X1O18A 10 BASE T S/N:
70236,70234,70233,70251,70250,70226
- -10- ADVANCED SEAGATE ST34572WC 4.5 GIG SCSI
- -2- ADVANCED DIGITAL LINK DL3100-AC-C-H T3
INITIAL /s/ [ILLEGIBLE]
---------------
Page 1 of 2
<PAGE>
QTY DESCRIPTION
[ILLEGIBLE] ADVANCED LINK DL404-10 HSSI MM
[ILLEGIBLE] SUN DATA 1191A SUN MICROSYSTEMS 300MHZ C
[ILLEGIBLE] SUN DATA SUN MICROSYSTEMS DISK ENC
- -36- INTERACTIVE THIRD PARTY 128MB MEMORY EXPANSION KIT (2X64MB SIMMS)
- -3- COMPUTER COMPCON 10 RACK MOUNT C S/N: 832SF024, 832SF025, 832SF026
- -1- COMPUTER COMPCON 10 TOWER CHASSI S/N: 831SF021
- -4- COMPUTER COMPCON AXI CPU WITH 30
- -8- COMPUTER 256 MB FOR COMP CON
- -3- COMPUTER 4GB CHEETAH 10K RPM
- -3- COMPUTER 9GB CHEETAH 10K RPM
- -1- COMPUTER COMPCON 10 TOWER CHASSIS S/N: 824SF011
- -1- COMPUTER COMPCON AXI CPU WITH 30
- -4- COMPUTER 128MB 3RD PARTY SIMM FOR
- -4- COMPUTER 9 GB 7200RPM
- -2- COMPUTER COMPCON 10 RACK MOUNT C S/N: 832SF0023, 832SF0022
- -2- COMPUTER COMPCON AXI CPU WITH 30
- -4- COMPUTER 128MB 3RD PARTY SIMM FO
- -2- COMPUTER DTSOLARIS 2.6 DT W/ RTU
- -2- COMPUTER 4.5 GB ULTRA WIDE SCSI
- -1- SUN DATA 2610A SUN MICROSYSTEMS I/O SYST
- -1- PC CONNECTION ETHEREXPRESS PRO 100 PCI-B 5 PACK
- -1- PC CONNECTION ACER AW35 JPRO WAVETABLE ENHANCED SOUND BOARD
- -1- PC CONNECTION ACERPOWER T9652WC PII266/32MB/4.3/32X
- -1- PC CONNECTION EDO KIT 32MB (2-16MB EDO SIMMS)
- -1- PC CONNECTION ACER AW35 PRO WAVETABLE ENHANCED SOUND BOARD
- -1- PC CONNECTION ACERPOWER T9652WC PII266/32MB/4.3/32X
- -1-- PC CONNECTION EDO KIT 32MB (2-16MB EDO SIMMS)
- -2- PC CONNECTION 17-INC OPTIQUEST V773 MONITOR
- -32- COMPUTER MEM-31363RD
- -4- COMPUTER COMPCON 10 RACK MOUNT C S/N: 833SF030, SF028, SF029, SF027
- -4- COMPUTER COMPCON AXI CPU WITH 30
- -8- COMPUTER 256 MB FOR COMPCON
- -1- MICRON COMPUTER ATO MODEL BOM 1311471-004 INCLUDING BUT NOT LIMITED TO:
LAB WARRANTY 1ST YR OF NBD ON SIT, 512K INTERNAL L2 SECONDARY CACHE,
MICROSOFT MOUSE PS/2.S BUTTON, MOD ASSY 128 MB (1-16M DIMM) ECC SDRAM, NO
MODEM, NO SECOND HARD DRIVE CAGE, BAS ASSY NETFRAM LV2000 W/LANDESK V2.8,
NO OEM SOFTWARE, FDD, ASSY 3.5 FLOPPY, HDD ASSY 1" 9GB ULTRA WIDE SCSI 3.
(9GB TOTAL), INTEGRATED CIRRUS 54M40.1024X788 SVGA GRAPHICS, ADAPTEC 7880
INTEGRATED PCI ULTRA WIDE SCSI 3, ASSY INTEL INTEGRATED ETHER EXPRESS PRO
100, ASSY SONY TRAY CD ROM 32X NETFRAM 2000/5000 SERVERS, CPU ASSY INTEL
PENTIUM, SINGLE LV2000/2001, ASSY ATX FULL TOWER (R) 4G/9G, MICROSOFT NT
SERVER 4.0 10 USER W/ SP3, 104 KEY ENHANCED PS2 KEYBOARD
- -1- INTERACTIVE SRVR E450 25OMHZ/ 256MB 4 GB
- -1- INTERACTIVE NORTH AMERICAN/ASlA PWR CRD KT
- -1- INTERACTIVE SOLARIS 2.6 US SV MEDIA KIT
INCLUDING, BUT NOT LIMITED TO, REPLACEMENT PARTS, SUBSTITUTIONS, ADDITIONS,
ACCESSORIES, AND PROCEEDS THEREOF.
This Schedule 'A' is attached to and made a part of R.C.C. FINANCE GROUP LTD.
lease #981051 and constitutes a true and accurate description of the equipment.
R.C.C. FINANCE GROUP LTD. INAME, INC.
(Lessor) (Lessee)
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ---------------------------------- -----------------------------------------
Page 2 of 2
<PAGE>
OPTION TO PURCHASE
ADDENDUM ANNEXED TO AND MADE PART OF LEASE AGREEMENT #981051, BY AND BETWEEN
R.C.C. FINANCE GROUP LTD. ("LESSOR") AND INAME, INC. ("LESSEE")
Provided that Lessee shall have made all payments due under the above referenced
Lease and provided, further, that there is no default in compliance with any of
the terms or conditions thereof, Lessee shall have the option to purchase the
Equipment covered by and described in said Lease, in whole and not in part, in
its then condition and at its then location, on an "as-is, where is" basis, as
of the expiration date of said Lease.
This option is only exercisable by delivery of written notice to Lessor at least
thirty (30) days prior to the expiration date of said Lease, together with
delivery of payment of the full net cash price of said Equipment, plus
applicable taxes.
The net cash purchase price will be $1.00.
This Option to Purchase must be exercised no later than five (5) days prior to
the original expiration of the Lease Term. The original expiration of the Lease
Term shall be -60- months subsequent to the date Lessee executes an
"Acknowledgment and Acceptance of Delivery" for the Leased Equipment.
Time is of the essence of this option.
Any notice required by this Addendum shall be by U.S. Mail, Registered, Return
Receipt Requested.
LESSEE: INAME, INC.
BY: /s/ [ILLEGIBLE], EVP & CFO
---------------------------
(Name and Title)
DATE: 12/31/98
---------------------------
LESSOR: R.C.C. FINANCE GROUP LTD.
BY:
---------------------------
DATE: 12/31/98
---------------------------
<PAGE>
BILL OF SALE # B981051
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, That INAME, INC., hereinafter called the seller,
in consideration of the sum of THREE HUNDRED SIXTEEN THOUSAND FIVE HUNDRED AND
00/100 -- Dollars ($316,500.00) to the seller paid, the receipt whereby hereof
is acknowledged, hereby does grant, bargain, sell, transfer and deliver unto
R.C.C. FINANCE GROUP LTD., hereinafter called the buyer, the following described
personal property now located at 11 BROADWAY, SUITE 660 NEW YORK, NY 10004 in
New York County, State of New York
THE ITEMS DESCRIBED ON EQUIPMENT SCHEDULE 'C', WHICH IS ANNEXED HERETO AND MADE
A PART HEREOF.
TO HAVE AND TO HOLD the same unto the said buyer and buyer's heirs, executors,
administrators, successors and assigns forever.
And the seller hereby covenants and agrees to and with the said buyer and to and
with the buyers successors in interest and assigns that seller is the owner of
the above described personal property; that the same is free from all
encumbrances; and that seller has a good right to sell the same; and that seller
will and seller's heirs, executors, administrators and successors shall warrant
and forever defend this sale against the lawful claims and demands of all
persons whomever.
In construing this bill of sale and where the context so requires, the singular
includes the plural and all grammatical changes shall be made so that this
instrument shall apply equally to individuals and to corporations.
IN WITNESS WHEREOF, the seller has hereunto executed this document; if the
undersigned seller is a corporation, it has caused its name to be signed and its
seal affixed by an officer or other person duly authorized to do so by order of
its board of directors.
Dated Dec 30,1998. INAME, INC.
by: /s/ Debra McClister
----------------------------------
(Corporate Seal)
STATE OF NEW JERSEY
---------------
COUNTY OF BERGEN
----------
I, D. McClister, being first duly sworn depose and say: that I am EXEC VP & CFO
of INAME, INC., the seller of the property described in the foregoing bill of
sale; that seller is the sole owner of said property; that the same has been
paid for in full and that as of this date said personal property and each and
every part thereof is free and clear of all liens, encumbrances and security
interests of any kind or nature
INAME, INC.
by: /s/ Debra McLister
----------------------------------
Subscribed and sworn to before December 30, 1998
X /s/ Ellen J. Bisogno
------------------------------------
Notary Public for
-------------------------
My commission expires
---------------------
ELLEN J. BISOGNO
Notary Public, State of New Jersey
No. 2109965
Certified in Bergen County
Commission Expires March 20, 2003
<PAGE>
EQUIPMENT SCHEDULE "C"
Schedule referred to in and made a part of agreement by and between R.C.C.
FINANCE GROUP LTD. as buyer and INAME, INC. as seller.
EQUIPMENT LOCATION: 11 BROADWAY, SUITE 660
NEW YORK, NY 10004
QTY DESCRIPTION
- -12- INTERACTIVE OPT 250MHZ CPU W/ 1 MB FOR E400
- -3- COMPUTER ULTRA 2 BASE UNIT; S/N: 635FOCCA 635F7778, 650F07D0
- -6- COMPUTER 200MHZ PROCESSOR FOR U
- -48- COMPUTER 64MB SIMMS FOR ULTRA
- -3- COMPUTER 4.2-GBYTE LOW PROFILE
- -2- COMPUTER ENTERPRISE 150 BASE
- -4- COMPUTER 64MB SIMM FOR SPARC 20
- -2- COMPUTER CREATOR GRAPHICS
- -10- COMPUTER DRIVE BRACKETS
- -2- COMPUTER FLOPPY FOR AN ULTRA
- -2- COMPUTER CD ROM SUN ULTRA
- -2- INTERACTIVE FCAL GBIC MODULE 100/MB/S
- -2- INTERACTIVE FCAL HUB 7 SLOT
- -4- INTERACTIVE 2 METER FIBRE CHANNEL CABLE
- -2- INTERACTIVE 15 METER FIBRE CHANNEL CABLE
- -2- INTERACTIVE OPT QUAD FASTETHERNET W/ SW
- -10- INTERACTIVE OPT INT DISK 9.1 GB/ 7200 FC-AL
- -1- INTERACTIVE SOLARIS 2.6 5/98 ENGLISH SVR
- -2- INTERACTIVE OPT 250MHZ CPU W/ 1 MB FOR E400
- -2- INTERACTIVE SPARCOMP. C/C++4.2 CD DOC LI
- -4- INTERACTIVE 45GB A5000
- -12- INTERACTIVE FC-AL 9.1GB 7200RPM 1.6IN DISK
- -4- INTERACTIVE A5000 CHASSIS INTERFACE BOARD
- -2- INTERACTIVE FCAL HUB 7 SLOT
- -10- INTERACTIVE FCAL GBIC MODULE 100MB/S
- -4- INTERACT1VE 2 METER FIBRE CHANNEL CABLE
- -2- INTERACTIVE FCAL 100MB/S SBUS HOST ADAPTER
- -2- INTERACTIVE 15 METER FIBRE CHANNEL CABLE
- -2- PC CONNECTION APPLE G3 128MB DIMM SYNCHR
- -1- PC CONNECTION POWERMAC G3 4MB SGRAM VIDE
- -1- PC CONNECTION ADOBE ILLUS 7MAC
- -1- PC CONNECTION ADOBE PSHOP 5 MAC
- -1- PC CONNECTION 17-INCH 200PS MULTISCAN MO
- -1- PC CONNECTION POWERBOOK G3 292/64/8.0/20X56
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3 VOLT
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3 VLT
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3VOLT
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION 32MB SDRAM 3.3 VOLT
- -1- PC CONNECTION STYLUS COLOR 800N PRINTER
- -1- PC CONNECTION POWERMAC G3 4MB SGRAM VIDE
- -1- PC CONNECTION APPLE G3/266 MT 32/6.0/
- -1- PC CONNECTION POWERMAC G3/266 MT 32/6.0
- -1- PC CONNECTION APPLE G3 128MB DIMM SYNCHR
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3 VOLT
- -1- PC CONNECTION ACERPOWER T4572WN 233MMX/3
- -1- PC CONNECTION DIMM 32MB SDRAM 3.3 VOLT
- -1- PC CONNECTION DESKPRO 2000 5200X/3200 MMX200/32/3.2
- -1- PC CONNECTION MARLOWCD 24X INTERNAL IDE CD-ROM
- -2- PC CONNECTION 17-lNCH OPTIQUEST V773 MONITOR
- -2- COMPUTER SPARC 20 BASE UNIT S/N: 04455, F4460
- -1- COMPUTER INT. FLOPPY FOR S20
- -5- COMPUTER E450 DRIVE BRACKET
- -1- COMPUTER SPARC 20 BASE UNIT S/N: F0C39
- -1- COMPUTER INT. FLOPPY FOR S20
- -6- COMPUTER X1O18A 10 BASE T S/N:
70236,70234,70233,70251,70250,70226
- -10- ADVANCED SEAGATE ST34572WC 4.5 GIG SCSI
- -2- ADVANCED DIGITAL LINK DL3100-AC-C-H T3
INITIAL /s/ [ILLEGIBLE]
---------------
Page 1 of 2
<PAGE>
QTY DESCRIPTION
[ILLEGIBLE] ADVANCED LINK DL404-10 HSSI MM
[ILLEGIBLE] SUN DATA 1191A SUN MICROSYSTEMS 300MHZ C
[ILLEGIBLE] SUN DATA SUN MICROSYSTEMS DISK ENC
- -36- INTERACTIVE THIRD PARTY 128MB MEMORY EXPANSION KIT (2X64MB SIMMS)
- -3- COMPUTER COMPCON 10 RACK MOUNT C S/N: 832SF024, 832SF025, 832SF026
- -1- COMPUTER COMPCON 10 TOWER CHASSI S/N: 831SF021
- -4- COMPUTER COMPCON AXI CPU WITH 30
- -8- COMPUTER 256 MB FOR COMP CON
- -3- COMPUTER 4GB CHEETAH 10K RPM
- -3- COMPUTER 9GB CHEETAH 10K RPM
- -1- COMPUTER COMPCON 10 TOWER CHASSIS S/N: 824SF011
- -1- COMPUTER COMPCON AXI CPU WITH 30
- -4- COMPUTER 128MB 3RD PARTY SIMM FOR
- -4- COMPUTER 9 GB 7200RPM
- -2- COMPUTER COMPCON 10 RACK MOUNT C S/N: 832SF0023, 832SF0022
- -2- COMPUTER COMPCON AXI CPU WITH 30
- -4- COMPUTER 128MB 3RD PARTY SIMM FO
- -2- COMPUTER DTSOLARIS 2.6 DT W/ RTU
- -2- COMPUTER 4.5 GB ULTRA WIDE SCSI
- -1- SUN DATA 2610A SUN MICROSYSTEMS I/O SYST
- -1- PC CONNECTION ETHEREXPRESS PRO 100 PCI-B 5 PACK
- -1- PC CONNECTION ACER AW35 JPRO WAVETABLE ENHANCED SOUND BOARD
- -1- PC CONNECTION ACERPOWER T9652WC PII266/32MB/4.3/32X
- -1- PC CONNECTION EDO KIT 32MB (2-16MB EDO SIMMS)
- -1- PC CONNECTION ACER AW35 PRO WAVETABLE ENHANCED SOUND BOARD
- -1- PC CONNECTION ACERPOWER T9652WC PII266/32MB/4.3/32X
- -1-- PC CONNECTION EDO KIT 32MB (2-16MB EDO SIMMS)
- -2- PC CONNECTION 17-INC OPTIQUEST V773 MONITOR
- -32- COMPUTER MEM-31363RD
- -4- COMPUTER COMPCON 10 RACK MOUNT C S/N: 833SF030, SF028, SF029, SF027
- -4- COMPUTER COMPCON AXI CPU WITH 30
- -8- COMPUTER 256 MB FOR COMPCON
- -1- MICRON COMPUTER ATO MODEL BOM 1311471-004 INCLUDING BUT NOT LIMITED TO:
LAB WARRANTY 1ST YR OF NBD ON SIT, 512K INTERNAL L2 SECONDARY CACHE,
MICROSOFT MOUSE PS/2.S BUTTON, MOD ASSY 128 MB (1-16M DIMM) ECC SDRAM, NO
MODEM, NO SECOND HARD DRIVE CAGE, BAS ASSY NETFRAM LV2000 W/LANDESK V2.8,
NO OEM SOFTWARE, FDD, ASSY 3.5 FLOPPY, HDD ASSY 1" 9GB ULTRA WIDE SCSI 3.
(9GB TOTAL), INTEGRATED CIRRUS 54M40.1024X788 SVGA GRAPHICS, ADAPTEC 7880
INTEGRATED PCI ULTRA WIDE SCSI 3, ASSY INTEL INTEGRATED ETHER EXPRESS PRO
100, ASSY SONY TRAY CD ROM 32X NETFRAM 2000/5000 SERVERS, CPU ASSY INTEL
PENTIUM, SINGLE LV2000/2001, ASSY ATX FULL TOWER (R) 4G/9G, MICROSOFT NT
SERVER 4.0 10 USER W/ SP3, 104 KEY ENHANCED PS2 KEYBOARD
- -1- INTERACTIVE SRVR E450 25OMHZ/ 256MB 4 GB
- -1- INTERACTIVE NORTH AMERICAN/ASlA PWR CRD KT
- -1- INTERACTIVE SOLARIS 2.6 US SV MEDIA KIT
INCLUDING, BUT NOT LIMITED TO, REPLACEMENT PARTS, SUBSTITUTIONS, ADDITIONS,
ACCESSORIES, AND PROCEEDS THEREOF.
This Schedule 'C' is attached to and made a part of Bill of Sale #B981051 by and
between R.C.C. FINANCE GROUP LTD. as Buyer and INAME, INC. and Seller and
constitutes a true and accurate description of the equipment.
R.C.C. FINANCE (Buyer) INAME, INC.
(Buyer) (Seller)
/s/ Bob Helfant /s/ [ILLEGIBLE]
- ---------------------------------- ----------------------------------------
Page 2 of 2
<PAGE>
Exhibit 10.23
Pacific [LOGO] Atlantic LEASE AGREEMENT
SYSTEMS LEASING
This Lease Agreement dated January 22, 1999, is made between PACIFIC ATLANTIC
SYSTEMS LEASING with an office at 8180 North Hayden Road, Suite D100,
Scottsdale, Arizona 85258 ("Lessor") and Mail.com, Inc. with an office at 11
Broadway, 6th Floor, New York, NY 10004 ("Lessee"). The parties agree as
follows:
1. LEASE
Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the
equipment and/or features ("Equipment") described in Equipment Schedule(s)
referencing this Lease Agreement. Each Equipment Schedule shall constitute a
separate lease. In the event of a conflict between the terms and conditions of
this Lease Agreement and the terms and conditions of any Equipment Schedule or
any amendment, addendum, or rider thereto, the terms and conditions of such
Equipment Schedule, amendment, addendum, or rider shall prevail. Any reference
to "Lease" shall mean this Lease Agreement, the applicable Equipment Schedule,
and any amendments, addenda, or riders thereto.
2. DEFINITIONS
(a) "Installation Date" means the date determined in accordance with the
applicable Equipment Schedule.
(b) "Commencement Date" means, as to all Equipment designated on any Equipment
Schedule, where the Installation Date for the Item of Equipment (an Item
of Equipment shall mean (i) a machine and its features, or (ii) a feature)
last to be installed falls on the first day of the month, that date, or in
any other case, the first day of the month following the month in which
the Item of Equipment last to be installed was installed.
(c) "Daily Rental" means 1/30th of the amount set forth as the Monthly Rental
for each Item of Equipment on the applicable Equipment Schedule.
3. TERM OF LEASE
The term of this Lease as to each Item of Equipment designated on any Equipment
Schedule shall commence on the Installation Date for such Item of Equipment and
shall continue for an initial period ending that number of months from the
Commencement Date as is specified on the applicable Equipment Schedule ("Initial
Term"). The term of this Lease for all such Equipment shall be automatically
extended for successive three-month periods until terminated by either party
giving to the other not less than six months' prior irrevocable written notice
of termination. Any such termination shall be effective only on the later of (a)
the last day of the Initial Term or the last day of any such successive period,
or (b) the date the Equipment has been recertified for maintenance.
4. RENTAL
The monthly rental ("Monthly Rental") for each Item of Equipment payable
hereunder is as set forth in the applicable Equipment Schedule. Rental for each
Item of Equipment shall begin to accrue on the Installation Date of such Item of
Equipment and shall be due and payable by Lessee in advance on the first day of
each month whether or not Lessee has received any notice that such payment is
due. If the Installation Date does not fall on the first day of the month, the
rental for that period of time from the Installation Date until the first day of
the succeeding month shall be an amount equal to the Daily Rental multiplied by
the number of days from (and including) the Installation Date to (but not
including) the first day of the succeeding month and shall be due and payable
on the Installation Date. The Monthly Rental set forth on the applicable
Equipment Schedule is conditioned upon the federal corporate income tax rate in
effect on the Installation Date.
In addition to the Monthly Rental set forth in the Equipment Schedule(s), Lessee
shall pay to Lessor an amount equal to all taxes paid, payable, or required to
be collected by Lessor, however designated, which are levied or based on the
rental, on the Lease, or on the Equipment or its purchase, sale, ownership,
delivery, possession, use, lease, operation, control, or value (including,
without limitation, state and local privilege or excise taxes based on gross
revenue), any penalties or interest in connection therewith not arising from
negligence on the part of Lessor or taxes or amounts in lieu thereof paid or
payable by Lessor in respect of the foregoing, but excluding taxes on Lessor's
net income.
Lessor shall be responsible for the timely filing of all necessary personal
property tax returns or declarations and shall pay all personal property taxes
levied or assessed against the Equipment during the Initial Term of the
applicable Equipment Schedule, and all renewals and extensions thereof, before
the taxes become delinquent. Promptly upon presentation of evidence of liability
for personal property taxes by Lessor to Lessee, Lessee shall reimburse Lessor
for all amounts of personal property taxes due, without proration.
Interest on any past due payments shall accrue at the rate of 1 1/2 percent per
month, or if such rate shall exceed the maximum rate allowed by law, then at
such maximum rate, and shall be payable on demand. Charges for taxes, penalties,
and interest shall be promptly paid by Lessee when invoiced by Lessor.
5. INSTALLATION, USE DISCONTINUANCE, AND MODIFICATION OF EQUIPMENT
(a) Lessor shall have the sole right and option to make all the arrangements
for (i) the transportation of each Item of Equipment to, and the
installation of each Item of Equipment at, the Equipment Location stated
in the applicable Equipment Schedule, and (ii) the discontinuance,
disassembly, packing, and transportation of each Item of Equipment from
the Equipment Location to a location of Lessor's choice within the
continental United States upon the termination of the applicable Equipment
Schedule (by expiration or otherwise) as to such Item of Equipment.
(b) Lessee shall (i) make all arrangements for rigging and drayage, if
applicable, with respect to the Equipment, and (ii) furnish suitable
electric current required to operate the Equipment and a specific area in
the Equipment Location which is suitable for the operation of the
Equipment and complies with applicable directives issued by the
manufacturer thereof and by Lessor. All transportation (including
insurance), rigging, and drayage costs with respect to the Equipment, both
on delivery to the Equipment Location and redelivery to a location of
Lessor's choice within the continental United States, and all
installation, discontinuance, disassembly, and packing costs shall be paid
by Lessee.
(c) Lessee shall have the uninterrupted right to enjoy the quiet possession
and exclusive use of the Equipment while the applicable Equipment Schedule
is in force, without limitation as to time, provided Lessee shall not be
in default hereunder.
(d) Any equipment, cards, disks, tapes, or other items not specified in the
Equipment Schedule which are used on or in connection with the Equipment
must meet the specifications of the manufacturer of the Equipment
("Manufacturer") and shall be acquired by Lessee at its own expense.
(e) Lessee will at all times keep the Equipment in its sole possession and
control. The Equipment shall not be moved from the Equipment Location
without Lessor's prior written consent. Lessee's rights under Sections
5(f) and 6(b) are subject to Lessor's right to match any Modification or
sublease proposed by a third party. Lessee will provide Lessor in writing
with the terms of the third party offer and Lessor shall have ten days to
match the offer. Lessee shall obtain such Modification from, or sublease
the Equipment to, Lessor if Lessor has timely matched the third party
offer.
(f) Lessee may not, without Lessors prior written consent, make alterations
in, or add features, attachments, or conversions to, or upgrade (model or
memory) the Equipment. Any such alteration, feature, attachment,
conversion, or upgrade (collectively, "Modification") not owned by Lessor
and leased to Lessee must (i) be installed by Manufacturer at Lessee's
sole expense, (ii) not interfere with the normal and satisfactory
operation or maintenance of the Equipment or with Lessee's ability to
obtain and maintain the maintenance contract required by Section 5(g)
hereof, (iii) be removable at any time without material damage to the
Equipment, and (iv) be removed by Manufacturer and the Equipment restored,
at Lessee's expense, to its normal, unmodified condition, reasonable wear
and tear only excepted, no later than the termination of the Lease as to
the applicable Item of Equipment. No lien, encumbrance, or interest may be
granted by Lessee in such Modification which would impair Lessor's right,
title, and interest in the applicable Item of Equipment. Any and all parts
removed as a result of any Modification remain the property of Lessor, and
may not be assigned, transferred, or otherwise disposed of by Lessee.
Lessee is responsible for storing and safekeeping the removed parts and
for their reinstallation prior to return of the Equipment upon
1.
<PAGE>
cancellation or termination of the Lease. All Modifications not leased by
Lessor to Lessee which are not removed upon cancellation or termination of
the Lease shall become the property of Owner, as defined in Section 9
hereof. Manufacturer or other organization selected by Lessee and approved
in writing by Lessor to maintain the Equipment ("Maintenance
Organization") may incorporate engineering changes or make temporary
alterations to the Equipment upon request of Lessee. Lessee shall promptly
accept and cause the installation of all engineering and safety changes
furnished without charge by Manufacturer, which safety and engineering
changes shall be and become the property of Lessor.
(g) Lessee shall, during the term of this Lease, at its own expense, enter
into and maintain in force a contract with Manufacturer or Maintenance
Organization covering at least prime shift maintenance of each Item of
Equipment. If at any time the Equipment is not being maintained to
Lessor's satisfaction, Lessor shall have the right to require Lessee to
have another company of Lessor's choice maintain the Equipment. Such
maintenance contract shall commence upon expiration of Manufacturer's
warranty period, if any, relating to such Item of Equipment. At Lessor's
request Lessee shall furnish Lessor with an executed copy of such contract
and all renewals and extensions thereof and amendments thereto.
(h) At the termination of this Lease as to the applicable Equipment Schedule
(by expiration or otherwise), Lessee shall, at its own expense, return the
Equipment to Lessor in the same operating order, repair, condition, and
appearance as on the Installation Date, subject only to reasonable wear
and tear and to the provisions of Section 5(f) hereof, complete with all
cables, diagnostics, and logic manuals. Lessee shall be responsible to
have the Equipment including software certified as acceptable for
Manufacturer's standard maintenance contract prior to redelivery to Lessor
without any reconditioning or initial set up or license charges. In the
event Lessee is unable to comply with the foregoing, Lessee shall
indemnify and hold Lessor harmless from any such charges incurred upon a
subsequent installation of the Equipment.
6. OWNERSHIP AND INSPECTION
(a) This is a contract of lease only and Lessee shall have no equity or
property interest in the Equipment other than the rights acquired as a
lessee hereunder and the Equipment shall remain personal property
regardless of the manner in which it may be installed or attached. Lessee
shall not, without Lessor's prior written consent, install or use the
Equipment in such a manner or in such circumstances that any part of the
Equipment is deemed to be an accession to other personal property. Lessee,
shall, at Lessor's request, affix to the Equipment tags, decals, or plates
furnished by Lessor indicating Owner's ownership and Lessee shall not
permit their removal or concealment.
(b) Lessee shall keep the Equipment free and clear of all liens and
encumbrances except liens or encumbrances arising through the actions or
omissions of Lessor. Lessee shall not assign or otherwise encumber this
Lease or any of its rights hereunder or sublease the Equipment or any
parts of the Equipment without Lessor's prior written consent, except that
Lessee, subject to the provisions of Section 5(e) hereof, at its expense
and upon prior written notice to Lessor, may assign this Lease or sublease
the Equipment to its parent or any subsidiary corporation or to a
corporation which shall have acquired all or substantially all of the
property of Lessee by merger, consolidation, or purchase. Upon any
permitted assignment or sublease, Lessee shall execute and deliver to
Lessor, or any assignee of Lessor, at Lessee's expense, such documentation
as Lessor or such assignee may require, including but not limited to
documentation to evidence and put third parties on notice of Lessor's or
its assignee's interest in the Equipment. No permitted assignment or
sublease shall relieve Lessee of any of its obligations hereunder.
(c) Lessor or its agents shall have free access to the Equipment at all
reasonable times for the purpose of inspection and for any other purpose
contemplated in this Lease. Lessee shall make Lessee's log and maintenance
records pertaining to the Equipment available during any such inspection.
(d) Lessee shall immediately notify Lessor of all details concerning any
damage to, or loss of, the Equipment arising out of any event or
occurrence whatsoever, including, but not limited to, the alleged or
apparent improper manufacture, functioning, or operation of the Equipment.
7. WARRANTIES AND DISCLAIMER OF WARRANTIES
(a) Lessee represents that, as of the Installation Date set forth in the
applicable Equipment Schedule, it shall have (i) thoroughly inspected the
Equipment, (ii) determined for itself that all Items of Equipment are of a
size, design, capacity, and manufacture selected by it, and (iii)
satisfied itself that the Equipment is suitable for Lessee's purposes.
Lessee authorizes Lessor to insert in each Equipment Schedule the serial
numbers and other identifying data of the Equipment.
(b) Lessee hereby covenants, represents, and warrants with respect to this
Lease and each Equipment Schedule executed hereunder as of the
Installation Date of any Item of Equipment that (i) the execution,
delivery. and performance thereof by Lessee have been duly authorized by
all necessary corporate action; (ii) the individual executing such was
duly authorized to do so; (iii) the Lease and each Equipment Schedule
constitute legal, valid, and binding agreements of Lessee enforceable in
accordance with their respective terms; and (iv) the Equipment is personal
property and when subjected to use by Lessee will not be or become
fixtures under applicable law.
(c) LESSOR SUPPLIES THE EQUIPMENT AS IS AND NOT BEING THE MANUFACTURER OF THE
EQUIPMENT, THE MANUFACTURER'S AGENT, OR THE SUPPLIER'S AGENT, MAKES NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE
EQUIPMENT'S MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, DESIGN,
CONDITION, QUALITY, CAPACITY, MATERIAL, WORKMANSHIP, CONFORMITY TO THE
PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER(S) RELATING THERETO,
OR AS TO PATENT INFRINGEMENT OR THE LIKE OR ANY SOFTWARE USED IN THE
EQUIPMENT, it being agreed that all such risks, as between Lessor and
Lessee, are to be borne by Lessee. Lessee agrees to look solely to
Manufacturer or to the supplier of the Equipment for any and all warranty
claims and any and all warranties made by Manufacturer or the supplier to
Lessor are hereby assigned to Lessee, to the extent permitted by
Manufacturer or the supplier, for the term of the applicable Equipment
Schedule. Lessee agrees that Lessor shall not be responsible for the
delivery, installation, maintenance, operation, or service of the
Equipment or for delay or inadequacy of any or all of the foregoing.
Lessor shall not be responsible for any general, incidental, special, or
consequential loss or damage resulting from the installation, operation,
or use of the Equipment or otherwise (including strict liability in tort).
Lessee will defend, indemnify, and hold Lessor harmless on an after-tax
basis against any and all claims, demands, and liabilities arising out of
or in connection with the design, manufacture, possession, or operation of
the Equipment, including strict liability in tort.
8. RISK OF LOSS
(a) Until the Equipment is returned to Lessor as provided in this Lease,
Lessee relieves Lessor of responsibility for all risks of physical damage
to or loss or destruction of the Equipment, whether or not insured
against, howsoever caused. During the term of this Lease as to any
Equipment Schedule, Lessee shall, at its expense, keep in effect all risk
and public liability insurance policies covering the Equipment designated
in each Equipment Schedule. The all risk insurance policy shall be for an
amount not less than the replacement cost of the Equipment. The public
liability insurance policy shall be in such amount as is reasonably
acceptable to Lessor. Lessor, its successors and assigns, shall be named
as additional insureds and/or loss payees on such policies, which shall be
written by one or more insurance companies of recognized responsibility
reasonably acceptable to Lessor. Evidence of such insurance coverage shall
be furnished to Lessor not later than the Installation Date set forth in
the applicable Equipment Schedule and from time to time thereafter as
Lessor may demand. Such policies shall provide that no less than ten days'
written notice shall be given to Lessor prior to cancellation of such
policies for any reason. Lessee hereby irrevocably appoints Lessor as
Lessee's attorney-in-fact coupled with an interest to make claim for,
receive payment of, and execute any and all documents that may be required
to be provided to the insurance carrier in substantiation of any such
claim for loss or damage under said insurance policies, and to endorse
Lessee's name to any and all drafts or checks in payment of the loss
proceeds.
(b) If any Item of Equipment is rendered unusable as a result of any physical
damage to, or loss or destruction of, the Equipment, or title thereto
shall be taken by any governmental authority under power of eminent domain
or otherwise, Lessee shall give to Lessor immediate notice thereof and
this Lease shall continue in full force and effect without any abatement
of rental. Lessee shall determine, within fifteen days after the date of
occurrence of any such damage or destruction, whether such Item of
Equipment can be repaired. In the event Lessee determines that the Item of
Equipment cannot be repaired or such Item of Equipment was lost,
destroyed, or title thereto taken, Lessee shall promptly replace such Item
of Equipment with identical equipment and transfer title to such
replacement equipment to Lessor free and clear of all liens, claims,
equities, and encumbrances of every kind or nature whatsoever, and this
Lease shall continue in full force and effect as though, subject to the
provisions of Section 9 hereof, such damage, loss, destruction, or taking
of title had not occurred, except that the replacement equipment shall
become Equipment for purposes of the Lease in lieu of the replaced
Equipment. In the event Lessee determines that such Item of Equipment can
be repaired,
2.
<PAGE>
Lessee shall cause such Item of Equipment to be promptly repaired. All
proceeds of insurance received by Lessor or Lessee under the all risk
insurance policy referred to in the preceding paragraph of this Section
shall be applied toward the cost of such repair or replacement.
9. TAX BENEFITS
This Lease has been entered into on the basis that Lessor (and/or any persons,
firms, corporations, or other entities to which Lessor has transferred or may
transfer title to all or any portion of the Equipment) (collectively, "Owner")
shall be entitled to such deductions, credits, and other benefits as are
provided by the Internal Revenue Code of 1986, as amended or superseded from
time to time and the rules and regulations promulgated thereunder (the Code"),
to an owner of property ("Tax Benefits"). As used herein the term "Owner" shall
mean and include Lessor in the event Lessor has not transferred title to all of
the Equipment, and the term "Lessor" shall mean and include each member of the
affiliated group of corporations with which Lessor files a consolidated return
for federal income tax purposes.
If to any extent as a result of (a) any act or failure to act by Lessee or any
person claiming by, through, or under Lessee, (b) any misrepresentation or
breach of any covenant, warranty, or agreement contained in this Lease or the
applicable Equipment Schedule, (c) any requisition of use or title to the
Equipment by any governmental entity or authority, whether by claim of right,
eminent domain, or otherwise, (d) any physical damage to, or loss or destruction
of, the Equipment, (e) the substitution of all or any part of the Equipment
pursuant to Section 8(b) hereof or otherwise, (f) any assignment or sublease, or
(g) Lessee permitting the Equipment to become "tax-exempt use property" within
the meaning of the Code, Owner, in determining its income tax liability for any
year, shall (i) lose the benefit of, or shall not have, or shall not claim as a
result of a written opinion of independent tax counsel that there is not a
reasonable possibility that Owner's claiming of such Tax Benefits would be
upheld by a court if the matter were litigated, or shall lose the right to
claim, or shall be delayed in claiming, or shall suffer a deferral, diminution,
or disallowance of, or shall be required to recapture, all or any part of the
Tax Benefits, or (ii) be required to include any amount in income other than
rental payments in the times and amounts set forth in the applicable Equipment
Schedule, or (iii) have any portion of the Tax Benefits attributed to foreign
sources (any of (i)-(iii) being hereinafter referred to as a "Loss"), then
Lessee shall pay to Owner, upon demand, a sum which, after deduction therefrom
for all federal, state, and local income taxes payable by Owner with respect to
the receipt of such sum, shall be sufficient to restore Owner's net economic
after-tax yield, cash flow, and rate of return that Owner would have had if such
Loss had not occurred, plus any fines, interest, penalties, or additions to tax
fairly attributable to such Loss. For purposes of this Section a Loss shall
occur upon the earliest of (i) the happening of any event (such as any
disposition, damage, loss, destruction, or change in the use of any Item of
Equipment) which may cause such Loss, (ii) the payment by Owner to the Internal
Revenue Service of the tax increase resulting from such Loss, (iii) the
adjustment by audit or otherwise of the tax return of Owner to reflect such
Loss, or (iv) the filing of any return reflecting such Loss.
10. EVENTS OF DEFAULT AND REMEDIES
The occurrence of any one of the following shall constitute an Event of Default
hereunder:
(a) Lessee fails to pay any installment of rent on or before the fifth day
following the date when the same becomes due and payable;
(b) Lessee attempts to remove, sell, transfer, encumber, sublet, or part with
possession of any Item of Equipment, except as expressly permitted herein;
(c) Lessee fails to observe or perform any of the other obligations required
to be observed or performed by Lessee hereunder and such failure shall
continue uncured for ten days after written notice thereof to Lessee by
Lessor;
(d) Any warranty, representation, or statement made or furnished to Lessor by
or on behalf of Lessee proves to have been false in any material respect
when made or furnished;
(e) Lessee ceases doing business as a going concern, makes an assignment for
the benefit of creditors, admits in writing its inability to pay its debts
as they become due, is generally not paying its debts as they mature,
files a voluntary petition in bankruptcy, files a petition seeking for
itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar arrangement under any present or
future statute, law, or regulation or files an answer admitting the
material allegations of a petition filed against it in any such
proceeding, consents to or acquiesces in the appointment of a custodian,
trustee, receiver, or liquidator of it or all or any substantial part of
its assets or properties, or if it or its shareholders shall take any
action looking to its dissolution or liquidation, or if any order for
relief is entered against Lessee under the federal bankruptcy laws;
(f) Within thirty days after the commencement of any proceedings against
Lessee seeking reorganization, arrangement, readjustment, liquidation,
dissolution, or similar relief under any present or future statue, law, or
regulation, such proceedings shall not have been dismissed, or if within
thirty days after the appointment without Lessee's consent or acquiescence
of any custodian, trustee, receiver, or liquidator of it or of all or any
substantial part of its assets and properties, such appointment shall not
be vacated; or
(g) The default by Lessee under any other Equipment Schedule or other
agreement between Lessee and Lessor or any assignee of Lessor.
Upon the occurrence of an Event of Default, Lessor may at its option do any or
all of the following: (a) by notice to Lessee cancel or terminate this Lease as
to any or all Equipment Schedules; (b) whether or not this Lease is canceled or
terminated as to any or all Equipment Schedules, take possession of any or all
of the Equipment listed on any or all Equipment Schedules, wherever situated,
and for such purpose, enter upon any premises without liability for so doing
(except that Lessor shall be liable for damages resulting from the fault or
negligence of Lessor) or Lessor may cause Lessee, and Lessee hereby agrees, to
return the Equipment to lessor as provided in this Lease; (c) recover from
Lessee, as liquidated damages for loss of a bargain and not as a penalty, an
amount equal to the present value of all monies to be paid by Lessee during the
remaining Initial Term or any successive period then in effect, discounted at
the rate of three percent per annum, which payment, together with applicable
sales or use tax, shall become immediately due and payable; or (d) sell, dispose
of, hold, use, or lease any Equipment as Lessor in its sole discretion may
determine (and Lessor shall not be obligated to give preference to the sale,
lease, or other disposition of the Equipment, which may be either wholesale or
retail, over the sale, lease, or other disposition of similar equipment owned,
leased, or managed by Lessor). Any disposition may be at private or public sale,
in bulk or in parcels, with or without notice, and without having the Equipment
present at the place of sale or lease. The subsequent acceptance of payments
hereunder by Lessor shall not be deemed a waiver of any prior existing breach by
Lessee regardless of Lessor's knowledge of such prior existing breach at the
time of acceptance of such payments. In any event, Lessee shall, without further
demand, pay to Lessor an amount equal to all sums due and payable for all
periods up to and including the date on which Lessor has declared this Lease to
be in default.
In the event that Lessee shall have paid to Lessor the liquidated damages and
other amounts referred to in the preceding paragraph of this Section, Lessor
hereby agrees to pay to Lessee, promptly after receipt thereof, either (a) if
Lessor re-leases the Equipment, all rentals or proceeds received from the
reletting of the Equipment during the balance of the Initial Term or any
successive period then in effect (after deduction of all expenses incurred by
Lessor), or (b) if Lessor sells the Equipment, all proceeds received from the
sale (after deduction of the estimated residual value of the Equipment as of the
end of the Initial Term or any successive period then in effect and of all
expenses incurred by Lessor), said amount never to exceed the amount of the
liquidated damages paid by Lessee. Lessee agrees that Lessor shall have no
obligation to sell the Equipment. Lessee shall in any event remain fully liable
for reasonable damages as provided by law and for all costs and expenses
incurred by Lessor on account of such default including, but not limited to, all
collection agency fees and all court costs and reasonable attorneys' fees,
whether or not suit is brought, including in-house attorneys' fees. Lessee
hereby agrees that, in any event, it will be liable for any deficiency after any
sale, lease, or other disposition by Lessor. The rights afforded Lessor
hereunder shall not be deemed to be exclusive, but shall be in addition to any
rights or remedies provided by law.
If, upon the cancellation or termination of the applicable Equipment Schedule as
to any Item of Equipment, Lessee fails or refuses to return and deliver
possession of such Item of Equipment to Lessor on the prescribed date, in
addition to all other rights and remedies available to Lessor, Lessee shall
promptly pay Lessor rent equal to the greater of the then fair market month to
month rental value or 150 percent of the current Monthly Rental for all
Equipment as shown on the applicable Equipment Schedule on a month to month
basis until all Equipment is returned to Lessor, provided Lessee shall be liable
for rent through the last day of any monthly extension. Lessee shall remain
liable for any direct damages Lessor may suffer by reason of being unable to
deliver such Item of Equipment to another party.
11. NET LEASE
Except as otherwise specifically provided in this Lease, it is understood and
agreed that each Equipment Schedule constitutes a net lease, and that, as
between Lessor and Lessee, Lessee shall be responsible for all costs and
expenses of every nature whatsoever (including, but not limited to,
transportation, installation, deinstallation, taxes, maintenance, and insurance)
arising out of or in connection with or related to this Lease or the Equipment.
Lessee hereby agrees that in the event that Lessee fails to pay or perform any
obligation under this Lease, Lessor may, at its option. pay or perform said
obligation and any payment made or expense incurred by Lessor in connection
therewith shall become additional rent which shall be due and payable by
3.
<PAGE>
Lessee upon demand. All amounts payable by Lessee under any Equipment Schedule
shall be absolute and unconditional and shall not be subject to any abatement,
reduction, offset, defense, counterclaim, interruption, deferment, or recoupment
for any reason whatsoever, and such amounts shall be and continue to be payable
in all events.
12. ASSIGNMENT
Lessee agrees that Lessor may transfer or assign all or any part of Lessor's
right, title, and interest in, under, or to the Equipment and this Lease or any
Equipment Schedule, and any or all sums due or to become due pursuant to any of
the above, to any third party ("Assignee") for any reason. Lessee agrees that
upon receipt of written notice from Lessor of such assignment, Lessee shall
perform all of its obligations hereunder for the benefit of Assignee and, if so
directed, shall pay all sums due or to become due hereunder directly to Assignee
or to any other party designated by Assignee. Lessee hereby covenants,
represents, and warrants as follows and agrees that Assignee shall be entitled
to rely on and shall be considered a third party beneficiary of the following
covenants, representations, and warranties: (a) Lessee's obligations to Assignee
hereunder are absolute and unconditional and are not subject to any abatement,
reduction, offset, defense, counterclaim, interruption, deferment, or recoupment
available to Lessee for any reason whatsoever including, but not limited to,
operation of law, defect in the Equipment, failure of Lessor to perform any of
its obligations hereunder, any insolvency or bankruptcy of Lessor, or for any
other cause or reason whatsoever, whether similar or dissimilar to the
foregoing; (b) Lessee shall not look to Assignee to perform any of Lessor's
obligations hereunder unless Assignee specifically assumes such obligations; (c)
Lessee will not amend or modify this Lease without the prior written consent of
Assignee; and (d) Lessee will send a copy to Assignee of each notice which
Lessee sends to Lessor.
Upon receipt of notice of such transfer or assignment, Lessee agrees to promptly
execute and deliver to Lessor such documentation as Assignee may require to
secure and/or complete such transfer or assignment, including, but not limited
to, the following: (a) an acknowledgment of, or consent to, the assignment which
may require Lessee to make certain representations or reaffirmations as to some
of the basic terms and covenants contained in this Lease; (b) a Certificate of
Incumbency; (c) an opinion of counsel for Lessee with respect to the
representations and warranties set forth in Section 7(b) above; and (d) a
Certificate of Delivery and Acceptance. Such assignment shall relieve Lessor of
its obligations hereunder upon the assumption thereof in writing by Assignee
unless Lessor, Lessee, and Assignee agree otherwise, and the rights of Lessee
hereunder shall not be impaired.
13. MISCELLANEOUS
(a) Neither this Lease, any Equipment Schedule, nor any consent or approval
provided for herein shall be binding upon Lessor unless signed on its
behalf by a duly authorized officer at its home office. This Lease shall
be deemed to have been made in the State of California and shall be
governed in all respects by the laws, but not the rules relating to choice
of laws, of such State. No rights or remedies referred to in Article 2A of
the Uniform Commercial Code will be conferred on Lessee unless expressly
granted in this Lease or an Equipment Schedule.
(b) This Lease and each Equipment Schedule constitute the entire agreement and
understanding of the parties with respect to the lease of the Equipment
listed on each Equipment Schedule (notwithstanding any contrary provision
contained in any instrument submitted by Lessee), supersede any or all
prior agreements and understandings related to the subject matter hereof,
and may not be changed orally but only by an agreement in writing signed
by both parties. Lessee's purchase order, if any, shall be used for
accounting purposes only and the provisions thereof shall be inapplicable
notwithstanding Lessor's acknowledgment thereof.
- -------
Lessee
Initials
(c) Any notice, request, or other communication to either party by the other
shall be given in writing and deemed received upon the earlier of actual
receipt or three days after mailing if mailed postage prepaid to the
address of the other party as set forth herein or to such other address as
such party shall have designated by proper notice or one day after it is
sent by courier or facsimile transmission if receipt is verified by the
receiving party.
Notices to Lessor shall be sent to the attention of the Manager, Contract
Documents.
(d) Subject to Sections 6(b) and 12 hereof, this Lease shall be binding upon
and inure to the benefit of Lessor and Lessee and their respective
successors and assigns (including any subsequent assignee of an Assignee).
(e) No representation or statement made by any representative of either party
not contained herein shall be binding upon such party. No provision of
this Lease or any Equipment Schedule which may be deemed unenforceable
shall in any way invalidate any other provision or provisions hereof, all
of which shall remain in full force and effect. Neither any failure nor
any delay on the part of either party in exercising any of its rights
hereunder shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise or the exercise of
any other right hereunder.
(f) No waiver of any of the terms and conditions hereof shall be effective
unless in writing and signed by the party against whom such waiver is
sought to be enforced. Any waiver of the terms hereof shall be effective
only in the specific instance and for the specific purpose given.
(g) Lessor is hereby authorized by Lessee to cause this Lease or other
instruments, including Uniform Commercial Code financing statements, to be
filed or recorded for the purposes of evidencing and putting third parties
on notice of Lessor's or Assignee's interest in the Equipment and Lessee
agrees that Lessor or Assignee may execute such instruments for and on
behalf of Lessee. In the event for any reason whatsoever Lessee is `
determined to have an interest in the Equipment other than a purely
leasehold interest for the term of this Lease, Lessee agrees to and does
hereby expressly subordinate such interest to the interests of Owner in
the Equipment and to the security interest in the Equipment of any
Assignee whether such security interest is presently in existence or
hereafter acquired. Lessee shall execute all documents requested by Owner
or any Assignee to evidence such subordination.
(h) During the term of this Lease, Lessee agrees to deliver to Lessor a copy
of Lessee's annual audited financial statements within a reasonable time
after the statements are available.
(i) Lessee's covenants, representations, and warranties shall survive the
expiration, termination, or cancellation of this Lease.
(j) If Equipment delivered pursuant to any Equipment Schedule contains any
features not specified therein, Lessor reserves the right to remove or
deactivate any such features at any reasonable time without liability for
any down time of any Item of Equipment occasioned thereby.
(k) Lessee and Lessor acknowledge that an Equipment Schedule may include
certain software ("Software") in which Lessor and Lessee have no ownership
or other proprietary rights. Where required by the Software owner or
manufacturer, Lessee shall enter into a license or other agreement for the
use of the Software. Any Software agreement shall be separate and distinct
from this Lease and any Equipment Schedule, and Lessor and Assignee shall
not have any rights or obligations thereunder.
(l) This Lease and any Equipment Schedule may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. To
the extent that this Lease constitutes chattel paper, no security interest
in this Lease may be created through the transfer of possession of any
counterpart other than an executed counterpart or a photostatic copy of an
executed counterpart of this Lease together with an executed Equipment
Schedule marked "Original."
(m) It is the intention of the parties hereto to comply with applicable usury
laws. Accordingly, it is agreed that in no event shall this Lease require
the payment or permit the collection of interest in excess of the maximum
amount permitted by law.
LESSOR: PACIFIC ATLANTIC SYSTEMS LEASING LESSEE: MAIL.COM, INC.
By: By: /s/ Bob Helfant 2/3/99
------------------------------------ -----------------------------
Name: Name: Bob Helfant
---------------------------------- ---------------------------
Title: Title: SVP
--------------------------------- --------------------------
Rev.4 8/98
4.
<PAGE>
CERTIFICATE OF INCUMBENCY
Re: Lease Agreement dated January 22, 1999, and all Equipment
Schedule(s) thereto between Pacific Atlantic Systems Leasing and
Mail.com, Inc.
I, Deborah McClister hereby certify that I am the duly elected, qualified and
presently serving CFO of Mail.com, Inc. ("Company"). I further certify that each
of the persons listed below was duly elected or appointed to and on the date
hereof holds the office or position set forth opposite his/her name and that the
signature appearing opposite the name of such person is the genuine signature of
such person. Each such person has the power and authority to execute any and all
documents on behalf of the Company relating to the above referenced transaction
and to bind the Company to perform in accordance with the terms thereof.
Name Office/Position Signature
Bob Helfant SVP /s/ Bob Helfant
- ------------------- ------------------------ -------------------
- ------------------- ------------------------ -------------------
- ------------------- ------------------------ -------------------
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Company this 3 day of Feb, 1999.
_________________________
(Corporate Seal)
<PAGE>
Mail.com[LOGO]
The Internet Messaging Company
February 2, 1999
Pacific Atlantic Systems Leasing
8180 North Hayden Rd, Ste D-l00
Scottsdale, AZ 85258
RE: Equipment schedule No. 1 to Lease Agreement dated January 22,1999 between
Mail.com, Inc. and Pacific Atlantic Systems Leasing (the "Lease")
To Whom It May Concern:
Please accept this letter as our 180-day notice of intent to terminate the Lease
effective June 30, 2002. We would like to know what the fair market value is
several months before the lease termination date so we can make our decision to
return it to you or purchase it. Thank you.
Sincerely,
/s/ Bob Helfant
Bob Helfant
Senior Vice President
Mail.Com, Inc.
11 broadway o suite 660, o new york o ny o p212.425.3477 o f212.425.3487
<PAGE>
[LOGO] GlobeComm(TM) Purchase Order
11 Broadway DATE P.O. NO.
Suite 660
New York, NY 10004 12/9/98 1327
---------------------------------- ----------------------------------
Vendor SHIP TO
---------------------------------- ----------------------------------
MTI iName, Inc.
Ben Woo 25 Broadway
1301 Concord Center/Hwy 36 5th floor
Hazlet, NJ 07730 New York, NY 10004
fax 212-996-1470
---------------------------------- ----------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
REQUISITION No. TERMS Expected SHIP VIA APPROVED BY:
----------------------------------------------------------------------------------------------
see note below 12/2/98 /s/ Bob Helfant
- ---------------------------------------------------------------------------------------------------------------------
ITEM DESCRIPTION QTY RATE AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GL3600IOP per 12/7 letter -frame plus 2 - I0 processors 4 22,000.00 88,000.00
SW2500-CHA StorageWare 2500 shelf with chassis (holds 12 drives) 19 5,680.00 107,920.00
SW25D3-182 18.2GB 10,000 RPM in MTI hot swap RAID canister 120 2,610.00 313,200.00
SW25D3-364 10,000 RPM 36 GB HD 108 4,176.00 451,008.00
support 3 years of 24x7 hardware/software support/warranty 1 0.00 0.00
which includes 7x24 monitoring by MTI.
Discount 1 -193,128.00 -193,128.00
Memo * Terms are 3 year lease beginning 7/1/99 - rate to be 0.00 0.00
approved by iName.
* System supports remote management and configuration.
* System supports Remote Mirroring and MTI will work
with iName to see that is implemented when needed by
iName.
* iName may change the delivery schedule with 30 days
notice to MTI.
- ---------------------------------------------------------------------------------------------------------------------
Total $767,000.00
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EL CAMINO [LOGO] RESOURCES LTD.
ASSIGNMENT OF PURCHASE ORDER
PURCHASE AGREEMENT OR PURCHASE RIGHTS
Introduction
MAIL.COM, INC.. ("Customer") has entered into Purchase Order No. 1327 dated
12/9/98 attached hereto and incorporated herein by reference (the "Purchase
Agreement") with MTI Technology (the "Supplier") for the purchase of certain
equipment described therein (the "Equipment"). In order to facilitate the
Customer's leasing of the Equipment, the Customer wishes to assign its rights to
purchase the Equipment to Pacific Atlantic Systems Leasing, a division of El
Camino Resources, Ltd. ("Assignee"). In the event of any conflict between the
aforesaid documents and this assignment (the "Assignment"), the language of this
Assignment shall control.
Agreement
In consideration of the mutual undertakings herein contained and for other good
and valuable consideration, the receipt of which is hereby acknowledged,
Supplier, Customer and Assignee agree as follows:
1. Customer hereby assigns to Assignee all of Customer's right to purchase
the Equipment, and, subject to the terms and conditions herein contained
and of execution of the lease for the Equipment between the Customer and
Assignee assumes and agrees to perform Customer's obligations to pay the
purchase price for the Equipment including freight, maintenance, set-up,
installation and software. The parties agree that progress payments made
or to be made by the Customer have been made or will be made on behalf of
the Assignee and shall be reimbursed by the Assignee to the Customer, and
the Assignee will only be liable to the Supplier for the actual net amount
still owing.
2. Customer shall remain liable to Supplier for the full performance of
Customer's obligations under the Purchase Agreement (except to the event
provided in Paragraph 1 above), and Customer agrees to hold Assignee
harmless from all loss, cost, damage and expense incurred as a result of
Customer's failure to perform the obligations it retains hereunder with
respect to the Purchase Agreement, or failure to obtain from Supplier a
refund of any funds due from Supplier.
3. Upon delivery of each item of Equipment, title to such item of Equipment
shall be conveyed to Assignee free and clear of all claims, liens and
encumbrances arising under or through the Supplier or Customer. Until
payment in full of the purchase price, the Supplier reserves a purchase
money security interest in the Equipment.
4. All Equipment shall, on the date of acquisition by the Assignee, be newly
manufactured depreciable personal property not used by any party prior to
Assignee's acquisition thereof, except for use by Customer for a period
not exceeding ninety (90) days prior to Assignee's acquisition. Title to
each item of the Equipment shall pass directly from Supplier to Assignee
on the later of the date of delivery of such item to Customer or the date
of this Assignment, and Supplier will invoice Assignee directly for such
purchase. In the event the Equipment is manufactured by Digital Equipment
Corporation, Customer and Supplier agreed that Supplier shall provide
Assignee with a fully executed copy of all media documentation, Software
license agreements, PAK agreements, and upon Assignee's request, any other
documents relating to the Equipment.
5. Any warranties (express or implied) made by the Supplier shall vest in
Assignee, and shall be enforceable by Assignee or by Customer on behalf of
Assignee.
<PAGE>
6. The Assignee is purchasing the Equipment for lease to the Customer and,
where permitted by applicable law, such purchase shall be considered a
purchase for resale.
7. Assignee's purchase payment obligations to Supplier shall be "net 10
days" from the later of: (i) the date of installation of the last unit of
Equipment as evidenced by Assignee's receipt of Assignee's executed
installation acceptance certificate ("Acceptance Certificate") executed
by Customer, as lessee pursuant to a lease with Asignee, as lessor; (ii)
receipt of Supplier's invoice listing all serial numbers and any related
purchase documents; or (iii) on more favorable terms if made available by
Supplier. The Supplier shall, upon request, provide to Assignee any
documents reasonably necessary to confirm that upon its payment of the
purchase price the Equipment will be free and clear of all claims, liens
and encumbrances.
8. In the event that Customer fails to accept the Equipment under the lease
promptly upon its delivery, then Assignee shall have the right upon notice
to Customer and Supplier to terminate this Assignment with respect to such
Equipment, and the Customer shall thereafter directly assume its
obligations to the Supplier under the Purchase Agreement.
9. The parties acknowledge that the Equipment listed herein may include
software ("Software") in which Assignee shall have no ownership or other
proprietary rights and no such title shall be transferred to Assignee
hereunder. Customer agrees to enter into a license or other agreement for
the use of the Software, and Customer agrees that, as between Assignee
and Customer, Assignee shall be third party beneficiary under such
license or other agreement. Any Software agreement shall be separate and
distinct from this Assignment, and Assignee shall not have any right or
obligations thereunder or with respect to such Software.
19. The Purchase Agreement and this Assignment represent the entire
understanding of the parties with respect to the purchase of the
Equipment. No modifications or additions to any of those documents which
affect the purchase shall be made unless consented to in writing by
Customer, Supplier and Assignee. This Assignment is valid only upon
signature of all parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Assignment as of
_______________ , l9__.
MAIL.COM, INC. PACIFIC ATLANTIC SYSTEMS LEASING,
(Customer) a division of El Camino Resources, Ltd.
(Assignee)
By: /s/ Bob Helfant By:
---------------------------- ------------------------------
Title: SVP Title:
------------------------- ---------------------------
Acknowledged and agreed to:
MTI TECHNOLOGY
(Supplier)
By:
----------------------------
Title:
-------------------------
<PAGE>
ECR NO. 4298-001
ADDENDUM A
TO EQUIPMENT SCHEDULE NO. 1 ("SCHEDULE")
TO LEASE AGREEMENT DATED JANUARY 22, 1999
BETWEEN
PACIFIC ATLANTIC SYSTEMS LEASING ("LESSOR") AND
MAIL.COM, INC. ("LESSEE")
Notwithstanding the terms and conditions contained in the Lease Agreement and to
the limited extent hereof, Lessor and Lessee hereby agree that this Addendum A
modifies the terms and conditions of the above referenced Schedule. In the event
of conflict or inconsistency between the terms and conditions hereof and those
of the Lease Agreement, the former shall govern. Unless otherwise herein
defined, the terms used herein shall have the same meanings as ascribed to them
in the Lease Agreement.
Section 3. Term of Lease. For the purpose of this Schedule No. 1 only, shall be
amended as follows: Delete the last two (2) sentences of this section in their
entirety.
Section 13. Miscellaneous. For the purpose of this Schedule No. 1 only, shall be
amended as follows: The following shall be added to this section in its
entirety:
"(n) At the conclusion of the thirty-sixth (36th) Initial Term rental payment
due under the Schedule, or upon any expiration of any renewal or extension
thereof as provided for in option (2) herein or otherwise, Lessee shall,
provided at least one hundred eighty (180) days prior written notice is received
by Lessor via certified mail, do one of the following: 1) purchase all (but not
less than all) of the Items of Equipment for the fair market value, 2) continue
the Schedule for twelve (12) additional months at the rate delineated on the
Schedule, or 3) return the Items of Equipment to Lessor at Lessee's expense to a
destination within the continental United States, and terminate the Schedule,
provided all accrued but unpaid late charges, interest, taxes, penalties, and
any and all other sums due and owing under the Schedule have been paid and
provided the provisions of Section 5 (f) have been specifically adhered to. With
respect to options (1) and (3) each party shall have absolute and sole
discretion regarding their agreement or lack of agreement to either such
arrangement. If Lessor and Lessee have not agreed to either option (1) or (3)
prior to the conclusion of the thirty-sixth (36th) Initial Term rental payment
or if the notice requirement provided for herein is not received by Lessor, via
certified mail, at least one hundred eighty (180) days prior to the conclusion
of the thirty-sixth (36th) Initial Term rental payment, then option (2) shall
prevail at the conclusion of the Initial Term or any renewal or extension
thereof."
In all other respects, the terms and conditions of the Lease Agreement, as
originally set forth, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto, by there authorized signatories, have
executed this Addendum A at the date set forth below their respective
signatures.
Lessor: Lessee:
PACIFIC ATLANTIC SYSTEMS LEASING MAIL.COM, INC.
By: By: /s/ Bob Helfant
---------------------------- ----------------------------
Name: Name: Bob Helfant
-------------------------- --------------------------
Title: Title: SVP
------------------------- -------------------------
Date: Date: 2/3/99
-------------------------- --------------------------
<PAGE>
ECR No. 4298-001
EQUIPMENT SCHEDULE NO. 1
TO LEASE AGREEMENT DATED JANUARY 22, 1999 ("LEASE") BETWEEN
PACIFIC ATLANTIC SYSTEMS LEASING ("LESSOR")
AND MAIL.COM, INC. ("LESSEE")
1.Equipment:
<TABLE>
<CAPTION>
ITEM QTY MFG DESCRIPTION
---- --- --- -----------
<S> <C> <C> <C>
01 04 MTI FRAME PLUS 2-10 PROCESSORS
02 19 STORAGE WARE 2500 SHELF WITH CHASSIS (HOLDS 12 DRIVES)
03 120 18.2GB 10,000 RPM in MTI HOT SWAP RAID CANISTERS
04 108 10,000 RPM 36GB HD
05 01 3 YEARS OF 24X7 HARDWARE/SOFTWARE SUPPORT/WARRANTY, AND 7X24
MONITORING BY MTI
TOTAL EQUIPMENT COST $767,000.00
</TABLE>
Note 1: To the extent there is software bundled with the Equipment,
Lessor is not leasing software to Lessee nor providing Lessee
with a license to use any software. Lessor has no ownership or
proprietary right to any software associated with the
Equipment, but is merely financing Lessee's acquisition of the
right to use the software. Any license must be between Lessee
and the respective software vendor.
Note 2. Lessee agrees that the above described configuration may be
amended by Lessor to reflect the configuration appearing on
Manufacturer's or supplier's invoice for the Equipment and that
Lessor may insert the serial numbers and other identifying data
of the Equipment.
2. Equipment Location: Mail.com, Inc.
25 Broadway, 5th Floor
New York, NY 10004
3. Projected Installation Date: On or by June 15, 1999.
<PAGE>
4. Installation Date: _________, 199__. If this space is not completed, the
Installation Date of each Item of Equipment shall be:
(a) in the case of an Item of Equipment which is the subject of a sale and
leaseback between Lessor and Lessee, the date upon which Lessor purchases such
Item of Equipment from Lesser; or
(b) in the case of and item of Equipment which is currently installed at the
Equipment Location, but where Lessor is obtaining title directly from
Manufacturer or supplier, the date upon which Lessor purchases such Item of
Equipment from Manufacturer or supplier; or
(c) in the case of an Item of Equipment requiring installation, the earlier to
occur of the following: (i) the date determined by Manufacturer or Maintenance
Organization to be the date of installation; or (ii) unless Lessor and Lessee
agree otherwise, the seventh day following delivery of such Item of Equipment to
the Equipment Location.
5. Commencement Date: July 1, 1999.
6. Initial Term: 36 months, beginning July 1, 1999, and the rent free period
from the Installation Date to the Commencement Date.
7. Monthly Rental: $26,284.00. A one month deposit in the amount of $26,284.00
is required and shall be applied to the last billing period of the Initial Term.
8. Additional Consideration: In addition to the rent payable under this
Equipment Schedule, Lessee shall grant to Lessor warrants to purchase a number
of shares of common stock determined based on the valuation of Mail.com, Inc. in
the current venture round plus twenty percent (20%) on mutually agreeable terms
set forth in a separate agreement executed contemporaneously herewith.
9. Lease Agreement. The lease and this Equipment Schedule may not be changed
orally but only by an agreement in writing signed by both parties. All of the
other terms, covenants, and conditions set forth in the Lease are set forth
herein by reference as if the same had been set forth in full. By their
execution and delivery of this Equipment Schedule, the parties hereby reaffirm
all of the terms and conditions of the Lease (including, without limitation, the
representations and warranties of Lessee set forth in Section 7 thereof) except
as modified herein.
LESSOR: PACIFIC ATLANTIC SYSTEMS LEASING Lessee: MAIL.COM, INC.
By: By: /s/ Bob Helfant
--------------------------------- ----------------------------
Name: Name: BOB HELFANT
------------------------------- --------------------------
Title: Title: SVP
------------------------------ -------------------------
Date: , 199 Date: 2/3/, 1999
----------------- --- -------------------
<PAGE>
Exhibit 10.24
- --------------------------------------------------------------------------------
CLASS A PREFERRED
STOCK PURCHASE AGREEMENT
between
GLOBECOMM, INC.
and
Jeff Barbakow, Hoyt Davidson, David Dennis,
Ihsan Essaid, Trevor Fettor, Dan Flatley,
Gerald Gorman, Tony James, Stephen Ketchum,
Ryan Kim, Steve Lebow, Joe Low,
Marsha Plotnitsky, Andrew Rush, Arvind Sanger,
Tim Weller, Vincent Degiaimo, William Donaldson,
Jack Kuehler, Tripp Smith, Vincent Degiamo
Rens Lipsius, Arkady Plotnitsky
Dated as of
May 27, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section 1. DEFINITIONS AND TERMS
Section 1.1. Definitions ....................................... 1
Section 1.2. Other Terms ....................................... 5
Section 1.3. Other Definitional Provisions ..................... 5
Section 2. BASIC TRANSACTION
Section 2.1. Sale of Shares .................................... 6
Section 2.2. Closing ........................................... 6
Section 2.3. Actions at the Closing ............................ 7
Section 2.4. Effect of Sale .................................... 7
Section 2.5. Escrow Funds ...................................... 8
Section 2.6. Issuance of Shares ................................ 10
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. Organization, Qualification and [ILLEGIBLE]
ii
<PAGE>
Section 3.19. Schedule of Contracts ............................. 15
Section 3.20. No Other Representations or
Warranties; Accurate at Closing ................. 15
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Section 4.1. Investment Representation ......................... 15
Section 4.2. Restricted Securities ............................. 16
Section 4.3. Legends ........................................... 16
Section 4.4. Due Diligence Investigation ....................... 16
Section 5. CONDITIONS TO THE PURCHASERS' OBLIGATIONS
Section 5.1. Representations and Warranties Correct ............ 17
Section 5.2. Performance ....................................... 17
Section 5.3. Compliance Certificate ............................ 17
Section 5.4. Secretary's Certificate ........................... 17
Section 5.5. Opinion of Counsel ................................ 17
Section 6. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Section 6.1. Representations and Warranties Correct ............ 18
Section 6.2. Performance ....................................... 18
Section 6.3. Investment Representation ......................... 18
Section 7. REGISTRATION RIGHTS
Section 7.1. Registration ...................................... 18
Section 7.2. Obligations of the Company ........................ 21
Section 7.3. Furnish Information ............................... 22
Section 7.4. Registration Expenses ............................. 22
Section 7.5. Selection of Underwriters ......................... 23
Section 7.6. Delay of Registration ............................. 23
Section 7.7. Conversion of Shares .............................. 23
Section 7.8. Indemnification ................................... 24
Section 7.9. No-Action Letter .................................. 26
Section 7.10. Reports Under the 1934 Act ........................ 26
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Section 7.11. Lock Up Period .................................... 27
Section 7.12. Transfer of Registration Rights ................... 27
Section 8. OTHER COVENANTS
Section 8.1. Modification of Bylaws ............................ 27
Section 8.2. Financial Statements .............................. 29
Section 8.3. Inspection ........................................ 29
Section 8.4. Covenant Not to Compete ........................... 30
Section 8.5. Arm's Length Transaction .......................... 30
Section 8.6. Termination ....................................... 30
Section 8.7. Voting Agreement .................................. 30
Section 8.8. Indemnification ................................... 31
Section 8.9. Transfer of Class B Common Stock .................. 31
Section 8.10. Authorization of Additional
Class A Preferred Stock ......................... 33
Section 8.11. Reservation of Stock Issuable
Upon Conversion ................................. 34
Section 9. PREEMPTIVE RIGHTS
Section 9.1. Rights of Inclusion ............................... 34
Section 9.2. Rights to Compel .................................. 36
Section 9.3. Right of First Offer .............................. 38
Section 10. POST CLOSING SHARE PRICE ADJUSTMENTS
Section 10.1. Anti-Dissolution .................................. 40
Section 10.2. Performance Ratchet ............................... 41
Section 10.3. Restrictions on Dividends ......................... 41
Section 11. MISCELLANEOUS
Section 11.1. Public Announcements .............................. 42
Section 11.2. No Third Party Beneficiaries ...................... 42
Section 11.3. Default ........................................... 42
Section 11.4. Notices ........................................... 42
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Section 11.5. Governing Law ..................................... 42
Section 11.6. Waivers ........................................... 42
Section 11.7. Headings .......................................... 43
Section 11.8. Severability ...................................... 43
Section 11.9. Binding Effects ................................... 43
Section 11.10. Counterparts ...................................... 43
Section 11.11. Execution of Document ............................. 43
Section 11.12. Expenses .......................................... 43
Section 11.13. Construction ...................................... 44
Section 11.14. Incorporation of Exhibits and
Schedules ..................................... 44
Section 11.15. Entire Agreement .................................. 44
Schedules
Schedule A: Purchasers' Shares Stage One ............................ S-1
Schedule B: Purchasers' Shares Stage Two ............................ S-4
Schedule C: Purchasers' Shares Stage Three .......................... S-6
Schedule D: Employees' Stock Rights ................................. S-8
Schedule E: Schedule of Contracts ................................... S-9
Exhibits
Exhibit A: Amendment to Certificate of Incorporation
Exhibit B: Investment Letter
Exhibit C: Opinion Letter
Exhibit D: Proprietary Information Agreement
Exhibit E: Ratchet Example
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CLASS A PREFERRED
STOCK PURCHASE AGREEMENT
AGREEMENT, dated the 27th day of May, 1997 by and between GLOBECOMM, INC.
(the "Company") doing business at 11 Broadway, Suite 660, New York, New York and
Jeff Barbakow, Hoyt Davidson, David Dennis, Ihsan Essaid, Trevor Fetter, Dan
Flatley, Gerald Gorman, Tony James, Stephen Ketchum, Ryan Kim, Steve Lebow, Joe
Low, Marsha Plotnitsky, Andrew Rush, Arvind Sanger, Tim Weller, Tripp Smith,
Vincent Degiamo, William Donaldson, Jack Kuehler, Rens Lipsuis and Arkady
Plotnitsky (collectively referred to as the "Purchasers" and individually as
"Purchaser"). The Company and the Purchasers are collectively referred to as the
"Parties."
WHEREAS, the Company desires to sell to the Purchasers, and the Purchasers
desire to purchase from the Company, certain shares of Class A Preferred Stock
of the Company upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the Parties hereto do hereby agree as follows:
SECTION 1. DEFINITIONS AND TERMS
1.1. Definitions. The following terms, as used herein, shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended.
"Additional Shares" has the meaning set forth in Section 9.1.3. of
this Agreement.
"Adjusted Share Price" has the meaning set forth in Section 10.2.1.
of this Agreement.
"Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
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"Agreement" means this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Books and Records" means all books, ledgers, files, reports,
documents, plans and operating records of, or maintained by, the Company, and
all other data in the possession of the Company relating to or reasonably
required for the operation of the Company's business.
"Class A Common Stock" means the thirteen million (13,000,000)
shares of Class A Common Stock that the Company is authorized to issue by way of
the Company's Certificate of Incorporation, and amendments thereto.
"Class A Preferred Stock" means the three million (3,000,000) shares
of Class A Preferred Stock that the Company is authorized to issue by way of the
Company's Certificate of Incorporation, and amendments thereto.
"Class B Common Stock" means the five million (5,000,000) shares of
Class B Common Stock that the Company is authorized to issue by way of the
Company's Certificate of Incorporation, and amendments thereto.
"Closing" has the meaning set forth in Section 2.2. of this
Agreement.
"Closing Date" has the meaning set forth in Section 2.2. of this
Agreement.
"Company" has the meaning set forth in the preface above.
"Company Sale" means the sale of all or substantially all of the
assets or capital stock of the Company or the merger, consolidation or
combination of the Company with any other Person.
"Company Stock" means any shares of any class of authorized capital
stock in the Company.
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"Confidential Information" means any information concerning the
businesses and affairs of the Company that is not already generally available to
the public.
"Controlling Stockholder" means Gerald Gorman, an individual
residing at 180 Midland Avenue, Montclair, New Jersey.
"Demand Registration" has the meaning set forth in Section 7.1.3. of
this Agreement.
"Designated Shares" has the meaning set forth in Section 9.2.1. of
this Agreement.
"Disclosure Schedule" has the meaning set forth in Section 3 of this
Agreement.
"Drag-Along Purchaser" has the meaning set forth in Section 9.2.2.
of this Agreement.
"Escrow Agent" has the meaning set forth in Section 2.3. of this
Agreement.
"Escrow Funds" has the meaning set forth in Section 2.5. of this
Agreement.
"Financial Statements" has the meaning set forth in Section 3.9. of
this Agreement.
"Form S-3" means such form under the Act as in effect on the date
hereof or any registration form under the Act subsequently adopted by the SEC
which permits inclusion or incorporation of substantial information by reference
to other documents filed by the Company with the SEC.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Holder" means any Person owning or having the right to acquire
Registrable Securities.
"Incidental Registration" has the meaning set forth in Section
7.1.1. of this Agreement.
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"Indemnified", "Indemnifying" has the meaning set forth in Section
7.8. of this Agreement.
"Knowledge" means actual knowledge after reasonable investigation.
"Offering Notice" has the meaning set forth in Section 9.3.2. of
this Agreement.
"Ordinary Course of Business" means the ordinary course of business
of the Company consistent with past custom and practice.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Proposed Purchaser" has the meaning set forth in Section 9.1.1.
"Purchaser" has the meaning set forth in the preface above.
"Registrable Securities" means (i) the Shares, (ii) the Class A
Common Stock issuable or issued upon conversion of the Shares and (iii) any
capital stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the securities referenced in (i) or (ii) above.
"SEC" means the Securities and Exchange Commission.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (A) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (B) purchase money liens securing rental payments under
capital lease arrangements, and (C) liens, charges,
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encumbrances, easements, rights-of-way, building and use restrictions,
exceptions, reservations and limitations that do not in any material respect
adversely detract from the value of the property subject thereto or materially
impair the operation of the Company.
"Shares" means the shares of Class A Preferred Stock issued or to be
issued to any Purchaser pursuant to this Agreement.
"Share Price" has the meaning set forth in Section 2.1.1. of this
Agreement.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tag-Along Purchaser" has the meaning set forth in Section 9.1.2. of
this Agreement.
"Transfer Allotment" has the meaning set forth in Section 9.1.2. of
this Agreement.
"Transfer Date" has the meaning set forth in Section 9.1.2. of this
Agreement.
"Transfer Notice" has the meaning set forth in Section 9.1.2. of
this Agreement.
1.2. Other Terms. Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning throughout
this Agreement.
1.3. Other Definitional Provisions. The words "herein", "hereof", "hereto"
and "hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa, and in such gender, as the sense and
circumstances require.
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SECTION 2. BASIC TRANSACTION
2.1. Sale of Shares.
2.1.1. Stage One Purchase. Subject to the terms and conditions of
this Agreement, the Company shall issue and sell to the Purchasers, and the
Purchasers shall purchase from the Company, the number of the Shares set forth
opposite each Purchaser's name on Schedule A at a cash purchase price of two
dollars ($2.00) per Share (the "Share Price"). The Company's agreements with
each of the Purchasers are separate agreements, and the sales of the Shares to
each Purchaser are separate sales.
2.1.2. Stage Two Purchase. Subject to the occurrence of events set
forth in Section 2.5.2.(A), the Company shall issue and sell to each Purchaser,
and each Purchaser shall purchase from the Company, the number of Shares set
forth opposite each Purchaser's name on Schedule B at the Share Price; provided,
however, in the event of a sale of Common Stock by the Company as set forth in
Sections 10.1. and 10.2. prior to the occurrence of events set forth in Section
2.5.2.(A), the Share Price shall be adjusted in accordance with Sections 10.1.
and 10.2.
2.1.3. Stage Three Purchase. Subject to the occurrence of events set
forth in Section 2.5.2.(B), the Company shall issue and sell to each Purchaser,
and each Purchaser shall purchase from the Company, the number of Shares set
forth opposite each Purchaser's name on Schedule C at the Share Price; provided,
however, in the event of a sale of Common Stock by the Company as set forth in
Section 10.1. and 10.2. prior to the occurrence of events set forth in Section
2.5.2.(B), the Share Price shall be adjusted in accordance with Sections 10.1.
and 10.2.
2.2. Closing. The purchase and sale of the Shares listed on Schedule A
(the "Closing") shall take place at the offices of the Company at 2:00 p.m. on
May 27, 1997, or at such other time, date and place as the Company and the
Purchasers acquiring in the aggregate more than fifty (50%) percent of the
Shares may otherwise agree (the "Closing Date").
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2.3. Actions at the Closing. On the Closing Date, (A) each Purchaser shall
deliver to the Company by personal check, the purchase price listed opposite
such Purchaser's name on Schedule A hereto, (B) each Purchaser shall deliver to
Brian J. Zimmet (the "Escrow Agent") by personal check, the purchase price
listed opposite such Purchaser's name on Schedules B and C to be held in
accordance with Sections 2.5. and 2.6., and (C) the Company shall issue to each
Purchaser the number of such Shares listed opposite such Purchaser's name on
Schedule A by delivering to such Purchaser the stock certificates for such
Shares duly issued and such other instruments as shall reasonably be required by
the Purchasers to grant to the Purchasers all rights, title and interest in such
Shares.
2.4. Effect of Sale.
2.4.1. Certificate of Incorporation. The Certificate of
Incorporation of the Company, and the amendments thereto, in effect at and as of
the Closing Date, shall remain the Certificate of Incorporation of the Company;
provided, however, that as a condition precedent to the Closing, the Company
shall amend its Certificate of Incorporation as set forth in Section 7.7. of
this Agreement.
2.4.2. Bylaws. The Bylaws of the Company, and the amendments
thereto, in effect at and as of the Closing Date, shall remain the Bylaws of the
Company; provided, however, that, as a condition precedent to the Closing, the
Company shall amend its Bylaws as set forth in Section 8.1. of this Agreement.
2.4.3. Directors and Officers. The directors and officers of the
Company in office at and as of the Closing Date will remain the directors and
officers of the Company retaining their respective positions and terms of
office; provided, however that the holders of shares of Class A Preferred Stock
shall, concurrently with the Closing, elect the directors and be granted the
right to elect members to the Company's board of directors in accordance with
Section 8.1. of this Agreement.
2.4.4. Outstanding Shares. Each share of the Company's Stock which
is outstanding at and as of the Closing Date will remain issued and outstanding.
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2.5. Escrow Funds. The funds delivered to the Escrow Agent in accordance
with Section 2.3. (B) (the "Escrow Funds") shall be held upon the following
terms and conditions:
2.5.1. Deposit of Proceeds. The Escrow Agent shall deposit the
Escrow Funds in an interest-bearing account at Merrill Lynch Pierce, Fenner &
Smith, Inc., 200 Park Avenue, New York, New York. The Escrow Agent shall deposit
the Escrow Funds in a money market fund bearing interest at a rate competitive
with other similar money market funds. Upon depositing the Escrow Funds, the
Escrow Agent shall notify the Parties of the bank where the Escrow Funds are
deposited and the account number of the escrow account.
2.5.2. Distribution of the Proceeds. The Escrow Agent shall
distribute (A) one-half of the Escrow Funds to the Company conditioned upon the
Company collecting revenues in the amount of fifty thousand dollars ($50,000)
from customers of the Company, which are not Affiliates of the Company, in
payment for subscriptions for the use of the Company's products and services,
and (B) the balance of the Escrow Funds (including all accumulated interest) to
the Company conditioned upon the Company collecting revenues in the amount of
fifty thousand dollars ($50,000) from customers of the Company which are not
Affiliates of the Company for e-mail and banner advertisements, newsletter
promotions, and other third-party revenues not paid directly by users, but
excluding revenues in payment of subscriptions for the use of the Company's
products and services. In the event that the Company fails to satisfy both the
conditions of this Section 2.5.2. on or by December 31, 1998, the Escrow Funds,
together with all accumulated interest, shall be refunded pro rata to the
purchasers; provided, however, if the Company satisfies one (but not both) of
the conditions of this Section 2.5.2. on or before December 31, 1998, fifty
percent (50%) of the Escrow Funds (including all accumulated interest on the
aggregate amount of the Escrow Funds) shall be returned pro rata to the
Purchasers.
2.5.3. Release and Discharge. Following the Escrow Agent's payment
of the Escrow Funds pursuant to the terms of this Agreement, the Escrow Agent
shall be released and discharged from all obligations and liabilities in
connection with the Escrow Funds.
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2.5.4. Interpleader of Escrow Funds. In the event of a dispute
between the Company and the Purchasers, as determined in good faith by the
Escrow Agent, the Escrow Agent may, in his sole discretion, deposit the Escrow
Funds with a court of competent jurisdiction selected by him in his capacity as
Escrow Agent, and, in such event, the Escrow Agent shall be fully released and
discharged from all liabilities and responsibilities in connection with holding
the Escrow Funds.
2.5.5. Obligations of the Escrow Agent. The Parties acknowledge that
the Escrow Agent is acting solely as a stakeholder at their request and that the
Escrow Agent shall not be deemed to be an agent of the Parties in any action
that he shall take in his capacity as Escrow Agent. The duties of the Escrow
Agent are only as herein specifically provided and are purely ministerial in
nature. The Escrow Agent shall not be liable for any action or omission on his
part unless such action or omission is as a result of his willful misconduct or
gross negligence. The Escrow Agent shall not incur liability for acting upon any
instruction, notice or receipt of document believed by him to be genuine and to
have been made, signed. sent or presented by a Person authorized to perform such
acts.
2.5.6. Indemnification of the Escrow Agent. The Parties shall
severally but not jointly, in proportion to the relative amount of the purchase
price paid by each of them, indemnify and hold harmless the Escrow Agent from
and against any and all costs, losses, claims, damages, liabilities and
expenses, including, without limitation, costs of investigation, court costs,
attorneys' fees and disbursements, which may be imposed upon or incurred by
Escrow Agent in connection with his acceptance of, or appointment as, Escrow
Agent hereunder, or in connection with the performance of his duties hereunder,
including, without limitation, any litigation arising out of this Agreement or
involving the subject matter hereof; provided, however, that this indemnity
shall not cover costs, losses, claims, damages, disbursements, liabilities and
expenses arising out of the Escrow Agent's willful misconduct or gross
negligence as determined by a final judgment of a court of competent
jurisdiction.
2.5.7. Representation. The Escrow Agent shall have the right to act
as counsel to the Company in any dispute
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with respect to the Escrow Funds; provided, however, that the Escrow Agent shall
resign and concurrently therewith, the Company shall be required to appoint a
successor escrow agent over the Escrow Funds prior to the commencement of any
such representation.
2.6. Issuance of Shares. Upon the Escrow Agent's release of any Escrow
Funds to the Company in accordance with Section 2.5.2(A) or (B), the Company
shall issue the amount of Shares to each Purchaser listed opposite such
Purchaser's name on Schedules B and C, respectively, by delivering to such
Purchaser the stock certificates for such Shares duly issued, and such other
instruments as shall reasonably be required by the Purchasers to grant to such
Purchaser all rights, title and interest in the Shares listed in Schedules B and
C, respectively.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the disclosure schedule accompanying this Agreement and initialed by
the Parties (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
3.1. Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. The Company is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. The Company has full corporate power and authority to
carry on the business in which it is engaged and to own and use the properties
owned and used by it.
3.2. Capitalization.
3.2.1. Corporate Formation. The total number of shares of all
classes of stock that the Corporation is authorized to issue is twenty one
million (21,000,000), consisting of thirteen million (13,000,000) shares of
Class A Common Stock
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with a par value of one cent ($.0l) per share, of which 2,433,750 shares are
issued and outstanding, three million (3,000,000) shares of Class A Preferred
Stock with a par value of one cent ($.01) per share, of which 327,500 shares are
issued and outstanding, and five million (5,000,000) shares of Class B Common
Stock with a par value of one cent ($01) per share, of which 5,000,000 are
issued and outstanding.
3.2.2. Preferences of Classes. The Shares shall have the voting
rights, preferences and qualifications as set forth in the Amendment to the
Certificate of Incorporation, a copy of which is attached as Exhibit A.
Immediately prior to the issuance of the Shares listed in Schedule A, the
outstanding liquidation preference of the outstanding Class A Preferred Stock
and Class B Common Stock is $1,195,500.
3.3. Outstanding Stock. All of the issued and outstanding shares of
Company Stock have been duly authorized and are validly issued, fully paid, and
nonassessable. Except for stock and stock options of employees of the Company
listed on Schedule D, and the 750,000 shares of Class A Common Stock reserved
for issuance of options in the future as described in Section 10.1., there are
(A) no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock, or (B) no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to the Company.
The Company is not a party or subject to any agreement or understanding and, to
the best knowledge of the Company, there is no agreement or understanding
between any Persons, which affects or relates to the voting or giving of written
consent with respect to any security of the Company or the voting by any
director of the Company.
3.4. Subsidiaries. The Company does not presently own or control, within
the meaning of Section 15 of the Act, any other corporation, association, or
business entity.
3.5. Registration Rights. Except as provided in this Agreement, the
Company is not obligated to register under the Act any outstanding shares of
Company Stock or any of its securities
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that may be issued subsequent to the date hereof.
3.6. Authorization of Transaction. The Company has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Company, enforceable
in accordance with its terms and conditions.
3.7. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company or any of its properties or
assets is subject or any provision of the charter or bylaws of the Company, or
(B) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate, or
cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which the Company is a party or by which it
is bound or to which any of its properties or assets is subject, or (C) result
in the imposition of any Security Interest upon any of its properties or assets.
3.8. Validity of Securities. The Shares, when issued, sold, and delivered
in accordance with the terms of this Agreement, shall be duly and validly
issued, fully paid, and nonassessable, and shall not be subject to any
preemptive rights or liens, claims, or encumbrances other than restrictions on
transfer under federal or state securities laws. The shares of Class A Common
Stock issuable upon conversion of the Shares have been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the amended
certificate of incorporation, will be duly and validly issued, fully paid and
nonassessable, and shall not be subject to any preemptive rights or liens,
claims or encumbrances other than restrictions on transfer under federal or
state securities laws.
3.9. Financial Statements. The Company has delivered to the Purchasers an
unaudited balance sheet and income statement of the Company as at and for the
year ended December 31, 1996 and
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for the quarter ended March 31, 1997 (the "Financial Statements"). The Financial
Statements are complete, true and correct in all material respects, have been
prepared in accordance with GAAP consistently applied throughout the periods
represented thereby, and present fairly the financial position of the Company
and the results of its operations as of the dates and for the periods covered
thereby.
3.10. No Adverse Change. Since March 31, 1997, there has been no change in
the assets, liabilities, financial condition, properties, or operation of the
Company other than changes in the Ordinary Course of Business, none of which
individually or in the aggregate have been materially adverse to the business,
properties, prospects or financial condition of the Company.
3.11. Undisclosed Liabilities. The Company has no liability, whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including any liability for taxes, except for (A)
liabilities set forth on the face of the Financial Statements and (B)
liabilities which have arisen in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law). No representation or warranty by the Company herein and no statement
contained in any document or other writing furnished by the Company in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was made,
to make the statements herein or therein not misleading.
3.12. Property and Assets. The Company has good and marketable title to
all of its properties and assets, and good and valid interest as lessee in all
properties held under lease, held in each case subject to no Security Interest.
With respect to the properties and assets it leases, the Company is in
compliance with the terms of such leases.
3.13. Litigation. There is no action, proceeding, or investigation pending
or, to the knowledge of the Company,
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threatened, or claim that has been made against the Company which seeks to
restrain, enjoin, prevent the consummation of or otherwise challenge this
Agreement, or the transactions contemplated hereby, or which might result,
either individually or in the aggregate, in any material adverse change in the
assets, conditions, affairs, or prospects of the Company.
3.14. Taxes. The Company has filed all federal, state, and local tax
returns and forms that are required to be filed by it, and has paid or made
provision for the payment of all taxes that have become due pursuant to said
returns or pursuant to any assessment received by it, or which, to the best
knowledge of the Company, are expected to become due with respect to the
Company's business, properties and operations.
3.15. Insurance. The Company maintains and keeps in force, with good and
responsible insurance companies adequate amounts of fire, public liability,
property damage, workers' compensation, and such other insurance as is usual and
customary in the type of business conducted by the Company.
3.16. Agreements with Related Parties. Except as attached hereto in
Schedule D, (A) the Company does not have any employees or former employees,
consultants or former consultants; (B) the Company is not a party to or
otherwise obligated under any collective bargaining agreement, and (C) the
Company does not maintain, contribute to, or have liability or obligation with
respect to any employee benefit plan as defined in Section 3 of the Employee
Retirement Income Security Act of 1974, as amended, or other employee program,
including, without limitation, any pension, medical, accident, life, disability,
policy or program.
3.17. Brokers' Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
3.18. Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local government authority is required on the part of the
Company in connection with the consummation of the transactions contemplated by
this Agreement.
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3.19. Schedule of Contracts. Attached as Schedule E are all contracts to
which the Company is currently a party (the "Contracts"). The Company is not in
default or breach under any of the Contracts, nor, to the best knowledge of the
Company, is any other party thereto in default or breach thereunder, nor are
there facts or circumstances which have occurred which, with or without the
giving of notice or the passage of time or both, would constitute a default or
breach under any of the Contracts.
3.20. No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 3, neither the Company
nor any other Person makes any express or implied representation or warranty on
behalf of the Company, and the Company hereby disclaims any such representation
or warranty whether made by Company, its Affiliates, officers, directors,
shareholders, employees, agents or representative or any other Person. The
representations and warranties contained in this Section 3 are true and correct
as of the date hereof and shall be true and correct as of the date of the
Closing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants as to itself, severally and not
jointly, to the Company that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date, except as set forth in the Disclosure Schedule
accompanying this Agreement and initialed by the Parties. The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.
4.1. Investment Representation. The Purchaser acknowledges that it is
aware that the Shares have not been registered under the Act. The Purchaser
represents and warrants to the Company that the Purchaser is acquiring the
Shares for investment and not with a view to or for sale in connection with any
distribution thereof or with any present intention of selling the Shares in
connection with a distribution, and Purchaser does not presently have reason to
anticipate any change in circumstances or any particular occasion or event that
would cause Purchaser to distribute the Shares.
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4.2. Restricted Securities. The Purchaser understands that the Shares are
characterized as "restricted securities" under the federal securities laws
inasmuch as the Shares are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Act only in certain
limited circumstances.
4.3. Legends. The Purchaser understands that the certificates evidencing
the Shares may bear the following legends:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933. The shares have been acquired not with a view to
distribution and may not be offered, sold, transferred, pledged, or hypothecated
in the absence of an effective registration statement for the shares under the
act and under any applicable state securities laws, or an opinion of counsel to
the corporation that such registration is not required as to such sale or offer.
The stock transfer agent has been ordered to effectuate transfers of this
certificate only in accordance with the above instruction."
"The shares of Class A Preferred Stock represented by this certificate are
subject to the terms and conditions provided in a Class A Preferred Stock
Purchase Agreement dated as of May 27, 1997, among the Company and the
Purchasers of Class A Preferred Stock identified therein, a copy of which is on
file with the Secretary of the Corporation. Any transfer in violation of that
agreement is invalid. By its acquisition of the shares represented by this
certificate, the holder hereof agrees to be bound by the terms and conditions of
such agreement."
4.4. Due Diligence Investigation. The Purchaser has completed to its
satisfaction an independent investigation of the Books and Records of the
Company and understands the nature of the potential risks and potential rewards
of its ownership interest in the Company. The Purchaser is a sophisticated
investor with investment experience in the area of venture capital and, in the
event of any liquidation or winding up of the Company, has the ability to bear
complete loss of its investment.
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SECTION 5. CONDITIONS TO THE PURCHASERS' OBLIGATIONS
The obligations of each Purchaser under Section 2 are subject to the
fulfillment at or before Closing of each of the following conditions:
5.1. Representations and Warranties Correct. The representations and
warranties contained in Section 3 shall be true and correct on the Closing Date
as if such representations and warranties were made on and as of such date.
5.2. Performance. The Company shall have performed and complied with all
agreements, conditions, and covenants contained in the Agreement (including,
without limitation, the approval by the Board of Directors of the resolutions
set forth in Section 8.1.1.) required to be performed or complied with by it on
or before Closing. The Company shall have furnished to the Purchasers a copy of
the written consent of the holders of Class A Preferred Stock set forth in
Section 8.1.2.
5.3. Compliance Certificate. There shall have been delivered to each
Purchaser a certificate, dated as of Closing Date, signed by the Company's
President, certifying that the conditions specified in Section 5.1. and 5.2.
have been fulfilled.
5.4. Secretary's Certificate. The Secretary of the Company shall have
delivered to each Purchaser a certificate attaching the Company's Certificate of
Incorporation, By-Laws and resolutions of the Board of Directors and
shareholders of the Company approving the execution, delivery and performance of
this Agreement, and the transactions contemplated hereby.
5.5. Opinion of Counsel. The Purchasers shall have received from Brian J.
Zimmet, counsel for the Company, an opinion dated as of the Closing Date,
substantially in the form attached as Exhibit B.
SECTION 6. CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company under Section 2 of this Agreement are
subject to the fulfillment at or before Closing of
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each of the following conditions:
6.1. Representations and Warranties Correct. The representations and
warranties of each Purchaser contained in Section 4 shall be true on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date.
6.2. Performance. Each Purchaser shall have performed and complied with
all agreements, conditions, and covenants contained in this Agreement required
to be performed or complied with by it on or before Closing.
6.3. Investment Representation. Each Purchaser shall execute and deliver
to the Company, with regard to the Shares to be issued by the Company to such
Purchaser, an investment letter substantially in the form attached to this
Agreement as Exhibit C.
SECTION 7. REGISTRATION RIGHTS
The Company and each Purchaser covenant and agree as follows:
7.1. Registration
7.1.1. Incidental Registration. If at any time the Company proposes
to register any Company Stock under the Act for its own account or for the
account of any of its security holders, on a form that would also permit
registration of the Registrable Securities, the Company shall, each such time,
give each Holder not less than twenty (20) days written notice of such proposed
registration (the "Incidental Registration"). Upon the written request of a
Holder, given within ten (10) days after receipt of any such notice from the
Company, the Company shall use its best efforts to include in such registration
all of the Registrable Securities any Holder requests be registered in such
registration.
7.1.2. Pro Rata Incidental Registration of Company Stock. If the
managing underwriter of any such offering determines that the number of shares
proposed to be sold by the
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Company or by other holders of shares of Company Stock is greater than the
number of shares that the underwriter believes feasible to sell at the time, at
the price and upon the terms approved by the Company, then the number of shares
of Company Stock that the underwriter believes may be sold shall be allocated
for inclusion in the registration statement in the following order of priority:
(A) Company Stock sold for the account of the Company; (B) pro rata among the
Holders and other holders whose shares are being registered therein according to
the number of shares requested to be registered by the Holders and such other
holders; provided, however, that (1) at least ten percent (10%) of each Holder's
Registrable Securities requested to be included shall be included in such
underwriting (other than the initial underwriting); and (2) the right of Holders
of Registrable Securities to participate in the offering shall have priority
over the holders of Class A Common Stock and Class B Common Stock, If a Holder
disapproves of the terms of the underwriting, it may elect to withdraw therefrom
by written notice to the Company and the managing underwriter; provided,
however, the election to withdraw occurs within ten (10) days after a Holder
receives notice of the terms of the underwriting.
7.1.3. Demand Registration. On or after the earlier of (A) the
effective date of a registration statement filed by the Company in connection
with an initial public offering of any Company Stock or other securities under
the Act, or (B) eighteen (18) months after the date of this Agreement, then,
upon written request of Holders holding in the aggregate greater than fifty
percent (50%) of the Registrable Securities that the Company effect the
registration under the Act of all or a portion of the Registrable Securities and
specifying the intended method of disposition thereof, the Company shall, within
fifteen (15) days after the Company has received such written notice, promptly
commence and use its best efforts to consummate the registration under the Act
of the Registrable Securities, or such portion thereof, and of all other stock
or securities which the Company has been requested to register by any other
Holder (the "Demand Registration"); provided, however, that (1) the Holders in
the aggregate will be entitled to request three (3) Demand Registrations,
provided that either (a) the Registrable Securities requested to be included in
such Demand Registration constitute at least twenty percent (20%) of the total
number of Registrable Securities issued hereunder or (b) the anticipated
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gross receipts from the offering exceed ten million dollars ($10,000,000), (2) a
registration will not count as one of such three permitted Demand Registrations
until it has become effective, (3) the Company may delay the filing of a
registration statement under the Act as required by this Section 7.1.3. for a
period of up to sixty (60) days after the request of the Holders if the board of
directors of the Company determines in good faith that such Demand Registration
would be materially adverse to the interests of the Company, and in such event,
the Holders will be entitled to withdraw such request and such Demand
Registration will not be counted as a Demand Registration hereunder, and (4) the
Company will not be required to effect a Demand Registration within six (6)
months after the effective date of a previous Demand Registration or
registration in which the Holder was given registration rights pursuant to
Section 7.1.1.
7.1.4. Pro Rata Demand Registration of Company Stock. If a Demand
Registration is an underwritten offering, and the managing underwriter advises
the Company in writing that in the underwriter's opinion the number of shares
requested to be included exceeds the number that can be sold in such offering,
then the Company shall include in such registration the number of shares
requested to be included by the Holders that in the opinion of such underwriter
can be sold prior to the inclusion of any securities of any other security
holder or the Company. If the managing underwriter advises the Company in
writing that in its opinion the aggregate number of shares requested for
inclusion by Holders exceeds the number of such shares that can be sold in such
offering, then the Company shall include in the registration statement only such
number of shares, pro rata among the Holders, based upon the number of shares
requested to be registered by each of them, which in the opinion of such
underwriter can be sold.
7.1.5. Form S-3 Demand Registration Rights. If at any time the
Holders holding in the aggregate greater than fifty percent (50%) of the
Registrable Securities request that the Company effect a Form S-3 registration
under the Act of all or a portion of the Registrable Securities, the Company
shall, within fifteen (15) days after the Company has received such written
notice, promptly commence and use its best efforts to consummate the Form S-3
registration of the Registrable Securities under the Act; provided, however, (A)
the aggregate fair market value of
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the Registrable Securities requested to be registered shall be greater than two
million dollars ($2,000,000), (B) the Company shall only be required to file one
Form S-3 registration every twelve (12) months, and (C) the Holders who request
that the Company effect a Form S-3 registration shall not be required to
participate in such Form S-3 registration.
7.1.6. Benefit of More Favorable Rights. If at any time registration
rights are granted with respect to Company Stock or capital stock of any
Affiliate of the Company which are on terms more favorable to the holders of
such securities with respect to any material terms applicable thereto including,
without limitation, the number of times or the circumstances under which such
rights may be exercised, the expenses to be paid by the Company or any Affiliate
of the Company in connection therewith or the duration of the availability of
such rights, the Company agrees that such more favorable terms will be
exercisable by the Holders of Registrable Securities automatically and without
further action by the Company. The Company covenants to give written notice to
the Holders of Registrable Securities not less than ten (10) days in advance of
the granting of registration rights with respect to Company Stock or capital
stock of any Affiliate of the Company.
7.1.7. Termination of Registration Rights. Notwithstanding any
provision to the contrary, no Holder of Registrable Securities shall be entitled
to exercise any right provided for in this Section 7.1. after five (5) years
following the consummation of the sale of Common Stock pursuant to a
registration statement filed by the Company under the Act in connection with the
initial firm commitment underwritten offering of its securities to the general
public.
7.2. Obligations of the Company. Where required under Section 7.1. to use
its best efforts to effect the registration of any of the Shares, the Company
shall, as expeditiously as reasonably possible,
7.2.1. Prepare and file with the SEC a registration statement with
respect to such Shares and use its best efforts to cause such registration
statement to become effective;
7.2.2. Prepare and file with the SEC such amendments
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and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration;
7.2.3. Furnish to the Holders such numbers of copies of such
registration statement and prospectus, including any preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as the
Holders may reasonably request in order to facilitate the disposition of the
Registrable Securities;
7.2.4. Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement; and
7.2.5. Use its best efforts to comply with all applicable rules and
regulations of the SEC.
7.3. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 7 that each
Holder shall furnish to the Company such information regarding such Holder, the
Registrable Securities held by such Holder, and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
7.4. Registration Expenses. In the case of any registration effected
pursuant to Section 7, the Company shall bear all registration and qualification
fees and expenses, and all costs and disbursements of counsel for the Company;
provided, however, that (A) each Holder selling Registrable Securities shall
bear the fees and costs of such Holder's own counsel and all underwriting
discounts and commissions with respect to the Registrable Securities sold by
such Holder, (B) the Company shall not be required to pay for any expenses of
any Demand Registration begun if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating Holders shall bear
such expenses), unless the
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Holders of a majority of the Registrable Securities agree in writing that the
Demand Registration so withdrawn shall be counted as one of the three permitted
Demand Registrations of the Holders pursuant to Section 7.1.3. and (C) in the
event any audit (other than an audit conducted at the end of the fiscal year of
the Company) is required in connection with a Demand Registration, the cost, in
excess of fifteen thousand dollars ($15,000), shall be borne pro rata by the
Holders participating in the Demand Registration.
7.5. Selection of Underwriters.
7.5.1. Company Selection. If a registration pursuant to Section
7.1.1. of this Agreement involves an underwritten offering, the Company shall
have the right to select the investment bankers and managers to administer the
offering. The Company shall not be required under Section 7.1.1. to register the
Holders' Registrable Securities in such registration unless the Holder accepts
the terms of the underwriting as agreed upon between the Company and the
underwriter.
7.5.2. Holders' Selection. If a registration pursuant to Section
7.1.3. or 7.1.5. involves an underwritten offering, then the Holders shall have
the right to select the investment bankers and managers to administer the
offering; provided, however, that the selection of such investment bankers and
managers shall be subject to the approval of the Company, such approval not to
be unreasonably withheld.
7.6. Delay at Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 7 or any other provision of this Agreement.
7.7. Conversion of Shares. Each share of Class A Preferred Stock shall
automatically be converted into one share of Class A Common Stock (adjusted to
reflect subsequent stock splits, combinations, stock dividends and
recapitalizations) immediately upon the earlier of (A) an underwritten offering
at or greater than twenty million dollars ($20,000,000) of Company Stock at or
greater than an offering price of ten dollars ($10.00) per share (adjusted to
reflect subsequent stock splits,
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combinations, stock dividends and recapitalizations), or (B) the affirmative
vote of the holders of the majority of the Class A Preferred Stock; provided,
however, (1) the Purchasers shall retain the rights set forth in Sections 10.1.
and 10.2. of this Agreement and (2) in the event of the liquidation,
dissolution, or winding up of the affairs of the Company, the Class B Common
Stock shall share pari passu in the distribution of the Company's assets.
7.8. Indemnification. If any Registrable Securities are included in a
registration statement pursuant to this Section 7, then,
7.8.1. To the extent permitted by law, the Company shall indemnify
and hold harmless each Holder, agents for each Holder, any underwriter for each
Holder, and each Person, if any, who controls such Person within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or several,
to which they may become subject under the Act or otherwise, insofar as such
losses, claims, damages, or liabilities arise out of any material fact contained
in such registration statement, including any preliminary prospectus or final
prospectus contained in the registration statement, or any amendments or
supplements to the registration statement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, and
will reimburse the Holder, the agents for the Holder, such underwriter, or
controlling Person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission based upon and
in conformity with written information furnished to the Company by an instrument
duly executed by the Holder or underwriter and stated to be specifically for use
therein.
7.8.2. To the extent permitted by law, each Holder, severally and
not jointly, shall indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed such registration statement, and
any underwriter for the Company against any losses, claims, damages, liabilities
or costs
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(including reasonable attorneys' fees) to which the Company or any such
director, officer, or underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based upon any untrue or alleged untrue statement of any material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained in the registration statement or any amendments or
supplements to the registration statement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary prospectus, or amendments or supplement
thereto, in reliance upon and in conformity with written information furnished
by the Holder duly executed and stated to be expressly for use therein, and the
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling Person, or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action.
7.8.3. Each party entitled to indemnification (the unindemnified
Party) shall give notice to the party required to provide indemnification
("Indemnifying Party") promptly after such Indemnified Party has Knowledge of
any claim as to which indemnity may be sought, and shall permit the Indemnifying
Party (at its expense) to assume the defense of any such claim or any litigation
resulting therefrom; provided, however, that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be reasonably
satisfactory to the Indemnified Party, and the Indemnified Party may participate
in such defense at such party's expense; provided, further, that the failure by
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 7.8., except to the
extent that the failure results in an omission of actual notice to the
Indemnifying Party and such Indemnifying Party is damaged solely as a result of
the failure to give notice; provided, further, that a refusal to permit the
Indemnifying Party to conduct such defenses by such counsel shall relieve such
Indemnifying Party of its obligations under this Section 7.8. No Indemnifying
Party,
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in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to the entry of any judgment or enter into
any settlement that does not include as an unconditional term the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation.
7.9. No-Action Letter. If the Company shall have obtained from the SEC a
"no-action" letter in which the SEC has indicated that it will take no action
if, without registration under the Act, a Holder disposes of the Registrable
Securities covered by any request made under Section 7.1. in the manner in which
it proposes to dispose of the Registrable Securities included in such request,
or, if in the opinion of counsel for the Company, concurred in by counsel for
the Holder, no registration under the Act is required in connection with such
disposition, the Company need not comply with such request or requests;
provided, however, that the Company shall not be relieved of its obligations
under Section 7 unless the aforementioned "no-action" letter or opinion of
counsel for the Company shall have been mailed by the Company to the Holder
within thirty (30) days after the Company's receipt of the request or requests.
7.10. Reports Under the Securities Exchange Act of 1934. With a view
toward making available to the Holders the benefits of SEC Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit the Holder to sell its Registrable Securities to the public without
registration, the Company agrees to comply with the filing requirements of
ss.15(d) of the Securities Exchange Act of 1934, as amended, on a timely basis
from the effective date of the first registration statement filed by the Company
and thereafter, even if the Company's duty to file is subsequently suspended
pursuant to the provisions of ss.15(d) and, so long as any Holder owns any of
the Registrable Securities, to furnish the Holder in writing upon its request
the information required to enable to the Holder to dispose of its Registrable
Securities pursuant to SEC Rule 144.
7.11. Lock-Up Period. Each Holder agrees that it shall not, to the extent
requested by the underwriter of the Company, sell or otherwise transfer or
dispose of any Registrable
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Securities of the same or similar class as the Registrable Securities being
registered by the Company during the one hundred eighty (180) day period
following the effective date of a registration statement; provided, however,
that (A) such agreement shall be applicable only to the first registration
statement of the Company that covers shares to be sold on its behalf to the
public in the underwritten offering, (B) the holders of Class B Common Stock and
the holders of at least ninety percent (90%) of Class A Common Stock are subject
to identical or substantially similar time restrictions, (C) all officers and
directors of the Company and all other persons with registration rights enter
into similar agreements, and (D) nothing contained herein shall prohibit any
Holder from transferring any Registrable Securities to a trust established for
estate planning purposes.
7.12. Transfer of Registration Rights. The registration rights of the
Holders under this Section 7 may be transferred to any transferee who acquires
at least five thousand (5,000) Registrable Securities (adjusted to reflect
subsequent stock splits, combinations, stock dividends and recapitalizations);
provided, however, that the Company is given written notice by the Holder at the
time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which the rights under this Section 7
are being assigned.
SECTION 8. OTHER COVENANTS
8.1. Modification of Bylaws.
8.1.1. Resolutions. At Closing, the board of directors of the
Company shall (A) resolve to increase the size of the Company's board of
directors from two (2) to five (5); (B) resolve to permit the holders of Class A
Preferred Stock to elect two directors; provided, however, that the right of the
holders of Class A Preferred Stock to elect one such director shall terminate in
the event that there are not outstanding at least 500,000 shares of Class A
Preferred Stock (adjusted to reflect subsequent stock splits, combinations,
stock dividends and recapitalizations), and provided further, that the right of
the holders of Class A Preferred Stock to elect one of such directors
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shall terminate in the event that a third party has (1) invested cash or
consideration greater than or equal to $3,000,000 in the Company, the value of
any non-cash consideration to be determined by the Board of Directors in good
faith evidenced by a board resolution, or (2) acquired an equity interest in the
Company of or in excess of ten percent (10%) of the outstanding shares of
Company Stock, and in either case, such third party requires as a condition to
its investment the right to elect a member of the board of directors, (C)
resolve to establish that in the event the holders of Class A Preferred Stock
shall lose their rights to elect at least one member to the board of directors,
the Company shall invite a representative designated by the holders of Class A
Preferred Stock to attend all meetings of its board of directors in a nonvoting
observer capacity; provided, however, (1) that such representative shall agree
to hold in confidence and trust and to act in a fiduciary manner with respect to
all Confidential Information concerning the Company furnished to such
representative in connection with any such meeting of the board of directors,
and (2) the Company reserves the right to withhold any information and to
exclude such representative from any meeting or portion thereof if access to
such information or attendance at such meeting would reasonably be expected to
adversely affect the attorney-client privilege between the Company and its
counsel, (D) resolve to establish that directors shall be reimbursed by the
Company for their reasonable costs for attending board of director meetings; and
(E) resolve to establish a(n) audit, compensation and management committee for
the Company.
8.1.2. Election of Directors. At Closing, the holders of Class A
Preferred Stock shall, by majority written consent, elect Stephen Ketchum and
Dan Flatley as members to the board of directors of the Company. Commencing on
the Closing Date and for so long as the events set forth in Section 8.1.1. (B)
have not occurred, the holders of Class A Preferred Stock or their duly
authorized representative shall have the right to designate up to two nominees
in accordance with Section 8.1.1. (B) to serve as directors of the Company for
election at the annual meeting of stockholders of the Company. Subject to the
conditions set forth in 8.1.1. (B), Gerald Gorman and the Purchasers agree to
use their best efforts to cause the person or persons so named to be nominated
for election to the board of directors of the Company at the time and in the
manner proper for
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such nominations whereupon Gerald Gorman and the Purchasers agree to cast all of
the votes they are entitled to cast in such election, subject to the limitations
set forth below, whether at the next annual meeting or a special meeting of the
stockholders, by written consent in lieu of a meeting or otherwise, for the
election of such nominees to the board of directors of the Company.
8.2. Financial Statements. So long as the Purchaser owns any Shares, the
Company shall deliver to such Purchaser the following financial statements of
the Company:
8.2.1. Within thirty (30) days after the end of each fiscal year of
the Company, a statement of operations, a balance sheet of the Company as of the
end of such fiscal year, and statements of operations, changes in financial
position, and changes in shareholder equity for such fiscal year, which year-end
financial reports shall be certified by independent certified public accountants
selected by the Company and approved by the Purchasers.
8.2.2. Within thirty (30) days after the end of each calendar month,
an unaudited statement of operations for such calendar month and a balance sheet
as of the end of such calendar month.
8.2.3. Within thirty (30) days after the end of each of the first
three quarters of the fiscal year, an unaudited statement of operations for such
fiscal quarter and a balance sheet as of the end of such fiscal quarter.
8.3. Inspection. So long as any Purchaser owns at least fifty thousand
(50,000) Shares (adjusted to reflect subsequent stock splits, combinations,
stock dividends and recapitalizations), the Company shall permit the Purchaser,
at his or her expense, to visit and inspect the Company's properties, to examine
its books of account and records, and to discuss the Company's affairs,
finances, and accounts with the Company's officers and independent public
accountants, all at such reasonable times as may be requested by Purchaser;
provided, however, that the Company shall not be obligated pursuant to this
Section 8.3. to provide any information (A) that the Company considers to be
Confidential Information unless the Purchaser
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enters into an agreement in a form reasonably satisfactory to the Company to
hold such information confidential, or (B) that the Company is obligated to hold
confidential by the terms of any agreement with a third party, or (C) in the
event the Purchaser owns an equivalent or larger investment in a competitor of
the Company.
8.4. Covenant Not to Compete. Prior to or on the Closing Date, the Company
shall have entered into (A) an agreement with each of Gerald Gorman and Gary
Millin, its principal executive officers, substantially in the form attached as
Exhibit D, providing that, upon termination of employment with the Company,
Gerald Gorman and Gary Millin shall not compete with the Company for a period of
two (2) years from the date of such termination. The Company has entered into a
consulting agreement with each of Eric Woodward and Vanity Mail Services, Inc.,
true and correct copies of which have been provided by the Company to the
Purchasers, providing that upon termination of such engagement with the Company,
Eric Woodward and Vanity Mail Services, Inc. shall not compete with the Company
for a period of two (2) years from the date of such termination, subject to the
qualifications set forth therein.
8.5. Arms' Length Transactions. The Company shall not enter into any
transaction, agreement, arrangement, sale, purchase, or lease with any holder of
shares of Company Stock, or any other Person, that provides for receipt by the
Company of less than fair and full consideration in money or money's worth in
exchange for the money, property or services provided by the Company pursuant to
such transaction, agreement, arrangement, sale, purchase, or lease.
8.6. Termination. The Company's obligations and Purchaser's rights under
Sections 8.2. and 8.3. shall terminate upon the effective date of the
registration statement filed by the Company in connection with the initial
public offering of the Company's stock or other securities under the Act as and
to the extent the Company is otherwise subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended.
8.7. Voting Agreement. In any vote to be taken by the Purchasers or the
Holders, as the case may be, in accordance with Sections 7.1.3., 7.1.5.. 7.7.1.,
8.1.1., 8.1.2., 8.8. and 9.2.1.
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of this Agreement, the Controlling Stockholder agrees and consents to vote, in
equal proportion to the votes cast by the remaining Purchasers or Holders, as
the case may be, his shares of Class A Preferred Stock, any capital stock of the
Company issued upon conversion thereof, any capital stock of the Company issued
as (or issued upon the conversion or exercise of any warrant, right or other
security issued as) a dividend or other distribution with respect thereto, or in
exchange for or in replacement of said securities with respect thereto.
8.8. Indemnification. Gerald Gorman shall indemnify, defend and hold
harmless each Purchaser, its Affiliates and their respective officers,
directors, employees, representatives and agents from and against any and all
claims, damages, losses, liabilities, costs and expenses, including, without
limitation, settlement costs and any reasonable legal, accounting or other
expenses incurred in connection with investigating or defending any actual or
threatened claims or actions (all of the foregoing, collectively, "Losses")
arising out of, relating to or in connection with that certain Agreement, dated
as of October 1, 1996, between the Company and InfoSpace. Inc., as the terms
thereof may be or may have been amended or modified, whether orally or in
writing; provided, however, that if and to the extent that any Losses are to be
satisfied by the issuance or delivery of shares of Company Stock in satisfaction
thereof, such obligation shall be satisfied by the delivery by Gerald Gorman of
shares of Company Stock owned beneficially or of record by him, and not by the
issuance by the Company of shares of Company Stock without the prior written
consent of the holders of fifty percent (50%) or more of the Shares.
8.9. Transfer of Class B Common Stock.
8.9.1. 10x Exit Condition. Except as provided in this Section 8.9.,
unless all of the Purchasers shall have been provided the opportunity to sell,
transfer or dispose of one hundred percent (100%) of their Shares or the shares
of Class A Common Stock or other Company Stock into which the Shares may be
converted or for which they may be exchanged, for an amount equal to or greater
than each Purchaser's aggregate investment set forth in Schedules A, B and C,
multiplied by ten (10), in cash, or in freely-tradable securities for which a
public market exists, or assets of equivalent fair market value (as determined
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by the Board of Directors in good faith evidenced by a board resolution adopted
by the affirmative votes of a majority of the directors, excluding Gerald Gorman
or his Affiliates, even though the remaining directors be less than a quorum),
and such sale, transfer or disposition shall have been consummated with respect
to all Holders electing to participate therein prior to the expiration of thirty
(30) months from the date of this Agreement (the "10x Exit Condition"), the
shares of Class B Common Stock shall not be transferable by Gerald Gorman and
any purported transfer thereof shall be void ab initio, and the Company
covenants and agrees that such transfer shall not be reflected on the stock
transfer books of the Company.
8.9.2. Amendment of Charter. In the event that Gerald Gorman desires
to sell, transfer or dispose of any shares of Class B Common Stock, and the 10x
Exit Condition has not been satisfied, the Holders and Gerald Gorman covenant
and agree that the Holders and Gerald Gorman shall use their best efforts to (A)
cause the Company to amend the Company's Certificate of Incorporation, in
accordance with applicable law, to create a new class of stock which (1)
authorizes such class to issue five million (5,000,000) shares, (2) designates
to the holders of such class of stock a liquidation preference in the amount of
$0.20 per share, in the event of the dissolution, liquidation or winding up of
the Company, in the distributable assets of the Company, such class to share pan
passu with the holders of Class A Preferred Stock and Class B Common Stock, (3)
permits such class a right to one vote per share of stock in any meeting of the
stockholders or in any written consent in lieu of a meeting in accordance with
the Bylaws of the Company, and (4) requires the mandatory conversion of such
shares of Class B Common Stock at a conversion rate of one share of Class B
Common Stock to one share of such class upon any transfer of shares of Class B
Common Stock, and (B) causes the Company to convert the shares of Class B Common
Stock into shares of such class and to at all times reserve and keep available
such shares solely for the purpose of effecting the conversion of all
outstanding shares of Class B Common Stock.
8.9.3. Conversion to Class A Common Stock. In the event the Company
is unable to (A) create and issue such class of stock as provided in 8.9.2., or
(B) cause the Class B Common Stock to be converted into such new class of stock,
in either
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case under applicable law or for any other reason, each share of Class B Common
Stock proposed to be sold, transferred or disposed of shall be exchanged by
Gerald Gorman for one share of Class A Common Stock, and it shall be a condition
of such proposed sale, transfer or disposition that such shares of Class B
Common Stock shall have been exchanged as set forth in this section; provided,
however, that if such exchange may not be consummated prior to the proposed
sale, transfer or disposition, Gerald Gorman covenants and agrees to enter into
an agreement with his proposed purchaser or transferee giving effect to the
exchange contemplated hereunder including, without limitation, the termination
of any special or preferential voting rights applicable to the Class B Common
Stock with regards to such shares being sold, transferred or disposed. The
Company represents, warrants and agrees that sufficient shares of Class A Common
Stock have been and will at all times remain duly and validly reserved for
issuance upon any exchange of Class B Common Stock as set forth herein.
8.9.4. Confirmation of Occurrence. The Company covenants and agrees
that no transfer of Class B Common Stock shall be given effect by the Company or
reflected on the Company's stock transfer ledger unless the Company shall first
have obtained confirmation in writing by the majority of the Purchasers, such
confirmation to be provided by the majority of the Purchasers in good faith,
that the 10x Exit Condition has been satisfied.
8.9.5. Legend Restriction. Gerald Gorman covenants and agrees to
deliver promptly upon the execution of this Agreement all of the shares of Class
B Common Stock to the Company in order that the Company may include a legend on
the certificates representing such shares to the effect of the foregoing.
8.10. Authorization of Additional Class A Preferred Stock. If at any time
the number of authorized but unissued shares of Class A Preferred Stock shall
not be sufficient to effect the obligations of the Company to issue additional
shares of Class A Preferred Stock pursuant to Section 10.1. and 10.2., the
Company shall take such corporate action as may be necessary or advisable to
increase the number of authorized but unissued shares of Class A Preferred Stock
to such number of shares as
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shall be sufficient for such purpose and Gerald Gorman and the Purchasers agree
to cast all of the votes they are entitled to cast to approve the same and give
effect thereto (whether at the next annual meeting or a special meeting of
stockholders, by written consent in lieu of a meeting or otherwise)
8.11. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Class A Common Stock, solely for the purpose of effecting the conversion of
all outstanding shares of capital stock which are convertible into shares of
Class A Common Stock, such number of shares of Class A Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of capital stock which are convertible into Class A Common Stock.
SECTION 9. PREEMPTIVE RIGHTS
9.1. Rights of Inclusion.
9.1.1. General. Except as provided in Section 9.1.6., if, at any
time, the Controlling Stockholder proposes to transfer shares of Company Stock
to a third party (a "Proposed Purchaser"), the Controlling Stockholder shall
afford each Holder the opportunity to participate in such transfer in accordance
with this Section 9.1.
9.1.2. Right to Participate. Each Holder, with respect to the
proposed transfers set forth in Section 9.1.1. (a "Tag-Along Purchaser"), shall
have the right to transfer, at the same price and upon identical terms and
conditions as such proposed transfer, the number of shares of Company Stock
owned by such Tag-Along Purchaser (the "Transfer Allotment") equal to (A) the
total number of shares of Company Stock proposed to be transferred by the
Controlling Stockholder multiplied by (B) a fraction, the numerator of which is
the total number of shares of Company Stock then owned by such Tag-Along
Purchaser as of the close of business on the second day preceding the mailing
date of the Transfer Notice (as defined below) and the denominator of which is
the total number of shares of Company Stock then owned by (1) all of the
Holders, (2) the Controlling Stockholder, and (3) all other stockholders of the
Company having tag-along or
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similar rights to participate in the proposed transfer. At the time any transfer
to a Proposed Purchaser is proposed, the Controlling Stockholder shall give
notice to each Tag-Along Purchaser of its right to sell shares of Company Stock
hereunder (the "Transfer Notice"), which notice shall identify the Proposed
Purchaser and state the number of shares of Company Stock proposed to be
transferred, the proposed offering price, the proposed date of any such transfer
(the "Transfer Date") and any other material terms and conditions of the
proposed transfer. The Transfer Notice shall also contain a complete and correct
copy of any offer to the Controlling Stockholder by the Proposed Purchaser to
purchase such shares of Company Stock.
9.1.3. Notice. Each Tag-Along Purchaser that wishes to participate
in the transfer shall provide written notice (the "Tag-Along Notice") to the
Controlling Stockholder no less than seven (7) days prior to the Transfer Date;
provided that the Controlling Stockholder shall use his best efforts to deliver
the Transfer Notice at least thirty (30) days prior to the Transfer Date and in
no event shall the Controlling Stockholder provide such Transfer Notice later
than fifteen (15) days prior to the Transfer Date. The Tag-Along Notice shall
set forth the number of shares of Company Stock that such Tag-Along Purchaser
elects to include in the transfer, which shall not exceed such Tag-Along
Purchaser's Transfer Allotment. The Tag-Along Notice shall also specify the
aggregate number of additional shares of Company Stock owned of record by such
Tag-Along Purchaser as of the date of the Tag-Along Notice, if any, which such
Tag-Along Purchaser desires also to include in the transfer (the "Additional
Shares") in the event there is any under-subscription for the entire amount of
all Tag-Along Purchasers' Transfer Allotments. In the event there is an
under-subscription by a Tag-Along Purchaser for the entire amount of the
Tag-Along Purchaser's Transfer Allotments, the Controlling Stockholder shall
apportion the unsubscribed Tag-Along Purchaser's Transfer Allotments to
Tag-Along Purchasers whose Tag-Along Notices specified an amount of Additional
Shares, which apportionment shall be on a pro rata basis among such Tag-Along
Purchasers in accordance with the number of Additional Shares specified by all
such Tag-Along Purchasers in their Tag-Along Notices. The Tag-Along Notices
given by the Tag-Along Purchasers shall constitute their binding agreements to
sell such shares of Company Stock on the terms and conditions applicable to the
transfer.
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9.1.4. Non Participation. If a Tag-Along Notice is not received by
the Controlling Stockholder prior to the seven (7) day period specified above,
the Controlling Stockholder shall have the right to sell or otherwise transfer
the number of shares of Company Stock specified in the Transfer Notice to the
Proposed Purchaser without any participation by such Tag-Along Purchaser
(subject to the right of other Tag-Along Purchasers to sell Additional Shares),
but only on terms and conditions with respect to the consideration paid by the
Proposed Purchaser and other material terms a reasonable investor would consider
in making its decision to invest which are no more favorable in any material
respect to the Controlling Stockholder than as stated in the Transfer Notice to
the Tag-Along Purchasers, and only if such Transfer occurs on a date within
sixty (60) days of the Transfer Date.
9.1.5. Representations. Each Tag-Along Purchaser shall only be
obligated to make representations as to (A) good title and the absence of a
Security Interest against the Tag-Along Purchaser's Shares, (B) the validity and
binding effect of any agreements entered into by such Tag-Along Purchaser in
connection with such transfer; provided, however, that each Tag-Along Purchaser
shall make such representations and warranties severally and not jointly.
9.1.6. Exceptions. The provisions of this Section 9.1. shall not
apply to any transfer by the Controlling Stockholder (A) to the spouse or family
members of the Controlling Stockholder, (B) to a Proposed Purchaser of Common
Stock having an aggregate fair market value of one million dollars ($1,000,000)
or less, (C) pursuant to a public offering or any Rule 144 transaction, or (D)
of Shares acquired in connection with customary trading activities at any time
following an initial public offering.
9.2 Rights to Compel.
9.2.1. General. Except as provided in Section 8.8., if, at any time,
(A) the Controlling Stockholder proposes to transfer all or any portion of his
shares of Company Stock constituting more than fifty percent (50%) of the issued
and outstanding shares of Company Stock to a Proposed Purchaser in a bona fide
arms' length transaction, and (B) in connection
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therewith the Controlling Stockholder obtains an opinion of a
nationally-recognized investment banking firm to the effect that the transfer to
the Proposed Purchaser is fair to the Controlling Shareholder and the Holders
from a financial point of view, then the controlling Stockholder may require the
Holders to transfer all or a portion of their shares of Company Stock (the
"Designated Shares") to the Proposed Purchaser in accordance with this Section
9.2.; provided, however, that the Holders of fifty percent (50%) or more of the
shares of Company Stock may by their written consent waive the obligation to
obtain such fairness opinion in any proposed transfer by the Controlling
Stockholder.
9.2.2. Requirement to Participate. Each Holder, with respect to the
proposed transfers set forth in Section 9.2.1. (the "Drag-Along Purchaser"),
shall be required to transfer the Designated Shares to the Proposed Purchaser at
the same price per share of Company Stock and upon identical terms and
conditions as such proposed transfer upon which the controlling Stockholder is
selling his shares of Company Stock. The Designated Shares shall be determined
by multiplying the shares of Company Stock owned by each Purchaser by a
fraction, the numerator of which shall be the number of shares of Company Stock
to be sold by the Controlling Stockholder and the denominator of which is the
total shares of Company Stock owned by the Controlling Stockholder.
9.2.3. Notice. The Controlling Stockholder shall send written notice
(the "Drag-Along Notice") of the exercise of such rights pursuant to this
Section 9.2. to each Drag-Along Purchaser, setting forth the consideration per
share of Company Stock to be paid by the Proposed Purchaser and the other terms
and conditions of such transaction. Within twenty (20) days following the date
of the Drag-Along Notice, each Drag-Along Purchaser shall deliver to the
Controlling Stockholder certificates representing the Designated Shares held by
them or duly endorsed, together with all other transfer documents reasonably
required to be executed in connection with such transaction; provided, however,
that each Drag-Along Purchaser shall only be obligated to make representations
as to (A) good title and the absence of a Security Interest against the
Drag-Along Purchaser's Shares, (B) the validity and binding effect of any
agreements entered into by such Drag-Along Purchaser in connection with such
transfer and that each Drag-Along Purchaser
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shall make such representations and warranties severally and not jointly.
9.2.4. Nonparticipation. In the event that a Drag-Along Purchaser
fails to deliver certificates representing the Designated Shares to the
Controlling Stockholder, the Company shall cause the Books and Records of the
Company to show that such shares of Company Stock are bound by the provisions of
this Section 9.2.
9.2.5. Failure to Close. If, within ninety (90) days after the
Controlling Stockholder gives the Drag-Along Notice, the sale of all of
Controlling Stockholder's shares of Common Stock in accordance herewith has not
been completed, the Controlling Stockholder shall return to the Drag-Along
Purchasers all certificates representing the Designated Shares, and all the
restrictions on sale or other disposition contained in the Agreement with
respect to the shares of Company Stock shall again be in effect.
9.2.6. Remittance of Sale Proceeds. Simultaneously with the
consummation of the sale of the Controlling Stockholder's shares of Company
Stock, and each Drag-Along purchaser's shares of Company Stock, the Controlling
Stockholder shall notify each Drag-Along Purchaser of the consummation of the
sale, and shall cause the Proposed Purchaser to remit directly to each
Drag-Along Purchaser that has delivered its shares of Company Stock, the total
sales price of each Drag-Along purchaser's shares of Company Stock sold or
otherwise disposed of pursuant thereto and shall furnish such other evidence of
the completion and time of completion of such sale or other disposition and the
terms thereof as may be reasonably requested by the Drag-Along Purchaser.
9.3. Right of First Offer.
9.3.1. General. Subject to the terms and conditions specified in
this Section 9.3., the Company hereby grants to each Holder a right of first
offer with respect to future sales by the Company of Company Stock. Each time
the Company proposes to offer (A) additional shares of capital stock of any or
all classes or series thereof, (B) rights, options or warrants to purchase
shares of its capital stock, or (C) securities
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convertible into such capital stock (the "New Offering"), the Company shall
first make an offering of thirty percent (30%) of the New Offering to the
Holders in the aggregates offered pro rata among the Holders, in accordance with
the following provisions. The Holders have no right to participate in the New
Offering of Company Stock in excess of the thirty percent (30%) in the aggregate
of the New Offering granted in this Section 9.3.
9.3.2. Notice. The Company shall provide a written notice (the
"Offering Notice") of the New Offering to each Holder stating (A) the Company's
bona fide intention to offer such shares, (B) the number of such shares to be
offered, and (C) the price and terms upon which it proposes to offer such
shares.
9.3.3. Election to Purchase. Within twenty (20) days following the
date of the Offering Notice (the "Election Period"), each Holder may elect to
purchase or obtain, at the price and on the terms specified in the Offering
Notice, up to that portion of such shares which equals thirty percent (30%)
multiplied by a fraction, the numerator of which is the number of shares of
Company Stock held by the Holder as of the date of the Offering Notice and the
denominator of which is the total Company Stock outstanding on the date of the
Offering Notice. After the expiration of the Election period, the Company shall
notify the Holders which exercise their rights to purchase additional shares
(the "Participating Purchasers") of each other Purchaser's failure to do
likewise (the "Declining Purchasers"). During the ten-day period commencing
after receipt of such information, each Participating Purchaser shall be
entitled to purchase that portion of the shares for which the Declining
Purchasers were entitled to subscribe but which were not subscribed for by the
Declining Purchasers which is equal to the proportion that the number of shares
of Company Stock issued and held by such Participating Purchaser bears to the
total number of shares of Company Stock issued and held by all Participating
Purchasers who wish to purchase unsubscribed shares.
9.3.4. Transfer to Proposed Purchaser. At any time after the
Offering Notice is given, the Company may offer for sale seventy percent (70%)
of the New Offering and, if the shares referred to in the Offering Notice are
not elected to be purchased as provided in Section 9.3.3., the Company may,
during the ninety (90) day period following the expiration of the
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Election Period, offer for sale the remaining unsubscribed portion of the New
Offering to any Person at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Offering Notice. If the
Company does not consummate the sale of the New Offering within such period, the
right provided hereunder shall be deemed to be revived and such shares shall not
be offered unless first reoffered to each Holder in accordance with this
section.
9.3.5. Exceptions. The right of first offer in this Section 9.3.
shall not be applicable (A) to shares issued as set forth Section 10.1. or
10.2., (B) to or after consummation of a bona fide, firmly underwritten public
offering of shares of Common Stock, registered under the Act, (C) to the
issuance of securities pursuant to the conversion or exercise of convertible or
exercisable securities outstanding as of the date hereof, or (D) to the issuance
of securities in connection with a strategic partnership or bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise.
SECTION 10. POST CLOSING SHARE PRICE ADJUSTMENTS
10.1. Anti-Dilution Rights. If, after the Closing Date, the Company shall
issue Company Stock to a third party for consideration less than the Share
Price, then each Purchaser shall be issued additional Class A Preferred Stock,
without paying additional consideration, so that the effective price of each
Purchaser's Class A Preferred Stock, after giving effect to such issuance, shall
be equal to the price of the Company Stock purchased by the third party;
provided, however, in no event shall the Purchasers have the right to receive
additional shares of Company Stock where the Company (A) offers for sale up to
seven hundred and fifty thousand (750,000) shares of Class A Common Stock
(adjusted to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations) to officers and employees of, consultants to, or directors
who are not employees of the Company, pursuant to a stock grant, option, or
purchase plan, or other employee stock incentive program approved by the
Company's board of directors, (B) issues stock, stock options, warrants or
rights to the employees and consultants of the Company as set forth in Schedule
D, or (C) issues three
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hundred twelve thousand five hundred (312,500) shares of Class A Common Stock or
options to purchase Class A Common Stock (adjusted to reflect subsequent stock
splits, combinations, stock dividends and recapitalizations) to Eric Woodward in
accordance with the agreement as in effect on the date hereof between the
Company and Eric Woodward. An example of the calculation of the additional
shares to be issued pursuant to this Section 10.1. is attached hereto as Exhibit
E.
10.2. Performance Ratchet Protection.
10.2.1. Timing of Ratchet. At the earlier of (A) thirty (30) months
after Closing or (B) the sale of all or substantially all of the assets or stock
of the Company or the merger, consolidation or combination of the Company with
any other Person (the "Company Sale"), each Purchaser shall be issued additional
Class A Preferred Stock of the Company, without paying additional consideration
therefor, so that, after giving effect to such issuance, the effective price of
all issued Shares held by such Purchaser shall be reduced from the Share Price
to an Adjusted Share Price calculated pursuant to Section 10.2.2. (the "Adjusted
Share Price").
10.2.2. Adjusted Share Price. The Adjusted Share Price shall be the
greater of (A) one dollar ($1.00) per Share, (B) ten percent (10%) of the
highest price per share offered to the Purchasers in any public offering or
private sale to a third party of Company Stock, in which the Purchasers were
provided and declined an opportunity to sell Shares, including but not limited
to any sale of securities in the manner set forth in Sections 7.1., 9.1. and
9.2.; or (C) ten percent (10%) of the price per share in a Company Sale, if such
has occurred; provided, however, that in no event shall the Adjusted Share Price
exceed two dollars ($2.00) per share. An example of the calculation of the
additional shares to be issued pursuant to this Section 10.2. is attached hereto
as Exhibit E.
10.3. Restriction on the Declaration of Dividends. The Company shall not
declare dividends to any class of Company Stock and shall not redeem, repurchase
or otherwise acquire for value any shares of Company Stock without the consent
of the holders of a majority in interest of the Class A Preferred Stock.
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SECTION 11. MISCELLANEOUS
11.1. Public Announcements. No Purchaser shall make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Company.
11.2. No Third Party Beneficiaries. Except as set forth in Section 7.8.,
this Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted transferees and
assigns.
11.3. Default. In the event a Party fails to comply with the terms of this
Agreement, any other Party to this Agreement shall be entitled to any relief or
remedy that may be available pursuant to this Agreement or at law or equity.
11.4. Notices. All notices hereunder shall be in writing and be given by
registered or certified mail, postage and registration fees prepaid, or by
overnight delivery, and shall be deemed given when so mailed as follows:
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10007
Attn: Gary Millin, President
Brian J. Zimmet, Esq.
801 Second Avenue 5th Floor
New York, NY 10017
To the Purchasers
At the addresses set forth in Schedule A
The foregoing addresses may be changed by notices given in the manner set forth
in this section.
11.5. Governing Law. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Delaware without
giving effect to the principles of the conflict of laws thereof.
11.6. Waivers; Amendments. The waiver by the undersigned of any of the
provisions of this Agreement shall not
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operate or be construed as a waiver of any subsequent breach. This Agreement may
be amended only by a written amendment executed by the Company and the holders
of a majority of the Shares.
11.7. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect the construction and interpretation
of this Agreement.
11.8. Severability. The invalidity of all or any part of any section of
this Agreement shall not render invalid the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
11.9. Binding Effect. This Agreement shall not be assigned by any
Purchaser without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of the Parties, their heirs, personal
representatives, successors, and permitted assignees.
11.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. This Agreement may contain more than one
counterpart of the signature page and may be executed by the affixing of the
signatures of each of the Parties to one of these counterpart signature pages.
All of the counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
11.11. Execution of Document. Each of the Parties hereto agrees to execute
and deliver, without cost or expense to any other Party, any and all such
further instruments or documents and to take any and all such further action
reasonably requested by such other of the Parties hereto as may be necessary or
convenient in order to effectuate this Agreement and the interests and purposes
thereof.
11.12. Expenses. Except to the extent otherwise specifically provided
herein, each of the Parties shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions
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contemplated hereby.
11.13. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
11.14. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
11.15. Entire Agreement. This Agreement (including the Disclosure Schedule
and the Exhibits and Schedules hereto), the amendment to the Certificate of
Incorporation, and the letter agreement of the Escrow Agent dated May 23, 1997,
contain the entire agreement of the Parties. The Parties are not bound by any
oral statements that are made outside of this Agreement.
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WHEREAS, the Parties have executed this Agreement as of the date first
above written:
GlobeComm, Inc. Escrow Agent
/s/ Gary Millin /s/ Brian J. Zimmet
- ---------------------------------- -----------------------------------
By: Gary Millin, President Brian J. Zimmet, Esq.
As to Section 2.5.
Purchasers
/s/ Hoyt Davidson
- ---------------------------------- -----------------------------------
Jeff Barbakow Hoyt Davidson
/s/ Ihsan Essaid
- ---------------------------------- -----------------------------------
David Dennis Ihsan Essaid
/s/ Dan Flatley
- ---------------------------------- -----------------------------------
Trevor Fetter Dan Flatley
/s/ Gerald Gorman /s/ Tony James
- ---------------------------------- -----------------------------------
Gerald Gorman Tony James
/s/ Stephen Ketchum /s/ Ryan Kim
- ---------------------------------- -----------------------------------
Stephen Ketchum Ryan Kim
/s/ Joe Low
- ---------------------------------- -----------------------------------
Steve Lebow Joe Low
/s/ Andrew Rush
- ---------------------------------- -----------------------------------
Marsha Plotnitsky Andrew Rush
45
<PAGE>
WHEREAS, the Parties have executed this Agreement as of the date first
above written:
GlobeComm, Inc. Escrow Agent
/s/ Gary Millin /s/ Brian J. Zimmet
- ---------------------------------- -----------------------------------
By: Gary Millin, President Brian J. Zimmet, Esq.
As to Section 2.5.
Purchasers
/s/ Hoyt Davidson
- ---------------------------------- -----------------------------------
Jeff Barbakow Hoyt Davidson
/s/ Ihsan Essaid
- ---------------------------------- -----------------------------------
David Dennis Ihsan Essaid
/s/ Dan Flatley
- ---------------------------------- -----------------------------------
Trevor Fetter Dan Flatley
/s/ Gerald Gorman
- ---------------------------------- -----------------------------------
Gerald Gorman Tony James
/s/ Stephen Ketchum /s/ Ryan Kim
- ---------------------------------- -----------------------------------
Stephen Ketchum Ryan Kim
- ---------------------------------- -----------------------------------
Steve Lebow Joe Low
- ---------------------------------- -----------------------------------
Marsha Plotnitsky Andrew Rush
45
<PAGE>
/s/ Tim Weller
- ---------------------------------- -----------------------------------
Arvind Sanger Tim Weller
/s/ Vincent Degiaimo /s/ William Donaldson
- ---------------------------------- -----------------------------------
Vincent Degiaimo William Donaldson
- ---------------------------------- -----------------------------------
Jack Kuehler Tripp Smith
- ---------------------------------- -----------------------------------
Lens Lipsuis Arkady Plotnitsky
/s/ Gerald Gorman
- ---------------------------------- -----------------------------------
Gerald Gorman, Personally
46
<PAGE>
SCHEDULE A
Purchaser No. Of Shares Purchase Price
--------- ------------- --------------
1. Jeff Barbakow 43,750 $87,500
830 Picacho Lane
Santa Barbara, CA 93108
2. Hoyt Davidson 25,000 $50,000
945 West Road
New Canaan, CT 06840
3. David Dennis 43,750 $87,500
12916 Evanston Street
Los Angeles, CA 90049
4. Ihsan Essaid 5,000 $10,000
17 Grove Street
CosCob, CT 10024
5. Trevor Fetter 25,000 $50,000
1530 Mimosa Lane
Montecito, CA 93108
6. Dan Flatley 75,000 $150,000
17 Maple Hill Drive
Larchmont, NY 10538
7. Gerald Gorman 100,000 $200,000
180 Midland Avenue
Monclair, NJ 07043
8. Tony James 25,000 $50,000
1001 Park Avenue, #15
New York, NY 10028
9. Stephen Ketchum 56,250 $112,500
151 East 80th Street, 11C
New York, NY 10021
S-1
<PAGE>
10. Ryan Kim 1,250 $2,500
161 East 81st Street, #1E
New York, NY 10028
11. Steve Lebow 12,500 $25,000
150 North Cliffwood Ave.
Los Angeles, CA 90049
12. Joe Low 21,250 $42,500
100 Cedar Cliff Road
Riverside, CT 06878
13. Marsha Plotnitsky 62,500 $125,000
36 Bank Street
New York, NY 10014
14. Andrew Rush 10,000 $20,000
35 Bradford Road
Scarsdale, NY 10583
15. Arvind Sanger 12,500 $25,000
277 Park Avenue, 14th Floor
New York, NY 10172
16. Tim Weller 12,500 $25,000
305 Second Avenue, #314
New York, NY 10003
17. Vincent Degiaimo 18,750 $37,500
31 Ridgecroft Road
Bronxville, NY 10708
18. William Donaldson 25,000 $50,000
277 Park Avenue
New York, New York 10017
19. Jack Kuehler 25,000 $50,000
66 Alpine Avenue
Los Gatos, CA 95030
20. Tripp Smith 12,500 $25,000
2 Colt Road
Summit, NJ
S-2
<PAGE>
21. Rens Lipsius 6,250 $12,500
18B Villa Riberole
Paris, France
22. Arkady Plotnitsky 6,250 $12,500
1500 Duke University Road
Durham, NC 27701
TOTAL: 625,000 $1,250,000
- ------ ------- ----------
S-3
<PAGE>
SCHEDULE B
Purchaser No. Of Shares Purchase Price
--------- ------------- --------------
1. Jeff Barbakow 21,875 $43,750
2. Hoyt Davidson 12,500 $25,000
3. David Dennis 21,875 $43,750
4. Ihsan Essaid 2,500 $5,000
5. Trevor Fetter 12,500 $25,000
6. Dan Flatley 37,500 $75,000
7. Gerald Gorman 50,000 $100,000
8. Tony James 12,500 $25,000
9. Stephen Ketchum 28,125 $56,250
10. Ryan Kim 625 $1,250
11. Steve Lebow 6,250 $12,500
12. Joe Low 10,625 $21,250
13. Marsha Plotnitsky 31,250 $62,500
14. Andrew Rush 5,000 $10,000
15. Arvind Sanger 6,250 $12,500
16. Tim Weller 6,250 $12,500
17. Vincent Degiamo 9,375 $18,750
18. William Donaldson 12,500 $25,000
19. Jack Kuehler 12,500 $25,000
S-4
<PAGE>
20. Tripp Smith 6,250 $12,500
21. Rens Lipsius 3,125 $6,250
22. Arkady Plotnitsky 3,125 $6,250
TOTAL: 312,500 $625,000
- ------ ------- --------
S-5
<PAGE>
SCHEDULE C
Purchaser No. Of Shares Purchase Price
--------- ------------- --------------
1. Jeff Barbakow 21,875 $43,750
2. Hoyt Davidson 12,500 $25,000
3. David Dennis 21,875 $43,750
4. Ihsan Essaid 2,500 $5,000
5. Trevor Fetter 12,500 $25,000
6. Dan Flatley 37,500 $75,000
7. Gerald Gorman 50,000 $100,000
8. Tony James 12,500 $25,000
9. Stephen Ketchum 28,125 $56,250
10. Ryan Kim 625 $1,250
11. Steve Lebow 6,250 $12,500
12. Joe Low 10,625 $21,250
13. Marsha Plotnitsky 31,250 $62,500
14. Andrew Rush 5,000 $10,000
15. Arvind Sanger 6,250 $12,500
16. Tim Weller 6,250 $12,500
17. Vincent Degiamo 9,375 $18,750
18. William Donaldson 12,500 $25,000
19. Jack Kuehier 12,500 $25,000
S-6
<PAGE>
20. Tripp Smith 6,250 $12,500
21. Rens Lipsius 3,125 $6,250
22. Arkady Plotnitsky 3,125 $6,250
TOTAL: 312,500 $625,000
- ------ ------- --------
S-7
<PAGE>
SCHEDULE D
Employee Options Vested(1) Options Vesting(2)
-------- ----------------- ------------------
1. Gerald Gorman 36,250 210,000
2. Gary Millin 108,500 125,000
3. Vanity Mail -0- 125,000
Services, Inc.(3)
4. Eric Woodward(4) 40,665 185,000
5. Bob Helfant 5,000 200,000
6. Jodi Fontana 5,000 7,000
7. Geoffrey Mize 2,500 4,750
8. Ben Schochet 3,300 17,500
9. Carlyle Elwin 750 7,750
10. Mark Leigh 20,335 50,000
11. Joshua Barrack -o- 7,000
12. Jane Centrella 4,165 9,750
13. Jean Brodsky 23,835 37,500
14. Peter Hamlen 2,500 47,500
15. Lily Dong(5) 13,835 1,430
16. Michael Gorman 22,500 -0-
17. Gilberto Irias -0- 8,000
18. John Kimball -0- 4,000
19. Ruigang Yang -0- 15,000
Total 289,135 1,062,180
- ----------
(1) All owned options can be exercised between $0.20 and $2.00 a share.
Options are for Class A Common Stock.
(2) All options vest quarterly over time between 24 and 48 months, except
for Bob Helfant and Peter Hamlen.
(3) The principal shareholder of the company, David Milligan, provides
consulting services to GlobeComm.
(4) Under separate agreement, as additional compensation for services
rendered, Eric Woodward is compensated by GlobeComm by the issuance of Class A
Common Stock. He receives blocks of 62,500 on a quarterly basis and is entitled
to receive in whole an additional 312,500.
(5) Employment terminated.
S-8
<PAGE>
SCHEDULE E
Party Nature of Contract
----- ------------------
1. Gerald Gorman Employment
2. Gary Millin Employment
3. Vanity Mail Services, Inc. Consulting
4. Eric Woodward Consulting
5. Bob Helfant Employment
6. Jodi Fontana Employment
7. Geoffrey Mize Employment
8. Ben Schochet Employment
9. Carlyle Elwin Employment
10. Mark Leigh Employment
11. Joshua Barrack Employment
12. Jane Centrella Employment
13. Jean Brodsky Employment
14. Peter Hamlen Employment
15. Lily Dong Employment
16. Michael Gorman Employment
17. Gilberto Irias Employment
18. John Kimball Employment
19. Ruigang Yang Employment
20. FOUR 1 1 Revenue Sharing
21. Infospace Revenue Sharing
22. Double Click Revenue Sharing
23. Who Where Revenue Sharing
24. Switchboard Revenue Sharing
25. Netscape Referral of Services
26. GNP Lease of Equipment
27. Anixter Lease of Equipment
28. Interactive Futures Lease of Equipment
29. DNA Lease of Equipment
30. Consan/DV Lease of Equipment
31. Sun/Toshiba Lease of Equipment
32. Datavision Lease of Equipment
33. Oracle Lease of Equipment
S-9
<PAGE>
Exhibit A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GLOBECOMM, INC.
------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
----------------------------------------
GlobeComm, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify as follows:
FIRST: The name of the corporation is: GLOBECOMM, INC.
SECOND: The certificate of incorporation was filed by the Department of
State on the 1st day of August, 1994.
THIRD: Resolutions setting forth a proposed amendment to the Certificate
of Incorporation of the Corporation, declaring said amendment to be advisable
and directing that said amendment be considered by the stockholders of the
Corporation entitled to vote thereon were duly adopted by unanimous written
consent of the Board of Directors of the Corporation dated as of May 23, 1997.
FOURTH: Thereafter, said amendment was approved in accordance with Section
228 of the General Corporation Law of the State of Delaware by the written
consent, dated May 23, 1997, of a majority of the stockholders of the
Corporation entitled to vote thereon.
<PAGE>
FIFTH: The certificate of incorporation is hereby amended to effect the
following changes:
(a) To modify the rights of the capital stock of the Corporation.
ARTICLE 5 of the Certificate of Incorporation of the Corporation
shall be deleted, and substituting in lieu thereof the following new ARTICLE 5:
ARTICLE 5: The total number of shares of all classes of stock that
the Corporation is authorized to issue is twenty one million (21,000,000),
consisting of thirteen million (13,000,000) shares of Class A Common Stock with
a par value of one cent ($.01) per share, three million (3,000,000) shares of
Class A Preferred Stock with a par value of one cent ($.01) per share, and five
million (5,000,000) shares of Class B Common Stock with a par value of one cent
($.01) per share with a par value of one cent ($.01) per share.
1. Each share of Class A Common Stock and Class A Preferred
Stock shall have one (1) vote per share. Each share of Class B Common Stock
shall have ten (10) votes per share.
2. In case of liquidation, dissolution, or winding up of the
affairs of the Corporation, whether voluntary or involuntary, holders of Class A
Preferred Stock shall be preferred, equally with holders of Class B Common Stock
over all holders of Class A Common Stock of the Corporation to the extent set
forth herein. Out of the distributable assets of the Corporation, in an amount
up to the total dollar investment of Class A Preferred Stock and Class B Common
Stock, holders of Class A Preferred Stock shall receive pro rata among all such
shares of Class A Preferred Stock, in the aggregate for all such shares
outstanding, the total dollar investment of Class A Preferred Stock divided by
the sum of the total dollar investment of Class A Preferred Stock plus Class B
Common Stock, expressed as a percentage, and holders of Class B Common Stock
shall receive pro rata among all such shares of Class B Common Stock, in the
aggregate for all such shares outstanding, the total dollar investment of Class
B Common Stock divided by the sum of the total dollar investment of Class A
Preferred Stock plus Class B Common Stock, expressed as a percentage.
Thereafter, the
2
<PAGE>
holders of Class A Common Stock shall receive pro rata among all such shares, an
amount in the aggregate for all such shares outstanding, up to the total dollar
investment of Class A Common Stock. Thereafter, the holders of Class A Common
Stock, Class A Preferred Stock and Class B Common Stock, shall share, pari
passu, in the remaining assets of the Corporation. Notwithstanding the
foregoing, in the event of any conversion of the shares of Class A Preferred
Stock, the preference applicable to the Class B Common Stock set forth herein
shall terminate automatically and the Class B Common Stock shall be entitled, in
the event of a liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, only to share in the remaining
assets of the Corporation pari passu with the Class A Common Stock.
3. The holders of the Class A Preferred Stock shall have conversion
rights as follows:
(a) Conversion. The holders of the Class A Preferred Stock shall
have the right to convert their shares into Class A Common Stock upon the
affirmative vote of the holders of a majority of the Class A Preferred Stock.
(b) Automatic Conversion. Each share of Class A Preferred Stock
shall automatically be converted into one share of Class A Common Stock
(adjusted to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations) immediately upon an underwritten offering of at or greater
than twenty million dollars ($20,000,000) of Company Stock at or greater than an
offering price of ten dollars ($10.00) per share (adjusted to reflect subsequent
stock splits, combinations, stock dividends, recapitalizations).
(c) Mechanics of Conversion. Before any holder of Class A Preferred
Stock shall be entitled to convert the same into shares of Class A Common Stock,
it shall surrender the certificate therefor, duly endorsed, at the office of the
Corporation, and shall give written notice to the Corporation at its principal
corporate office, of the election to convert the same and shall state the name
in which the certificate for shares of Class A Common Stock are to be issued.
The Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Class A Preferred Stock a certificate
3
<PAGE>
for the number of shares of Class A Common Stock to which such holder shall be
entitled.
SIXTH: The Board of Directors is granted the authority to fix by
resolution any powers, preferences and rights, qualifications, limitations or
restrictions not fixed by certificate of amendment to the certificate of
incorporation.
SEVENTH: Said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this certificate has been subscribed by the
undersigned who affirms that the statements made herein are true under the
penalties of perjury.
Dated: May 27, 1997
New York, New York
GlobeComm, Inc.
---------------------------
By: Gary Millin, President
Corporate Seal
4
<PAGE>
Exhibit B
May 27, 1997
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10007
Attn: Gary Millin, President
Re: Investment Letter
Dear Mr. Millin:
This letter is delivered to you in compliance with Section 6.3. of the
Stock Purchase Agreement dated May 27, 1997 between myself and GlobeComm, Inc.
(the "Agreement"). All capitalized terms used in this opinion without definition
have the respective meaning given to them in the Agreement.
I represent and warrant to you that the Shares that I shall receive are
not being acquired by me with a view to their distribution except to the extent
and in the manner provided for in paragraph (d) of Rule 145 of the Act.
I agree not to dispose of any such Shares in any manner that would violate
the Act or any applicable rule or regulation promulgated thereunder or any state
securities law, and unless and until you shall have received an opinion of
counsel satisfactory to you, to the effect that a proposed disposition of such
shares may be effected without any such violation.
I further agree that the certificate representing the Shares may bear a
legend referring to the restrictions on disposition thereof in accordance with
the provisions of the foregoing paragraph and that stop-transfer instructions
may be filed with respect to such shares with the transfer agent for such
shares.
Very truly yours,
Purchasers
<PAGE>
- ------------------------- -------------------------
Jeff Barbakow Hoyt Davidson
- ------------------------- -------------------------
David Dennis Ihsan Essaid
- ------------------------- -------------------------
Trevor Fettor Dan Flatley
- ------------------------- -------------------------
Gerald Gorman Tony James
- ------------------------- -------------------------
Stephen Ketchum Ryan Kim
- ------------------------- -------------------------
Steve Lebow Joe Low
- ------------------------- -------------------------
Marsha Plotnitsky Andrew Rush
- ------------------------- -------------------------
Arvind Sanger Tim Weller
- ------------------------- -------------------------
Vincent Degiaimo William Donaldson
- ------------------------- -------------------------
Jack Kuehler Rens Lipsuis
- -------------------------
Arkady Plotnitsky
<PAGE>
Exhibit C
[LETTERHEAD OF BRIAN J. ZIMMET, ATTORNEY AT LAW]
May 27, 1997
To the Purchasers Named in
Schedule A of the Stock Purchase
Agreement dated May 27, 1997
Re: Opinion Letter
Dear Sirs and Madams:
I have acted as counsel to GlobeComm, Inc., a Delaware Corporation in
connection with the Stock Purchase Agreement dated May 27, 1997 (the
"Agreement") between the Company and Jeff Barbakow, Hoyt Davidson, David Dennis,
Ihsan Essaid, Trevor Fetter, Dan Flatley, Gerald Gorman, Tony James, Stephen
Ketchum, Ryan Kim, Steve Lebow, Joe Low, Marsha Plotnitsky, Andrew Rush, Arvind
Sanger, Tim Weller, Vincent Degiaimo, William Donaldson, Jack Kuehler, Tripp
Smith, Rens Lipsius and Arkady Plotnitsky (collectively the "Purchasers"). This
is the opinion contemplated by Section 5.5. of the Agreement. All capitalized
terms used in this opinion without definition have the respective meanings given
to them in the Agreement.
I have examined originals of all of the Company's documents deemed
necessary as a basis for the opinions hereinafter expressed. As to questions of
fact material to such opinions, I have, when relevant facts were not
independently established, relied on representations of the Company from its
respective officers. This Opinion Letter is governed by, and shall be
interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the
ABA Section of Business Law and is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations,
specifically, ss.ss. 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20 in the Accord,
and this Opinion Letter should be read in conjunction therewith. The law covered
by the opinions expressed herein is limited to the Federal Law of the United
States and the Law of the States of New York and Delaware.
Based on the foregoing, my opinion is as follows:
1. The Company is a corporation duly organized, validity existing and
in good standing under the laws of the State of Delaware. The
Company is duly qualified to do business as a foreign corporation
and is in good standing in each other state in which the nature of
its activities or of its properties owned or leased makes such
qualification necessary, except to the extent that failure to so
qualify would not have a material adverse effect on the Company.
<PAGE>
Purchasers under Agreement
May 27, 1997
Page two of four
2. The Agreement has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed and
delivered the Company. The Agreement is legal, valid, binding and
enforceable against the Company in accordance with its terms.
3. The total number of shares of all classes of stock that the
Corporation is authorized to issue is twenty one million
(21,000,000), consisting of thirteen million (13,000,000) shares of
Class A Common Stock with a par value of one cent ($.01) per share
of which 2,433,750 shares are issued and outstanding, three million
(3,000,000) shares of Class A Preferred Stock with a par value of
one cent ($.01) per share of which 327,500 shares are issued and
outstanding, and five million (5,000,000) shares of Class B Common
Stock with a par value of one cent ($.01) per share of which
5,000,000 are issued and outstanding.
4. All of the outstanding shares of Company Stock have been duly
authorized and are validly issued, fully paid, and nonassessable.
Expect for stock options of Employees listed on Schedule D and the
Disclosure Schedule, there are no (A) outstanding or authorized
options, warrants, calls, claims, purchase rights, subscription
rights, conversion rights, convertible securities, exchange rights,
or other contracts or commitments that could require the Company to
issue, sell, or otherwise cause to become outstanding any of its
capital stock; and (B) no preemptive or similar rights to subscribe
for or to purchase Company Stock.
5. The Company has full power and authority (including full corporate
power and authority) to own its properties and assets, to carry on
its business as presently conducted and to execute and deliver the
Agreement and to perform its obligations thereunder.
6. Neither the execution and the delivery of the Agreement, nor the
consummation of the transactions contemplated thereby, will (1)
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Company is
subject or any provision of the charter or bylaws of the Company or
(2) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right
to accelerate, terminate, or cancel, or require any notice to or
consent of any party under any agreement, contract, lease, license,
instrument or other arrangement to which the Company is a party or
by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its
assets).
<PAGE>
Purchasers under Agreement
May 27, 1997
Page three of four
7. The Shares have been duly authorized and, when issued, sold, and
delivered in accordance with the terms of this Agreement, shall be
duly and validly issued, fully paid, and nonassessable, and shall
not be subject to any liens, claims, or encumbrances other than
restrictions on transfer under federal or state securities laws. The
shares of Class A Preferred Stock contemplated to be issued pursuant
to Section 10.2. of the Agreement and 172,500 shares of Class A
Preferred Stock contemplated to be issued pursuant to Section 10.1.
of the Agreement have been duly authorized, and the Company has
reserved sufficient shares of Class A Preferred Stock for issuance
pursuant thereto, and, when issued and delivered in accordance with
the terms of the Agreement, such shares of Class A Preferred Stock
shall be duly and validly issued, fully paid and nonassessable, and
shall not be subject to any liens, claims or encumbrances other than
restrictions on transfer under federal or state securities laws. The
Company has reserved sufficient shares of Class A Common Stock for
issuance upon conversion of the Class A Preferred Stock and, when
issued upon conversion of the Class A Preferred Stock, such shares
of Class A Common Stock shall be duly and validly issued, fully paid
and nonassessable.
8. There is no action, proceeding or investigation pending or, to the
best of my knowledge, threatened, or any claim that has been made
against the Company or the Controlling Stockholder, which seeks to
restrain, enjoin, prevent the consummation of otherwise challenge
the Agreement, the execution, delivery and performance thereof by
the Parties thereto or the transactions contemplated thereby, or
which might result, either individually or in the aggregate in any
material adverse change in the assets, conditions, affairs or
prospects of the Company.
9. Based upon the representations of the Purchasers contained in the
Agreement and the investment letter delivered by each Purchaser, the
offer, sale, issuance and delivery of the Shares, the shares of
Class A Preferred Stock contemplated to be issued pursuant to
Section 10.1. and 10.2. and the shares of Class A Common Stock to be
issued upon conversion of the Class A Preferred Stock are all exempt
from the registration requirement of the Securities Act of 1933, as
amended, and applicable state "blue sky" laws.
<PAGE>
Purchasers under Agreement
May 27, 1997
Page four of four
10. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority is required
in connection with the valid execution, delivery and performance by
the Company of the Agreement, other than such consents, approvals,
authorizations, designations, declarations or filings as have been
made or obtained on or before the date hereof or which are not
required to be made or obtained until after the date hereof.
Very truly yours,
Brian J. Zimmet
<PAGE>
Exhibit D
PROPRIETARY INFORMATION AGREEMENT
AGREEMENT, dated the 27th day of May, 1997, by and between GLOBECOMM, INC.
(the "Company") doing business at 11 Broadway, Suite 660, New York, New York and
Gerald Gorman residing at 180 Midland Avenue, Montclair, New Jersey. The Company
and GORMAN are collectively referred to as the "Parties."
WHEREAS, GORMAN is employed by the Company as Secretary and Treasurer, the
controlling shareholder in the Company and a member of the board of directors of
the Company;
WHEREAS, the Company is entering into a stock purchase agreement (the
"Stock Purchaser Agreement") with various purchasers (the "Purchasers"), which
provides, among other things, that the purchasers shall invest two million five
hundred thousand dollars ($2,500,000) in the Company;
WHEREAS, as a condition to their willingness to enter into the Stock
Purchase Agreement, the purchasers require GORMAN enter into this Proprietary
Information Agreement;
WHEREAS, in order to induce the Purchasers to enter into the Stock
Purchase Agreement, GORMAN is willing to enter into this Proprietary Information
Agreement.
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the Parties hereto do hereby agree as follows:
1. Noncompetition. During the term of this Agreement and for the period of
two (2) years after his termination of employment with the Company, with or
without cause, GORMAN shall not, (1) own an interest in; or (2) participate (as
an officer, director, or in any other capacity) in the management, operation, or
control of; or (3) perform services as or act in the capacity of an employee,
independent contractor, consultant, or agent of any enterprise engaged, directly
or indirectly, in the business of the Company or otherwise competitive with that
of the Company or engage in competition with any business conducted by the
Company except with the prior written consent of the Company; provided, however,
if the Company ceases to do business the
1
<PAGE>
restrictions of this section shall not apply. GORMAN agrees that due to the
unique nature of the business of the Company, the limitations set forth in this
covenant not to compete are reasonable.
2. Confidentiality. GORMAN acknowledges and agrees that all product
specifications, lists of the Company's customers and suppliers, product planning
information, and other Company data related to its business ("Confidential
Information") are valuable assets of the Company. Except for disclosures
reasonably made to advance the business of the Company and information which is
a matter of public record, GORMAN shall not, during the term of this Agreement
or after the termination of employment with the Company, disclose any
Confidential Information to any person or use any Confidential Information for
his benefit or the benefit of any other person, except with prior written
consent of the Company.
3. Return of Documents. GORMAN acknowledges and agrees that all originals
and copies of records, reports, documents, lists, plans, drawings, memoranda,
notes, and other documentation related to the business of the Company or
containing any Confidential Information shall be the sole and exclusive property
of the Company, and shall be returned to the Company upon the termination of
employment with the Company or upon the written request of the Company.
4. Inventions. GORMAN acknowledges and agrees that any idea, invention,
technique, modification, process, or improvement (whether patentable or not),
any industrial design (whether registerable or not), and any work of authorship
(whether or not copyright protection may be obtained for it) created, conceived,
or developed by GORMAN (the "Invention"), either solely or in conjunction with
others, during the term of this Agreement, that relates in any way to, or is
useful in any manner in, the business then being conducted or proposed to be
conducted by the Company, and any such item created by GORMAN, either solely or
in conjunction with others, following termination of GORMAN's employment with
the Company, shall belong exclusively to the Company.
2
<PAGE>
5. Injunction. GORMAN agrees that it would be difficult to measure damage
to the Company from any breach by him of this Agreement and that monetary
damages would be an inadequate remedy for any such breach. Accordingly, GORMAN
agrees that if there shall be any breach or threatened breach by him of this
Agreement, the Company shall be entitled, in addition to all other remedies it
may have at law or in equity, to an injunction or other appropriate orders to
restrain any such breach, without showing or proving any actual damage sustained
by the Company.
6. No Release. GORMAN agrees that his termination with the Company or the
expiration of the term of this Agreement shall not release him from any
obligations under this Agreement.
WHEREAS, the Parties have signed their names to this Agreement on the date
as above written:
GlobeComm, Inc.
- ------------------------- -------------------------
By: Gary Millin, President Gerald Gorman
3
<PAGE>
PROPRIETARY INFORMATION AGREEMENT
AGREEMENT, dated the 27th day of May, 1997, by and between GLOBECOMM, INC.
(the "Company") doing business at 11 Broadway, Suite 660, New York, New York and
Gary Millin residing at 303 East 81st Street, New York, New York. The Company
and MILLIN are collectively referred to as the "Parties."
WHEREAS, MILLIN is a shareholder of the Company and is employed as the
President of the Company;
WHEREAS, the Company is entering into a stock purchase agreement (the
"Stock Purchase Agreement") with various purchasers (the "Purchasers"), which
provides, among other things, that the Purchasers shall invest two million five
hundred thousand dollars ($2,500,000) in the Company;
WHEREAS, as a condition to their willingness to enter into the Stock
Purchase Agreement, the Purchasers require that MILLIN enter into this
Proprietary Information Agreement;
WHEREAS, in order to induce the Purchasers to enter into the Stock
Purchase Agreement, MILLIN is willing to enter into this Proprietary Information
Agreement.
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the Parties hereto do hereby agree as follows:
1. Noncompetition. During the term of this Agreement and for the period of
two (2) years after his termination of employment with the Company, with or
without cause, MILLIN shall not, (1) own any interest in, or (2) participate (as
an officer, director, or in any other capacity) in the management, operation, or
control of, or (3) perform services as, or act in the capacity of, an employee,
independent contractor, consultant, or agent of any enterprise engaged, directly
or indirectly, in the business of the Company or otherwise competitive with the
Company, or engage in competition with any business conducted by the Company,
except with the prior written consent of the Company; provided, however, if the
Company dissolves, liquidates, winds up or ceases to do business, the
restrictions of this section shall not apply.
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MILLIN agrees that due to the unique nature of the business of the Company, the
limitations set forth in this covenant not to compete are reasonable.
2. Confidentiality. MILLIN acknowledges and agrees that all product
specifications, lists of the Company's customers and suppliers, product planning
information, and other Company data related to its business ("Confidential
Information") are valuable assets of the Company. Except for disclosures
reasonably made to advance the business of the Company and information which is
a matter of public record, MILLIN shall not, during the term of this Agreement
or after the termination of employment with the Company, disclose any
Confidential Information to any person or use any Confidential Information for
his benefit or the benefit of any other person, except with prior written
consent of the Company.
3. Return of Documents. MILLIN acknowledges and agrees that all originals
and copies of records, reports, documents, lists, plans, drawings, memoranda,
notes, and other documentation related to the business of the Company or
containing any Confidential Information shall be the sole and exclusive property
of the Company, and shall be returned to the Company upon the termination of
employment with the Company or upon the written request of the Company.
4. Injunction. MILLIN agrees that it would be difficult to measure damage
to the Company from any breach by him of this Agreement and that monetary
damages would be an inadequate remedy for any such breach. Accordingly, MILLIN
agrees that if there shall be any breach or threatened breach by him of this
Agreement, the Company shall be entitled, in addition to all other remedies it
may have at law or in equity, to an injunction or other appropriate orders to
restrain any such breach, without showing or proving any actual damage sustained
by the Company.
5. No Release. MILLIN agrees that his termination with the Company or the
expiration of the term of this Agreement shall not release him from any
obligations under this Agreement.
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WHEREAS, the Parties have signed their names to this Agreement on the date
as above written:
GlobeComm, Inc.
- ------------------------- -------------------------
Gerald Gorman, Secretary Gary Millin
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Exhibit E
Ratchet Protection
I. The following examples are applications of Section 10.1 of the Class A
Stock Purchase Agreement.
Share Price: $2.00
Shares sold: 1,000,000
Total Investment: $2,000,000
The Company sells Common Stock in a secondary private placement at $1.50 /
share.
$2.00/share x 1,000,000 shares = $2,000,000
$1.50/share x 1,333,333 shares = $2,000,000
Purchasers shall be issued pro rata an additional 333,333 shares of Class
A Preferred Stock (1,333,333 shares less 1,000,000 shares).
II. The following are examples of the applications of Section 10.2.1 and
10.2.2 of the Class A Stock Purchase Agreement.
Share Price: $2.00
Shares sold: 1,000,000
Total Investment: $2,000,000
A. No public offering or private offer to sell shares or Company Sale
occurs within 30 months after the Closing Date.
$2/share x 1,000,000 shares = $2,000,000
$1/share x 2,000,000 shares = $2,000,000
Purchasers shall be issued an additional 1,000,000 shares of Class A
Preferred Stock (2,000,000 shares less 1,000,000 shares)
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B. Public Offering or private offer to sell occurs within 30 months of
the Closing Date; no Company Sale occurs.
Offering price = $16.00/share for Class A Common or Class A Preferred.
$2/share x 1,000,000 shares = $2,000,000
$1.6/share x 1,250,000 shares = $2,000,000
Purchaser will be issued an additional 250,000 shares of Class A Preferred
Stock (1,250,000 shares less 1,000,000).
C. Public Offering or private offer to sell and Company Sale occur
within 30 months of Closing Date.
Offering price = $18.00 / share for Class A Common or Class A Preferred
Company Sale = $16.00 / share for Class A Common or Class A Preferred
$2/share x 1,000,000 shares = $2,000,000
$1.6/share x 1,250,000 shares = $2,000,000
$1.8/share x 1,111,111 shares = $2,000,000
Purchaser will be issued an additional 111,111 shares of Class A Preferred
Stock (1,111,111 shares less 1,000,000) since the $1.80 / shares in the
public offering or private sale is greater than the $1.60 / share of the
Company Sale.
D. Public Offering does not occur, Company Sale occurs within 30 months
of Closing Date.
Company Sale = $8.00 / share for Class A Common or Class A Preferred
$2/share x 1,000,000 shares = $2,000,000
$.80/share x 2,500,000 shares = $2,000,000
Purchaser will be issued an additional 1,000,000 shares of Class A
Preferred Stock, not 1,500,000 shares, since in no event shall the share
price be adjusted to less than $1.00 / share
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CONSENT OF THE HOLDERS OF
CLASS A COMMON STOCK OF GLOBECOMM, INC.
Pursuant to Section 228 of the
Delaware General Corporation Law
The undersigned, being the holders of the majority of the Class A Common
Stock of GlobeComm, Inc., (the "Corporation"), do hereby consent to the adoption
of the following resolution in lieu of holding a meeting of the holders of the
Class A Common Stockholders.
RESOLVED, that the Certificate of Incorporation be amended and modified,
as advised by the Board of Directors of the Corporation, in the manner set forth
in the minutes of the Board of Directors dated May 27, 1997, a copy of which is
attached hereto.
Dated: New York, New York
May 27, 1997
/s/ Gerald Gorman /s/ Gary Millin
- ------------------------- -------------------------
Gerald Gorman Gary Millin
/s/ Eric Woodward /s/ Bob Helfant
- ------------------------- -------------------------
Eric Woodward Bob Helfant
- -------------------------
Anthony Millin
InfoSpace, Inc. Vanity Mail Services, Inc.
/s/ David Milligan
- ------------------------- -------------------------
By: Naveen Jain By: David Milligan
<PAGE>
PRESIDENT'S COMPLIANCE CERTIFICATE
OF
GLOBECOMM, INC.
I, Gary Millin, President of GlobeComm, Inc., do hereby certify that,
except as set forth in the Disclosure Schedule dated May 27, 1997, the
representations and warranties contained in Section 3 of the Stock Purchase
Agreement are true and correct as of this date. I certify that all agreements,
conditions and covenants contained in the Stock Purchase Agreement required to
be performed or complied with by the day of closing have been performed or
complied with as this date.
Dated: May 27, 1997
New York, New York
GlobeComm, Inc.
/s/ Gary Millin, President
---------------------------
By: Gary Millin, President
<PAGE>
Exhibit 10.25
WAIVER, CONSENT AND AMENDMENT
TO THE CLASS A PREFERRED STOCK PURCHASE
AGREEMENT DATED MAY 27, 1997, THE PURCHASE
AND SALE AGREEMENT DATED DECEMBER 17, 1997,
THE PURCHASE AND SALE AGREEMENT DATED
JANUARY 5, 1998, BETWEEN iNAME, Inc. (formerly named GLOBECOMM, INC.) AND
THE PERSONS IDENTIFIED THEREIN,
AND INVESTORS' RIGHTS AGREEMENT BETWEEN iNAME, INC.,
(formerly named GLOBECOMM, INC.) AND THE PERSON IDENTIFIED HEREIN
WAIVER, CONSENT, AMENDMENT and AGREEMENT, dated as of the 31st day of
July, 1998, by and among iNAME, INC., (formerly named GLOBECOMM, INC.), a
Delaware corporation (the "Company"), doing business at 11 Broadway, Suite 660,
New York, New York and the undersigned holders of Class A Preferred Stock of the
Company, together constituting the holders of a majority of the Class A
Preferred Stock of the Company issued pursuant to the Class A Preferred Stock
Purchase Agreement dated May 27, 1997, the Purchase and Sale Agreement dated
December 17, 1997 and the Purchase and Sale Agreement dated January 5, 1998,
Gerald Gorman, residing at 415 Bernardsville Road, Mendham, New Jersey, in his
capacities as holder of Class A Preferred Stock, Class B Common Stock and
controlling stockholder (the "Controlling Stockholder"), and the holders of
Class C Preferred Stock. The holders of Class A Preferred Stock that are parties
to the Stock Purchase Agreement (as defined below) shall be referred to
collectively as the "Original Purchasers" and the holders of Class C Preferred
Stock and/or Warrants who are parties to this Agreement shall be referred to
collectively as the "Additional Purchasers." The Original Purchasers and the
Additional Purchasers are collectively referred to as the "Purchasers." The
Company and the Purchasers are collectively referred to as the "Parties."
WHEREAS, the Company and the Original Purchasers are parties to a
certain (i) Class A Preferred Stock Purchase Agreement dated as of May 27, 1997,
(ii) Purchase and Sale Agreement dated December 17, 1997, and (iii) Purchase and
Sale Agreement dated January 5, 1998 (collectively, the "Stock Purchase
Agreement"); and
WHEREAS, Section 11.6 of the Stock Purchase Agreement provides that the
Stock Purchase Agreement may be modified by the written consent of the Company
and the holders of a majority of the shares of Class A Preferred Stock issued to
the Original Purchasers pursuant to the Stock Purchase Agreement; and
WHEREAS, the Company and the holders of a majority of the Class A
Preferred Stock issued pursuant to the Stock Purchase Agreement desire, among
other things, to waive and amend certain provisions of the Stock Purchase
Agreement in order to permit the sale by the Company of shares of Class C
Preferred Stock to the Additional Purchasers at a price per share
<PAGE>
of SEVEN DOLLARS ($7.00), and to provide that the Additional Purchasers become
parties to this Agreement and be bound by the same obligations and entitled to
the same rights and benefits as the Original Purchasers thereunder, as more
fully set forth herein; and
WHEREAS, the Company and the Additional Purchasers are parties to a
Class C Preferred Stock Purchase Agreement dated simultaneously herewith (the
"Class C Preferred Stock Purchase Agreement"); and
WHEREAS, in order to induce the Additional Purchasers to invest funds
in the Company pursuant to the Class C Preferred Stock Purchase Agreement, the
Original Purchasers, the Additional Purchasers and the Company agree that this
Agreement shall govern the rights of the Original Purchasers, the Additional
Purchasers and the Company with respect to the subject matter set forth herein
and in connection with the terms and provisions as set forth herein;
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the Parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 DEFINITIONS. The following terms, as used herein, shall
have the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such Person.
"Agreement" means this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Books and Records" means all books, ledgers, files, reports,
documents, plans and operating records of, or maintained by, the Company, and
all other data in the possession of the Company relating to or reasonably
required for the operation of the Company's business.
"Class A Common Stock" means the thirty million (30,000,000) shares of
Class A Common Stock that the Company is authorized to issue by way of the
Company's Amended and Restated Certificate of Incorporation, and amendments
thereto.
"Class A Preferred Stock" means the six million (6,000,000) shares of
Class A Preferred Stock that the Company is authorized to issue by way of the
Company's Amended and Restated Certificate of Incorporation, and amendments
thereto.
"Class A Demand Registration" has the meaning set forth in Section
4.1.3. of this Agreement.
<PAGE>
"Class B Common Stock" means the five million (5,000,000) shares of
Class B Common Stock that the Company is authorized to issue by way of the
Company's Amended and Restated Certificate of Incorporation, and amendments
thereto.
"Class C Preferred Stock" means the six million (6,000,000) shares of
Class C Preferred Stock that the Company is authorized to issue by way of the
Company's Amended and Restated Certificate of Incorporation, and amendments
thereto.
"Class C Demand Registration" has the meaning set forth in Section
4.1.4. of this Agreement.
"Class D Preferred Stock" means the five million (5,000,000) shares of
Class D Preferred Stock that the Company is authorized to issue by way of the
Company's Amended and Restated Certificate of Incorporation, and amendments
thereto.
"Company Stock" means any shares of any class of authorized capital
stock in the Company.
"Confidential Information" means any information concerning the
businesses and affairs of the Company that is not already generally available to
the public.
"Controlling Stockholder" has the meaning set forth in the preface
above.
"Incidental Registration" has the meaning set forth in Section 4.1.1.
of this Agreement.
"Indemnified Party" and "Indemnifying Party" has the meaning set forth
in Section 4.7. of this Agreement.
"Fully Diluted Shares Outstanding" has the meaning set forth in Section
6.3.3. of this Agreement.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Purchasers" means the meaning set forth in the preface above.
"Registrable Securities" means (i) the Class A Common Stock issuable or
issued upon conversion of the Shares or the Warrant Shares, (ii) any Class A
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the securities referenced in (i) and (iii) any other shares of capital stock of
the Corporation into or for which the Class A Common Stock may be converted into
or exchanged pursuant to a recapitalization or reclassification of the Company's
capital stock.
"SEC" means the Securities and Exchange Commission.
<PAGE>
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (A) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (B) purchase money liens securing rental payments under
capital lease arrangements, and (C) liens, charges, encumbrances, easements,
rights-of-way, building and use restrictions, exceptions, reservations and
limitations that do not in any material respect adversely detract from the value
of the property subject thereto or materially impair the operation of the
Company.
"Shares" means the shares of Class A Preferred Stock or Class C
Preferred Stock, as the case may be, issued or to be issued to the Purchasers
pursuant to the Stock Purchase Agreement, as amended, and the Class C Preferred
Stock Purchase Agreement.
"Warrant Shares" means the shares of capital stock of the Company
issuable upon the exercise of the Warrants.
"Warrants" means the warrants for the purchase of capital stock of the
Company issued or to be issued to the Additional Purchasers under the Class C
Preferred Stock Purchase Agreement.
Section 1.2 OTHER TERMS. Other terms may be defined elsewhere in the
text of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
Section 1.3 OTHER DEFINITIONAL PROVISIONS. The words "herein,"
"hereof," "hereto" and "hereunder" and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The terms defined in the singular shall
have a comparable meaning when used in the plural, and vice versa, and in such
gender, as the sense and circumstances require.
ARTICLE II
CONSENT OF THE ORIGINAL PURCHASERS
The Original Purchasers (i) ratify and approve the written consent of
the Board of Directors attached hereto as Exhibit A in all respects, including
the rights and preferences afforded the holders of the Class A Common Stock,
Class A Preferred Stock, Class B Common Stock, Class C Preferred Stock and Class
D Preferred Stock, (ii) agree and consent that the Company's Certificate of
Incorporation be amended and modified, in accordance with the terms set forth in
the Amended and Restated Certificate of Incorporation attached as Exhibit B and
(iii) consent to the issuance of Class C Preferred Stock pursuant to the Class C
Preferred Stock Purchase Agreement.
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ARTICLE III
MODIFICATIONS
To the extent that any provision in this Agreement conflicts with the
terms of the Stock Purchase Agreement, the terms of this Agreement shall control
and supercede the conflicting sections of the Stock Purchase Agreement
concerning the subject matter contained herein. Without limiting the foregoing,
the Parties, the Company and the Controlling Stockholder agree and consent that
section 7 ("Registration Rights"), other than section 7.7 ("Conversion of
Shares"); section 8.1 ("Modification of Bylaws); section 8.2 ("Financial
Statements"); section 8.3 ("Inspection"); section 8.5 ("Arm's Length
Transactions"); section 8.6 ("Termination"); section 8.7 ("Voting Agreement");
section 8.9 ("Transfer of Class B Common Stock"); section 9 ("Preemptive
Rights"); section 10.3 ("Restriction on the Declaration of Dividends"); and
section 11.6 ("Waivers; Amendments") of the Stock Purchase Agreement and section
4.A of the Purchase and Sale Agreement dated December 17, 1997 and the Purchase
and Sale Agreement dated January 5, 1998, each between the Company and the
Additional Purchasers (as defined therein) (insofar as such section relates to
the aforementioned sections of the Stock Purchase Agreement) are deleted in
their entirety, and the rights afforded to the Original Purchasers by virtue of
those sections are modified and amended as set forth in Sections 4, 5, 6 and 7
of this Agreement.
ARTICLE IV
REGISTRATION RIGHTS
The Company and the Purchasers covenant and agree as follows:
Section 4.1 REGISTRATION
4.1.1. INCIDENTAL REGISTRATION. If at any time the Company proposes to
register any Company Stock under the Act for its own account or for the account
of any of its stockholders, in connection with an underwritten public offering
of such Company Stock, on a form that would also permit registration of the
Registrable Securities, the Company shall, each such time, give the Purchasers
not less than twenty (20) days written notice of such proposed registration (the
"Incidental Registration"). Upon the written request of the Purchasers, given
within twenty (20) days after receipt of any such notice from the Company, the
Company shall, subject to Section 4.1.2., cause to be included in such
registration all of the Registrable Securities the Purchasers request be
registered in such registration. There shall be no restriction with respect to
the number of times the Purchasers may request such Incidental Registration.
4.1.2. PRO RATA INCIDENTAL REGISTRATION OF COMPANY STOCK. If the
managing underwriter of any offering described in the first sentence of Section
4.1.1 determines that the number of shares proposed to be sold by the Company or
by other stockholders of Company Stock is greater than the number of shares that
the underwriter believes feasible to sell at the time, at the price and upon the
terms approved by the Company, then the number of shares of Company Stock that
the underwriter believes may be sold shall be
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allocated for inclusion in the registration statement in the following order of
priority: (A) Company Stock sold for the account of any holders of the Company's
securities if the registration was initiated by such holders pursuant to
contractual demand registration rights and Company Stock sold for the account of
Lycos, Inc. ("Lycos"), pursuant to contractual incidental registration rights
that permit it to participate in such an offering on a pro rata basis with such
holders, pro rata among such holders and Lycos according to the number of shares
requested to be registered by such holders and Lycos; (B) Company Stock sold for
the account of the Company; and (C) pro rata among the Purchasers whose shares
are being registered therein pursuant to Section 4.1.1. and any other holders of
securities of the Company exercising contractual incidental registration rights
(other than holders described in clause (A) above), according to the number of
shares requested to be registered by Purchasers and other holders; provided,
however, that (1) as between the Company, on the one hand, and such Purchasers
and other holders referred to in clause (C) above, at least ten percent (10%) of
the Purchasers' and such other holders' Registrable Securities requested to be
included shall be included in such underwriting (other than the initial
underwriting); and (2) the right of the Purchasers and other holders to
participate in the offering shall have priority over the purchasers of Class A
Common Stock and Class B Common Stock . If a Purchaser disapproves of the terms
of the underwriting, it may elect to withdraw therefrom by written notice to the
Company and the managing underwriter; provided, however, the election to
withdraw occurs within ten (10) days after such Purchaser receives notice of the
terms of the underwriting.
4.1.3. CLASS A PREFERRED STOCKHOLDERS' DEMAND REGISTRATION. On or after
the earlier of (A) 180 days after the effective date of a registration statement
filed by the Company in connection with an initial public offering of any
Company Stock or other securities under the Act, or (B) May 31, 1999, then, upon
written request of the Original Purchasers holding in the aggregate greater than
fifty percent (50%) of the Class A Preferred Stock held by the Original
Purchasers that the Company effect the registration under the Act of all or a
portion of the Registrable Securities and specifying the intended method of
disposition thereof, the Company shall, within fifteen (15) days after the
Company has received such written notice, promptly commence and use its best
efforts to consummate the registration under the Act of the Registrable
Securities, or such portion thereof, and of all other stock or securities which
the Company has been requested to register by any other holder of the Company's
securities that is entitled to include securities in such registration (the
"Class A Demand Registration"); provided, however, that (1) the Original
Purchasers in the aggregate will be entitled to request three (3) Class A Demand
Registrations, provided that either (a) the Registrable Securities requested to
be included in such Class A Demand Registration constitute at least twenty
percent (20%) of the total number of Registrable Securities issued hereunder or
(b) the anticipated gross receipts from the offering exceed ten million dollars
($10,000,000), (2) a registration will not count as one of such three permitted
Class A Demand Registrations until it has become effective, (3) the Company may
delay the filing of a registration statement under the Act as required by this
Section 4.1.3. for a period of up to sixty (60) days after the request of the
Original Purchasers if the Board of Directors of the Company determines in good
faith that such Class A Demand Registration would be materially adverse to the
interests of the Company, and in such event, the Original Purchasers will be
entitled to withdraw such request and such Class A Demand Registration will not
be counted as a
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Class A Demand Registration hereunder, and (4) the Company will not be required
to effect a Class A Demand Registration within six (6) months after the
effective date of a previous Class A Demand Registration, Class C Demand
Registration (defined below) or registration in which the Original Purchasers
were given registration rights pursuant to Section 4.1.1.
4.1.4. CLASS C PREFERRED STOCKHOLDERS' DEMAND REGISTRATION. On or after
the earlier of (A) 180 days after the effective date of a registration statement
filed by the Company in connection with an initial public offering of any
Company Stock or other securities under the Act, or (B) July 31, 2000, then,
upon written request of the Additional Purchasers holding in the aggregate
greater than fifty percent (50%) of the Class C Preferred Stock that the Company
effect the registration under the Act of all or a portion of the Registrable
Securities and specifying the intended method of disposition thereof, the
Company shall, within fifteen (15) days after the Company has received such
written notice, promptly commence and use its best efforts to consummate the
registration under the Act of the Registrable Securities, or such portion
thereof, and of all other stock or securities which the Company has been
requested to register by any other holder of the Company's securities that is
entitled to include securities in such registration (the "Class C Demand
Registration"); provided, however, that (1) the Additional Purchasers shall be
entitled to request one (1) Class C Demand Registration, provided that either
(a) the Registrable Securities requested to be included in such Class C Demand
Registration constitute at least twenty percent (20%) of the total number of
Registrable Securities issued hereunder or (b) the anticipated gross receipts
(before underwriters discounts and commissions and costs of such registration)
from the offering exceed ten million dollars ($10,000,000), (2) a registration
will not count as the permitted Class C Demand Registration until it has become
effective, (3) the Company may delay the filing of a registration statement
under the Act as required by this Section 4.1.4. for a period of up to sixty
(60) days after the request of the Additional Purchasers if the Board of
Directors of the Company determines in good faith that such Class C Demand
Registration would be materially adverse to the interests of the Company, and in
such event, the Additional Purchasers will be entitled to withdraw such request
and such Class C Demand Registration will not be counted as the Class C Demand
Registration hereunder (provided, however, that the Company shall not use this
right more than once in any 180 day period) and (4) the Company will not be
required to effect a Class C Demand Registration within six (6) months after the
effective date of a registration in which the Additional Purchasers were given
registration rights pursuant to Section 4.1.1. In the event that the Additional
Purchasers exercise the demand registration right hereunder, and shares
requested to be registered by Lycos in connection therewith are included in such
registration on a pro rata basis with the Additional Purchasers' Registrable
Securities, pursuant to section 11 of the letter agreement between Lycos and the
Company dated March 9, 1998 or otherwise, account for 30% or more of the shares
offered in such registered offering, then the Additional Purchasers shall have
the right to one (1) additional Class C Demand Registration hereunder.
4.1.5. PRO RATA DEMAND REGISTRATION OF COMPANY STOCK. (a) In the event
a Class A Demand Registration or Class C Demand Registration (each a "Demand
Registration") is initiated subsequent to the initial public offering of any
Company Stock
7
<PAGE>
or other securities under the Act and such Demand Registration is an
underwritten offering, and the managing underwriter advises the Purchasers and
the Company in writing that in the underwriter's opinion the number of shares
requested to be included exceeds the number that can be sold in such offering,
then the number of shares of Company Stock that the underwriter believes may be
sold shall be allocated for inclusion in the registration statement in the
following order of priority: (A) shares requested to be included by the Original
Purchasers, in the case of a Class A Demand Registration, or the Additional
Purchasers, in the case of a Class C Demand Registration, together with the
shares requested to be included by Lycos to the extent Lycos is entitled to
participate in such offering on a pro rata basis with the Original Purchasers or
the Additional Purchasers, as applicable, pursuant to contractual incidental
registration rights, that in the opinion of such underwriter can be sold prior
to the inclusion of any securities of any other security holder of the Company;
provided that, if the managing underwriter advises the Company in writing that
in its opinion the aggregate number of shares requested for inclusion by the
Original Purchasers, in the case of a Class A Demand Registration, or the
Additional Purchasers, in the case of a Class C Demand Registration, together
with such shares of Lycos, exceeds the number of such shares that can be sold in
such offering, then the Company shall include in the registration statement only
such number of shares, pro rata among the Original Purchasers, in the case of a
Class A Demand Registration, or the Additional Purchasers, in the case of a
Class C Demand Registration, and Lycos, based upon the number of shares
requested to be registered by each of the Original Purchasers or the Additional
Purchasers, as applicable, and Lycos, which in the opinion of such underwriter
can be sold; (B) shares sold for the account of the Company; and (C) pro rata
among the Original Purchasers, in the case of a Class C Demand Registration, or
pro rata among the Additional Purchasers, in the case of a Class A Demand
Registration, and any other holders of securities of the Company exercising
contractual incidental registration rights other than any holders whose shares
are included pursuant to clause (A) above.
(b) In the event a Demand Registration is initiated prior to the
Company giving notice under Section 4.1.1. that it proposes to register any
Company Stock under the Act in its initial public offering of any Company Stock
or other securities under the Act and such Demand Registration is an
underwritten offering, and the managing underwriter advises the Purchasers and
the Company in writing that in the underwriter's opinion the number of shares
requested to be included exceeds the number that can be sold in such offering,
then the number of shares of Company Stock that the underwriter believes may be
sold shall be allocated for inclusion in the registration statement in the
following order of priority: (A) shares requested to be included by the Original
Purchasers, in the case of a Class A Demand Registration, or the Additional
Purchasers, in the case of a Class C Demand Registration, together with the
shares requested to be included by Lycos to the extent Lycos is entitled to
participate in such offering on a pro rata basis with the Original Purchasers or
the Additional Purchasers, as applicable, pursuant to contractual incidental
registration rights, that in the opinion of such underwriter can be sold prior
to the inclusion of any securities of any other security holder of the Company;
provided that, if the managing underwriter advises the Company in writing that
in its opinion the aggregate number of shares requested for inclusion by the
Original Purchasers, in the case of a Class A Demand Registration, or the
Additional Purchasers, in the case of a Class C Demand Registration, together
with such shares of Lycos, exceeds the number of such
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shares that can be sold in such offering, then the Company shall include in the
registration statement only such number of shares, pro rata among the Original
Purchasers, in the case of a Class A Demand Registration, or the Additional
Purchasers, in the case of a Class C Demand Registration, and Lycos, based upon
the number of shares requested to be registered by each of the Original
Purchasers or the Additional Purchasers, as applicable, and Lycos, which in the
opinion of such underwriter can be sold; (B) pro rata among the Original
Purchasers, in the case of a Class C Demand Registration or pro rata among the
Additional Purchasers, in the case of a Class A Demand Registration, and any
other holders of securities of the Company exercising contractual incidental
registration rights other than any holders whose shares are included pursuant to
clause (A) above; and (C) shares sold for the account of the Company.
(c) If the Original Purchasers make a written request to exercise
rights to a Class A Demand Registration under Section 4.1.3. prior to the
Additional Purchasers making a written request to exercise rights to a Class C
Demand Registration under Section 4.1.4., then the registration following from
such request shall be a Class A Demand Registration. If the Additional
Purchasers make a written request to exercise rights to a Class C Demand
Registration under Section 4.1.4. prior to the Original Purchasers making a
written request to exercise rights to a Class A Demand Registration under
Section 4.1.3., then the registration following from such request shall be a
Class C Demand Registration.
4.1.6. CLASS A PREFERRED STOCKHOLDERS' AND CLASS C PREFERRED
STOCKHOLDERS' FORM S-3 DEMAND REGISTRATION RIGHTS. If at any time the Original
Purchasers holding in the aggregate greater than fifty percent (50%) of the
Class A Preferred Stock held by the Original Purchasers, or the Additional
Purchasers holding in the aggregate greater than fifty percent (50%) of the
Class C Preferred Stock, request that the Company effect a Form S-3 registration
under the Act of all or a portion of the Registrable Securities, the Company
shall, within fifteen (15) days after the Company has received such written
notice, promptly commence and use its best efforts to consummate the Form S-3
registration of the Registrable Securities under the Act; provided, however, (A)
the aggregate fair market value of the Registrable Securities requested to be
registered shall be greater than two million dollars ($2,000,000), (B) the
Company shall only be required to file one Form S-3 registration every twelve
(12) months, and (C) the Original Purchasers or Additional Purchasers who
request that the Company effect a Form S-3 registration shall not be required to
participate in such Form S-3 registration.
4.1.7. BENEFIT OF MORE FAVORABLE RIGHTS. Except for the differences
afforded the Original Purchasers and Additional Purchasers set forth in this
Agreement, if at any time registration rights are granted with respect to
Company Stock or capital stock of any Affiliate of the Company which are on
terms more favorable to the holders of such securities with respect to any
material terms applicable thereto including, without limitation, the number of
times or the circumstances under which such rights may be exercised, the
expenses to be paid by the Company or any Affiliate of the Company in connection
therewith or the duration of the availability of such rights, the Company agrees
that such more favorable terms will be exercisable by the Purchasers
automatically and without further action by the Company. The Company covenants
to give written notice to the Purchasers not less than ten (10) days in advance
of the granting of
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registration rights with respect to Company Stock or capital stock of any
Affiliate of the Company.
4.1.8. CLASS A PREFERRED STOCKHOLDERS' TERMINATION OF REGISTRATION
RIGHTS. Notwithstanding any provision to the contrary, no Original Purchaser
shall be entitled to exercise any right provided for in this Section 4.1. after
five (5) years following the consummation of the sale of Company Stock pursuant
to a registration statement filed by the Company under the Act in connection
with the initial firm commitment underwritten offering of its securities to the
general public.
4.1.9. CLASS C PREFERRED STOCKHOLDERS' TERMINATION OF REGISTRATION
RIGHTS. Upon the date which is thirty (30) months following a firm commitment
underwritten public offering pursuant to a registration statement under the Act,
the public offering price of which is not less than two hundred percent (200%)
of the then applicable Conversion Price of the Class C Preferred Stock (as
defined in the Class C Preferred Stock Purchase Agreement) and an offering
amount of not less than twenty million dollars ($20,000,000) (a "Qualified
Offering"), then the Additional Purchasers shall not be entitled to exercise any
right provided for in this Section 4.1, provided that the rights provided under
4.1.1. shall continue with respect to Registrable Securities issued or issuable
upon exercise of a Warrant (or conversion of a Warrant Share issued or issuable
upon exercise of a Warrant) until twenty four (24) months after the date of the
exercise of such Warrant if such date is after the date specified above.
Section 4.2 OBLIGATIONS OF THE COMPANY. Where required under Section
4.1. to use its best efforts to effect the registration of any of the Shares,
the Company shall, as expeditiously as reasonably possible,
4.2.1. Prepare and file with the SEC a registration statement with
respect to such Shares and use its best efforts to cause such registration
statement to become effective and, upon the request of the holders of a majority
of the Registrable Securities, keep such registration statement effective for up
to one hundred twenty (120) days;
4.2.2. Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration;
4.2.3. Furnish to the Purchaser such numbers of copies of such
registration statement and prospectus, including any preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as the
Purchaser may reasonably request in order to facilitate the disposition of the
Registrable Securities;
4.2.4. Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement; and
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4.2.5. Otherwise comply with all applicable rules and regulations of
the SEC.
Section 4.3 FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Section 4 that the
Purchaser shall furnish to the Company such information regarding the Purchaser,
the Registrable Securities held by the Purchaser, and the intended method of
disposition thereof as the Company or its appointed agents shall reasonably
request and as shall be required in connection with the action to be taken by
the Company.
Section 4.4 CLASS A PREFERRED STOCKHOLDERS' REGISTRATION EXPENSES. In
the case of any registration effected pursuant to Section 4, the Company shall
bear all registration and qualification fees and expenses, and all costs and
disbursements of counsel for the Company; provided, however, that (A) each
Original Purchaser shall bear the fees and costs of such Original Purchaser's
own counsel and all underwriting discounts and commissions with respect to the
Registrable Securities sold by such person and (B) the Company shall not be
required to pay for any expenses of any Class A Demand Registration begun if the
registration request is subsequently withdrawn at the request of a majority in
interest of the Original Purchasers to be registered (in which case all
participating Original Purchasers shall bear such expenses), unless the holders
of a majority of the Original Purchasers agree in writing that the Class A
Demand Registration so withdrawn shall be counted as one of the three permitted
Class A Demand Registrations; provided further that, if the Original Purchasers
elect to engage counsel other than counsel for the Company in connection with a
Class A Demand Registration, the Company shall bear the fees and expenses, and
all costs and disbursements of one firm to act as such counsel to all Original
Purchasers up to a maximum aggregate amount of fifteen thousand dollars
($15,000).
Section 4.5 CLASS C PREFERRED STOCKHOLDERS' REGISTRATION EXPENSES. In
the case of any registration effected pursuant to Section 4, the Company shall
bear all registration and qualification fees and expenses, and all costs and
disbursements of counsel for the Company; provided, however, that (A) each
Additional Purchaser selling Registrable Securities shall bear the fees and
costs of such Additional Purchaser's own counsel and all underwriting discounts
and commissions with respect to the Registrable Securities sold by such person,
and (B) the Company shall not be required to pay for any expenses of the Class C
Demand Registration begun if the registration request is subsequently withdrawn
at the request of a majority in interest of the Additional Purchasers (in which
case the withdrawing Additional Purchasers shall bear such expenses); provided
that, if the Additional Purchasers elect to engage counsel other than counsel
for the Company in connection with a Class C Demand Registration, the Company
shall bear the fees and expenses, and all costs and disbursements of one firm to
act as such counsel to all Additional Purchasers up to a maximum aggregate
amount of fifteen thousand dollars ($15,000).
Section 4.6 SELECTION OF UNDERWRITERS.
4.6.1. COMPANY SELECTION. If a registration pursuant to Section 4.1.1.
of this Agreement involves an underwritten offering, the Company shall have the
right to select the investment bankers and managers to administer the offering.
The Company shall not be required under Section 4.1.1. to register the Shares in
such registration unless the
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Purchasers accept the terms of the underwriting as agreed upon between the
Company and the underwriter.
4.6.2. ORIGINAL PURCHASERS' SELECTION. If a registration pursuant to
Section 4.1.3. or 4.1.6. involves an underwritten offering, then the Original
Purchasers shall have the right to select the investment bankers and managers to
administer the offering; provided, however, that the selection of such
investment bankers and managers shall be subject to the approval of the Company,
such approval not to be unreasonably withheld.
4.6.3. ADDITIONAL PURCHASERS' SELECTION. If a registration pursuant to
Section 4.1.4, or pursuant to Section 4.1.6 at the demand of the Additional
Purchasers, involves an underwritten offering, then the Additional Purchasers
shall have the right to select the investment bankers and managers to administer
the offering; provided, however, that the selection of such investment bankers
and managers shall be subject to the approval of the Company, such approval not
to be unreasonably withheld.
Section 4.7 INDEMNIFICATION. If any Registrable Securities are included
in a registration statement pursuant to this Section 4, then,
4.7.1. To the extent permitted by law, the Company shall indemnify and
hold harmless the Purchasers, agents for the Purchasers, any underwriter for
each Purchasers, and each Person, if any, who controls such Person within the
meaning of the Act, against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities arise out of any untrue statement
or alleged untrue statement of material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained in
the registration statement, or any amendments or supplements to the registration
statement, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, and will reimburse the Purchasers,
the agents for the Purchasers, such underwriter, or controlling Person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission based upon and in conformity with written
information furnished to the Company by an instrument duly executed by the
Purchasers or underwriter and stated to be specifically for use therein.
4.7.2. To the extent permitted by law, each Purchaser, severally and
not jointly, shall indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed such registration statement, and
any underwriter for the Company against any losses, claims, damages or
liabilities to which the Company or any such director, officer, or underwriter
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained in the
registration statement or any amendments or supplements to the registration
statement, or arise out of
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or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statement therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in such registration statement, preliminary prospectus, or amendments or
supplement thereto, in reliance upon and in conformity with written information
furnished by such Purchaser duly executed and stated to be expressly for use
therein, and such Purchaser will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
Person, or underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, that such Purchaser's
liability under this Section 4.7.2. shall not exceed the amount of the gross
proceeds of the offering of such Purchaser's Registrable Securities included
therein.
4.7.3. Each party entitled to indemnification (the "Indemnified Party")
shall give notice to the party required to provide indemnification
("Indemnifying Party") promptly after such Indemnified Party has knowledge of
any claim as to which indemnity may be sought, and shall permit the Indemnifying
Party (at its expense) to assume the defense of any such claim or any litigation
resulting therefrom; provided, however, that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be reasonably
satisfactory to the Indemnified Party, and the Indemnified Party may participate
in such defense at such party's expense; provided, further, that the failure by
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 4.7., except to the
extent that the failure results in an omission of actual notice to the
Indemnifying Party and such Indemnifying Party is damaged solely as a result of
the failure to give notice; provided, further, that a refusal to permit the
Indemnifying Party to conduct such defenses by such counsel shall relieve such
Indemnifying Party of its obligations under this Section 4.7. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to the entry of any judgment or enter
into any settlement that does not include as an unconditional term the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation.
Section 4.8 REPORTS UNDER THE SECURITIES EXCHANGE ACT OF 1934. With a
view toward making available to the Purchasers the benefits of SEC Rule 144
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit the Purchaser to sell its Registrable Securities to the
public without registration or pursuant to a registration on Form S-3, the
Company agrees to:
(i) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its shares to the general public;
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(ii) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Securities Exchange Act of 1934, as is
necessary to enable the holders of Registrable Securities to utilize Form S-3
for the sale of their shares, such action to be taken as soon as practicable
after the end of the fiscal year in which the first registration statement filed
by the Company for the offering of its shares to the general public is declared
effective;
(iii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Securities Exchange Act
of 1934; and
(iv) furnish to any holder of the Registrable Securities, so long as
the holder of the Registrable Shares owns any shares, forthwith upon request (i)
a written statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time after ninety (90) days after the effective
date of the first registration statement filed by the Company), the Act and the
Securities Exchange Act of 1934 (at any time after it has become subject to such
reporting requirements), or as to its qualification that it qualifies as a
registrant whose shares may be resold pursuant to Form S-3 (at any time after it
so qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any holder of
Registrable Securities of any rule or regulation of the SEC which permits the
selling of any such shares without registration or pursuant to such form.
Section 4.9 LOCK-UP PERIOD. The Purchasers agree that it shall not, to
the extent requested by the underwriter of the Company, sell or otherwise
transfer or dispose of any Registrable Securities of the same or similar class
as the Registrable Securities being registered by the Company during the one
hundred eighty (180) day period following the effective date of a registration
statement filed by the Company; provided, however, that (A) such agreement shall
be applicable only to the first registration statement of the Company that
covers shares of the Company to be sold to the public in an underwritten
offering, (B) the holders of Class B Common Stock and the holders of at least
ninety percent (90%) of Class A Common Stock are subject to identical or
substantially similar time restrictions, (C) all officers and directors of the
Company and all other persons with registration rights enter into similar
agreements, and (D) nothing contained herein shall prohibit any holder of
Company Stock from transferring any Registrable Securities to a trust
established for estate planning purposes. Notwithstanding anything to the
contrary set forth herein, the terms of this Section 4.9 may not be amended or
modified, directly or indirectly, without the express written consent of each
holder of Registrable Securities detrimentally affected by such amendment or
modification and any such amendment or modification made without such holder's
consent shall not be applicable to that holder.
Section 4.10 TRANSFER OF REGISTRATION RIGHTS. The registration rights
of the Purchasers under this Section 4 may be assigned and transferred (i) by
the Additional Purchasers to any Affiliate of such Additional Purchaser to whom
any of the shares owned by the Additional Purchasers are transferred, and (ii)
by any Purchaser to any transferee who acquires at least five thousand (5,000)
Registrable Securities (adjusted to reflect subsequent stock splits,
combinations, stock dividends and recapitalizations); provided, however, that
the Company is given written notice by the Purchasers at the time of such
assignment and transfer stating the
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name and address of the transferee and identifying the securities with respect
to which the rights under this Section 4 are being assigned and transferred. For
the purposes of this Section 4.10, a change in control of an Affiliate of an
Additional Purchaser holding shares entitling such Affiliate to the registration
rights hereunder, such that such Affiliate is subsequent to such change of
control no longer an Affiliate of an Additional Purchaser, shall be deemed an
attempted transfer of the registration rights hereunder and such former
Affiliate of an Additional Purchaser shall not be entitled to such registration
rights.
ARTICLE V
OTHER COVENANTS
Section 5.1 ORIGINAL PURCHASERS' DESIGNATION OF DIRECTOR AND OBSERVER.
The Original Purchasers shall have the right to elect one director to the board;
provided, however, that the right of the Original Purchasers to elect such
director shall terminate in the event that there are not outstanding at least
500,000 shares of Class A Preferred Stock held by the Original Purchasers
(adjusted to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations); provided further that, in the event the Original Purchasers
shall lose their rights to elect a member to the Board of Directors, the
Original Purchasers shall have the right to invite a representative designated
by the Original Purchasers to attend all meetings of its Board of Directors in a
nonvoting observer capacity; provided, however, (1) that such representative
shall agree to hold in confidence and trust and to act in a fiduciary manner
with respect to all Confidential Information concerning the Company furnished to
such representative in connection with any such meeting of the Board of
Directors, and (2) the Company reserves the right to withhold any information
and to exclude such representative from any meeting or portion thereof if access
to such information or attendance at such meeting would reasonably be expected
to adversely affect the attorney-client privilege between the Company and its
counsel. Subject to the conditions set forth in this section, the Controlling
Stockholder, the Original Purchasers and the Additional Purchasers agree to use
their best efforts to cause the person or persons so named to be nominated for
election to the Board of Directors of the Company at the time and in the manner
proper for such nominations whereupon the Controlling Stockholder, the Original
Purchasers and the Additional Purchasers agree to cast all of the votes they are
entitled to cast in such election, subject to the limitations set forth below,
whether at the next annual meeting or a special meeting of the stockholders, by
written consent in lieu of a meeting or otherwise, for the election of such
nominees to the Board of Directors of the Company.
Section 5.2 CLASS C PREFERRED DESIGNATION OF DIRECTOR AND OBSERVER. The
Board of Directors of the Company shall, by way of written consent in lieu of a
meeting or otherwise, (i) resolve to permit Sycamore Ventures (or its
Affiliates) to nominate and elect a director to the board; provided, however,
that (a) any such director shall be subject to the approval of the Company's
Board of Directors, such approval not to be unreasonable withheld, and (b) such
right shall terminate at such time as Sycamore Ventures ceases to hold at least
50% of the Class A Common Stock it shall hold immediately following the closing
of the Class C Preferred Stock Purchase Agreement (on an as converted basis
after giving effect to all conversion price adjustments), and (ii) resolve to
permit the Sycamore Venture (or its Affiliate) to designate one observer to the
board to attend all meetings of its Board of Directors in a nonvoting observer
capacity; provided, however, (a) that such representative shall agree to hold in
confidence and
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trust and to act in a fiduciary manner with respect to all Confidential
Information concerning the Company furnished to such representative in
connection with any such meeting of the Board of Directors, and (b) the Company
reserves the right to withhold any information and to exclude such
representative from any meeting or portion thereof if access to such information
or attendance at such meeting would reasonably be expected to adversely affect
the attorney-client privilege between the Company and its counsel or would
result in disclosure of trade secrets to such observer. Subject to the
conditions set forth in this section, the Controlling Stockholder, the Original
Purchasers and the Additional Purchasers agree to use their best efforts to
cause the person or persons so named to be nominated for election to the Board
of Directors of the Company at the time and in the manner proper for such
nominations whereupon the Controlling Stockholder, the Original Purchasers and
the Additional Purchasers agree to cast all of the votes they are entitled to
cast in such election, subject to the limitations set forth below, whether at
the next annual meeting or a special meeting of the stockholders, by written
consent in lieu of a meeting or otherwise, for the election of such nominees to
the Board of Directors of the Company.
Section 5.3 FINANCIAL STATEMENTS. So long as a Purchaser owns any
Shares, the Company shall use its best efforts to deliver to such Purchaser the
following financial information of the Company within the time period provided:
5.3.1. Within one hundred and twenty days (120) days after the end of
each fiscal year of the Company, a statement of operations, a balance sheet of
the Company as of the end of such fiscal year, and statements of operations,
changes in financial position, and changes in shareholder equity for such fiscal
year (including all footnotes to same), which year-end financial reports shall
be audited and certified in accordance with generally accepted accounting
principles by independent certified public accountants of nationally recognized
standing selected by the Company;
5.3.2. Within thirty (30) days after the end of each calendar month, an
unaudited statement of operations for such calendar month and a balance sheet as
of the end of such calendar month;
5.3.3. Within thirty (30) days after the end of each of the first three
quarters of the fiscal year, an unaudited statement of operations for such
fiscal quarter and a balance sheet as of the end of such fiscal quarter; and
5.3.4. During the fourth quarter of the preceding year, a budget and
business plan for the next fiscal year.
Section 5.4 INSPECTION. So long as a Purchaser together with all of its
Affiliates owns at least an aggregate of fifty thousand (50,000) Shares
(adjusted to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations), the Company shall permit such Purchaser, at its expense, to
visit and inspect the Company's properties, to examine its books of account and
records, and to discuss the Company's affairs, finances, and accounts with the
Company's officers and independent public accountants, all at such reasonable
times as may be requested by such Purchaser; provided, however, that the Company
shall not be obligated pursuant to this Section 5.4. to provide any information
(A) that the Company is obligated to hold confidential by the terms of any
agreement with a third party, or (B) in the event the
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Purchaser owns an equivalent or larger investment in a Competitor of the Company
unless such Purchaser is a passive investor in the Company and such Competitor
(provided that such Purchaser shall be considered a passive investor only if
such Purchaser would be entitled to report holdings of greater than five percent
(5%) on a Schedule 13G if the Company and such Competitor were publicly traded).
A "Competitor" of the Company for the purposes of this Agreement shall mean any
Person any one of whose primary businesses is providing internet e-mail
services.
Section 5.5 ARMS' LENGTH TRANSACTIONS. The Company shall not enter into
any transaction, agreement, arrangement, sale, purchase, or lease with any
holder of shares of Company Stock, or any other Person, that provides for
receipt by the Company of less than fair and reasonable consideration for the
money, property or services provided by the Company pursuant to such
transaction, agreement, arrangement, sale, purchase, or lease.
Section 5.6 TERMINATION. The Company's obligations and the Purchaser's
rights under Sections 5.3.2., 5.3.4. and 5.4. shall terminate upon the effective
date of the registration statement filed by the Company in connection with a
Qualified Offering of the Company's stock or other securities under the Act as
and to the extent the Company is otherwise subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended.
Section 5.7 TRANSFER OF CLASS B COMMON STOCK.
5.7.1. CLASS B COMMON STOCK EXIT CONDITION. Except as provided in this
Section 5.7., (i) unless the Original Purchasers shall have been provided the
opportunity to sell, transfer or dispose of one hundred percent (100%) of their
Class A Preferred Stock or the shares of Class A Common Stock or other Company
Stock into which the Shares may be converted or for which they may be exchanged,
for an amount equal to or greater than each Original Purchaser's aggregate
investment, as set forth on Schedule A to the Stock Purchase Agreement,
multiplied by ten (10), in cash, or in freely-tradable securities for which a
public market exists, or assets of equivalent fair market value (as determined
by the Board of Directors in good faith evidenced by a board resolution adopted
by the affirmative votes of a majority of the directors, excluding Gerald Gorman
or his Affiliates, even though the remaining directors be less than a quorum),
and such sale, transfer or disposition shall have been consummated with respect
to all Original Purchasers electing to participate therein prior to November 30,
1999 (the "10x Exit Condition"), and (ii) unless the Additional Purchasers shall
have been provided the opportunity to sell, transfer or dispose of one hundred
percent (100%) of the Shares or the shares of Class A Common Stock or other
Company Stock into which the Shares may be converted or for which they may be
exchanged, for an amount equal to or greater than each Additional Purchaser's
aggregate investment, as set forth in the Class C Preferred Stock Purchase
Agreement, multiplied by three (3), in cash, or in Marketable Securities (as
defined below), within twenty four (24) months from the date of this Agreement,
or thirty (30) months from the date of this Agreement if the Company has
completed a registration under the Act in connection with a Qualified Offering
within twenty four (24) months of the date upon which the Additional Purchasers
purchaser shares of Class C Preferred Stock (the "3x Exit Condition"), then the
shares of Class B Common
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Stock shall not be transferable by the Controlling Stockholder as shares of
Class B Common Stock and any purported transfer thereof shall be void ab initio,
and the Company covenants and agrees that such transfer shall not be reflected
on the stock transfer books of the Company. "Marketable Securities" means: (i)
securities issued or directly and fully guaranteed and insured by the United
States Government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of less than six months from the date of acquisition; or (ii) short
term debt instruments with a maturity of less than 90 days from the date of
issuance of an issuer rated at least A by Standard & Poors Rating Services or
equity securities of an issuer with a market capitalization of at least
$150,000,000, which equity securities are traded on a major nationally
recognized exchange (other than the NASDAQ small cap index or the NASDAQ
bulletin board).
5.7.2. CONFIRMATION OF OCCURRENCE. The Company covenants and agrees
that no transfer of Class B Common Stock shall be given effect by the Company or
reflected on the Company's stock transfer ledger unless the Company shall first
have obtained confirmation in writing by a majority in interest of each of the
Original Purchasers and the Additional Purchasers, such confirmation to be
provided by the Purchasers in good faith, that the 10x Exit Condition and 3x
Exit Condition has been satisfied.
5.7.3. LEGEND RESTRICTION. The Controlling Stockholder covenants and
agrees to deliver promptly upon the execution of this Agreement all of the
shares of Class B Common Stock to the Company in order that the Company may
include a legend on the certificates representing such shares to the effect of
the foregoing.
Section 5.8 VOTING AGREEMENT. In any vote to be taken by the Original
Purchasers in accordance with Sections 4.1.3, 4.1.6, 5.1 or 6.2. of this
Agreement, or by the Purchasers or the Holders (as such terms are defined in the
Stock Purchase Agreement) in accordance with Sections 7.7. or 8.8. of the Stock
Purchase Agreement, as the case may be, the Controlling Stockholder agrees and
consents to vote, in equal proportion to the votes cast by the remaining
Original Purchasers or Purchasers or Holders, as the case may be, his shares of
Class A Preferred Stock, any capital stock of the Company issued upon conversion
thereof, any capital stock of the Company issued as (or issued upon the
conversion or exercise of any warrant, right or other security issued as) a
dividend or other distribution with respect thereto, or in exchange for or in
replacement of said securities with respect thereto.
In addition, if at any time the number of authorized but unissued
shares of Class C Preferred Stock shall not be sufficient to effect the
obligations of the Company to issue additional shares of Class C Preferred
Stock, the Controlling Stockholder agrees to cast all of the votes he is
entitled to cast to approve the same and give effect thereto (whether at the
next annual meeting or a special meeting of stockholders, by written consent in
lieu of a meeting or otherwise).
Section 5.9 RESTRICTION ON THE DECLARATION OF DIVIDENDS, REDEMPTION,
ETC. The Company shall not declare dividends on any class of Company Stock and
shall not redeem, repurchase or otherwise acquire for value any shares of
Company Stock without the consent of the holders of a majority in interest of
the Class A Preferred Stock held by the Original Purchasers, other than
redemptions, repurchases or other acquisitions of Class C Preferred Stock,
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Warrants or Warrant Shares or Class A Common Stock issuable upon conversion of
Class C Preferred Stock pursuant to the terms of the Class C Preferred Stock
Purchase Agreement, the terms of the Warrants, the Company's Amended and
Restated Certificate of Incorporation and any amendment thereto or this
Agreement.
Section 5.10 APPROVAL BY HOLDERS OF CLASS A PREFERRED SHARES AND CLASS
C PREFERRED SHARES OF ISSUANCE OF CERTAIN SHARES OF THE COMPANY/DEEMED FAIR
MARKET VALUE. The holders of Class C Preferred Stock party hereto and the
holders of Class A Preferred Stock party hereto do approve in all respects the
issuance of securities to Digital Equipment Corporation, Cable News Network,
Inc, CNET, Inc., and Surfree.com, Inc., respectively, in accordance with the
contracts with such Persons set forth on Schedule 3.21 to the Class C Preferred
Stock Purchase Agreement in connection with a bona fide commercial business
arrangement with each such entity, and do also approve the issuance of up to a
maximum aggregate 35,000 shares of Class A Preferred Stock to InfoSpace, Inc.
Also in connection with the issuance of any of the aforementioned securities (i)
the holders of Class C Preferred Stock party hereto do agree that, for the
purposes of article V, section 3(c)(iv) ("Conversion Price Adjustments") of the
Company's Amended and Restated Articles of Incorporation, as amended, the fair
market value of the consideration per share received in consideration of any
such security at the time it was issued shall be deemed to be equal to or
greater than the Class C Conversion Price (as such term is defined in the
Company's Amended and Restated Articles of Incorporation, as amended) in effect
immediately prior to the issuance of such stock, and (ii) the holders of Class A
Preferred Stock party hereto do agree that, for the purposes of section 10.1
("Anti-Dilution Rights") of the Stock Purchase Agreement, the fair market value
of the consideration per share received in consideration of any such security at
the time it was issued shall be deemed to be greater than the Share Price (as
such term is defined in the Stock Purchase Agreement) in effect immediately
prior to the issuance of such stock.
Section 5.11 ESTABLISHMENT OF COMPENSATION COMMITTEE OF BOARD OF
DIRECTORS The Board of Directors of the Company, at or prior to the first
regular meeting of the Board of Directors of the Company following the date
hereof, shall establish and thereafter at all times shall maintain a
compensation committee (the "Compensation Committee") which shall be comprised
of three directors of the Board of Directors of the Company, two of whom shall
be non-management directors.
Section 5.12 CONFIDENTIALITY. Any information obtained from the
Company, whether included in financial statements distributed pursuant to
Section 5.3, obtained in the course of the exercise of rights of inspection
arising under Section 5.4, or otherwise, shall be maintained confidential and
not disclosed to any third party and used only for purposes of monitoring and
administering the Purchaser's investment in the Company; provided, each
Purchaser's obligation under this Agreement to hold all information received
from the Company from reports, inspections or otherwise in confidence shall not
prohibit such Purchaser from disclosing such information (i) if such information
is public, (ii) to its investment advisers, attorneys, accountants, consultants
and other professionals to the extent necessary to obtain their services in
connection with such Purchaser's investment in the Company, provided that such
persons agree to hold such information confidential, (iii) to any prospective
purchaser of any shares of the Company owned by such Purchaser as long as such
prospective purchaser agrees in writing to be bound by the confidentiality
provisions of this Agreement and so long as such prospective purchaser is not a
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Competitor of the Company and does not hold shares of a Competitor of the
Company (except that such prospective purchaser may hold shares of a Competitor
of the Company if it is a passive investor with respect thereto (determined in
the same manner as in Section 5.4)), (iv) to any of such Purchaser's affiliates,
provided that such affiliates agree to hold such information confidential as
provided herein, or (v) upon request, to a regulatory body, stock exchange or
court having jurisdiction over the Purchaser or by court or administrative order
or as otherwise required by applicable law or regulation or listing or trading
agreement concerning such Purchaser or the Company, subject in each case to
allowing the Company to seek a protective order with respect to disclosure of
any such information.
ARTICLE VI
PREEMPTIVE RIGHTS
Section 6.1 RIGHTS OF INCLUSION.
6.1.1. GENERAL. Except as provided in Section 6.1.6., if, at any time,
the Controlling Stockholder proposes to transfer shares of Company Stock to a
third party (a "Proposed Purchaser"), the Controlling Stockholder shall (i)
first, afford each Purchaser any right of first refusal to purchase such shares
arising under Section 6.4, then (ii) second, afford each Purchaser the
opportunity to participate in such transfer in accordance with this Section 6.1.
6.1.2. RIGHT TO PARTICIPATE. Each Purchaser, with respect to the
proposed transfers set forth in Section 6.1.1., whether pursuant to clause (i)
or (ii) of Section 6.1.1. (the "Tag-Along Purchaser"), shall have the right to
transfer, at the same price and upon identical terms and conditions as such
proposed transfer, the number of shares of Company Stock owned by the Purchaser
equal to (A) the total number of shares of Company Stock proposed to be
transferred by the Controlling Stockholder multiplied by (B) a fraction, the
numerator of which is the total number of shares of Class A Common Stock then
owned by such Tag-Along Purchaser plus the aggregate number of shares of Class A
Common Stock issuable upon conversion, exchange or exercise of all convertible
securities, options or warrants then owned by such Tag-Along Purchaser as of the
close of business on the second day preceding the mailing date of the Transfer
Notice (as defined below) and the denominator of which is the total number of
shares of Class A Common Stock then owned by (1) all of the Purchasers, (2) the
Controlling Stockholder, and (3) all other stockholders of the Company having
tag-along or similar rights to participate in the proposed transfer (the
"Transfer Allotment") plus the number of shares of Class A Common Stock issuable
upon conversion, exchange or exercise of all convertible securities, options or
warrants then owned by any Person referenced in (1), (2) or (3) is then
convertible. At the time any transfer to a Proposed Purchaser is proposed, the
Controlling Stockholder shall give notice to the Purchasers' of their right to
sell shares of Company Stock hereunder (the "Transfer Notice"), which notice
shall identify the Proposed Purchaser and state the number of shares of Company
Stock proposed to be transferred, the proposed offering price, the proposed date
of any such
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transfer (the "Transfer Date") and any other material terms and conditions of
the proposed transfer. The Transfer Notice shall also contain a complete and
correct copy of any offer to the Controlling Stockholder by the Proposed
Purchaser to purchase such shares of Company Stock.
6.1.3. NOTICE. Each Tag-Along Purchaser that wishes to participate in
the transfer shall provide written notice (the "Tag-Along Notice") to the
Controlling Stockholder within thirty (30) days of the Transfer Notice. The
Tag-Along Notice shall set forth the number of shares of Company Stock that the
Purchaser elects to include in the transfer, which shall not exceed such
Purchaser's Transfer Allotment. The Tag-Along Notice shall also specify the
aggregate number of additional shares of Company Stock owned of record by such
Tag-Along Purchaser as of the date of the Tag-Along Notice, if any, which such
Tag-Along Purchaser desires also to include in the transfer (the "Additional
Shares") in the event there is any under-subscription for the entire amount of
all Tag-Along Purchasers' Transfer Allotments. In the event there is an
under-subscription by a Tag-Along Purchaser for the entire amount of the
Tag-Along Purchaser's Transfer Allotments, the Controlling Stockholder shall
apportion the unsubscribed Tag-Along Purchaser's Transfer Allotments to
Tag-Along Purchasers whose Tag-Along Notices specified an amount of Additional
Shares, which apportionment shall be on a pro rata basis among such Tag-Along
Purchasers in accordance with the number of Additional Shares specified by all
such Tag-Along Purchasers in their Tag-Along Notices. The Tag-Along Notice given
by each Purchaser shall constitute its binding agreements to sell such shares of
Company Stock as against such Purchaser on the terms and conditions applicable
to the transfer.
6.1.4. NON PARTICIPATION. If a Tag-Along Notice is not received by the
Controlling Stockholder prior to the expiration of the thirty (30) day period
specified in Section 6.1.3. above, the Controlling Stockholder shall have the
right to sell or otherwise transfer the number of shares of Company Stock
specified in the Transfer Notice to the Proposed Purchaser without any
participation by such Purchaser, but only on terms and conditions with respect
to the consideration paid by the Proposed Purchaser and other material terms a
reasonable investor would consider in making its decision to invest which are no
more favorable in any material respect to the Controlling Stockholder than as
stated in the Transfer Notice to the Purchaser, and only if such Transfer occurs
on a date within sixty (60) days of the Transfer Date.
6.1.5. REPRESENTATIONS. The Purchaser shall be obligated to make
representations as to (A) good title and the absence of a Security Interest
against the Shares and, (B) the validity and binding effect of any agreements
entered into by the Purchaser in connection with such transfer; provided,
however, that each Purchaser shall make such representations and warranties
severally and not jointly.
6.1.6. EXCEPTIONS. The provisions of this Section 6.1. shall not apply
to any transfer by the Controlling Stockholder (A) to the spouse or family
members of the Controlling Stockholder, (B) to a Proposed Purchaser of Company
Stock in one or a series of related transactions having an aggregate fair market
value of one million dollars ($1,000,000) or less, (C) pursuant to a Qualified
Offering or any Rule 144 transaction, or
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(D) of Shares sold in connection with customary trading activities at any time
following a Qualified Offering.
Section 6.2 RIGHTS TO COMPEL.
6.2.1. GENERAL. Except as provided in Section 5.7. and subject to
Section 6.4., if, at any time the Controlling Stockholder proposes to transfer
all or any portion of his shares of Company Stock to a Proposed Purchaser in a
bona fide arms' length transaction, and, in connection therewith, the
Controlling Stockholder obtains an opinion of a nationally-recognized investment
banking firm to the effect that the transfer to the Proposed Purchaser is fair
to the Controlling Stockholder and the Purchasers from a financial point of
view, then the Controlling Stockholder may require the Purchasers to transfer
all or a portion of the Shares (the "Designated Shares") to the Proposed
Purchaser in accordance with this Section 6.2.; provided, however, that (i) the
Purchasers may, by consent of a majority in interest of the Original Purchasers
and a majority in interest of the Additional Purchasers, waive the right to
obtain such fairness opinion in any proposed transfer by the Controlling
Stockholder, and (ii) the rights afforded the Controlling Stockholder by this
Section 6.2 shall be conditioned upon the purchase price per share for the Class
C Preferred Stock being greater than or equal to six dollars ($6.00) (adjusted
to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations).
6.2.2. REQUIREMENT TO PARTICIPATE. The Purchasers, with respect to the
proposed transfers set forth in Section 6.2.1., shall be required to transfer
the Designated Shares to the Proposed Purchaser at the same price per share of
Company Stock and upon no less favorable terms and conditions as such proposed
transfer upon which the Controlling Stockholder is selling his shares of Company
Stock. The Designated Shares shall be determined by multiplying the shares of
Company Stock owned by the Purchasers by a fraction, the numerator of which
shall be the number of shares of Company Stock to be sold by the Controlling
Stockholder and the denominator of which is the total shares of Company Stock
owned by the Controlling Stockholder.
6.2.3. NOTICE. The Controlling Stockholder shall send written notice
(the "Drag-Along Notice") of the exercise of such rights pursuant to this
Section 6.2. to the Purchasers, setting forth the consideration per share of
Company Stock to be paid by the Proposed Purchaser and the other terms and
conditions of such transaction. The Purchasers shall only be obligated to make
representations as to (A) good title and the absence of a Security Interest
against their Designated Shares, (B) the validity and binding effect of any
agreements entered into by the Purchasers in connection with such transfer, and
each such Purchaser shall make such representations and warranties severally and
not jointly.
6.2.4. NONPARTICIPATION. In the event that a Purchaser fails to deliver
certificates representing the Designated Shares to the Proposed Purchaser on the
consummation of the sale of the Controlling Shareholder's shares of Company
Stock to such Proposed Purchaser, the Company shall cause the Books and Records
of the Company to show that such shares of Company Stock are bound by the
provisions of this Section 6.2.
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6.2.5. FAILURE TO CLOSE. If, within ninety (90) days after the
Controlling Stockholder gives the Drag-Along Notice, the sale of all of
Controlling Stockholder's shares of stock in accordance herewith has not been
completed, the Purchaser shall not be obligated to transfer any Designated
Shares to the Proposed Purchaser, and all the restrictions on sale or other
disposition contained in the Agreement with respect to the shares of Company
Stock shall again be in effect.
6.2.6. REMITTANCE OF SALE PROCEEDS. Simultaneously with the
consummation of the sale of the Controlling Stockholder's shares of Company
Stock, and the Purchaser's shares of Company Stock, the Controlling Stockholder
shall notify the Purchaser of the consummation of the sale, and shall cause the
Proposed Purchaser to remit directly to the Purchaser that has delivered its
shares of Company Stock, the total sales price of the Purchaser's shares of
Company Stock sold or otherwise disposed of pursuant thereto and shall furnish
such other evidence of the completion and time of completion of such sale or
other disposition and the terms thereof as may be reasonably requested by the
Purchaser.
Section 6.3 RIGHT OF FIRST OFFER OF COMPANY STOCK.
6.3.1. GENERAL. Subject to the terms and conditions specified in this
Section 6.3., the Company grants each Purchaser a right of first offer with
respect to future sales by the Company of Company Stock or other securities
exercisable or convertible into Company Stock. Each time the Company proposes to
offer (i) additional shares of capital stock of any or all classes or series
thereof, (ii) rights, options or warrants to purchase shares of its capital
stock, or (iii) securities convertible into such capital stock (the "New
Offering"), the Company shall first make an offer to each Purchaser to
participate in the New Offering in an amount proportional to the number of
shares of Class A Common Stock then owned by such Purchaser plus the aggregate
number of shares of Class A Common Stock issuable upon conversion, exchange or
exercise of all convertible securities, options or warrants then owned by such
Purchaser at the time of the New Offering in accordance with the following
provisions. The rights set forth in this Section 6.3 with respect to the sale of
additional shares of Class C Preferred Stock pursuant to the Class C Preferred
Stock Purchase Agreement shall become enforceable by the Additional Purchasers
sixty (60) days after the sale of the Class C Preferred Stock in accordance with
the Class C Preferred Stock Purchase Agreement (the "Effective Date"), and in
the event the Company makes a New Offering prior to the Effective Date, the
Additional Purchasers shall have no right to participate in such offering.
6.3.2. NOTICE. The Company shall provide a written notice (the
"Offering Notice") of the New Offering to the Purchasers stating (i) the
Company's bona fide intention to offer such shares, rights, options, warrants or
other securities (ii) the number of such shares, rights, options, warrants or
other securities to be offered, and (iii) the price and terms upon which it
proposes to offer such shares, rights, options, warrants or other securities.
6.3.3. ELECTION TO PURCHASE. Within twenty (20) business days following
the date of the Offering Notice (the "Election Period"), each Purchaser may
elect to purchase or
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obtain, at the price and on the terms specified in the Offering Notice, up to
that portion of each class and type of such shares, rights, options, warrants or
other securities which equals one hundred percent (100%), multiplied by a
fraction the numerator of which is the number of shares of Class A Common Stock
then owned by such Purchaser plus the aggregate number of shares of Class A
Common Stock issuable upon conversion, exchange or exercise of all convertible
securities, options or warrants then owned by such Purchaser is then convertible
and the denominator of which is the total number of shares of Class A Common
Stock then outstanding plus the aggregate number of shares of Class A Common
Stock issuable upon conversion, exchange or exercise of all convertible
securities, options or warrants then outstanding ("Fully Diluted Shares
Outstanding")(such Purchaser's "Offering Allotment"). In the event a Purchaser
desires to participate in the New Offering, the Purchaser shall provide the
Company with written notice of his intention to participate in the New Offering
(the "Election Notice"), and shall specify in the Election Notice that amount of
such shares, rights, options, warrants or other securities which the Purchaser
desires to purchase (such Purchaser's "Elected Shares"). The Election Notice
shall also specify the aggregate number of additional shares, rights, options,
warrants or other securities, if any, which such Purchaser desires to purchase
(such Purchaser's "Additional Elected Shares") in the event there is any
under-subscription for the entire amount of all Purchasers' Offering Allotments.
In the event there is an under-subscription by a Purchaser for the entire amount
of such Purchaser's Offering Allotment, the Company shall apportion the
unsubscribed portion of such Purchaser's Offering Allotments to Purchasers whose
Offering Notices specified an amount of Additional Elected Shares, which
apportionment shall be on a pro rata basis among such Purchasers in accordance
with the number of Additional Elected Shares specified by all such Purchasers in
their Election Notices.
6.3.4. TRANSFER TO PROPOSED PURCHASER. At any time after the Offering
Notice is given, the Company may offer for sale the New Offering, less the
amount reserved for the Purchasers in accordance with Section 6.3.3. and, if the
shares, rights, options, warrants or other securities referred to in the
Offering Notice are not elected to be purchased as provided in Section 6.3.3.,
the Company may, during the ninety (90) day period following the expiration of
the Election Period, offer for sale the remaining unsubscribed portion of the
New Offering to any Person at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Offering Notice. If the
Company does not consummate the sale of the New Offering within such period, the
right provided hereunder shall be deemed to be revived and such shares, rights,
options, warrants or other securities shall not be offered unless first
reoffered to the Purchasers in accordance with this section.
6.3.5. EXCEPTIONS. The right of first offer in this Section 6.3. shall
not be applicable (A) to a Qualified Offering, (B) to the issuance of securities
pursuant to the conversion or exercise of convertible or exercisable securities
outstanding as of the date hereof, (C) to the issuance of securities in
connection with an acquisition, a bona fide commercial strategic partnership or
a bona fide commercial business arrangement by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise (including
but not limited to Digital Equipment Corporation, Cable News Network, Inc, CNET,
Inc., GeoCities and Surfree.com, Inc. described on Schedule 3.21
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to the Class C Preferred Stock Purchase Agreement), (D) to the issuance of
options to employees, consultants or directors of the Company in accordance with
a stock option plan approved by the Board of Directors and the Compensation
Committee thereof, (E) to the issuance of up to 1,225,250 shares of Class C
Preferred Stock and 428,850 Warrants within 60 days of the initial closing of
the Class C Preferred Stock Purchase Agreement at the same price and on
substantially similar terms and conditions as those set forth therein (it being
understood that the offer of certain of such shares to the Original Purchasers
is in satisfaction of the right of first offer granted such Original Purchasers
as set forth in Section 9.3 of the Stock Purchase Agreement (before giving
effect to this Agreement) which, any other provision of this Agreement
notwithstanding, shall govern the rights of such Original Purchasers to purchase
shares of Class C Preferred Stock issued pursuant to the Class C Preferred Stock
Purchase Agreement) and (F) to the issuance of up to a maximum aggregate 35,000
shares of Class A Preferred Stock to InfoSpace, Inc.
6.3.6. TERMINATION. The rights provided in this Section 6.3. shall
terminate upon the Company's sale of its Class A Common Stock in a Qualified
Offering.
Section 6.4 PURCHASERS' RIGHT OF FIRST REFUSAL OF CONTROLLING
STOCKHOLDER'S STOCK.
6.4.1. GENERAL. Subject to the terms and conditions specified in this
Section 6.4., the Controlling Stockholder grants the Purchasers a right of first
refusal with respect to future sales by the Controlling Stockholder of any of
his Company Stock. Each time the Controlling Stockholder receives a written
offer to purchase any of his Company Stock from a third party which the
Controlling Stockholder intends to accept (the "Resale Offering"), the
Controlling Stockholder shall first provide each Purchaser the opportunity to
purchase that number of shares of Company Stock which the Controlling
Stockholder desires to sell in the Resale Offering which results from multplying
the total number of shares the Controlling Stockholder desires to sell in the
Resale Offering by a fraction the numerator of which is the number of shares of
Class A Common Stock then owned by such Purchaser plus the aggregate number of
shares of Class A Common Stock issuable upon conversion, exchange or exercise of
all convertible securities, options or warrants then owned by such Purchaser and
the denominator of which is the number of Fully Diluted Shares Outstanding in
accordance with the following provisions.
6.4.2. NOTICE. The Controlling Stockholder shall immediately provide a
written notice (the "Resale Notice") of the Resale Offering to the Purchasers
stating (i) the identity of the third party, (ii) the number of such shares
proposed to be purchased by such third party, and (iii) the price and terms upon
which the third party proposes to purchase such shares and including any
documents with respect thereto.
6.4.3. ELECTION TO PURCHASE. Each Purchaser may elect to purchase or
obtain, at the price and on the terms specified in the Resale Notice, up to that
portion of such shares which equals one hundred percent (100%), multiplied by a
fraction, the numerator of which is the number of shares of Class A Common Stock
held by such Purchaser as of the date of the Resale Notice plus the aggregate
number of shares of Class A Common
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Stock issuable upon conversion, exchange or exercise of all convertible
securities, options or warrants then held by such Purchaser and the denominator
of which is the number of Fully Diluted Shares Outstanding (such Purchaser's
"Resale Offering Allotment"). In the event a Purchaser desires to participate in
the Resale Offering, within twenty (20) days following the date of delivery of
the Resale Notice the Purchaser shall provide the Company and the Controlling
Stockholder with written notice of his intention to participate in the Resale
Offering (the "Resale Election Notice"), and shall specify in the Resale
Election Notice that amount of such shares which the Additional Purchaser
desires to purchase (such Purchaser's "Resale Elected Shares"). The Resale
Election Notice shall also specify the aggregate number of additional shares of
the Controlling Stockholder's Company Stock, if any, which such Purchaser
desires purchase (such Purchaser's "Additional Resale Shares") in the event
there is any under-subscription for the entire amount of all Purchasers' Resale
Offering Allotments. In the event there is an under-subscription by a Purchaser
for the entire amount of such Purchaser's Resale Offering Allotment, the Company
shall apportion the unsubscribed portion of such Purchaser's Resale Offering
Allotment to Purchasers whose Resale Election Notices specified an amount of
Additional Resale Shares, which apportionment shall be on a pro rata basis among
such Purchasers in accordance with the number of Additional Resale Shares
specified by all such Purchasers in their Resale Election Notices.
6.4.4. TRANSFER TO PROPOSED PURCHASERS. If the Purchasers fail to
purchase any portion of the shares specified in and in accordance with the
Resale Notice within thirty (30) days of the delivery of the Resale Election
Notice, the Controlling Stockholder shall thereupon have the right, within the
ninety (90) day period thereafter, to sell his Company Stock, reduced by the
amount purchased by the Purchasers, to the proposed third party purchaser at a
price not less than, and upon terms no more favorable to the proposed third
party purchaser than those specified in the Resale Notice. If the Controlling
Stockholder does not consummate the sale of the Resale Offering within the
above-mentioned ninety (90) day period, the rights provided hereunder to the
Purchasers shall be deemed to be revived and such shares shall not be offered
unless first reoffered to the Purchasers in accordance with this section.
6.4.5. EXCEPTIONS. The right of first refusal of the Controlling
Stockholder's Company Stock in this Section 6.4. shall not be applicable (A) to
or after a Qualified Offering, (B) in the event that the Controlling Stockholder
transfers, sells or disposes of greater than fifty one percent (51%) of his
Company Stock in one transaction, (C) in the event that the Controlling
Stockholder transfers, sells or disposes of his Company Stock in connection with
an acquisition, a bona fide commercial strategic partnership or a bonafide
commercial business arrangement by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise with a
business entity or investor not generally considered a financial investor and,
(D) to the sale by the Controlling Stockholder of not more than 100,000 shares,
in the aggregate, of Class B Common Stock in any one or a series of
transactions.
6.4.6. TERMINATION. The rights provided in this Section 6.4. shall
terminate upon the Company's sale of its Class A Common Stock in a Qualified
Offering.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, 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
(including permitted transferees of any shares of Registrable Securities).
Without limiting any other rights of transfer herein, each Additional Purchaser
may transfer, assign and convey its shares of capital stock of the Company and
its rights and obligations thereunder to an Affiliate of such Additional
Purchaser, and such Affiliate shall be deemed to be an "Additional Purchaser"
for purposes of construction of this Agreement. Nothing in this Agreement is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or liability
under or by reason of this Agreement, except as expressly provided in this
Agreement.
Section 7.2 NOTICES. All notices hereunder shall be in writing and be
given by registered or certified mail, postage and registration fees prepaid, or
by overnight delivery, and shall be deemed given when so mailed as follows:
If to the Company, to it at:
Gary Millin, President
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10007
With a copy to:
Law Offices of Brian J. Zimmet
801 Second Avenue, 5th Floor
New York, NY 10017
and to:
David Ambrosia, Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
If to the Original Purchasers, to them at
the addresses set forth in Schedule A.
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With a copy to:
David Ambrosia, Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
If to the Additional Purchasers,
to them at the addresses
set forth in Schedule B
With a copy to:
Paul Vogt, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
The foregoing addresses may be changed by notices given in the manner set forth
in this section.
Section 7.3 GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of Delaware
without giving effect to the principles of the conflict of laws thereof.
Section 7.4 WAIVERS; AMENDMENTS. The waiver by the undersigned of any
of the provisions of this Agreement or the Stock Purchase Agreement shall not
operate or be construed as a waiver of any subsequent breach. This Agreement or
the Stock Purchase Agreement may be amended, and any provision of this Agreement
may be waived, only by a written amendment executed by (i) the Company, (ii) the
Controlling Stockholder, (iii) in the case of any amendment affecting the rights
or obligations of the Original Purchasers, the holders of a majority of the
outstanding shares of Class A Preferred Stock purchased by the Original
Purchasers or stock issuable on conversion of such shares and (iv) in the case
of any amendment affecting the rights or obligations of the Additional
Purchasers, the holders of a majority of shares of Class C Preferred Stock
purchased by the Additional Purchasers or stock issuable on conversion of such
shares. Notwithstanding the foregoing, the Company will provide each Purchaser
with written notice and sufficient information, sufficiently far in advance of a
date a decision is required, to enable such Person to make an informed and
considered decision with respect to any proposed amendment, waiver or consent in
respect of any of the provisions hereof. The Company will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of capital
stock of the Company as consideration for or as an inducement to the entering
into by any such holder of any waiver or amendment to any of the terms and
provisions of this Agreement, unless prior to the payment of any remuneration to
any holder of capital stock of the Company, the holders of Class C Preferred
Stock shall, ratably, have been offered the opportunity to provide any such
waiver or amendment upon the same financial terms and conditions as any holder
of capital stock who has consented to the waiver or amendment of any of the
terms of this Agreement. No waiver or amendment of the
28
<PAGE>
provisions in the preceding sentence shall be effective with respect to any
Purchaser unless consented to in writing by such Purchaser.
Section 7.5 HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect the construction and
interpretation of this Agreement
Section 7.6 SEVERABILITY. The invalidity of all or any part of any
section of this Agreement shall not render invalid the remainder of such
section. If any provision of this Agreement is so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is enforceable.
Section 7.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. This Agreement may contain more than one
counterpart of the signature page and may be executed by the affixing of the
signatures of each of the Parties to one of these counterpart signature pages.
All of the counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
Section 7.8 AGGREGATION OF STOCK. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
Section 7.9 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
Section 7.10 ENTIRE AGREEMENT. This Agreement and the Stock Purchase
Agreement (with respect to the Original Purchasers only) and the Class C
Preferred Stock Purchase Agreement (with respect to the Additional Purchasers
only) contain the entire agreement of the Parties. The Parties are not bound by
any oral statements that are made outside of this Agreement.
Section 7.11 BENEFIT OF MORE FAVORABLE RIGHTS. If, within sixty (60)
days following the initial closing under the Class C Preferred Stock Purchase
Agreement, the Company grants to a third party investor rights which are more
beneficial than the preferences afforded to the Additional Purchasers pursuant
to this Agreement, with respect to Company Stock or capital stock of any
Affiliate of the Company, which are on terms more favorable to the holders of
such securities with respect to any of the material terms applicable thereto,
including, without limitation, the number of times or the circumstances under
which such rights may be exercised, the expenses to be paid by the Company or
any Affiliate of the Company in connection therewith or the duration of the
availability of such rights, the Parties agree that such more favorable terms
will be exercisable by the Additional Purchasers automatically and without
further action by the Company or any of the other Parties.
29
<PAGE>
Section 7.12 ADDITIONAL PURCHASERS. It is contemplated that the Company
shall issue up to an additional 1,225,250 shares of Class C Preferred Stock and
an additional 428,850 Warrants within the sixty (60) day period immediately
following the initial closing of the Class C Preferred Stock Purchase Agreement
on the terms and conditions set forth therein. Each purchaser of such additional
shares shall become party to this agreement and be deemed an Additional
Purchaser hereunder, shall agree to assume all of the obligations of an
Additional Purchaser hereunder and shall be entitled to all of the rights of an
Additional Purchaser hereunder.
30
<PAGE>
WHEREAS, the Parties have executed this Agreement as of the date first
above written:
iNAME, INC. (formerly named GLOBECOMM, INC.)
/s/ Gary Millin
- ----------------------------------------
By: Gary Millin
Title: President
HOLDERS OF CLASS A PREFERRED STOCK
- ----------------------------------------
Jeff Barbakow
- ----------------------------------------
Jean Brodsky
- -----------------------------------------
John Chalsty
- -----------------------------------------
Frank Connley
/s/ Hoyt Davidson
- -----------------------------------------
Hoyt Davidson
/s/ Vincent Degiaimo
- ---------------------------------------
Vincent Degiaimo
31
<PAGE>
- -----------------------------------------
David Dennis
/s/ William Donaldson
- -----------------------------------------
William Donaldson
/s/ Pat Durkin
- -----------------------------------------
Pat Durkin
/s/ Brian Ehrlich
- -----------------------------------------
Brian Ehrlich
/s/ Ihsan Essaid
- -----------------------------------------
Ihsan Essaid
- -----------------------------------------
Trevor Fettor
/s/ Dan Flatley
- -----------------------------------------
Dan Flatley
/s/ Gerald Gorman
- -----------------------------------------
Gerald Gorman
/s/ Norman Greenberg
- ------------------------------------------
Norman Greenberg
32
<PAGE>
IMAGE PARTNERS, INC.
By:
-----------------------------------
Name:
Title:
/s/ Tony James
- --------------------------------------
Tony James
/s/ Stephen Ketchum
- --------------------------------------
Stephen Ketchum
/s/ Ryan Kim
- --------------------------------------
Ryan Kim
- --------------------------------------
Jack Kuehler
- --------------------------------------
Steve Lebow
/s/ Chris Kirchen
- --------------------------------------
Chris Kirchen
- --------------------------------------
Rens Lipsius
33
<PAGE>
/s/ Josiah Low
- --------------------------------------
Josiah Low
/s/ Brian McGloughlin
- --------------------------------------
Brian McGloughlin
/s/ Mark Piegza
- --------------------------------------
Mark Piegza
- --------------------------------------
Arkady Plotnitsky
- --------------------------------------
Marsha Plotnitsky
/s/ Joe Roby
- --------------------------------------
Joe Roby
/s/ Andrew Rush
- --------------------------------------
Andrew Rush
- --------------------------------------
Arvind Sanger
CRAIG S. SIM AND D. SUSAN SIM AS
JOINT TENANTS IN COMMON
- -------------------------------------
Craig S. Sim
34
<PAGE>
- --------------------------------------
D. Susan Sim
- ---------------------------------------
Tripp Smith
- ---------------------------------------
John Sommerer
/s/ Michael Stevens
- ---------------------------------------
Michael Stevens
/s/ Tim Weller
- ---------------------------------------
Tim Weller
/s/ Brian Zimmet
- ---------------------------------------
Brian Zimmet
35
<PAGE>
PURCHASERS OF CLASS C PREFERRED STOCK
-----------------------------------------
Brian M. Barefoot
-----------------------------------------
Kevin J. Brandon
-----------------------------------------
Leonard Brooks, III
-----------------------------------------
Donald C. Cacciapaglia
CITI GROWTH FUND II OFFSHORE, L.P.
By:______________________________________
Name:
-----------------------------------------
Emily A. Chien
-----------------------------------------
J. Scott Coburn
36
<PAGE>
CG ASIAN AMERICAN FUND, L.P.
By:_______________________________________
Name:
-------------------------------------------
Riza Dekidjiev, Jr.
-------------------------------------------
Frank Drazka
-------------------------------------------
Peter G. Gerry
-------------------------------------------
Joesph J. Grano
--------------------------------------------
Kenneth D. Kron
-------------------------------------------
Joesph L. Morea
PRINCETON GLOBAL FUND, L.P.
By:______________________________________
Name:
37
<PAGE>
-----------------------------------------
Subir K. Ray
SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC.
By J&W Seligman & Co. Incorporated, its investment advisor
By:_______________________________________
Name:
-----------------------------------------
Kilin To
-----------------------------------------
John R. Whitman
THE WHITMAN CHILDREN IRREVOCABLE TRUST,
CHRISTINE T. WHITMAN AS TRUSTEE
By:_______________________________________
Name:
38
<PAGE>
SCHEDULE A
Jeff Barbakow
830 Picacho Lane
Santa Barbara, CA 93108
Jean Brodsky
John Chalsty
Frank Connley
Hoyt Davidson
945 West Road
New Cannan, CT 06840
Vincent Degiaimo
31 Ridgecroft Road
Bronxville, NJ 10708
David Dennis
12916 Evanston Street
Los Angeles, CA 90049
William Donaldson
277 Park Ave
New York, NY 10017
Pat Durkin
Brian Ehrlich
Ihsan Essaid
17 Grove Street
CosCob, CT 10024
Trevor Fettor
1530 Mimosa Lane
Montecito, CA 93108
Dan Flatley
17 Maple Hill Drive
Larchmont, NY 10538
39
<PAGE>
Gerald Gorman
180 Midland Ave
Monclair, NJ 07043
OR
Gerald Gorman
415 Bernordsurue Road
Mendham, NJ 07945
Norman Greenberg
Image Partners
Tony James
1001 Park Avenue, #15
New York, NY 10028
Stephen Ketchum
151 East 80th Street,11C
New York, NY 10021
Ryan Kim
161 East 81st Street, #1E
New York, NY 10028
Jack Kuehler
66 Alpine Ave
Los Gatos, CA 95030
Chris Kurcheon
Steve Lebow
150 North Cliffwood Ave.
Los Angeles, CA 90049
Rens Lipsuis
18B Villa Riberole
Paris, France
Josiah Low
100 Cedar Cliff Road
Riverside, CT 06878
Arkady Plotnitsky
1500 Duke University Road
40
<PAGE>
Durham, NC 27701
Marsha Plotnitsky
36 Bank Street
New York, NY 10014
Joe Roby
Andrew Rush
35 Bradford Road
Scarsdale, NY 10583
Arvind Sanger
277 Park Ave, 14th Flr
New York, NY 10172
Craig and Susan Sim
Tripp Smith
100 Cedar Cliff Road
Riverside Road, CT 06878
John Sommerer
Tim Weller
305 Second Ave,#314
New York, NY 10003
Michael Stevens
Brain Zimmet
41
<PAGE>
SCHEDULE B
Brian M. Barefoot
18 Lennox Road
Summit, NJ 07901
Kevin J. Brandon
118 Acadia Court, #6
Princeton NJ 08540
Leonard Brooks, III
34 Edgehill Avenue
Chatham, NJ 07029
Donald C. Cacciapaglia
95 Stuyvesant Avenue
Rye, NY 10580
Citi Growth Fund II Offshore
c/- Sycamore Ventures
989 Lenox Drive, Suite 208
Lawrenceville, NJ 08648
Emily A. Chien
21 East 87th Street, Apt 8C
New York, NY 10128
J.Scott Coburn
1 Maywood Court
Darien, CT 06820
CG Asian American Fund, L.P.
c/- Sycamore Ventures
989 Lawrenceville, NJ 08648
Kenneth D. Cron
161 Feeks Lane
Lattingtown, NY11560
Riza Dekidjiev, Jr.
173 Webster Road
Scarsdale, NY 10583
42
<PAGE>
Frank Drazka
212 East 47th Street, Apt. 20E
New York, NY 10017
Peter G. Gerry
126 Moores Mill Road
Hopewell NJ 08525
Joesph J. Grano
Sheepfield Farms Drive
New Vernon, NJ 07976
Joesph L. Morea
1623 Stewart Lane
Laurel Hollow, NJ 11791-9639
Princeton Global Fund
c/- Sycamore Ventures
989 Lenox Drive, Suite 208
Lawrenceville, NJ 08648
Subir K. Ray
32 Newport Drive
Princeton Junction NJ 08550
Seligman Communication Information Fund, Inc.
100 Park Ave
New York, NY 10017
Kilin To
1131 Stuart Road
Princeton NJ 08540
John R. Whitman
P.O. Box 146
Oldwick NJ 08858
The Whitman Children Irrevocable Trust,
Christine R. Whitman as Trustee
P.O. Box 146
Oldwick NJ 08858
43
<PAGE>
Exhibit 10.26
ACCESSION AGREEMENT AMONG iNAME, INC.
AND THE INVESTORS SIGNATORY HERETO
AGREEMENT, dated as of the 31st day of August, 1998, by and among
iName, Inc., a Delaware corporation doing business at 11 Broadway, Suite 660,
New York, New York (the "Company"), Primus Capital Fund IV Limited Partnership,
a limited partnership organized under the laws of Delaware ("Primus IV Fund")
and Primus Executive Fund Limited Partnership, a limited partnership organized
under the laws of Delaware ("Primus Executive Fund") (Primus IV Fund and Primus
Executive Fund together referred to as the "Primus Investors" and each
individually as a "Primus Investor").
WHEREAS, the Company and certain Purchasers (as defined in the Stock
Purchase Agreement referred to below) are parties to a certain Class C Preferred
Stock Purchase Agreement dated as of July 31, 1998, a copy of which is attached
as Exhibit A (the "Stock Purchase Agreement"), and a certain Waiver, Consent,
Amendment and Agreement dated as of July 31, 1998, a copy of which is attached
as Exhibit B (the "Investors' Rights Agreement"), whereby the Company sold and
such Purchasers purchased certain shares of Class C Preferred Stock and warrants
to purchase shares of Class C Preferred Stock of the Company;
WHEREAS, the Company desires to sell to the Primus Investors, and the
Primus Investors desire to purchase from the Company, 428,571 shares of Class C
Preferred Stock and 149,999 Warrants to purchase an equal amount of Stock Units
(as defined in the certificates representing the Warrants) of the Company upon
substantially the same terms and conditions as set forth in the Stock Purchase
Agreement; and
WHEREAS, the Company and the Primus Investors desire that the Primus
Investors become Purchasers under the terms of the Stock Purchase Agreement and
Additional Purchasers under the terms of the Investors' Rights Agreement, and be
bound by the terms and obligations set forth in the Stock Purchase Agreement and
the Investors' Rights Agreement, and be entitled to the same rights and benefits
as the Purchasers under the Stock Purchase Agreement and the Additional
Purchasers under the Investors' Rights Agreement;
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the parties hereto do hereby agree as follows:
SECTION 1 SALE OF SHARES
1
<PAGE>
1.1 DEFINED TERMS. Except as set forth herein, the capitalized terms
contained in this Agreement shall have the respective meanings ascribed to such
terms in the Stock Purchase Agreement.
1.2. SALE OF SHARES AND WARRANTS. Subject to the terms and conditions
of this Agreement and the Stock Purchase Agreement, the Company shall issue and
sell to each Primus Investor, and each Primus Investor shall purchase from the
Company, the number of Shares and Warrants set forth opposite such Primus
Investor's name on Schedule 1.2 hereto at a cash purchase price of $6.91 per
Share and $0.25714 per Warrant. The purchase and sale of the Shares and Warrants
shall take place at the offices of the Company at 2:00 p.m. on August 31, 1998,
or at such other time, date (the "Closing Date") and place as the Company and
the Primus Investors may otherwise agree.
SECTION 2 AGREEMENT TO BE BOUND BY THE STOCK PURCHASE AGREEMENT AND THE
INVESTORS' RIGHTS AGREEMENT
By purchasing Shares and Warrants pursuant hereto, each Primus Investor
shall be deemed to become a Purchaser under the Stock Purchase Agreement and an
Additional Purchaser under the Investors' Rights Agreement, and, as such, agrees
to be bound by the terms and conditions of, and shall be entitled to the rights
and benefits under, the Stock Purchase Agreement and Investors' Rights
Agreement.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Disclosure Schedule attached hereto shall, for the purposes of this
Agreement, be the disclosure schedule with respect to the Stock Purchase
Agreement, and the Company represents that each of the representations and
warranties contained in section 3 of the Stock Purchase Agreement are true and
correct as of the date hereof.
SECTION 4 CLOSING DELIVERIES
4.1 DELIVERIES BY EACH PRIMUS INVESTOR. At the closing, each Primus
Investor shall deliver to the Company, by check or by wire transfer to an
account designated by the Company at least two days prior to the Closing Date,
the purchase price for the Shares and Warrants set forth opposite such Primus
Investor's name on Schedule 1.2.
4.2 DELIVERIES BY THE COMPANY. At the Closing, the Company shall
deliver to each Primus Investor:
(a) a certificate representing the Shares purchased by such
Primus Investor and a certificate representing the Warrants purchased
by such Primus Investor;
2
<PAGE>
(b) an opinion of Brian Zimmet, counsel for the Company, and
an opinion of Winthrop, Stimson, Putnam & Roberts, special counsel for
the Company, in the respective forms set forth as Exhibit D to the
Stock Purchase Agreement;
(c) a Compliance Certificate and Secretary's Certificate as
contemplated by section 5.3 and 5.4, respectively, of the Stock
Purchase Agreement; and,
(d) the Observer Rights Agreement attached hereto as
Exhibit C.
3
<PAGE>
WHEREAS, the undersigned have executed this Accession Agreement as of
the date above written.
iNAME, INC.
/s/ Gary Millin
- -----------------------------------------
Name: Gary Millin
Title: President
PRIMUS CAPITAL FUND IV LIMITED PARTNERSHIP
By: Primus Venture Partners IV Limited Partnership, its
general partner
By: Primus Venture Partners IV, Inc., its general partner
/s/ William C. Mulligan
- -----------------------------------------
Name: William C. Mulligan
Title: Executive Vice President
PRIMUS EXECUTIVE FUND LIMITED PARTNERSHIP
By:
By: Primus Venture Partners IV Limited Partnership, its
general partner
By: Primus Venture Partners IV, Inc., its general partner
/s/ William C. Mulligan
- -----------------------------------------
Name: William C. Mulligan
Title: Executive Vice President
4
<PAGE>
SCHEDULE 1.2
<TABLE>
<CAPTION>
- ---------------------------- -------------------------- -------------------------- --------------------------
INVESTOR NUMBER OF SHARES NUMBER OF WARRANTS PURCHASE PRICE
- ---------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Primus Capital Fund IV 411,428 143,999 $2,879,995.30
Limited Partnership
- ---------------------------- -------------------------- -------------------------- --------------------------
Primus Executive Fund 17,143 6,000 120,000.97
Limited Partnership
- ---------------------------- -------------------------- -------------------------- --------------------------
TOTAL 428,571 149,999 $2,999,996.27
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
5
<PAGE>
Exhibit 10.26
August 31, 1998
Mr. William Mulligan
Primus Venture Partners, Inc
5900 Landerbrook Drive, Suite 200
Cleveland, 0H 4124-4020
Re: Accession Agreement between
iName, Inc. and Primus
Dear Mr. Mulligan:
Reference is made to the Accession Agreement dated as of August 31, 1998
between iName, Inc., the Primus Capital Fund IV Limited Partnership and the
Primus Executive Fund Limited Partnership (the "Accession Agreement"). The terms
set forth herein shall have the meaning set forth in the Accession Agreement.
In order to induce the Primus Funds to execute the Accession Agreement, I
agree to the following additional limitation on my rights contained in section
6.2.1 of the Investors' Rights Agreement.
I agree that I will not exercise the rights set forth in section 6.2.1 of
the Investors' Rights Agreement at a price per share of Class C Preferred Stock
of less than seven dollars ($7.00) (adjusted to reflect subsequent stock splits,
combinations, stock dividends and recapitalizations) until after the earlier of
(i) the date on which the Liquidity Ratchet Adjustment set forth in Article IV,
section 3(c)(v) of the Company's Amended and Restated Certificate of
Incorporation is made, and (ii) the date on which the Additional Purchasers have
been offered the opportunity to sell, transfer or dispose of 100% of their
shares of Class C Preferred Stock or the underlying shares of Class A Common
Stock in accordance with the 3x Exit Condition referred to in section 5.7 of the
Investors' Rights Agreement.
Very truly yours,
/s/ Gerald Gorman
Gerald Gorman
<PAGE>
Exhibit 10.27
August 31, 1998
Mr. William Mulligan
Primus Venture Partners, Inc
5900 Landerbrook Drive, Suite 200
Cleveland, 0H 4124-4020
Re: Accession Agreement between
iName, Inc. and Primus
Dear Mr. Mulligan:
Reference is made to the Accession Agreement dated as of August 31, 1998
between iName, Inc., the Primus Capital Fund IV Limited Partnership and the
Primus Executive Fund Limited Partnership (the "Accession Agreement"). The terms
set forth herein shall have the meaning set forth in the Accession Agreement.
In order to induce the Primus Funds to execute the Accession Agreement, I
agree to the following additional limitation on my rights contained in section
6.2.1 of the Investors' Rights Agreement.
I agree that I will not exercise the rights set forth in section 6.2.1 of
the Investors' Rights Agreement at a price per share of Class C Preferred Stock
of less than seven dollars ($7.00) (adjusted to reflect subsequent stock splits,
combinations, stock dividends and recapitalizations) until after the earlier of
(i) the date on which the Liquidity Ratchet Adjustment set forth in Article IV,
section 3(c)(v) of the Company's Amended and Restated Certificate of
Incorporation is made, and (ii) the date on which the Additional Purchasers have
been offered the opportunity to sell, transfer or dispose of 100% of their
shares of Class C Preferred Stock or the underlying shares of Class A Common
Stock in accordance with the 3x Exit Condition referred to in section 5.7 of the
Investors' Rights Agreement.
Very truly yours,
/s/ Gerald Gorman
Gerald Gorman
<PAGE>
EXHIBIT 10.28
EXECUTION COPY
INVESTORS' RIGHTS AGREEMENT
INVESTORS' RIGHTS AGREEMENT, dated as of the 10th day of March, 1999, by
and among Mail.com, Inc. (formerly named iNAME, INC.), a Delaware corporation
(the "Company"), doing business at 11 Broadway, Suite 660, New York, New York,
the undersigned holders of Class E Preferred Stock of the Company (the
"Purchasers"), and Gerald Gorman, residing at 415 Bernardsville Road, Mendham,
New Jersey, in his capacities as holder of Class A Preferred Stock, Class B
Common Stock and controlling stockholder (the "Controlling Stockholder"). The
Company, the Controlling Stockholder and the Purchasers are collectively
referred to as the "Parties."
WHEREAS, the Company and the Purchasers are parties to a certain Class E
Preferred Stock Purchase Agreement dated as of the date hereof (the "Stock
Purchase Agreement"); and
WHEREAS, in order to induce the Purchasers to enter into the Stock Purchase
Agreement, the Purchasers and the Company agree that this Agreement shall govern
the rights of the Parties with respect to the subject matter set forth herein
and in connection with the terms and provisions as set forth herein;
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the Parties do hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 DEFINITIONS. The following terms, as used herein, shall have
the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such Person.
"Agreement" means this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Books and Records" means all books, ledgers, files, reports, documents,
plans and operating records of, or maintained by, the Company, and all other
data in the possession of the Company relating to or reasonably required for the
operation of the Company's business.
"Class A Common Stock" means the shares of Class A Common Stock that the
Company is authorized to issue pursuant of the Company's Amended and Restated
Certificate of Incorporation, as amended from time to time.
<PAGE>
"Class A Preferred Stock" means the shares of Class A Preferred Stock that
the Company is authorized to issue pursuant of the Company's Amended and
Restated Certificate of Incorporation, as amended from time to time.
"Class A Preferred Stock Purchase Agreement" means the Class A Preferred
Stock Purchase Agreement dated May 27, 1997, the Purchase and Sale Agreement
dated December 17, 1997 and the Purchase and Sale Agreement dated January 5,
1998, among the Company and the holders of Class A Preferred Stock that are
signatories thereto, as amended.
"Class B Common Stock" means the shares of Class B Common Stock that the
Company is authorized to issue pursuant of the Company's Amended and Restated
Certificate of Incorporation, as amended from time to time.
"Class C Preferred Stock" means the shares of Class C Preferred Stock that
the Company is authorized to issue pursuant of the Company's Amended and
Restated Certificate of Incorporation, as amended from time to time.
"Class C Stock Purchase Agreement" means the Class C Stock Purchase
Agreement dated July 31, 1998 among the Company and the holders of Class C
Preferred Stock.
"Class E Demand Registration" has the meaning set forth in Section 2.1.3.
of this Agreement.
"Class E Preferred Stock" means the shares of Class E Preferred Stock that
the Company is authorized to issue pursuant of the Company's Amended and
Restated Certificate of Incorporation, as amended from time to time.
"Company Stock" means any shares of any class of authorized capital stock
in the Company.
"Competitor" has the meaning set forth in Section 3.3 of this Agreement.
"Confidential Information" means any information concerning the businesses
and affairs of the Company that is not generally available to the public.
"Controlling Stockholder" has the meaning set forth in the preface above.
"Fully Diluted Shares Outstanding" has the meaning set forth in Section
4.3.3. of this Agreement.
"Incidental Registration" has the meaning set forth in Section 2.1.1. of
this Agreement.
"Indemnified Party" and "Indemnifying Party" has the meaning set forth in
Section 2.6.3. of this Agreement.
"Other Shareholders' Consent" means the consent by the holders of Class A
Preferred Stock purchased pursuant to the Class A Preferred Stock Purchase
Agreement and by the holders of the Class C Preferred Stock purchased pursuant
to the Class C Preferred Stock Purchase Agreement to the amendment of the
Consent, Amendment and Waiver and Investors' Rights
2
<PAGE>
Agreement dated as of July 31, 1998 among the Company and the investors
signatory thereto (the "Preferred Stock Investors' Rights Agreement") to permit,
in connection with an Incidental Registration, the Purchasers to include their
Registrable Securities on a pro rata basis with such Class A Preferred Stock and
Class C Preferred Stock to the extent that such Class A Preferred Stock and/or
Class C Preferred Stock is included in such registration pursuant to incidental
registration rights as contemplated by clause (C) of Section 2.1.2. hereof and
not demand registration rights as contemplated by clause (A) of Section 2.1.2.
hereof.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Purchasers" has the meaning set forth in the preface above.
"Registrable Securities" means (i) the Class A Common Stock issuable or
issued upon conversion of the Shares, (ii) any Class A Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security that is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of the securities referenced in
clauses (i) and (ii), and (iii) any other shares of capital stock of the Company
into or for which the securities referenced in clause (i) and (ii) may be
converted into or exchanged pursuant to a recapitalization or reclassification
of the Company's capital stock.
"SEC" means the Securities and Exchange Commission.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (A) liens for taxes not yet due and
payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (B) purchase money liens securing rental payments under
capital lease arrangements, and (C) liens, charges, encumbrances, easements,
rights-of-way, building and use restrictions, exceptions, reservations and
limitations that do not in any material respect adversely detract from the value
of the property subject thereto or materially impair the operation of the
Company.
"Shares" means the shares of Class E Preferred Stock issued or to be issued
to the Purchasers pursuant to the Stock Purchase Agreement, as the same may be
amended.
Section 1.2 OTHER TERMS. Other terms may be defined elsewhere in the text
of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
Section 1.3 OTHER DEFINITIONAL PROVISIONS. The words "herein," "hereof,"
"hereto" and "hereunder" and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa, and in such gender,
as the sense and circumstances require.
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ARTICLE II
REGISTRATION RIGHTS
The Company and the Purchasers covenant and agree as follows:
Section 2.1 REGISTRATION
2.1.1. INCIDENTAL REGISTRATION. If at any time the Company proposes to
register any Company Stock under the Act for its own account or for the
account of any of its stockholders, in connection with an underwritten
public offering of such Company Stock, on a form that would also permit
registration of the Registrable Securities, the Company shall, each such
time, give the Purchasers not less than twenty (20) days written notice of
such proposed registration (the "Incidental Registration"). Upon the
written request of the Purchasers, given within twenty (20) days after
receipt of any such notice from the Company, the Company shall, subject to
Section 2.1.2., cause to be included in such registration all of the
Registrable Securities the Purchasers request be registered in such
registration. There shall be no restriction with respect to the number of
times the Purchasers may request such Incidental Registration.
2.1.2. PRO RATA INCIDENTAL REGISTRATION OF COMPANY STOCK. If the
managing underwriter of any offering described in the first sentence of
Section 2.1.1 determines that the number of shares proposed to be sold by
the Company or by other stockholders of Company Stock is greater than the
number of shares that the underwriter believes feasible to sell at the
time, at the price and upon the terms approved by the Company, then the
number of shares of Company Stock that the underwriter believes may be sold
shall be allocated for inclusion in the registration statement in the
following order of priority: (A) Company Stock sold for the account of any
holders of the Company's securities if the registration was initiated by
such holders pursuant to contractual demand registration rights and Company
Stock sold for the account of Lycos, Inc. ("Lycos"), pursuant to
contractual incidental registration rights that permit it to participate in
such an offering on a pro rata basis with such holders, pro rata among such
holders and Lycos according to the number of shares requested to be
registered by such holders and Lycos; (B) Company Stock sold for the
account of the Company; and (C) (x) if the Other Shareholders' Consent is
obtained on or before the consummation of the Company's initial public
offering, pro rata among any other holders of securities of the Company
exercising contractual incidental registration rights (other than holders
described in clause (A) above if pursuant to a demand right and other than
Lycos as described in clause (A) above) and the Purchasers according to the
number of shares requested to be registered by such other holders and the
Purchasers; provided, however, that (1) as between the Company, on the one
hand, and the Purchasers and other holders referred to in clause (C) above,
on the other hand, at least ten percent (10%) of the Purchasers'
Registrable Securities and of such other holders' registrable securities
requested to be included shall be included in such underwriting (other than
the initial underwriting); and (2) the right of such other holders and the
Purchasers to participate in the offering shall have priority over Class A
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Common Stock held by employees of the Company and Class B Common Stock held
by employees of the Company or (y) if the Other Shareholders' Consent is
not obtained on or before the consummation of the Company's initial public
offering, pro rata among any other holders of securities of the Company
exercising contractual incidental registration rights (other than holders
described in clause (A) above if pursuant to a demand right and other than
Lycos as described in clause (A) above) and, subject to the provisos set
forth in clauses (1) and (2) below, the Purchasers according to the number
of shares requested to be registered by such other holders and the
Purchasers; provided, however, that (1) as between the Company, on the one
hand, and the holders of Class A Preferred Stock purchased pursuant to the
Class A Preferred Stock Purchase Agreement, the holders of Class C
Preferred Stock purchased pursuant to the Class C Preferred Stock Purchase
Agreement and the Purchasers, on the other hand, at least ten percent (10%)
of such holders' registrable securities requested to be included shall be
included in such underwriting (other than the initial underwriting); (2)
the right of the holders of the Class A Preferred Stock and the holders of
the Class C Preferred Stock to participate in such underwriting shall have
priority over the holders of the Class E Preferred Stock, the holders of
Class A Common Stock and the holders of Class B Common Stock; and (3) the
right of the holders of any Company Stock held by Persons who are not
employees of the Company shall have priority over Class A Common Stock held
by employees of the Company and Class B Common Stock held by employees of
the Company. If any Purchaser disapproves of the terms of the underwriting,
it may elect to withdraw therefrom by written notice to the Company and the
managing underwriter; provided, however, the election to withdraw occurs
within ten (10) days after such Purchaser receives notice of the terms of
the underwriting.
2.1.3. DEMAND REGISTRATION. On or after the earlier of (A) 180 days
after the effective date of a registration statement filed by the Company
in connection with an initial public offering of any Company Stock or other
securities under the Act, or (B) July 31, 2000, then, upon written request
of the Purchasers holding in the aggregate greater than twenty percent
(20%) of the Registrable Securities or Registrable Securities having a
minimum anticipated aggregate net offering proceeds of at least ten million
dollars ($10,000,000) that the Company effect the registration under the
Act of all or a portion of the Registrable Securities and specifying the
intended method of disposition thereof, the Company shall, within fifteen
(15) days after the Company has received such written notice, promptly
commence and use its best efforts to consummate the registration under the
Act of the Registrable Securities, or such portion thereof, and of all
other stock or securities which the Company has been requested to register
by any other holder of the Company's securities that is entitled to include
securities in such registration (the "Class E Demand Registration");
provided, however, that (1) the Purchasers shall be entitled to request one
(1) Class E Demand Registration, provided that either (a) the Registrable
Securities requested to be included in such Class E Demand Registration
constitute at least twenty percent (20%) of the total number of Registrable
Securities issued hereunder or (b) the anticipated gross receipts (before
underwriters discounts and commissions and costs of such registration) from
the offering exceed ten million dollars ($10,000,000), (2) a registration
will not count as the permitted Class E Demand Registration until it has
become effective, (3) the Company may delay the filing of a registration
statement under the Act as required by this Section 2.1.3. for a period of
up to sixty (60) days after the
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request of the Purchasers if the Board of Directors of the Company
determines in good faith that such Class E Demand Registration would be
materially adverse to the interests of the Company, and in such event, the
Purchasers will be entitled to withdraw such request and such Class E
Demand Registration will not be counted as the Class E Demand Registration
hereunder (provided, however, that the Company shall not use this right
more than once in any 180 day period) and (4) the Company will not be
required to effect a Class E Demand Registration within six (6) months
after the effective date of a registration in which the Purchasers were
given registration rights pursuant to Section 2.1.1. In the event that the
Purchasers exercise the demand registration right hereunder, and shares
requested to be registered by Lycos in connection therewith are included in
such registration on a pro rata basis with the Purchasers' Registrable
Securities, pursuant to section 11 of the letter agreement between Lycos
and the Company dated March 9, 1998 or otherwise, account for 30% or more
of the shares offered in such registered offering, then the Purchasers
shall have the right to one (1) additional Class E Demand Registration
hereunder. Subject to the terms and conditions hereof, the Purchasers'
right to request a registration under this Section 2.1.3. shall survive the
conversion of any Class E Preferred Stock into Class A Common Stock
2.1.4. PRO RATA DEMAND REGISTRATION OF COMPANY STOCK. (a) In the event
a Class E Demand Registration is initiated subsequent to the initial public
offering of any Company Stock or other securities under the Act and such
Class E Demand Registration is an underwritten offering, and the managing
underwriter advises the Purchasers and the Company in writing that in the
underwriter's opinion the number of shares requested to be included exceeds
the number that can be sold in such offering, then the number of shares of
Company Stock that the underwriter believes may be sold shall be allocated
for inclusion in the registration statement in the following order of
priority: (A) shares requested to be included by the Purchasers, together
with the shares requested to be included by Lycos to the extent Lycos is
entitled to participate in such offering on a pro rata basis with the
Purchasers, as applicable, pursuant to contractual incidental registration
rights, that in the opinion of such underwriter can be sold prior to the
inclusion of any securities of any other security holder of the Company;
provided that, if the managing underwriter advises the Company in writing
that in its opinion the aggregate number of shares requested for inclusion
by the Purchaser, together with such shares of Lycos, exceeds the number of
such shares that can be sold in such offering, then the Company shall
include in the registration statement only such number of shares, pro rata
among Purchasers and Lycos, based upon the number of shares requested to be
registered by the Purchaser and Lycos, which in the opinion of such
underwriter can be sold; (B) shares sold for the account of the Company;
and (C) pro rata among any other holders of securities of the Company
exercising contractual incidental registration rights other than any
holders whose shares are included pursuant to clause (A) above.
(b) In the event a Class E Demand Registration is initiated prior to
the Company giving notice under Section 2.1.1. that it proposes to register
any Company Stock under the Act in its initial public offering of any
Company Stock or other securities under the Act and such Class E Demand
Registration is an underwritten offering, and the managing underwriter
advises the Purchasers and the Company in writing that in the underwriter's
opinion the number of shares requested to be included exceeds the number
that can be
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sold in such offering, then the number of shares of Company Stock that the
underwriter believes may be sold shall be allocated for inclusion in the
registration statement in the following order of priority: (A) shares
requested to be included by the Purchasers together with the shares
requested to be included by Lycos to the extent Lycos is entitled to
participate in such offering on a pro rata basis with the Purchasers
pursuant to contractual incidental registration rights, that in the opinion
of such underwriter can be sold prior to the inclusion of any securities of
any other security holder of the Company; provided that, if the managing
underwriter advises the Company in writing that in its opinion the
aggregate number of shares requested for inclusion by the Purchasers,
together with such shares of Lycos, exceeds the number of such shares that
can be sold in such offering, then the Company shall include in the
registration statement only such number of shares, pro rata among the
Purchasers and Lycos, based upon the number of shares requested to be
registered by the Purchasers and Lycos, which in the opinion of such
underwriter can be sold; (B) pro rata among the Purchasers and any other
holders of securities of the Company exercising contractual incidental
registration rights other than any holders whose shares are included
pursuant to clause (A) above; and (C) shares sold for the account of the
Company.
(c) If the Purchasers make a written request to exercise rights to a
Class E Demand Registration under Section 2.1.3. prior to any other holder
of securities making a written request to exercise contractual rights to a
demand registration, then the registration following from such request
shall be a Class E Demand Registration. If any other holder of securities
makes a written request to exercise contractual rights to a demand
registration prior to the Purchasers making a written request to exercise
rights to a Class E Demand Registration under Section 2.1.3., then the
registration following from such request shall not be a Class E Demand
Registration.
2.1.5. FORM S-3 DEMAND REGISTRATION RIGHTS. If at any time the
Purchasers holding in the aggregate greater than twenty-five percent (25%)
of the Registrable Securities held by the Purchasers request that the
Company effect a Form S-3 registration under the Act of all or a portion of
the Registrable Securities, the Company shall, within fifteen (15) days
after the Company has received such written notice, promptly commence and
use its best efforts to consummate the Form S-3 registration of the
Registrable Securities under the Act; provided, however, (A) the aggregate
fair market value of the Registrable Securities requested to be registered
shall be greater than two million dollars ($2,000,000), (B) the Company
shall only be required to file one Form S-3 registration every twelve (12)
months, and (C) the Purchasers who request that the Company effect a Form
S-3 registration shall not be required to participate in such Form S-3
registration.
2.1.6. BENEFIT OF MORE FAVORABLE RIGHTS. If at any time registration
rights are granted with respect to Company Stock or capital stock of any
Affiliate of the Company which are on terms more favorable to the holders
of such securities with respect to any material terms applicable thereto
including, without limitation, the number of times or the circumstances
under which such rights may be exercised, the expenses to be paid by the
Company or any Affiliate of the Company in connection therewith or the
duration of the availability of such rights, the Company agrees that such
more favorable terms will be
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exercisable by the Purchasers automatically and without further action by
the Company. The Company covenants to give written notice to the Purchasers
not less than ten (10) days in advance of the granting of registration
rights with respect to Company Stock or capital stock of any Affiliate of
the Company.
2.1.7. TERMINATION OF REGISTRATION RIGHTS. Upon the date which is
thirty (30) months following a firm commitment underwritten public offering
pursuant to a registration statement under the Act, with gross proceeds of
not less than twenty million dollars ($20,000,000) (a "Qualified
Offering"), then the Purchasers shall not be entitled to exercise any right
provided for in this Section 2.1.
Section 2.2 OBLIGATIONS OF THE COMPANY. Where required under Section 2.1.
to use its best efforts to effect the registration of any of the Registrable
Securities, the Company shall, as expeditiously as reasonably possible,
2.2.1. Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective and, upon the request of
Purchasers holding the minimum percentage of Registrable Securities or
Registrable Securities having the minimum aggregate anticipated offering
proceeds necessary to obtain registration under Sections 2.1.3 and 2.1.5
hereof, keep such registration statement effective for up to one hundred
twenty (120) days;
2.2.2. Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such registration;
2.2.3. Furnish to the Purchasers such numbers of copies of such
registration statement and prospectus, including any preliminary
prospectus, in conformity with the requirements of the Act, and such other
documents as the Purchasers may reasonably request in order to facilitate
the disposition of the Registrable Securities;
2.2.4. Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement; and
2.2.5. Otherwise comply with all applicable rules and regulations of
the SEC.
Section 2.3 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2 that the
Purchasers shall furnish to the Company such information regarding the
Purchasers, the Registrable Securities held by the Purchasers, and the intended
method of disposition thereof as the Company or its appointed agents shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
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Section 2.4 REGISTRATION EXPENSES. In the case of any registration effected
pursuant to Section 2, the Company shall bear all registration and qualification
fees and expenses, and all costs and disbursements of counsel for the Company;
provided, however, that (A) each Purchaser shall bear the fees and costs of such
Purchaser's own counsel and all underwriting discounts and commissions with
respect to the Registrable Securities sold by such person and (B) the Company
shall not be required to pay for any expenses of any Class E Demand Registration
begun if the registration request is subsequently withdrawn at the request of a
majority in interest of the Purchasers to be registered (in which case all
participating Purchasers shall bear such expenses); provided that, if the
Purchasers elect to engage counsel other than counsel for the Company in
connection with a Class E Demand Registration, the Company shall bear the fees
and expenses, and all costs and disbursements of one firm to act as such counsel
to all Purchasers up to a maximum aggregate amount of fifteen thousand dollars
($15,000).
Section 2.5 SELECTION OF UNDERWRITERS.
2.5.1. COMPANY SELECTION. If a registration pursuant to Section 2.1.1.
of this Agreement involves an underwritten offering, the Company shall have
the right to select the investment bankers and managers to administer the
offering. The Company shall not be required under Section 2.1.1. to
register the Registrable Securities in such registration unless the
Purchasers accept the terms of the underwriting as agreed upon between the
Company and the underwriter.
2.5.2. PURCHASERS' SELECTION. If a registration pursuant to Section
2.1.3. or 2.1.5. involves an underwritten offering, then the Purchasers
shall have the right to select the investment bankers and managers to
administer the offering; provided, however, that the selection of such
investment bankers and managers shall be subject to the approval of the
Company, such approval not to be unreasonably withheld.
Section 2.6 INDEMNIFICATION. If any Registrable Securities are included in
a registration statement pursuant to this Section 2, then,
2.6.1. To the extent permitted by law, the Company shall indemnify and
hold harmless the Purchasers, agents for the Purchasers, any underwriter
for the Purchasers, and each Person, if any, who controls such Person
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Act or otherwise, insofar as such losses, claims, damages, or liabilities
arise out of any untrue statement or alleged untrue statement of material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained in the registration statement, or
any amendments or supplements to the registration statement, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading, and will reimburse the Purchasers, the
agents for the Purchasers, such underwriter, or controlling Person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any untrue statement or omission based upon and in
conformity
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with written information furnished to the Company by an instrument duly
executed by the Purchasers or underwriter and stated to be specifically for
use therein.
2.6.2. To the extent permitted by law, each Purchaser, severally and
not jointly, shall indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed such registration
statement, and any underwriter for the Company against any losses, claims,
damages or liabilities to which the Company or any such director, officer,
or underwriter may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities arise out of or are based upon
any untrue or alleged untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained in the registration statement or any amendments or
supplements to the registration statement, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement therein
not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary prospectus,
or amendments or supplement thereto, in reliance upon and in conformity
with written information furnished by such Purchaser duly executed and
stated to be expressly for use therein, and such Purchaser will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling Person, or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, that such Purchaser's liability under this Section 2.6.2.
shall not exceed the amount of the gross proceeds of the offering of such
Purchaser's Registrable Securities included therein.
2.6.3. Each party entitled to indemnification (the "Indemnified
Party") shall give notice to the party required to provide indemnification
("Indemnifying Party") promptly after such Indemnified Party has knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party (at its expense) to assume the defense of any such claim
or any litigation resulting therefrom; provided, however, that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be reasonably satisfactory to the Indemnified Party, and
the Indemnified Party may participate in such defense at such party's
expense; provided, further, that the failure by any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 2.6., except to the extent that the
failure results in an omission of actual notice to the Indemnifying Party
and such Indemnifying Party is damaged solely as a result of the failure to
give notice; provided, further, that a refusal to permit the Indemnifying
Party to conduct such defenses by such counsel shall relieve such
Indemnifying Party of its obligations under this Section 2.6. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such
claim or litigation.
Section 2.7 REPORTS UNDER THE SECURITIES EXCHANGE ACT OF 1934. With a view
toward making available to the Purchasers the benefits of SEC Rule 144
promulgated under the
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Act and any other rule or regulation of the SEC that may at any time permit the
Purchaser to sell its Registrable Securities to the public without registration
or pursuant to a registration on Form S-3, the Company agrees to:
(i) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration statement filed by
the Company for the offering of its shares to the general public;
(ii) take such action, including the voluntary registration of
its Common Stock under Section 12 of the Securities Exchange Act of 1934,
as is necessary to enable the holders of Registrable Securities to utilize
Form S-3 for the sale of their shares, such action to be taken as soon as
practicable after the end of the fiscal year in which the first
registration statement filed by the Company for the offering of its shares
to the general public is declared effective;
(iii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Securities Exchange
Act of 1934; and
(iv) furnish to any holder of the Registrable Securities, so long
as the holder of the Registrable Shares owns any shares, forthwith upon
request (i) a written statement by the Company as to its compliance with
the reporting requirements of Rule 144 (at any time after ninety (90) days
after the effective date of the first registration statement filed by the
Company), the Act and the Securities Exchange Act of 1934 (at any time
after it has become subject to such reporting requirements), or as to its
qualification that it qualifies as a registrant whose shares may be resold
pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any holder of
Registrable Securities of any rule or regulation of the SEC which permits
the selling of any such shares without registration or pursuant to such
form.
Section 2.8 LOCK-UP PERIOD. Each Purchaser agrees that it shall not, to the
extent requested by the underwriter of the Company, sell or otherwise transfer
or dispose of any Registrable Securities or any securities of the same or
similar class as securities being registered by the Company during the one
hundred eighty (180) day period following the effective date of a registration
statement filed by the Company; provided, however, that (A) such agreement shall
be applicable only to the first registration statement of the Company that
covers shares of the Company to be sold to the public in an underwritten
offering, (B) the holders of Class B Common Stock and the holders of at least
ninety percent (90%) of Class A Common Stock are subject to identical or
substantially similar time restrictions, (C) all officers and directors of the
Company and all other persons with registration rights enter into similar
agreements, and (D) nothing contained herein shall prohibit any holder of
Company Stock from transferring any Registrable Securities to a trust
established for estate planning purposes. The restrictions contained in this
Section 2.8 shall not prevent a Purchaser from selling shares of Class A Common
Stock purchased by it in the public markets in the initial public offering of
the Company or thereafter provided that such Purchaser is not in a net short
position with respect to
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publicly tradeable Class A Common Stock or other derivative securities with
respect thereto at any time during such 180 day period. Notwithstanding anything
to the contrary set forth herein, the terms of this Section 2.8 may not be
amended or modified, directly or indirectly, without the express written consent
of each holder of Registrable Securities detrimentally affected by such
amendment or modification and any such amendment or modification made without
such holder's consent shall not be applicable to that holder.
Section 2.9 TRANSFER OF REGISTRATION RIGHTS. The registration rights of the
Purchasers under this Section 2 may be assigned and transferred (i) by any
Purchaser to any Affiliate of such Purchaser to whom any of the shares owned by
the Purchaser are transferred, and (ii) by any Purchaser to any transferee who
acquires at least five thousand (5,000) Registrable Securities (adjusted to
reflect subsequent stock splits, combinations, stock dividends and
recapitalizations); provided, however, that the Company is given written notice
by such Purchaser at the time of such assignment and transfer stating the name
and address of the transferee and identifying the securities with respect to
which the rights under this Section 2 are being assigned and transferred. For
the purposes of this Section 2.9, a change in control of an Affiliate of a
Purchaser holding shares entitling such Affiliate to the registration rights
hereunder, such that such Affiliate is subsequent to such change of control no
longer an Affiliate of such Purchaser, shall be deemed an attempted transfer of
the registration rights hereunder and such former Affiliate of such Purchaser
shall not be entitled to such registration rights.
ARTICLE III
OTHER COVENANTS
Section 3.1 CLASS E PREFERRED DESIGNATION OF DIRECTOR AND OBSERVER. The
Board of Directors of the Company shall, by way of written consent in lieu of a
meeting or otherwise, (i) resolve to permit the holders of a majority of the
Shares to nominate and to elect a director to the board; provided, however, that
(a) any such director shall be subject to the approval of the Company's Board of
Directors, such approval not to be unreasonably withheld, and (b) such right
shall terminate at such time as the Purchasers cease to hold at least 50% of the
Shares or the shares of Class A Common Stock issuable upon conversion of the
Shares that they shall hold immediately following the closing of the Stock
Purchase Agreement and (ii) resolve to permit U.S. Information Technology
Financing, L.P. and Encompass Group, Inc. (or their Affiliates) to jointly
designate one observer to the board to attend all meetings of its Board of
Directors in a nonvoting observer capacity; provided, however, that (a) such
representative shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all Confidential Information concerning the
Company furnished to such representative in connection with any such meeting of
the Board of Directors, and (b) the Company reserves the right to withhold any
information and to exclude such representative from any meeting or portion
thereof if access to such information or attendance at such meeting would
reasonably be expected to adversely affect the attorney-client privilege between
the Company and its counsel or would result in disclosure of trade secrets to
such observer. Subject to the conditions set forth in this section, the
Controlling Stockholder and the Purchasers agree to use their best efforts to
cause the person or persons so named to be nominated for election to the Board
of Directors of the Company at the time and in the manner proper for such
nominations whereupon the Controlling Stockholder and the Purchasers agree to
cast all of the votes they are entitled to cast in such election, subject to
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the limitations set forth below, whether at the next annual meeting or a special
meeting of the stockholders, by written consent in lieu of a meeting or
otherwise, for the election of such nominees to the Board of Directors of the
Company.
Section 3.2 FINANCIAL STATEMENTS. So long as a Purchaser owns any Shares,
the Company shall use its best efforts to deliver to such Purchaser the
following financial information of the Company within the time period provided:
3.2.1. Within one hundred and twenty (120) days after the end of each
fiscal year of the Company, a statement of operations, a balance sheet of
the Company as of the end of such fiscal year, and statements of
operations, changes in financial position, and changes in shareholder
equity for such fiscal year (including all footnotes to same), which
year-end financial reports shall be audited and certified in accordance
with generally accepted accounting principles by independent certified
public accountants of nationally recognized standing selected by the
Company;
3.2.2. Within thirty (30) days after the end of each calendar month,
an unaudited statement of operations for such calendar month and a balance
sheet as of the end of such calendar month;
3.2.3. Within thirty (30) days after the end of each of the first
three quarters of the fiscal year, an unaudited statement of operations for
such fiscal quarter and a balance sheet as of the end of such fiscal
quarter; and
3.2.4. During the fourth quarter of the preceding year, a budget and
business plan for the next fiscal year.
Section 3.3 INSPECTION. So long as a Purchaser together with all of its
Affiliates owns at least an aggregate of fifty thousand (50,000) Shares
(adjusted to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations), the Company shall permit such Purchaser, at its expense, to
visit and inspect the Company's properties, to examine its books of account and
records, and to discuss the Company's affairs, finances, and accounts with the
Company's officers and independent public accountants, all at such reasonable
times as may be requested by such Purchaser; provided, however, that the Company
shall not be obligated pursuant to this Section 3.3. to provide any information
(A) that the Company is obligated to hold confidential by the terms of any
agreement with a third party, or (B) in the event the Purchaser owns an
equivalent or larger investment in a Competitor of the Company unless such
Purchaser is a passive investor in the Company and in such Competitor (provided
that such Purchaser shall be considered a passive investor only if such
Purchaser would be entitled to report holdings of greater than five percent (5%)
on a Schedule 13G if the Company and such Competitor were publicly traded). A
"Competitor" of the Company for the purposes of this Agreement shall mean any
Person any one of whose primary businesses is providing internet e-mail
services.
Section 3.4 ARMS' LENGTH TRANSACTIONS. The Company shall not enter into any
transaction, agreement, arrangement, sale, purchase, or lease with any holder of
shares of Company Stock, or any other Person, that provides for receipt by the
Company of less than fair
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and reasonable consideration for the money, property or services provided by the
Company pursuant to such transaction, agreement, arrangement, sale, purchase, or
lease.
Section 3.5 TERMINATION. The Company's obligations and the Purchaser's
rights under Sections 3.2.2., 3.2.4. and 3.3. shall terminate upon the effective
date of the registration statement filed by the Company in connection with a
Qualified Offering of the Company's stock or other securities under the Act as
and to the extent the Company is otherwise subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended.
Section 3.6 TRANSFER OF CLASS B COMMON STOCK.
3.6.1. CLASS B COMMON STOCK EXIT CONDITION. Except as provided in this
Section 3.6.1. unless the Purchasers shall have been provided the
opportunity to sell, transfer or dispose of one hundred percent (100%) of
the Shares or the shares of Class A Common Stock or other Company Stock
into which the Shares may be converted or for which they may be exchanged,
for an amount equal to or greater than each Purchaser's aggregate
investment, as set forth in the Stock Purchase Agreement, multiplied by two
(2), in cash, or in Marketable Securities (as defined below), within twenty
four (24) months from the date of this Agreement, or thirty (30) months
from the date of this Agreement if the Company has completed a registration
under the Act in connection with a Qualified Offering within twenty four
(24) months of the date upon which the Purchasers purchased shares of Class
E Preferred Stock (the "2x Exit Condition"), then the shares of Class B
Common Stock shall not be transferable by the Controlling Stockholder as
shares of Class B Common Stock and any purported transfer thereof shall be
void ab initio, and the Company covenants and agrees that such transfer
shall not be reflected on the stock transfer books of the Company.
"Marketable Securities" means: (i) securities issued or directly and fully
guaranteed and insured by the United States Government or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof) having maturities of less than
six months from the date of acquisition; or (ii) short term debt
instruments with a maturity of less than 90 days from the date of issuance
of an issuer rated at least A by Standard & Poors Rating Services or equity
securities of an issuer with a market capitalization of at least
$150,000,000, which equity securities are traded on a major nationally
recognized exchange (other than the NASDAQ small cap index or the NASDAQ
bulletin board).
3.6.2. CONFIRMATION OF OCCURRENCE. The Company covenants and agrees
that no transfer of Class B Common Stock shall be given effect by the
Company or reflected on the Company's stock transfer ledger unless the
Company shall first have obtained confirmation in writing by a majority in
interest of the Purchasers, such confirmation to be provided by the
Purchasers in good faith, that the 2x Exit Condition has been satisfied.
3.6.3. LEGEND RESTRICTION. The Controlling Stockholder covenants and
agrees to deliver promptly upon the execution of this Agreement all of the
shares of Class B Common Stock to the Company in order that the Company may
include a legend on the certificates representing such shares to the effect
of the foregoing.
Section 3.7 VOTING AGREEMENT. In addition, if at any time the number of
authorized but unissued shares of Class A Common Stock shall not be sufficient
to effect the obligations of
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the Company to issue shares of Class A Common Stock upon conversion of the Class
E Preferred Stock or otherwise pursuant to the terms of the Class E Preferred
Stock, the Controlling Stockholder agrees to cast all of the votes he is
entitled to cast to approve the same and give effect thereto (whether at the
next annual meeting or a special meeting of stockholders, by written consent in
lieu of a meeting or otherwise).
Section 3.8 APPROVAL BY HOLDERS OF SHARES OF CLASS E PREFERRED STOCK. The
holders of Class E Preferred Stock party hereto do approve in all respects the
issuance of securities in accordance with the contracts and commitments set
forth on Schedule 3.3 to the Stock Purchase Agreement in connection with a bona
fide commercial business arrangement with each such entity, and do also approve
the issuance of up to a maximum aggregate 70,000 shares of Class A Preferred
Stock to InfoSpace, Inc. Also in connection with the issuance of any of the
aforementioned securities, the holders of Class E Preferred Stock agree that,
for the purposes of article V, section 3(e)(iv) ("Conversion Price
Adjustments"), of the Company's Amended and Restated Certificate of
Incorporation, as amended, the fair market value of the consideration per share
received in consideration of any such security at the time it was issued shall
be deemed to be equal to or greater than the Class E Conversion Price (as such
term is defined in the Company's Amended and Restated Certificate of
Incorporation, as amended) in effect immediately prior to the issuance of such
stock.
Section 3.9 CONFIDENTIALITY. Any information obtained from the Company,
whether included in financial statements distributed pursuant to Section 3.2,
obtained in the course of the exercise of rights of inspection arising under
Section 3.3, or otherwise, shall be maintained confidential and not disclosed to
any third party and used only for purposes of monitoring and administering the
Purchasers' investment in the Company; provided, each Purchaser's obligation
under this Agreement to hold all information received from the Company from
reports, inspections or otherwise in confidence shall not prohibit such
Purchaser from disclosing such information (i) if such information is public,
(ii) to its board of directors, investment advisers, attorneys, accountants,
consultants and other professionals to the extent necessary to obtain their
services in connection with such Purchaser's investment in the Company, provided
that such persons agree to hold such information confidential, (iii) to any
prospective purchaser of any shares of the Company owned by such Purchaser as
long as such prospective purchaser agrees in writing to be bound by the
confidentiality provisions of this Agreement and so long as such prospective
purchaser is not a Competitor of the Company and does not hold shares of a
Competitor of the Company (except that such prospective purchaser may hold
shares of a Competitor of the Company if it is a passive investor with respect
thereto (determined in the same manner as in Section 3.3)), (iv) to any of such
Purchaser's affiliates, provided that such affiliates agree to hold such
information confidential as provided herein, or (v) upon request, to a
regulatory body, stock exchange or court having jurisdiction over the Purchaser
or by court or administrative order or as otherwise required by applicable law
or regulation or listing or trading agreement concerning such Purchaser or the
Company, subject in each case to allowing the Company to seek a protective order
with respect to disclosure of any such information.
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ARTICLE IV
PREEMPTIVE RIGHTS
Section 4.1 RIGHTS OF INCLUSION.
4.1.1. GENERAL. Except as provided in Section 4.1.6., if, at any time,
the Controlling Stockholder proposes to transfer shares of Company Stock to
a third party (a "Proposed Purchaser"), the Controlling Stockholder shall
(i) first, afford each Purchaser any right of first refusal to purchase
such shares arising under Section 4.4, then (ii) second, afford each
Purchaser the opportunity to participate in such transfer in accordance
with this Section 4.1.
4.1.2. RIGHT TO PARTICIPATE. Each Purchaser, with respect to the
proposed transfers set forth in Section 4.1.1., whether pursuant to clause
(i) or (ii) of Section 4.1.1. (the "Tag-Along Purchaser"), shall have the
right to transfer, at the same price and upon identical terms and
conditions as such proposed transfer, the number of shares of Company Stock
owned by the Purchaser equal to (A) the total number of shares of Company
Stock proposed to be transferred by the Controlling Stockholder multiplied
by (B) a fraction, the numerator of which is the total number of shares of
Class A Common Stock then owned by such Tag-Along Purchaser plus the
aggregate number of shares of Class A Common Stock issuable upon
conversion, exchange or exercise of all convertible securities, options or
warrants then owned by such Tag-Along Purchaser as of the close of business
on the second day preceding the mailing date of the Transfer Notice (as
defined below) and the denominator of which is the total number of shares
of Class A Common Stock then owned by (1) all of the Purchasers, (2) the
Controlling Stockholder, and (3) all other stockholders of the Company
having tag-along or similar rights to participate in the proposed transfer
(the "Transfer Allotment") plus the number of shares of Class A Common
Stock issuable upon conversion, exchange or exercise of all convertible
securities, options or warrants then owned by any Person referenced in (1),
(2) or (3) above is then convertible. At the time any transfer to a
Proposed Purchaser is proposed, the Controlling Stockholder shall give
notice to the Purchasers of their right to sell shares of Company Stock
hereunder (the "Transfer Notice"), which notice shall identify the Proposed
Purchaser and state the number of shares of Company Stock proposed to be
transferred, the proposed offering price, the proposed date of any such
transfer (the "Transfer Date") and any other material terms and conditions
of the proposed transfer. The Transfer Notice shall also contain a complete
and correct copy of any offer to the Controlling Stockholder by the
Proposed Purchaser to purchase such shares of Company Stock.
4.1.3. NOTICE. Each Tag-Along Purchaser that wishes to participate in
the transfer shall provide written notice (the "Tag-Along Notice") to the
Controlling Stockholder within thirty (30) days of the Transfer Notice. The
Tag-Along Notice shall set forth the number of shares of Company Stock that
the Purchaser elects to include in the transfer, which shall not exceed
such Purchaser's Transfer Allotment. The Tag-Along Notice shall also
specify the aggregate number of additional shares of Company Stock owned of
record by such Tag-Along Purchaser as of the date of the Tag-Along Notice,
if
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any, which such Tag-Along Purchaser desires also to include in the transfer
(the "Additional Shares") in the event there is any under-subscription for
the entire amount of all Tag-Along Purchasers' Transfer Allotments. In the
event there is an under-subscription by a Tag-Along Purchaser for the
entire amount of the Tag-Along Purchaser's Transfer Allotments, the
Controlling Stockholder shall apportion the unsubscribed Tag-Along
Purchaser's Transfer Allotments to Tag-Along Purchasers whose Tag-Along
Notices specified an amount of Additional Shares, which apportionment shall
be on a pro rata basis among such Tag-Along Purchasers in accordance with
the number of Additional Shares specified by all such Tag-Along Purchasers
in their Tag-Along Notices. The Tag-Along Notice given by each Purchaser
shall constitute its binding agreements to sell such shares of Company
Stock as against such Purchaser on the terms and conditions applicable to
the transfer.
4.1.4. NON PARTICIPATION. If a Tag-Along Notice is not received by the
Controlling Stockholder prior to the expiration of the thirty (30) day
period specified in Section 4.1.3. above, the Controlling Stockholder shall
have the right to sell or otherwise transfer the number of shares of
Company Stock specified in the Transfer Notice to the Proposed Purchaser
without any participation by such Purchaser, but only on terms and
conditions with respect to the consideration paid by the Proposed Purchaser
and other material terms a reasonable investor would consider in making its
decision to invest which are no more favorable in any material respect to
the Controlling Stockholder than as stated in the Transfer Notice to the
Purchaser, and only if such Transfer occurs on a date within sixty (60)
days of the Transfer Date.
4.1.5. REPRESENTATIONS. The Purchaser shall be obligated to make
representations as to (A) good title and the absence of a Security Interest
against the Shares and, (B) the validity and binding effect of any
agreements entered into by the Purchaser in connection with such transfer;
provided, however, that each Purchaser shall make such representations and
warranties severally and not jointly.
4.1.6. EXCEPTIONS. The provisions of this Section 4.1. shall not apply
to any transfer by the Controlling Stockholder (A) to the spouse or family
members of the Controlling Stockholder, (B) to a Proposed Purchaser of
Company Stock in one or a series of related transactions having an
aggregate fair market value of one million dollars ($1,000,000) or less,
(C) pursuant to a Qualified Offering or any Rule 144 transaction, or (D) of
shares sold in connection with customary trading activities at any time
following a Qualified Offering.
Section 4.2 RIGHTS TO COMPEL.
4.2.1. GENERAL. Except as provided in Section 3.6. and subject to
Section 4.4., if, at any time the Controlling Stockholder proposes to
transfer all or any portion of his shares of Company Stock to a Proposed
Purchaser in a bona fide arms' length transaction, and, in connection
therewith, the Controlling Stockholder obtains an opinion of a
nationally-recognized investment banking firm to the effect that the
transfer to the Proposed Purchaser is fair to the Controlling Stockholder
and the Purchasers from a financial point of view, then the Controlling
Stockholder may require the Purchasers to
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transfer all or a portion of the Shares or shares of Class A Common Stock
issued or issuable upon conversion of the Shares (the "Designated Shares")
to the Proposed Purchaser in accordance with this Section 4.2.; provided,
however, that (i) the Purchasers may, by consent of a majority in interest
thereof, waive the right to obtain such fairness opinion in any proposed
transfer by the Controlling Stockholder, and (ii) the rights afforded the
Controlling Stockholder by this Section 4.2 shall be conditioned upon the
purchase price per share of the Designated Shares on an as converted basis
being greater than or equal to one hundred fifty percent (150%) of the then
applicable conversion price of the Shares or, if the Shares have been
previously been converted, the conversion price of the Shares immediately
prior to conversion (adjusted to reflect subsequent stock splits,
combinations, stock dividends and recapitalizations).
4.2.2. REQUIREMENT TO PARTICIPATE. The Purchasers, with respect to the
proposed transfers set forth in Section 4.2.1., shall be required to
transfer the Designated Shares to the Proposed Purchaser at the same price
per share of Company Stock and upon no less favorable terms and conditions
as such proposed transfer upon which the Controlling Stockholder is selling
his shares of Company Stock. The Designated Shares shall be determined by
multiplying the shares of Company Stock owned by the Purchasers by a
fraction, the numerator of which shall be the number of shares of Company
Stock to be sold by the Controlling Stockholder and the denominator of
which is the total shares of Company Stock owned by the Controlling
Stockholder.
4.2.3. NOTICE. The Controlling Stockholder shall send reasonable
written notice (the "Drag-Along Notice") of the exercise of such rights
pursuant to this Section 4.2. to the Purchasers, setting forth the
consideration per share of Company Stock to be paid by the Proposed
Purchaser and the other terms and conditions of such transaction. The
Purchasers shall only be obligated to make representations as to (A) good
title and the absence of a Security Interest against their Designated
Shares, (B) the validity and binding effect of any agreements entered into
by the Purchasers in connection with such transfer, and each such Purchaser
shall make such representations and warranties severally and not jointly.
4.2.4. NONPARTICIPATION. In the event that a Purchaser fails to
deliver certificates representing the Designated Shares to the Proposed
Purchaser on the consummation of the sale of the Controlling Shareholder's
shares of Company Stock to such Proposed Purchaser, the Company shall cause
the Books and Records of the Company to show that such shares of Company
Stock are bound by the provisions of this Section 4.2.
4.2.5. FAILURE TO CLOSE. If, within ninety (90) days after the
Controlling Stockholder gives the Drag-Along Notice, the sale of all of
Controlling Stockholder's shares of stock in accordance herewith has not
been completed, the Purchaser shall not be obligated to transfer any
Designated Shares to the Proposed Purchaser, and all the restrictions on
sale or other disposition contained in the Agreement with respect to the
shares of Company Stock shall again be in effect.
4.2.6. REMITTANCE OF SALE PROCEEDS. Simultaneously with the
consummation of the sale of the Controlling Stockholder's shares of Company
Stock, and the Purchaser's
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shares of Company Stock, the Controlling Stockholder shall notify the
Purchaser of the consummation of the sale, and shall cause the Proposed
Purchaser to remit directly to the Purchaser that has delivered its shares
of Company Stock, the total sales price of the Purchaser's shares of
Company Stock sold or otherwise disposed of pursuant thereto and shall
furnish such other evidence of the completion and time of completion of
such sale or other disposition and the terms thereof as may be reasonably
requested by the Purchaser.
Section 4.3 RIGHT OF FIRST OFFER OF COMPANY STOCK.
4.3.1. GENERAL. Subject to the terms and conditions specified in this
Section 4.3., the Company grants each Purchaser a right of first offer with
respect to future sales by the Company of Company Stock or other securities
exercisable or convertible into Company Stock. Each time the Company
proposes to offer (i) additional shares of capital stock of any or all
classes or series thereof, (ii) rights, options or warrants to purchase
shares of its capital stock, or (iii) securities convertible into such
capital stock (the "New Offering"), the Company shall first make an offer
to each Purchaser to participate in the New Offering in an amount
proportional to the number of shares of Class A Common Stock then owned by
such Purchaser plus the aggregate number of shares of Class A Common Stock
issuable upon conversion, exchange or exercise of all convertible
securities, options or warrants then owned by such Purchaser at the time of
the New Offering in accordance with the following provisions. The rights
set forth in this Section 4.3 shall not apply to the sale of additional
shares of Class E Preferred Stock pursuant to the Stock Purchase Agreement
to the extent consummated in accordance with the provisions of Section 2.4
of the Stock Purchase Agreement.
4.3.2. NOTICE. The Company shall provide a written notice (the
"Offering Notice") of the New Offering to the Purchasers stating (i) the
Company's bona fide intention to offer such shares, rights, options,
warrants or other securities (ii) the number of such shares, rights,
options, warrants or other securities to be offered, and (iii) the price
and terms upon which it proposes to offer such shares, rights, options,
warrants or other securities.
4.3.3. ELECTION TO PURCHASE. Within twenty (20) business days
following the date of the Offering Notice (the "Election Period"), each
Purchaser may elect to purchase or obtain, at the price and on the terms
specified in the Offering Notice, up to that portion of each class and type
of such shares, rights, options, warrants or other securities which equals
one hundred percent (100%), multiplied by a fraction the numerator of which
is the number of shares of Class A Common Stock then owned by such
Purchaser plus the aggregate number of shares of Class A Common Stock
issuable upon conversion, exchange or exercise of all convertible
securities, options or warrants then owned by such Purchaser is then
convertible and the denominator of which is the total number of shares of
Class A Common Stock then outstanding plus the aggregate number of shares
of Class A Common Stock issuable upon conversion, exchange or exercise of
all convertible securities, options or warrants then outstanding ("Fully
Diluted Shares Outstanding")(such Purchaser's "Offering Allotment"). In the
event a Purchaser desires to participate in the New Offering, the Purchaser
shall provide the Company with written
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notice of his intention to participate in the New Offering (the "Election
Notice"), and shall specify in the Election Notice that amount of such
shares, rights, options, warrants or other securities which the Purchaser
desires to purchase (such Purchaser's "Elected Shares"). The Election
Notice shall also specify the aggregate number of additional shares,
rights, options, warrants or other securities, if any, which such Purchaser
desires to purchase (such Purchaser's "Additional Elected Shares") in the
event there is any under-subscription for the entire amount of all
Purchasers' Offering Allotments. In the event there is an
under-subscription by a Purchaser for the entire amount of such Purchaser's
Offering Allotment, the Company shall apportion the unsubscribed portion of
such Purchaser's Offering Allotments to Purchasers whose Offering Notices
specified an amount of Additional Elected Shares, which apportionment shall
be on a pro rata basis among such Purchasers in accordance with the number
of Additional Elected Shares specified by all such Purchasers in their
Election Notices.
4.3.4. TRANSFER TO PROPOSED PURCHASER. At any time after the Offering
Notice is given, the Company may offer for sale the New Offering, less the
amount reserved for the Purchasers in accordance with Section 4.3.3. and,
if the shares, rights, options, warrants or other securities referred to in
the Offering Notice are not elected to be purchased as provided in Section
4.3.3., the Company may, during the ninety (90) day period following the
expiration of the Election Period, offer for sale the remaining
unsubscribed portion of the New Offering to any Person at a price not less
than, and upon terms no more favorable to the offeree than those specified
in the Offering Notice. If the Company does not consummate the sale of the
New Offering within such period, the right provided hereunder shall be
deemed to be revived and such shares, rights, options, warrants or other
securities shall not be offered unless first reoffered to the Purchasers in
accordance with this section.
4.3.5. EXCEPTIONS. The right of first offer in this Section 4.3. shall
not be applicable (A) to a Qualified Offering, (B) to the issuance of
securities pursuant to the conversion or exercise of convertible or
exercisable securities outstanding as of the date hereof, (C) to the
issuance of securities in connection with an acquisition, a bona fide
commercial strategic partnership or a bona fide commercial business
arrangement by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise (including but not limited
to CNET, Inc., NBC Multimedia, Inc., SNAP! LLC and SuperNews described on
Schedule 3.3 to the Stock Purchase Agreement), (D) to the issuance of
options to employees, consultants or directors of the Company in accordance
with a stock option plan approved by the Board of Directors and the
Compensation Committee thereof, (E) to the sale of additional shares of
Class E Preferred Stock pursuant to the Stock Purchase Agreement to the
extent consummated in accordance with the provisions of Section 2.4 of the
Stock Purchase Agreement (it being understood that the offer of certain of
such shares to certain holders of Class A Preferred Stock, Class C
Preferred Stock and Class A Common Stock is in satisfaction of the right of
first offer granted to such holders pursuant to agreements between such
holders and the Company) and (F) to the issuance of up to a maximum
aggregate 70,000 shares of Class A Preferred Stock to InfoSpace, Inc.
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4.3.6. TERMINATION. The rights provided in this Section 4.3. shall
terminate upon the Company's sale of its Class A Common Stock in a
Qualified Offering.
Section 4.4 PURCHASERS' RIGHT OF FIRST REFUSAL OF CONTROLLING STOCKHOLDER'S
STOCK.
4.4.1. GENERAL. Subject to the terms and conditions specified in this
Section 4.4., the Controlling Stockholder grants the Purchasers a right of
first refusal with respect to future sales by the Controlling Stockholder
of any of his Company Stock. Each time the Controlling Stockholder receives
a written offer to purchase any of his Company Stock from a third party
which the Controlling Stockholder intends to accept (the "Resale
Offering"), the Controlling Stockholder shall first provide each Purchaser
the opportunity to purchase that number of shares of Company Stock which
the Controlling Stockholder desires to sell in the Resale Offering which
results from multiplying the total number of shares the Controlling
Stockholder desires to sell in the Resale Offering by a fraction the
numerator of which is the number of shares of Class A Common Stock then
owned by such Purchaser plus the aggregate number of shares of Class A
Common Stock issuable upon conversion, exchange or exercise of all
convertible securities, options or warrants then owned by such Purchaser
and the denominator of which is the number of Fully Diluted Shares
Outstanding in accordance with the following provisions.
4.4.2. NOTICE. The Controlling Stockholder shall immediately provide a
written notice (the "Resale Notice") of the Resale Offering to the
Purchasers stating (i) the identity of the third party, (ii) the number of
such shares proposed to be purchased by such third party, and (iii) the
price and terms upon which the third party proposes to purchase such shares
and including any documents with respect thereto.
4.4.3. ELECTION TO PURCHASE. Each Purchaser may elect to purchase or
obtain, at the price and on the terms specified in the Resale Notice, up to
that portion of such shares which equals one hundred percent (100%),
multiplied by a fraction, the numerator of which is the number of shares of
Class A Common Stock held by such Purchaser as of the date of the Resale
Notice plus the aggregate number of shares of Class A Common Stock issuable
upon conversion, exchange or exercise of all convertible securities,
options or warrants then held by such Purchaser and the denominator of
which is the number of Fully Diluted Shares Outstanding (such Purchaser's
"Resale Offering Allotment"). In the event a Purchaser desires to
participate in the Resale Offering, within twenty (20) days following the
date of delivery of the Resale Notice the Purchaser shall provide the
Company and the Controlling Stockholder with written notice of his
intention to participate in the Resale Offering (the "Resale Election
Notice"), and shall specify in the Resale Election Notice that amount of
such shares which the Purchaser desires to purchase (such Purchaser's
"Resale Elected Shares"). The Resale Election Notice shall also specify the
aggregate number of additional shares of the Controlling Stockholder's
Company Stock, if any, which such Purchaser desires to purchase (such
Purchaser's "Additional Resale Shares") in the event there is any
under-subscription for the entire amount of all Purchasers' Resale Offering
Allotments. In the event there is an under-subscription by a Purchaser for
the entire amount of such Purchaser's Resale Offering Allotment, the
Company shall apportion the unsubscribed portion of such Purchaser's
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Resale Offering Allotment to Purchasers whose Resale Election Notices
specified an amount of Additional Resale Shares, which apportionment shall
be on a pro rata basis among such Purchasers in accordance with the number
of Additional Resale Shares specified by all such Purchasers in their
Resale Election Notices.
4.4.4. TRANSFER TO PROPOSED PURCHASERS. If the Purchasers fail to
purchase any portion of the shares specified in and in accordance with the
Resale Notice within thirty (30) days of the delivery of the Resale
Election Notice, the Controlling Stockholder shall thereupon have the
right, within the ninety (90) day period thereafter, to sell his Company
Stock, reduced by the amount purchased by the Purchasers, to the proposed
third party purchaser at a price not less than, and upon terms no more
favorable to the proposed third party purchaser than those specified in the
Resale Notice. If the Controlling Stockholder does not consummate the sale
of the Resale Offering within the above-mentioned ninety (90) day period,
the rights provided hereunder to the Purchasers shall be deemed to be
revived and such shares shall not be offered unless first reoffered to the
Purchasers in accordance with this section.
4.4.5. EXCEPTIONS. The right of first refusal of the Controlling
Stockholder's Company Stock in this Section 4.4. shall not be applicable
(A) to or after a Qualified Offering, (B) in the event that the Controlling
Stockholder transfers, sells or disposes of greater than fifty one percent
(51%) of his Company Stock in one transaction, (C) in the event that the
Controlling Stockholder transfers, sells or disposes of his Company Stock
in connection with an acquisition, a bona fide commercial strategic
partnership or a bonafide commercial business arrangement by the Company,
whether by merger, consolidation, sale of assets, sale or exchange of stock
or otherwise with a business entity or investor not generally considered a
financial investor and, (D) to the sale by the Controlling Stockholder of
not more than 100,000 shares, in the aggregate, of Class B Common Stock in
any one or a series of transactions.
4.4.6. TERMINATION. The rights provided in this Section 4.4. shall
terminate upon the Company's sale of its Class A Common Stock in a
Qualified Offering.
ARTICLE V
MISCELLANEOUS
Section 5.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
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 (including
permitted transferees of any shares of Registrable Securities). Without limiting
any other rights of transfer herein, each Purchaser may transfer, assign and
convey its shares of capital stock of the Company and its rights and obligations
thereunder to an Affiliate of such Purchaser or to a shareholder, partner or
member of such Purchaser; provided, however, that in the case of each such
shareholder, partner or member of such Purchaser, each transferee acquires more
than 10,000 shares of capital stock and there shall be no more than ten (10)
such transferees by any one Purchaser, and such Affiliate or shareholder,
partner or member of such Purchaser shall be deemed to be a "Purchaser" for
purposes of construction of this Agreement. Nothing in this Agreement is
intended to confer
22
<PAGE>
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liability under or by reason of
this Agreement, except as expressly provided in this Agreement.
Section 5.2 NOTICES. All notices hereunder shall be in writing and be given
by registered or certified mail, postage and registration fees prepaid, or by
overnight delivery, and shall be deemed given when so mailed as follows: -------
If to the Company, to it at:
Gary Millin, President
Mail.com, Inc.
11 Broadway, Suite 660
New York, NY 10007
With a copy to:
Brian J. Zimmet, Esq.
Law Offices of Brian J. Zimmet
801 Second Avenue, 5th Floor
New York, NY 10017
and to:
David Ambrosia, Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
If to the Purchasers,
to them at the addresses
set forth in Schedule A
With a copy to:
Paul Vogt, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
and to:
David Brinton, Esq.
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
and to:
Daniel Schloendorn, Esq.
23
<PAGE>
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
The foregoing addresses may be changed by notices given in the manner set forth
in this section.
Section 5.3 GOVERNING LAW; FORUM AND CONSENT TO JURISDICTION.
(a) GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of New York without
giving effect to those laws requiring the application of any laws other
than the laws of the State of New York.
(b) FORUM AND CONSENT TO JURISDICTION. Each party hereto submits to
the nonexclusive jurisdiction of the courts of the State of New York and
the federal courts of the United States of America located in such state
solely in respect of the interpretation and enforcement of the provisions
of this Agreement, and the other instruments, agreements and documents to
be delivered pursuant hereto, and hereby waives, and agrees not to assert,
as a defense in any action, suit or proceeding for the interpretation or
enforcement of this Agreement or any of such instruments, agreements and
documents, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that
this Agreement or any of such other instruments, agreements and documents
may not be enforced in or by said courts or that its property is exempt or
immune from execution, that the suit, action or proceeding is brought in an
inconvenient forum, or that the venue of the suit, action or proceeding is
improper. Each party (other than those residing in New York, in which case
service of process may be made to such parties at their respective
addresses as set forth in Section 5.2) hereto agrees that service of
process may be made upon it by service upon Corporation Services Company,
Inc. ("CSC") at its office in New York City in any such action, suit or
proceeding against such party with respect to this Agreement or any other
agreements relating hereto, and hereby irrevocably designates and appoints
CSC as its authorized agent upon which process may be served in any such
action, suit or proceeding, it being understood that such appointment and
designation shall become effective without any further action on the part
of any party. Service of process upon such authorized agent shall be
deemed, in every respect, effective service of process upon the applicable
party. If CSC ceases to maintain an office in New York City, then each
party shall appoint another agent for service of process in the State of
New York acceptable to the others. A copy of any complaint or other item
served pursuant to this Section shall also be sent at the same time to the
party or parties designated for notice at the addresses and in the manner
specified in Section 5.2. Each party hereto agrees that final judgment
(with all right of appeal having expired or been waived) against it in any
such action, suit or proceeding shall be conclusive and that each party is
entitled to enforce such judgment in any other jurisdiction by suit on the
judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and amount of indebtedness arising from such judgment.
24
<PAGE>
Section 5.4 WAIVERS; AMENDMENTS. The waiver by the undersigned of any of
the provisions of this Agreement or the Stock Purchase Agreement shall not
operate or be construed as a waiver of any subsequent breach. This Agreement or
the Stock Purchase Agreement may be amended, and any provision of this Agreement
may be waived, only by a written amendment executed by (i) the Company, (ii) the
Controlling Stockholder and (iii) in the case of any amendment affecting or that
may affect the rights or obligations of the Purchasers, the holders of a
majority of the outstanding shares of Class E Preferred Stock purchased by the
Purchasers or stock issuable on conversion of such shares. Notwithstanding the
foregoing, the Company will provide each Purchaser with written notice and
sufficient information, sufficiently far in advance of a date a decision is
required, to enable such Person to make an informed and considered decision with
respect to any proposed amendment, waiver or consent in respect of any of the
provisions hereof. The Company will not, directly or indirectly, pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, to any holder of capital stock of the Company as consideration
for or as an inducement to the entering into by any such holder of any waiver or
amendment to any of the terms and provisions of this Agreement, unless prior to
the payment of any remuneration to any holder of capital stock of the Company,
the holders of Class E Preferred Stock shall, ratably, have been offered the
opportunity to provide any such waiver or amendment upon the same financial
terms and conditions (including but not limited to the time specified by which a
consent to such waiver or amendment must be given) as any holder of capital
stock who has consented to the waiver or amendment of any of the terms of this
Agreement. No waiver or amendment of the provisions in the preceding sentence
shall be effective with respect to any Purchaser unless consented to in writing
by such Purchaser. No amendment shall adversely affect the Purchasers unless it
shall either be approved by the Purchasers so adversely affected or shall apply
to all Purchasers uniformly.
Section 5.5 HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect the construction and
interpretation of this Agreement
Section 5.6 SEVERABILITY. The invalidity of all or any part of any section
of this Agreement shall not render invalid the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
Section 5.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. This Agreement may contain more than one
counterpart of the signature page and may be executed by the affixing of the
signatures of each of the Parties to one of these counterpart signature pages.
All of the counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
Section 5.8 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
25
<PAGE>
Section 5.9 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
Section 5.10 ENTIRE AGREEMENT. This Agreement and the Stock Purchase
Agreement contain the entire agreement of the Parties. The Parties are not bound
by any oral statements that are made outside of this Agreement.
Section 5.11 BENEFIT OF MORE FAVORABLE RIGHTS. If, within sixty (60) days
following the initial closing under the Stock Purchase Agreement, the Company
grants to a third party investor rights which are more beneficial than the
preferences afforded to the Purchasers pursuant to this Agreement, with respect
to Company Stock or capital stock of any Affiliate of the Company, which are on
terms more favorable to the holders of such securities with respect to any of
the material terms applicable thereto, including, without limitation, the number
of times or the circumstances under which such rights may be exercised, the
expenses to be paid by the Company or any Affiliate of the Company in connection
therewith or the duration of the availability of such rights, the Parties agree
that such more favorable terms will be exercisable by the Purchasers
automatically and without further action by the Company or any of the other
Parties.
Section 5.12 ADDITIONAL PURCHASERS. It is contemplated that the Company may
issue additional shares of Class E Preferred Stock under the Stock Purchase
Agreement in accordance with the provisions of section 2.4 thereof following the
initial closing under the Stock Purchase Agreement on the terms and conditions
set forth therein. Each purchaser of such additional shares shall become party
to this agreement and be deemed a Purchaser hereunder, shall agree to assume all
of the obligations of a Purchaser hereunder and shall be entitled to all of the
rights of a Purchaser hereunder.
26
<PAGE>
WHEREAS, the Parties have executed this Agreement as of the date first above
written:
MAIL.COM, INC., as Company
/s/ Gary Millin
------------------------------------
Name: Gary Millin
Title: President
PURCHASERS
ALERION ASSOCIATES LLC
By: Alerion Management LLC, Manager
/s/ Martin S. Sands
------------------------------------
Name: Martin S. Sands
Title: Manager
AMERICAN FARM INVESTMENT CORPORATION
/s/ John Elder
------------------------------------
Name: John Elder
Title: Director
/s/ Gail Lamb
------------------------------------
Name: Gail Lamb
Title: Director
APOLLO NOMINEES INCORPORATED
/s/ E. Adrian Meyer
------------------------------------
Name: E. Adrian Meyer
Title:
<PAGE>
CG ASIAN-AMERICAN FUND, L.P.
/s/ John R. Whitman
------------------------------------
Name: John R. Whitman
Title: Treasurer
CITI GROWTH FUND II OFFSHORE, L.P.
/s/ John R. Whitman
------------------------------------
Name: John R. Whitman
Title: Treasurer
ENCOMPASS GROUP, INC.
/s/ Shozo Okuda
------------------------------------
Name: Shozo Okuda
Title: Director
FABRICANT & FABRICANT, INC.
/s/ Kenneth Fabricant
------------------------------------
Name: Kenneth Fabricant
Title: President
OFFSHORE ONLINE INVESTORS II, INC.
/s/ Hussain A. Sajwani
------------------------------------
By: Hussain A. Sajwani
Title:
<PAGE>
PRIMUS VENTURES
/s/ William C. Mulligan
------------------------------------
Name: William C. Mulligan
Title: Executive Vice President
PRINCETON GLOBAL FUND, L.P.
/s/ Subir Ray
------------------------------------
Name: Subir Ray
Title: Director
ROPART INVESTMENTS, LLC
/s/ Robert B. Goergen
------------------------------------
Name: Robert B. Goergen
Title: Manager
SELIGMAN COMMUNICATIONS AND
INFORMATION FUND, INC.
By: J & W Seligman & Co.,Inc.
/s/ Richard Schwartz
------------------------------------
Name: Richard Schwartz
Title: Director of Investments
SURFREE.COM, Inc.
/s/ Adam Portnoy
------------------------------------
Name: Adam Portnoy
Title: President and C.E.O.
<PAGE>
U.S. INFORMATION TECHNOLOGY
FINANCING L.P.
/s/ Shozu Okuda
------------------------------------
Name: Shozu Okuda
Title: Managing Director
THE WHITMAN CHILDREN IRREVOCABLE
TRUST
/s/ John R. Whitman
------------------------------------
Name: John R. Whitman
Title: Attorney-in-Fact
<PAGE>
BOCNY LLC
/s/ Keith R. Fox
------------------------------------
Name: Keith R. Fox
Title: President
EXCELSIOR PARTNERS I, L.P.
By: Exeter Capital Management Corp.,
its general manager
/s/ Keith R. Fox
------------------------------------
Name: Keith R.Fox
Title: President
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.,
its general partner
By: Exeter IV Advisors, Inc.,
its general partner
/s/ Keith R. Fox
------------------------------------
Name: Keith R.Fox
Title: President
<PAGE>
/s/ Giacomo Antonini
------------------------------------
Giacomo Antonini
/s/ Brian M. Barefoot
------------------------------------
Brian M. Barefoot
/s/ Kevin J. Brandon
------------------------------------
Kevin J. Brandon
/s/ John R. Whitman
------------------------------------
For: Richard M. Chong
By: Attorney-in-Fact
/s/ Frank Connolly
------------------------------------
Frank Connolly
/s/ Riza Dekidjiev, Jr.
------------------------------------
Riza Dekidjiev, Jr.
/s/ Pat Durkin
------------------------------------
Pat Durkin
<PAGE>
/s/ Brian Ehrlich
------------------------------------
Brian Ehrlich
/s/ Ihsan Essaid
------------------------------------
Ihsan Essaid
/s/ James J. Geddes, Jr.
------------------------------------
James J. Geddes, Jr.
/s/ John R. Whitman
------------------------------------
For: Peter G. Gerry
By: John R. Whitman
Attorney-in-Fact
/s/ Gerald Gorman
------------------------------------
Gerald Gorman
/s/ Joseph J. Grano
------------------------------------
Joseph J. Grano
<PAGE>
/s/ Frank Graziano
- -------------------------------
Frank Graziano
/s/ Stephen Ketchum
- -------------------------------
Stephen Ketchum
/s/ Ryan Kim
- -------------------------------
Ryan Kim
/s/ Chris Kirchen
- -------------------------------
Chris Kirchen
/s/ Ren Lipsius
- -------------------------------
Rens Lipsius
/s/ Debra L. McClister
- -------------------------------
Debra L. McClister
/s/ Albert G. Nichols, Jr.
- -------------------------------
Albert G. Nichols, Jr.
<PAGE>
/s/ Lon Otremba
- -------------------------------
Lon Otremba
/s/ Evan Perkins
- -------------------------------
Evan Perkins
/s/ Arkady Plotnitsky
- -------------------------------
Arkady Plotnitsky
/s/ Marsha Plotnitsky
- -------------------------------
Marsha Plotnitsky
/s/ Subir Ray
- -------------------------------
For: Subir Ray
By: John R. Whitman
Attorney-in-Fact
/s/ Eric J. Rosen
- -------------------------------
Eric J. Rosen
/s/ Michael Stevens
- -------------------------------
Michael Stevens
<PAGE>
/s/ David F. Thomas
- -------------------------------
David F. Thomas
/s/ Kilin To
- -------------------------------
For: Kilin To
By: John R. Whitman
Attorney-in-Fact
/s/ John R. Whitman
- -------------------------------
John R. Whitman
/s/ John G. Troiano
- -------------------------------
John G. Troiano
/s/ Gabriele J. Troiano
- -------------------------------
Gabriele J. Troiano
/s/ Brian Zimmet
- -------------------------------
Brian Zimmet
<PAGE>
/s/ Craig S. Sim
- -------------------------------
Craig S. Sim
<PAGE>
EXHIBIT 10.29
OBSERVER RIGHTS AGREEMENT
This Observer Rights Agreement by and among Sycamore Venture Capital Group
("Sycamore"), Primus Capital Fund IV Limited Partnership, a limited partnership
organized under the laws of Delaware (the "Primus IV Fund"), Primus Executive
Fund Limited Partnership, a limited partnership organized under the laws of
Delaware (the "Primus Executive Fund") (the Primus IV Fund and the Primus
Executive Fund being hereinafter referred to collectively as the "Primus Funds")
and iName, Inc. (the "Company"), shall be effective upon the closing (the
"Primus Closing") under that certain Class C Preferred Stock Purchase Agreement
(the "Stock Purchase Agreement") dated as of July 31, 1998 between iName, Inc.
and certain Purchasers (as defined therein) contemplated by that certain
Accession Agreement (the "Accession Agreement") among the Company and the
investors signatory thereto dated August 31, 1998. Capitalized terms used herein
but not otherwise defined shall have the respective meanings ascribed to such
terms in the Waiver, Consent and Amendment to the Class A Preferred Stock
Purchase Agreement dated May 27, 1997, the Purchase and Sale Agreement dated
December 17, 1997, the Purchase and Sale Agreement dated January 5, 1998,
between the Company and the persons identified therein, and Investors' Rights
Agreement between the Company and the persons identified therein (the
"Investors' Rights Agreement").
WHEREAS, the Company has granted to Sycamore the right (the "Observer
Right") to designate one observer to the board to attend all meetings of the
Board of Directors of the Company in a nonvoting observer capacity pursuant to
section 5.2 of the Investors' Rights Agreement;
WHEREAS, the Primus Funds shall purchase Shares and Warrants and become
parties to the Investors' Rights Agreement upon the Primus Closing; and
WHEREAS, the Primus Funds desire to have the right to appoint one observer
to the board to attend all meetings of the Board of Directors of the Company in
a nonvoting observer capacity, and Sycamore desires to grant to the Primus Funds
the right to utilize its Observer Right, subject to the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
in the Stock Purchase Agreement and in the Accession Agreement and other good
and valuable consideration, the receipt of which is hereby acknowledged,
Sycamore and the Primus Funds agree to the following:
For so long as Sycamore shall enjoy its Observer Right under the Investors'
Rights Agreement Sycamore shall appoint as the observer to the board pursuant to
the Observer Right a person (the "Observer") designated by the Primus Funds,
provided that Sycamore shall at all times, in its sole discretion, for any
reason or no reason, have the right to remove such person as Observer and
appoint its own designee as Observer. The terms and conditions of such
<PAGE>
appointment and the rights and obligations of such Observer shall be as set
forth in the Investors' Rights Agreement.
In the event that Sycamore shall remove the Observer designated by the
Primus Funds pursuant to the previous paragraph, the Company shall grant to the
Primus Funds the right to appoint one observer (the "Primus Observer") to the
board to attend all meetings of the Board of Directors of the Company in a
nonvoting observer capacity. The rights and obligations of the Primus Observer
shall be the same as those set forth with respect to the Observer in the
Investors' Rights Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Observer Rights
Agreement as of August 31, 1998.
SYCAMORE VENTURE CAPITAL GROUP
By: /s/ John R. Whitman
-----------------------------------------------
Name: John R. Whitman
Title: Managing Partner
iNAME, INC.
By: /s/ Gary Millin
-----------------------------------------------
Name: Gary Millin
Title: President
PRIMUS CAPITAL FUND IV LIMITED PARTNERSHIP
By: Primus Venture Partners IV Limited Partnership, its
general partner
By: Primus Venture Partners IV, Inc., its general partner
By: /s/ William C. Mulligan
-----------------------------------------------
Name: William C. Mulligan
Title: Executive Vice President
PRIMUS EXECUTIVE FUND LIMITED PARTNERSHIP
By: Primus Venture Partners IV Limited Partnership, its
general partner
By: Primus Venture Partners IV, Inc., its general partner
By: /s/ William C. Mulligan
-----------------------------------------------
Name: William C. Mulligan
Title: Executive Vice President
<PAGE>
EXHIBIT 10.30
EXECUTION COPY
INVESTORS' RIGHTS AGREEMENT
INVESTORS' RIGHTS AGREEMENT, dated as of the 1st day of March 1999, by and
among Mail.com, Inc. (formerly named iNAME, INC.), a Delaware corporation (the
"Company"), doing business at 11 Broadway, Suite 660, New York, New York, the
undersigned holders of the Warrants and their nominees, successors and assigns
(the "Warrantholders"), and Gerald Gorman, residing at 415 Bernardsville Road,
Mendham, New Jersey, in his capacities as holder of Class A Preferred Stock,
Class B Common Stock and controlling stockholder (the "Controlling
Stockholder"). The Company, the Controlling Stockholder and the Warrantholders
are collectively referred to as the "Parties."
WHEREAS, the Company has issued Warrants to the Warrantholders as
represented by the Warrants to Purchase Capital Stock dated as of the date
hereof (the "Warrant Certificates"); and
WHEREAS, in order to induce the Warrantholders to take delivery of the
Warrant Certificates, the Warrantholders and the Company agree that this
Agreement shall govern the rights of the Warrantholders and the Company with
respect to the subject matter set forth herein and in connection with the terms
and provisions as set forth herein;
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the Parties do hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 DEFINITIONS. The following terms, as used herein, shall have
the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such Person.
"Agreement" means this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Class A Common Stock" means the shares of Class A Common Stock that the
Company is authorized to issue by way of the Company's Amended and Restated
Certificate of Incorporation, and amendments thereto.
<PAGE>
"Class A Preferred Stock" means the shares of Class A Preferred Stock that
the Company is authorized to issue by way of the Company's Amended and Restated
Certificate of Incorporation, and amendments thereto.
"Class B Common Stock" means the shares of Class B Common Stock that the
Company is authorized to issue by way of the Company's Amended and Restated
Certificate of Incorporation, and amendments thereto.
"Class C Preferred Stock" means the shares of Class C Preferred Stock that
the Company is authorized to issue by way of the Company's Amended and Restated
Certificate of Incorporation, and amendments thereto.
"Company Stock" means any shares of any class of authorized capital stock
in the Company.
"Controlling Stockholder" has the meaning set forth in the preface above.
"Incidental Registration" has the meaning set forth in Section 2.1.1. of
this Agreement.
"Indemnified Party" and "Indemnifying Party" has the meaning set forth in
Section 2.6. of this Agreement.
"Other Shareholders' Consent" means the consent by the holders of Class A
Preferred Stock purchased pursuant to the Class A Preferred Stock Purchase
Agreement and by the holders of the Class C Preferred Stock purchased pursuant
to the Class C Preferred Stock Purchase Agreement to the amendment of the
Consent, Amendment and Waiver and Investors' Rights Agreement dated as of July
31, 1998 among the Company and the investors signatory thereto (the "Preferred
Stock Investors' Rights Agreement") to permit, in connection with an Incidental
Registration, the Warrantholders to include their Registrable Securities on a
pro rata basis with such Class A Preferred Stock and/or Class C Preferred Stock
to the extent that such Class A Preferred Stock and/or Class C Preferred Stock
is included in such registration pursuant to incidental registration rights as
contemplated by clause (C) of Section 2.1.2. hereof and not demand registration
rights as contemplated by clause (A) of Section 2.1.2. hereof.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Registrable Securities" means (i) the Class A Common Stock issuable or
issued upon exercise of the Warrants (it being understood that if any of the
Warrants expire, in whole or in part, unexercised upon the Expiration Date as
defined in the Warrant Certificates, then the Class A Common Stock that is no
longer issuable as a result of such expiration shall not be deemed to be
Registrable Securities), (ii) any Class A Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution with respect to, or
in exchange for or in replacement of the
2
<PAGE>
securities referenced in clauses (i) and (ii), and (iii) any other shares of
capital stock of the Company into or for which the securities referenced in
clause (i) and (ii) may be converted into or exchanged pursuant to a
recapitalization or reclassification of the Company's capital stock.
"SEC" means the Securities and Exchange Commission.
"Warrant Demand Registration" has the meaning set forth in Section 2.1.3.
of this Agreement.
"Warrantholders" has the meaning set forth in the preface above.
"Warrants" means the rights to purchase One Million Five Hundred Thousand
(1,500,000) shares of Class A Common Stock by the Warrantholders as represented
by the Warrant Certificates, as the same may be amended.
Section 1.2 OTHER TERMS. Other terms may be defined elsewhere in the text
of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
Section 1.3 OTHER DEFINITIONAL PROVISIONS. The words "herein," "hereof,"
"hereto" and "hereunder" and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa, and in such gender,
as the sense and circumstances require.
ARTICLE II
REGISTRATION RIGHTS
The Company and the Warrantholders covenant and agree as follows:
Section 2.1 REGISTRATION
2.1.1. INCIDENTAL REGISTRATION. If at any time the Company proposes to
register any Company Stock under the Act for its own account or for the
account of any of its stockholders, in connection with an underwritten
public offering of such Company Stock, on a form that would also permit
registration of the Registrable Securities, the Company shall, each such
time, give the Warrantholders not less than twenty (20) days written notice
of such proposed registration (the "Incidenta Registration"). Upon the
written request of the Warrantholders, given within twenty (20) days after
receipt of any such notice from the Company, the Company shall, subject to
Section 2.1.2., cause to be included in such registration all of the
Registrable Securities the Warrantholders request be registered in such
registration. There shall be no restriction with respect to the number of
times the Warrantholders may request such Incidental Registration.
2.1.2. PRO RATA INCIDENTAL REGISTRATION OF COMPANY STOCK. If the
managing underwriter of any offering described in the first sentence of
Section 2.1.1. determines that the number of shares proposed to be sold by
the Company or by other stockholders of Company
3
<PAGE>
Stock is greater than the number of shares that the underwriter believes
feasible to sell at the time, at the price and upon the terms approved by
the Company, then the number of shares of Company Stock that the
underwriter believes may be sold shall be allocated for inclusion in the
registration statement in the following order of priority: (A) Company
Stock sold for the account of any holders of the Company's securities if
the registration was initiated by such holders pursuant to contractual
demand registration rights and Company Stock sold for the account of Lycos,
Inc. ("Lycos"), pursuant to contractual incidental registration rights that
permit it to participate in such an offering on a pro rata basis with such
holders, pro rata among such holders and Lycos according to the number of
shares requested to be registered by such holders and Lycos; (B) Company
Stock sold for the account of the Company; and (C) (x) if the Other
Shareholders' Consent is obtained on or before the consummation of the
Company's initial public offering, pro rata among any other holders of
securities of the Company exercising contractual incidental registration
rights (other than holders described in clause (A) above if pursuant to a
demand right and other than Lycos as described in clause (A) above) and the
Warrantholders according to the number of shares requested to be registered
by such other holders and the Warrantholders; provided, however, that (1)
as between the Company, on the one hand, and the Warrantholders and other
holders referred to in clause (C) above, on the other hand, at least ten
percent (10%) of the Warrantholders' Registrable Securities and of such
other holders' registrable securities requested to be included shall be
included in such underwriting (other than the initial underwriting); and
(2) the right of such other holders and the Warrantholders to participate
in the offering shall have priority over Class A Common Stock held by
employees of the Company and Class B Common Stock held by employees of the
Company or (y) if the Other Shareholders' Consent is not obtained on or
before the consummation of the Company's initial public offering, pro rata
among any other holders of securities of the Company exercising contractual
incidental registration rights (other than holders described in clause (A)
above if pursuant to a demand right and other than Lycos as described in
clause (A) above) and, subject to the provisos set forth in clauses (1) and
(2) below, the Warrantholders according to the number of shares requested
to be registered by such other holders and the Warrantholders; provided,
however, that (1) as between the Company, on the one hand, and the holders
of Class A Preferred Stock purchased pursuant to the Class A Preferred
Stock Purchase Agreement, the holders of Class C Preferred Stock purchased
pursuant to the Class C Preferred Stock Purchase Agreement and the
Warrantholders, on the other hand, at least ten percent (10%) of such
holders' registrable securities requested to be included shall be included
in such underwriting (other than the initial underwriting); (2) the right
of the holders of the Class A Preferred Stock and the holders of the Class
C Preferred Stock to participate in such underwriting shall have priority
over the Warrantholders, the holders of Class A Common Stock and the
holders of Class B Common Stock; and (3) the right of the holders of any
Company Stock held by Persons who are not employees of the Company shall
have priority over Class A Common Stock held by employees of the Company
and Class B Common Stock held by employees of the Company. If any
Warrantholder disapproves of the terms of the underwriting, it may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter; provided, however, the election to withdraw occurs within ten
(10) days after such Warrantholder receives notice of the terms of the
underwriting.
2.1.3. DEMAND REGISTRATION. On or after the earlier of (A) 180 days
after the effective date of a registration statement filed by the Company
in connection with an initial
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public offering of any Company Stock or other securities under the Act,
or (B) July 31, 2000, then, upon written request of the holder or
holders of a majority of the Registrable Securities that the Company
effect the registration under the Act of all or a portion of the
Registrable Securities and specifying the intended method of disposition
thereof, the Company shall, within fifteen (15) days after the Company
has received such written notice, promptly commence and use its best
efforts to consummate the registration under the Act of the Registrable
Securities, or such portion thereof, and of all other stock or
securities which the Company has been requested to register by any other
holder of the Company's securities that is entitled to include
securities in such registration (the "Warrant Demand Registration");
provided, however, that (1) the Warrantholders shall be entitled to
request one (1) Warrant Demand Registration, provided that either (a)
the Registrable Securities requested to be included in such Warrant
Demand Registration constitute at least twenty percent (20%) of the
total number of Registrable Securities issued hereunder or (b) the
anticipated gross receipts (before underwriters discounts and
commissions and costs of such registration) from the offering exceed ten
million dollars ($10,000,000), (2) a registration will not count as the
permitted Warrant Demand Registration until it has become effective, (3)
the Company may delay the filing of a registration statement under the
Act as required by this Section 2.1.3. for a period of up to sixty (60)
days after the request of the Warrantholders if the Board of Directors
of the Company determines in good faith that such Warrant Demand
Registration would be materially adverse to the interests of the
Company, and in such event, the Warrantholders will be entitled to
withdraw such request and such Warrant Demand Registration will not be
counted as the Warrant Demand Registration hereunder (provided, however,
that the Company shall not use this right more than once in any one
hundred eighty (180) day period) and (4) the Company will not be
required to effect a Warrant Demand Registration within six (6) months
after the effective date of a registration in which the Warrantholders
were given registration rights pursuant to Section 2.1.1. In the event
that the Warrantholders exercise the demand registration right
hereunder, and shares requested to be registered by Lycos in connection
therewith are included in such registration on a pro rata basis with the
Warrantholders' Registrable Securities, pursuant to section 11 of the
letter agreement between Lycos and the Company dated March 9, 1998 or
otherwise, account for thirty percent (30%) or more of the shares
offered in such registered offering, then the Warrantholders shall have
the right to one (1) additional Warrant Demand Registration hereunder.
2.1.4. PRO RATA DEMAND REGISTRATION OF COMPANY STOCK. (a) In the event
a Warrant Demand Registration is initiated subsequent to the initial public
offering of any Company Stock or other securities under the Act and such
Demand Registration is an underwritten offering, and the managing
underwriter advises the Warrantholders and the Company in writing that in
the underwriter's opinion the number of shares requested to be included
exceeds the number that can be sold in such offering, then the number of
shares of Company Stock that the underwriter believes may be sold shall be
allocated for inclusion in the registration statement in the following
order of priority: (A) shares requested to be included by the
Warrantholders, together with the shares requested to be included by Lycos
to the extent Lycos is entitled to participate in such offering on a pro
rata basis with the Warrantholders, as applicable, pursuant to contractual
incidental registration rights, that in the opinion of such underwriter can
be sold prior to the inclusion of any securities of any other security
holder of the Company; provided that, if the managing underwriter advises
the Company in writing that in its opinion the aggregate number of shares
requested for inclusion by the Warrantholders, together
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with such shares of Lycos, exceeds the number of such shares that can be
sold in such offering, then the Company shall include in the registration
statement only such number of shares, pro rata among Warrantholders and
Lycos, based upon the number of shares requested to be registered by the
Warrantholders and Lycos, which in the opinion of such underwriter can be
sold; (B) shares sold for the account of the Company; and (C) pro rata
among any other holders of securities of the Company exercising contractual
incidental registration rights other than any holders whose shares are
included pursuant to clause (A) above.
(b) In the event a Warrant Demand Registration is initiated prior to
the Company giving notice under Section 2.1.1. that it proposes to register
any Company Stock under the Act in its initial public offering of any
Company Stock or other securities under the Act and such Warrant Demand
Registration is an underwritten offering, and the managing underwriter
advises the Warrantholders and the Company in writing that in the
underwriter's opinion the number of shares requested to be included exceeds
the number that can be sold in such offering, then the number of shares of
Company Stock that the underwriter believes may be sold shall be allocated
for inclusion in the registration statement in the following order of
priority: (A) shares requested to be included by the Warrantholders
together with the shares requested to be included by Lycos to the extent
Lycos is entitled to participate in such offering on a pro rata basis with
the Warrantholders pursuant to contractual incidental registration rights,
that in the opinion of such underwriter can be sold prior to the inclusion
of any securities of any other security holder of the Company; provided
that, if the managing underwriter advises the Company in writing that in
its opinion the aggregate number of shares requested for inclusion by the
Warrantholders, together with such shares of Lycos, exceeds the number of
such shares that can be sold in such offering, then the Company shall
include in the registration statement only such number of shares, pro rata
among the Warrantholders and Lycos, based upon the number of shares
requested to be registered by the Warrantholders and Lycos, which in the
opinion of such underwriter can be sold; (B) pro rata among the
Warrantholders and any other holders of securities of the Company
exercising contractual incidental registration rights other than any
holders whose shares are included pursuant to clause (A) above; and (C)
shares sold for the account of the Company.
(c) If the Warrantholders make a written request to exercise rights to
a Warrant Demand Registration under Section 2.1.3. prior to any other
holder of securities making a written request to exercise contractual
rights to a demand registration, then the registration following from such
request shall be a Warrant Demand Registration. If any other holder of
securities makes a written request to exercise contractual rights to a
demand registration prior to the Warrantholders making a written request to
exercise rights to a Warrant Demand Registration under Section 2.1.3., then
the registration following from such request shall not be a Warrant Demand
Registration.
2.1.5. FORM S-3 DEMAND REGISTRATION RIGHTS. If at any time the holders
of a majority in interest of the Warrants held by the Warrantholders
request that the Company effect a Form S-3 registration under the Act of
all or a portion of the Registrable Securities, the Company shall, within
fifteen (15) days after the Company has received such written notice,
promptly commence and use its best efforts to consummate the Form S-3
registration of the Registrable Securities under the Act; provided,
however, (A) the aggregate fair market value of the Registrable Securities
requested to be registered shall be greater than two million dollars
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($2,000,000), (B) the Company shall only be required to file one Form S-3
registration every twelve (12) months, and (C) the Warrantholders who
request that the Company effect a Form S-3 registration shall not be
required to participate in such Form S-3 registration.
2.1.6. BENEFIT OF MORE FAVORABLE RIGHTS. If at any time registration
rights are granted with respect to Company Stock or capital stock of any
Affiliate of the Company which are on terms more favorable to the holders
of such securities with respect to any material terms applicable thereto
including, without limitation, the number of times or the circumstances
under which such rights may be exercised, the expenses to be paid by the
Company or any Affiliate of the Company in connection therewith or the
duration of the availability of such rights, the Company agrees that such
more favorable terms will be exercisable by the Warrantholders
automatically and without further action by the Company. The Company
covenants to give written notice to the Warrantholders not less than ten
(10) days in advance of the granting of registration rights with respect to
Company Stock or capital stock of any Affiliate of the Company.
2.1.7. TERMINATION OF REGISTRATION RIGHTS. Upon the date which is
thirty (30) months following a firm commitment underwritten public offering
pursuant to a registration statement under the Act, with gross proceeds of
not less than twenty million dollars ($20,000,000) (a "Qualified
Offering"), then the Warrantholders shall not be entitled to exercise any
right provided for in this Section 2.1.
Section 2.2 OBLIGATIONS OF THE COMPANY. Where required under Section 2.1.
to use its best efforts to effect the registration of any of the
Registrable Securities, the Company shall, as expeditiously as reasonably
possible,
2.2.1. Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective and, upon the request of
the holders of a majority of the Registrable Securities, keep such
registration statement effective for up to one hundred twenty (120) days;
2.2.2. Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such registration;
2.2.3. Furnish to the Warrantholders such numbers of copies of such
registration statement and prospectus, including any preliminary
prospectus, in conformity with the requirements of the Act, and such other
documents as the Warrantholders may reasonably request in order to
facilitate the disposition of the Registrable Securities;
2.2.4. Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement; and
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2.2.5. Otherwise comply with all applicable rules and regulations of
the SEC.
Section 2.3 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2 that the
Warrantholders shall furnish to the Company such information regarding the
Warrantholders, the Registrable Securities held by the Warrantholders, and the
intended method of disposition thereof as the Company or its appointed agents
shall reasonably request and as shall be required in connection with the action
to be taken by the Company.
Section 2.4 REGISTRATION EXPENSES. In the case of any registration effected
pursuant to Section 2, the Company shall bear all registration and qualification
fees and expenses, and all costs and disbursements of counsel for the Company;
provided, however, that (A) each Warrantholder shall bear the fees and costs of
such Warrantholder's own counsel and all underwriting discounts and commissions
with respect to the Registrable Securities sold by such Person and (B) the
Company shall not be required to pay for any expenses of any Warrant Demand
Registration begun if the registration request is subsequently withdrawn at the
request of a majority in interest of the Warrantholders to be registered (in
which case all participating Warrantholders shall bear such expenses); provided
that, if the Warrantholders elect to engage counsel other than counsel for the
Company in connection with a Warrant Demand Registration, the Company shall bear
the fees and expenses, and all costs and disbursements of one firm to act as
such counsel to all Warrantholders up to a maximum aggregate amount of fifteen
thousand dollars ($15,000).
Section 2.5 SELECTION OF UNDERWRITERS.
2.5.1. COMPANY SELECTION. If a registration pursuant to Section 2.1.1.
of this Agreement involves an underwritten offering, the Company shall have
the right to select the investment bankers and managers to administer the
offering. The Company shall not be required under Section 2.1.1. to
register the Warrants in such registration unless the Warrantholders accept
the terms of the underwriting as agreed upon between the Company and the
underwriter.
2.5.2. WARRANTHOLDERS' SELECTION. If a registration pursuant to
Section 2.1.3. or 2.1.5. involves an underwritten offering, then the
Warrantholders shall have the right to select the investment bankers and
managers to administer the offering; provided, however, that the selection
of such investment bankers and managers shall be subject to the approval of
the Company, such approval not to be unreasonably withheld.
Section 2.6 INDEMNIFICATION. If any Registrable Securities are included in
a registration statement pursuant to this Section 2, then,
2.6.1. To the extent permitted by law, the Company shall indemnify and
hold harmless the Warrantholders, agents for the Warrantholders, any
underwriter for the Warrantholders, and each Person, if any, who controls
such Person within the meaning of the Act, against any losses, claims,
damages or liabilities, joint or several, to which they may become subject
under the Act or otherwise, insofar as such losses, claims, damages, or
liabilities arise out of any untrue statement or alleged untrue statement
of material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained in the
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registration statement, or any amendments or supplements to the
registration statement, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, and
will reimburse the Warrantholders, the agents for the Warrantholders, such
underwriter, or controlling Person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
the Company shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any
untrue statement or omission based upon and in conformity with written
information furnished to the Company by an instrument duly executed by the
Warrantholders or underwriter and stated to be specifically for use
therein.
2.6.2. To the extent permitted by law, each Warrantholder, severally
and not jointly, shall indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed such registration
statement, and any underwriter for the Company against any losses, claims,
damages or liabilities to which the Company or any such director, officer,
or underwriter may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities arise out of or are based upon
any untrue or alleged untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained in the registration statement or any amendments or
supplements to the registration statement, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement therein
not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary prospectus,
or amendments or supplement thereto, in reliance upon and in conformity
with written information furnished by such Warrantholder duly executed and
stated to be expressly for use therein, and such Warrantholder will
reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling Person, or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, that such Warrantholder's liability under
this Section 2.6.2. shall not exceed the amount of the gross proceeds of
the offering of such Warrantholder's Registrable Securities included
therein.
2.6.3. Each party entitled to indemnification (the "Indemnified
Party") shall give notice to the party required to provide indemnification
("Indemnifying Party") promptly after such Indemnified Party has knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party (at its expense) to assume the defense of any such claim
or any litigation resulting therefrom; provided, however, that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be reasonably satisfactory to the Indemnified Party, and
the Indemnified Party may participate in such defense at such party's
expense; provided, further, that the failure by any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 2.6., except to the extent that the
failure results in an omission of actual notice to the Indemnifying Party
and such Indemnifying Party is damaged solely as a result of the failure to
give notice; provided, further, that a refusal to permit the Indemnifying
Party to conduct such defenses by such counsel shall relieve such
Indemnifying Party of its obligations under this Section 2.6. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each
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Indemnified Party, consent to the entry of any judgment or enter into any
settlement that does not include as an unconditional term the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation.
Section 2.7 REPORTS UNDER THE SECURITIES EXCHANGE ACT OF 1934. With a view
toward making available to the Warrantholders the benefits of SEC Rule 144
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit the Warrantholder to sell its Registrable Securities to the
public without registration or pursuant to a registration on Form S-3, the
Company agrees to:
(i) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its shares to the general public;
(ii) take such action, including the voluntary registration of its
common stock under Section 12 of the Securities Exchange Act of 1934, as is
necessary to enable the holders of Registrable Securities to utilize Form
S-3 for the sale of their shares, such action to be taken as soon as
practicable after the end of the fiscal year in which the first
registration statement filed by the Company for the offering of its shares
to the general public is declared effective;
(iii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Securities Exchange
Act of 1934; and
(iv) furnish to any holder of the Registrable Securities, so long as
the holder of the Registrable Shares owns any shares, forthwith upon
request (i) a written statement by the Company as to its compliance with
the reporting requirements of Rule 144 (at any time after ninety (90) days
after the effective date of the first registration statement filed by the
Company), the Act and the Securities Exchange Act of 1934 (at any time
after it has become subject to such reporting requirements), or as to its
qualification that it qualifies as a registrant whose shares may be resold
pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any holder of
Registrable Securities of any rule or regulation of the SEC which permits
the selling of any such shares without registration or pursuant to such
form.
Section 2.8 LOCK-UP PERIOD. Each Warrantholder agrees that it shall not, to
the extent requested by the underwriter of the Company, sell or otherwise
transfer or dispose of any Registrable Securities or any securities of the same
or similar class as securities being registered by the Company during the one
hundred eighty (180) day period following the effective date of a registration
statement filed by the Company; provided, however, that (A) such agreement shall
be applicable only to the first registration statement of the Company that
covers shares of the Company to be sold to the public in an underwritten
offering, (B) the holders of Class B Common Stock and the holders of at least
ninety percent (90%) of Class A Common Stock are subject to identical or
substantially similar time restrictions, (C) all officers and directors of the
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Company and all other persons with registration rights enter into substantially
similar agreements, and (D) nothing contained herein shall prohibit any holder
of Company Stock from transferring any Registrable Securities to a trust
established for estate planning purposes. Notwithstanding anything to the
contrary set forth herein, the terms of this Section 2.8 may not be amended or
modified, directly or indirectly, without the express written consent of each
holder of Registrable Securities detrimentally affected by such amendment or
modification and any such amendment or modification made without such holder's
consent shall not be applicable to that holder.
Section 2.9 TRANSFER OF REGISTRATION RIGHTS. The registration rights of the
Warrantholders under this Section 2 may be assigned and transferred (i) by any
Warrantholder to any Affiliate of such Warrantholder to whom any of the shares
owned by the Warrantholder are transferred, and (ii) by any Warrantholder to any
transferee who acquires at least five thousand (5,000) Registrable Securities
(adjusted to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations); provided, however, that the Company is given written notice
by such Warrantholder at the time of such assignment and transfer stating the
name and address of the transferee and identifying the securities with respect
to which the rights under this Section 2 are being assigned and transferred. For
the purposes of this Section 2.9, a change in control of an Affiliate of a
Warrantholder holding shares entitling such Affiliate to the registration rights
hereunder, such that such Affiliate is subsequent to such change of control no
longer an Affiliate of such Warrantholder, shall be deemed an attempted transfer
of the registration rights hereunder and such former Affiliate of such
Warrantholder shall not be entitled to such registration rights except to the
extent such transfer would be permitted under clause (ii) above.
ARTICLE III
MISCELLANEOUS
Section 3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
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 (including
permitted transferees of any shares of Registrable Securities). Without limiting
any other rights of transfer herein (including Section 2.9), each Warrantholder
may transfer, assign and convey its shares of capital stock of the Company and
its rights and obligations thereunder to an Affiliate of such Warrantholder, and
such Affiliate shall be deemed to be a "Warrantholder" for purposes of
construction of this Agreement. Nothing in this Agreement is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liability under or by reason of
this Agreement, except as expressly provided in this Agreement.
Section 3.2 NOTICES. All notices and other communications under this
Agreement shall (a) be in writing (which shall include communications by
telecopy), (b) be (i) sent by registered or certified mail, postage prepaid,
return receipt requested, (ii) sent by telecopier, or (iii) delivered by hand,
(c) be given at the following respective addresses and telecopier numbers and to
the attention of the following persons:
(i) If to the Company, to it at:
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Mail.com, Inc.
11 Broadway, Suite 660
New York, NY 10007
Attention: Gary Millin, President
Telephone No.: (212) 425-3477
Telecopier No.: (212) 425-3487
with a copy to:
Law Offices of Brian J. Zimmet
801 Second Avenue, 5th Floor
New York, NY 10017
Attention: Brian J. Zimmet
Telephone No.: (212) 922-1330
Telecopier No.: (212) 949-6916
and to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Attention: David W. Ambrosia
Telephone No.: (212) 858-1208
Telecopier No.: (212) 858-1500
(ii) if to the Warrantholders, to them at their respective
addresses as set forth in Schedule A,
or at such other address or telecopier number or to the attention of such other
person as the party to whom such information pertains may hereafter specify for
the purpose in a notice to the other, and (d) be effective or deemed delivered
or furnished (i) if given by mail, on the fifth business day after such
communication is deposited in the mail, addressed as above provided, (ii) if
given by telecopier, when such communication is transmitted to the appropriate
number determined as above provided in this Section 3.2 and the appropriate
answer back is received or receipt is otherwise acknowledged, and (iii) if given
by hand delivery, when left at the address of the addressee addressed as above
provided. The foregoing addresses may be changed by notices given in the manner
set forth in this section.
Section 3.3 GOVERNING LAW; FORUM AND CONSENT TO JURISDICTION.
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(a) GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Delaware without
giving effect to the principles of the conflict of laws thereof.
(b) FORUM AND CONSENT TO JURISDICTION. Each party hereto submits to the
nonexclusive jurisdiction of the courts of the State of New York and the federal
courts of the United States of America located in such state solely in respect
of the interpretation and enforcement of the provisions of this Agreement, and
the other instruments, agreements and documents to be delivered pursuant hereto,
and hereby waives, and agrees not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement of this Agreement or any of
such instruments, agreements and documents, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that this Agreement or any of such other instruments,
agreements and documents may not be enforced in or by said courts or that its
property is exempt or immune from execution, that the suit, action or proceeding
is brought in an inconvenient forum, or that the venue of the suit, action or
proceeding is improper. Each party hereto agrees that service of process may be
made upon it by service upon The Prentice-Hall Corporation System, Inc. ("PHCS")
at its office in New York City in any such action, suit or proceeding against
such party with respect to this Agreement or any other agreements relating
hereto, and hereby irrevocably designates and appoints PHCS as its authorized
agent upon which process may be served in any such action, suit or proceeding,
it being understood that such appointment and designation shall become effective
without any further action on the part of any party. Service of process upon
such authorized agent shall be deemed, in every respect, effective service of
process upon the applicable party. If PHCS ceases to maintain an office in New
York City, then each party shall appoint another agent for service of process in
the State of New York acceptable to the others. A copy of any complaint or other
item served pursuant to this Section shall also be sent at the same time to the
party or parties designated for notice at the addresses and in the manner
specified in Section 3.2. Each party hereto agrees that final judgment (with all
right of appeal having expired or been waived) against it in any such action,
suit or proceeding shall be conclusive and that each party is entitled to
enforce such judgment in any other jurisdiction by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and amount of indebtedness arising from such judgment.
Section 3.4 WAIVERS; AMENDMENTS. The waiver by the undersigned of any of
the provisions of this Agreement or the Warrant Certificates shall not operate
or be construed as a waiver of any subsequent breach. This Agreement or the
Warrant Certificates may be amended, and any provision of this Agreement may be
waived, only by a written amendment executed by (i) the Company, (ii) the
Controlling Stockholder and (iii) in the case of any amendment affecting the
rights or obligations of the Warrantholders, the holders of a majority in
interest of the outstanding Warrants issued to the Warrantholders or stock
issuable upon exercise of such Warrants. Notwithstanding the foregoing, the
Company will provide each Warrantholder with written notice and sufficient
information, sufficiently far in advance of a date a decision is required, to
enable such Warrantholder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent in respect of any of the
provisions hereof. The Company will not, directly or indirectly, pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, to any holder of capital stock of
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the Company as consideration for or as an inducement to the entering into by any
such holder of any waiver or amendment to any of the terms and provisions of
this Agreement, unless prior to the payment of any remuneration to any holder of
capital stock of the Company, the Warrantholders shall, ratably, have been
offered the opportunity to provide any such waiver or amendment upon the same
financial terms and conditions (including but not limited to the time specified
by which a consent to such waiver or amendment must be given) as any holder of
capital stock who has consented to the waiver or amendment of any of the terms
of this Agreement. No waiver or amendment of the provisions in the preceding
sentence shall be effective with respect to any Warrantholder unless consented
to in writing by such Warrantholder.
Section 3.5 HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect the construction and
interpretation of this Agreement
Section 3.6 SEVERABILITY. The invalidity of all or any part of any section
of this Agreement shall not render invalid the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
Section 3.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. This Agreement may contain more than one
counterpart of the signature page and may be executed by the affixing of the
signatures of each of the Parties to one of these counterpart signature pages.
All of the counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
Section 3.8 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
Section 3.9 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
Section 3.10 ENTIRE AGREEMENT. This Agreement and the Warrant Certificates
contain the entire agreement of the Parties. The Parties are not bound by any
oral statements that are made outside of this Agreement.
14
<PAGE>
WHEREAS, the Parties have executed this Agreement as of the date first
above written:
MAIL.COM, INC.
/s/ Gary Millin
- ----------------------------------------
By: Gary Millin
Title: President
CNET, INC., as Warrantholder
/s/ Douglas Woodrum
- -----------------------------------------
By: Douglas Woodrum
Title: CFO
NBC MULTIMEDIA, INC., as Warrantholder
/s/ Christopher A. Glowacki
- -----------------------------------------
By: Christopher A. Glowacki
Title: Vice President
<PAGE>
EXHIBIT A TO INVESTORS'
RIGHTS AGREEMENT
NOTICE ADDRESSES OF WARRANTHOLDERS
To CNET, Inc. at:
CNET, Inc.
150 Chestnut Street
San Francisco, CA 94111
Attention: Doug Woodrum
Telephone No.: (415) 395-7800
Telecopier No.: (415) 395-9205
with a copy to:
Hughes & Luce, LLP
1717 Main Street, Suite 2800
Dallas, TX 75201
Attention: R. Clayton Mulford
Telephone No.: (214) 939-5500
Telecopier No.: (214) 939-5849
To NBC Multimedia, Inc. at:
NBC Multimedia, Inc.
c/o National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, NY 10112
Attention: Chris Glowacki
Telephone No.: (212) 664-4774
Telecopier No.: (212) 664-5561
with a copy to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, NY 10112
Attention: General Counsel
Telephone No.: (212) 664-4444
Telecopier No.: (212) 664-2648
<PAGE>
Exhibit 10.31
TERM SHEET AGREEMENT
Lycos, Inc. & GlobeComm, Inc.
1. Definitions. "Lycos Service" means the World Wide Web site located at
http://www.lycos.com. "Licensed Service" is a Lycos-branded version of
GlobeComm's electronic mail services, including the forwarding service,
automated POP service, personalized electronic mail service, and web-based
electronic mail. "Net Advertising Revenues" are the monies received by
Lycos from advertising revenues, minus advertising sales expenses payable
to Lycos or Lycos' designated sales agent (not to exceed 20%), from the
Licensed Service and any other revenue derived by Lycos from the Licensed
Service. "Net Subscription Revenues" are the monies received by GlobeComm
from subscription revenues from the Licensed Service and any other revenue
derived by GlobeComm from the Licensed Service less any applicable third
party commissions, broker fees, and user/advertiser credits or refunds.
2. Grant of License. GlobeComm will license to Lycos the Licensed Service for
inclusion in the Lycos Service. Lycos will have the right to provide
online access to the Licensed Service to licensees or partners of the
Lycos Service, subject to adjustments of business terms if such
arrangements will require the production of additional sites by GlobeComm.
Additional services and functionality to be developed by GlobeComm in
order to keep the Licensed Service competitive with other offerings will
be provided by GlobeComm at no cost to Lycos.
3. Exclusivity. GlobeComm will not establish a business or other relationship
for the Licensed Service with the following direct Lycos competitors:
WebCrawler, AOL Netfind (but not AOL.com, to which GlobeComm may provide
e-mail services), Search.com, CMP NetGuide, Yahoo!, AltaVista, Infoseek,
or Excite. During the term of this agreement, Lycos will not contract for
the provision of e-mail services on the Lycos Service with the following
direct GlobeComm competitors: Hotmail, Four11, Whowhere, Infospace,
Oracle, USANet, and ProntoMail. Nothing in the foregoing precludes either
party from entering into usual advertising sales or purchasing
arrangements with the above mentioned parties. If Lycos acquires a company
that provides e-mail as part of that company's service, Lycos will not be
prohibited from maintaining that company's e-mail service provided that
Lycos continues to use GlobeComm as the exclusive e-mail provider of
Lycos-branded versions of e-mail services, including the forwarding
service, automated POP service, personalized electronic mail service, and
web-based e-mail on the Lycos Service.
4. Branding. The Licensed Service will be branded Lycos, with the appropriate
GlobeComm logo and copyrights displayed at the bottom of each page. The
page URL will be masked by GlobeComm and branded Lycos, in a form ending
in lycosemail.com. Each page of the Licensed Service will have the Lycos
look and feel as defined by Lycos and any other branding opportunities
resulting from the Licensed Service will also be branded Lycos. The
default free electronic mail address choice for users of the Licensed
Service will be a domain of Lycos' choice. Lycos will have the right to
offer to users of the Licensed Service any domain names provided by
GlobeComm to the public through other services, subject to any contractual
restrictions and shall have the right to approve other free name choices
which shall include at least iname.com.
Lycos-GlobeComm Confidential
<PAGE>
5. Royalties. Lycos and GlobeComm will split all Net Advertising Revenues
from Licensed Service pages 50% to Lycos and 50% to GlobeComm. Unsold
banner inventory will be bartered by Lycos outside of the Lycos network to
drive traffic back to the Licensed Service. Lycos and GlobeComm will split
all Net Subscription Revenues from Licensed Service pages 50% to Lycos and
50% to GlobeComm.
6 Responsibilities. Lycos will be responsible for: providing links to the
Licensed Service from the Lycos Service; making all advertising sales on
Licensed Service pages; and promoting the Licensed Service from the Lycos
Service. GlobeComm will be responsible for: serving the Licensed Service;
procuring system operation software; operating the Licensed Service;
procuring all hardware and assuming all hardware costs; assuming all
network costs; tagging Licensed Service pages for Lycos-served
advertisements; generating daily traffic reports; and auditing traffic
with the ABVS software or equivalent service. GlobeComm will have three
months to incorporate such auditing service. The Licensed Service's pro
rata share of the cost of such service will be subtracted from Net
Subscription Revenues before revenue sharing as outlined in paragraph 5
above. GlobeComm will furnish Lycos with monthly reports in electronic
format of any user information gathered from users of the Licensed
Service, including whether the users registered from the Lycos Service, if
and when such technology is made available to other GlobeComm licensees.
Both parties will use reasonable efforts to track referrals from Lycos and
bartered banners and include such information in monthly reports. During
the term of this agreement, GlobeComm shall not use any information
obtained from Lycos users for any purpose other than to service Lycos
users.
7. Performance. The Licensed Service will meet response performance standards
for Lycos users similar to that of other comparable web based email sites.
Except for force majeure events, and the initial launch period through
October 20, 1997, the Licensed Service will be available an average of not
less than 95% of the time in any given thirty (30) day period. If the
Licensed Service is not available an average of 95% of the time in any
given thirty (30) day period, Lycos will have the right to cancel this
agreement upon written notice to GlobeComm unless GlobeComm takes adequate
corrective measures (a "Cure") within ten (10) calendar days after failing
to achieve an average of 95% availability; provided, however, that
GlobeComm will have the right to only one Cure in any given six (6) month
period.
8. Term. The term of this agreement shall be one (1) year with automatic
successive one year renewals. Either party may cancel this agreement with
written notice 60 days prior to the start of any new term.
9. User Ownership. Upon cancellation of this agreement for any reason, Lycos
will retain at no cost the Lycos-branded domain name and those users
currently using the Lycos-branded domain name for their email address,
provided Lycos continues to provide comparable email services to the users
and supports services provided to such users. Lycos will pay all ongoing
costs and fees associated with the continued provision and use of the
Lycos-branded domain name. GlobeComm will incur no migration, integration
or other costs in connection therewith.
10. Lycos Options: GlobeComm will grant to Lycos the right, excerciseable
through February 7, 1998, to purchase 1,000,000 shares of GlobeComm Class
A Common stock at $4.OO per share.
11. Lycos Board Rights : During the term of this agreement, a Lycos senior
executive (a "representative") will receive all of the rights, except the
right to vote, of a member of
Lycos & GlobeComm Confidential
<PAGE>
GlobeComm's Board of Directors. In the event Lycos exercises it's
investment option described above, a Lycos representative will be elected
to the GlobeComm Board. Such board rights must be relinquished as soon as
Lycos commences preparation to provide e-mail services competitive to
those offered by GlobeComm. The GlobeComm Board members may ask the Lycos
representative to temporarily be absented from the board meeting if it
reasonably concludes that a certain disussion in front of the Lycos
representative could have a negative effect on GlobeComm's business
prospects.
12. GlobeComm will provide a copy of source code for the version of all
software products that are deployed by Lycos, to be maintained via an
Escrow Agreement. GlobeComm will choose the escrow agent, which must be
reasonably acceptable to Lycos. The escrow agreement will provide that the
source code will be released from escrow upon GlobeComm's bankruptcy; if
GlobeComm ceases business operations; or if GlobeComm ceases to support
the Licensed Service. GlobeComm will update the escrowed source code twice
a year.
This term sheet constitutes a binding agreement between the parties hereto
with respect to the contents hereof. Faxed signatures constitute original
signatures for all purposes. The parties agree to proceed in good faith to
confirm the terms of this agreement in a definitive document or documents
within a reasonable amount of time.
ACCEPTED:
Signature /s/ [ILLEGIBLE] Signature /s/ [ILLEGIBLE]
---------------- ----------------
Date 10/8/97 Date 10/8/97
---------------- ----------------
Lycos, Inc. GlobeComm, Inc.
Lycos & GlobeComm Confidential
<PAGE>
Second Amendment in the Agreement between Lycos, Inc. and GlobeComm, Inc.
Lycos and GlobeComm agree to the following amendments to the Term Sheet
Agreement between Lycos and GlobeComm dated October 8, 1997, (the "Agreement").
1. Lycos Options. Lycos' option to purchase 1,000,000 shares of
GlobeComm Class A Common stock $4.00 per share is hereby converted into an
option to purchase 1,000,000 shares of GlobeComm Class A Preferred Stock
at $4.00 per share. The GlobeComm Class A Preferred stock shall have the
same rights of ownership as the GlobeComm Class A Common stock and,
in addition a cash preference in the event of sale or dissolution.
Sale option may be exercised on or before March 9, 1998.
2. Except as expressly modified hereby and by the First Amendment to
the Agreement (executed by Lycos on February 2, 1998 and by GlobeComm on
February 3, 1998), all other terms of the Agreement shall remain in full
force and effect.
ACCEPTED;
LYCOS, INC. GLOBECOMM, INC.
By: /s/ Edward M. Philip By: /s/ Gary Millin
- ------------------------ -------------------
Name Edward M. Philip Name Gary Millin
Date 3/9/98 Date 3/9/98
The President
<PAGE>
March 9, 1998
GlobeComm, Inc.
11 Broadway, Suite 660
Ncw York, NY 10004
Re: Warrant Exercise
Gentlemen:
Reference is hereby made to that certain Term Sheet Agreement by and
between Lycos, Inc. (" Lycos") and GlobeComm, Inc.("GlobeComm"), dated as of
Octobeer 8, 1997, as amended by that certain First Amendment to the agreement
between Lycos, Inc. and GlobeComm, Inc., executed by Lycos and GlobeComm on
February 2, 1998 and February 3, 1998, respectively, and that certain Second
Agreement to the Amendment between Lycos, Inc. and GlobeComm, Inc., executed by
Lycos and GlobeComm on March 9, 1998 (the "Amended Agreement".)
1. For good and valuable considerations, we hereby agree with you as
follows:
(a) The parties agree that the option referred to in the Amended Agreemdnt
represents and option to purchase one million (1,000,000) shares of GlobeComm
Class A Preferred Stock at an exercise price of $4.00 per share (the "GlobeComm
Stock"). Lycos has elected to exercise its option to purchase the GlobeComm
Stock. The GlobeComm Stock shall have the same rights of ownership as the
GlobeComm Class A Common Stock and, in addition, a cash preference in the event
of sale, liquidation or dissolution. The GlobeComm Stock shall represent
approximately 9.85% of the 10,155,062 shares of GlobeComm's Common Stock
outstanding on a fully-diluted basis on the date hereof (after giving effect to
the exercise or conversion of all options, warrants and other convertible
securities outstanding on the date hereof) and shall have the rights, terms and
privileges set forth in GlobeComm's Certificate of Incorporation, as amended,
attached hereto as Exhibit A.
<PAGE>
(b) Except as provided below, GlobeComm agrees to accept payment in full
for the exercise of such option by the delivery at 100,062 shares of
newly-issued Lycos common stock (the "Lycos Shares"), valued at the exchange of
the last quoted sale price for shares of Lycos common stock on the Nasdaq
National Market for each of the ten trading days preceding the date hereof.
2. GlobeComm hereby represents to Lycos as Follows:
(a) GlobeComm is acquiring the Lycos Shares for investment only and not
with a view towards, intention of, or in connection with, any resale or
distribution of such shares or any interest therein.
(b) GlobeComm understands that the Lycos Shares to be issued to it will
not have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law by reason of specific exemptions
under the provisions thereof which depend in part upon the other representations
and warranties made by GlobeComm in this Agreement. GlobeComm understands that
Lycos is relying upon GlobeComm's representation and warranties contained in
this Section 2 for the purpose of determining whether this transaction meets the
requirements for such exemptions. GlobeCommm is an "accredited investor" as
detailed in Rule 501 promulgated under the Securities Act.
(c) GlobeComm has made, either alone or together with its advisors, such
independent investigation of Lycos, its management and related matters as
GlobeComm deems to be, or such advisors have advised to be, necessary or
advisable in connection with an investment in the Lycos shares through the
transactions contemplated by this Agreement; and GlobeComm and advisors have
received all information and data that GlobeComm and such advisors believe to be
necessary in order to reach an informed decision as to the advisability of an
investment in the Lycos Shares pursuant to the transaction contemplated by this
Agreement.
(d) GlobeComm understands that the Lycos Shares to be received by
GlobeComm in the transactions contemplated hereby will be "restricted
securities" under applicable federal securities laws and that the Securities Act
and the rules of the Securities and Exchange Commission promulgated thereunder
provides in substance that GlobeComm may dispose of such shares only pursuant to
an effective registration statement under the Securities Act or an exemption
from registration if available. GlobeComm further understands that, except as
provided in Section 4, Lycos has no obligation or intention to register the sale
of the shares of the Lycos Shares to be received by GlobeComm in the
transactions contemplated hereby, or take any other action so as to permit sales
pursuant to, the Securities Act. Accordingly, except as provided in Section 4,
GlobeComm understands that GlobeComm may dispose of such shares only in
transactions which are of a type except from registration under the Securities
Act, including, without limitation a "private placement", in which event the
transferee will acquire such shares as "restricted securities" and subject to
the same
-2-
<PAGE>
limitations as in the hands of GlobeComm. GlobeComm further understands that
applicable state securities laws may impose additional restrictions upon the
sale of securities. As a consequence, GlobeComm understands that GlobeComm may
have to bear the economic risk of an investment in the Lycos Shares to be
received by GlobeComm pursuant to the transactions contemplated hereby for an
indefinite period of time.
(e) The certificate(s) evidencing the Lycos Shares to be issued pursuant
to the transactions contemplated hereby shall bear the following legend
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or any state securities laws and
may not be sold or transferred in the absence of such registration or an
exemption therefrom under the Securities of 1933, as amended, and
applicable state securities laws."
(f) There is no (f).
(g) The authorized capital stock of GlobeComm consists of 27,000,000
shares, consisting of 16,000,000 shares of Class A Common Stock of which
2,048,750 shares are issued and outstanding, 5,000,000 shares of Class B Common
Stock of which 5,000,000 shares are issued and outstanding, and 6,000,000
shares of Class A Preferred Stock, of which 2,057,500 shares are issued and
outstanding. Schedule 2(g) sets forth a complete and correct list of the
record ownership of the issued and outstanding shares of capital stock. All of
the issued and outstanding shares of capital stock were duly authorized and
validly issued and are fully paid and nonassessable, and were not issued in
violation of any preemptive rights or Federal or state securities laws. Except
as set forth in Schedule 2(g), there are no outstanding options, warrants or
other rights to purchase, or any securities convertible into or exchangable
for, shares of the capital stock of GlobeComm, and there are no agreements,
arrangements or understandings to which GlobeComm is or may be required to issue
additional shares of its capital stock.
(h) Attached hereto as Schedule 2(h) is the balance sheet of GlobeComm as
of September 30, 1997 and the statements of income and statements of cash flows
of GlobeComm for the first nine months of the fiscal year, including the notes
thereto (hereinafter collectively referred to as the "Financial Statements").
The Financial Statements (i) have been prepared from the books and records of
GlobeComm, (ii) have been prepared in accordance with generally accepted
accounting principles consistently applied (except as may be expressly indicated
therein or on the face of the schedules or notes to such Financial
Statements) during the periods covered thereby and (iii) present fairly in all
material respects the financial condition, results of operations and cash flows
of GlobeComm as at the dates, and for the periods, stated therein, except
that the Financial Statements are subject to normal end of quarter adjustments
when audited
-3-
<PAGE>
which will not be individually or in the aggregate material in amount or
effect and do not include footnotes.
(i) Except (i) as set forth or reserved against in the balance sheet of
GlobeComm as of September 30, 1997, included in the Financial Statements (the
"Balance Sheets"), (ii) for obligations incurred since September 30, 1997 in the
ordinary course of business, which are not individually or in the aggregate,
material amount, and (iii) as set forth in Schedule 2(i), GlobeComm does not
have any liablilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise.
(j) There are no suits, actions, claims, proceedings (including, without
limitation, arbitral or administrative proceedings) or investigations pending
or, to the best knowledge of GlobeComm, threatened against GobeComm or its
properties, assets or business or, to the best knowledge of GlobeComm, pending
or, to the best Knowledge of GlobeComm, threatened challenging tyhe validity of
threatened against any of the officers, directors, employees, agents or
consultants of GlobeComm in connection with the business of GlobeComm. There are
no such suits, actions, claims, proceedings or investigations pending, or
to the best knowledge of GlobeComm, threatened challenging the validity or
propriety of the transactions contemplated by this Agreement. There is no
judgment, order, injunction, decree or award (whether issued by a court, and
arbitrator or an administrative agency) to which GlobeComm is a party, or
involving GlobeComm's properties, assets or business, which is threatened or
which requires continuing compliance therewith by GlobeComm.
(k) The Company has disclosed in Schedule 2(k) all material registered
copyrights, copyright registrations and copyright applications, trademark
registrations and applications for registration, patents and patent
applications, trademarks, service marks, trade names, or Internet domain names
(collectively, "Intellectual Property Rights") used by Globecomm in GlobeComm's
business as presently conducted, including all intellectual Property Rights used
in connection with or contained in all versions of GlobeComm's World Wide Web
sites and all licenses, assignments and releases of Intellectual Property Rights
of others in material works embodied in its products. All Intellectual Property
Rights purported to be owned by GlobeComm held by any employee, officer or
consultant are owned by GlobeComm by operaton of law or have been validly
assigned to GlobeComm. The Intellectual Property Rights are sufficient to carry
on the business of GlobeComm as presently conducted. GlobeComm has exclusive
ownership of or license to use all Intellectual Property Rights identified in
Schedule 2(k) or has obtained any licenses, releases of assignments reasonably
necessary to use all third parties' Intellectual Property Rights in works
embodied in its products. The present business activities or products of
GlobeComm do not infringe any Intellectual Property Rights of others. GlobeComm
has not received any notice or other claim from any person asserting that any of
GlobeComm's present activities infringe or may infringe any Intellectual
Property Rights of such period.
GlobeComm has the right to use all trade secrets, customer lists, hardware
designs, programming processes, software and other information required for or
incident
-4-
<PAGE>
to its products or its business as presently conducted or contemplated.
GlobeComm has taken all reasonable measures to protect and preserve the security
and confidentiality of its trade secrets and other confidential information.
GlobeComm is the exclusive owner of all material right, title and interest in
its Intellectual Property Rights as purported to be owned by GlobeComm, and to
GlobeComm's best knowledge, such Intellectual Property Rights are valid and in
full force and effect. No university government agency (whether federal or
state) or other organization which sponsored research and development conducted
by GlobeComm or has any claim of right to or ownership of or other encumbrance
upon the Intellectual Property Rights of GlobeComm. GlobeComm is not aware of
any infringement by others of its copyright or other Intellectual Proprietary
Rights in any of its products, technology or services, or any violation of the
confidentiality of any of its propieratary information. To GlobeComm's
knowledge, GlobeComm is not making unlawful use of any confidential information
or trade secrets of any past or present employees of GlobeComm. For the purposes
of this Section 3.11. Intellectual Property Rights also includes any and all
intellectual property rights, licenses, databases, computer programs and other
computer software user interfaces, know-how, trade secrets, customer lists,
proprietary technology, processes and formulae, source code, object code,
algorithms, architecture, structure, display screens, layouts, development
tools, instructions, templates, marketing materials created by GlobeComm,
inventions, trade dress, logos and designs.
(l) GlobeComm is not in violation in any material respect of any
applicable safety, health, environmental or other law, statute, ordinance, code,
rule, regulation, judgment, order, injunction, writ or decree of any Federal,
state, local or foreign court or governmental or regulatory body, agency or
authority having, asserting or claiming jurisdiction over it or over any part of
its business, operations, properties or assets.
(m) No representation or warranty by GlobeComm contained in this
Agreement and no statement contained in any certificate or other document or
instrument delivered or to be delivered pursuant to this Agreement by GlobeComm
or its representatives contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
the statements contained therein not misleading.
(n) The execution and delivery of this Letter Agreement does not,
and the performance of GlobeComm's obligations under this Letter Agreement will
not, (i) conflict with or violate the Certificate of Incorporation or By-Laws of
GlobeComm; or (ii) conflict with or violate any laws applicable to GlobeComm or
by which GlobeComm or its assets are bound or affected; or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under any contract, agreement or other
instrument to which GlobeComm is a party or by which GlobeComm or its assets are
bound or effected, except for any breach or default that would not have,
individually or in the aggregate, a material adverse effect upon GlobeComm.
-5-
<PAGE>
(o) Except for the representations and warranties contained herein,
GlobeComm makes no express or implied representations or warranties.
3. Lycos hereby represents to GlobeComm as follows:
(a) The Lycos Shares are duly authorized, validly issued, fully paid
and non assessable.
(b) The execution and delivery of the Letter Agreement does not, and
the performance of Lycos' obligations under this Letter Agreement will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws of Lycos;
or (ii) conflict with or violate any laws applicable to Lycos or by which Lycos
or its assets are bound or affected; or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under any contract, agreement or other instrument to
which Lycos is a part or by which Lycos or its assets are bound or effected,
except for any breach or default that would not have individuality or in the
aggregated, a material adverse effect upon Lycos.
(c) Lycos is acquiring the GlobeComm Stock for investment only and
not with a view towards, intention of, or in connection with any resale or
distribution of such shares or any interest therein.
(d) Lycos understand that the GlobeComm Stock to be issued to it
will not have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law by reason of specific exemptions
under the provisions thereof which depend in part upon the other representations
and warranties made by Lycos in this Agreement. Lycos understands that GlobeComm
is relying upon Lycos' representation and warranties contained in this Section 3
for the purpose of determining whether this transaction meets the requirements
for such exemptions. Lycos is an "accredited investor" as defined in Rule 501
promulgated under the Securities Act.
(e) Lycos has made, either alone or together with its advisors, such
independent investigation of GlobeComm, its management and related matters as
Lycos deems to be, or such advisors have advised to be, necessary or advisable
in connection with an investment in the GlobeComm Stock through the transactions
contemplated by this Agreement; and Lycos and advisors have received all
information and date that Lycos and such advisors believe to be necessary in
order to reach an informed decision as to the advisability of an investment in
the GlobeComm Stock pursuant to the transactions contemplated by this Agreement.
(f) Lycos understands that the Lycos Shares to be received by GlobeComm in
the transactions contemplated hereby will be "restricted securities" under
applicable federal securities laws and that the Securities Act and the rules of
the Securities and Exchange Commission promulgated thereunder provide in
substance that Lycos may dispose of such shares only pursuant to an effective
registration statement
-6-
<PAGE>
under the Securities Act or an exemption from registration if available. Lycos
further understands that, except as provided in Section 11, GlobeComm has no
obligation or intention to register the sale of any of the shares of the
GlobeComm Stock to be received by Lycos in the transactions contemplated hereby,
or take any other action so as to permit sales pursuant to the Securities
Act. Accordingly, except as provided in Section 11, Lycos understands that Lycos
may dispose of such shares only in transactions which are of a type exempt from
registration under the Securities Act, including, without limitation, a "private
placement," in which event the transferee will acquire such shares as
"restricted securities" and subject to the same limitations as in the hand of
Lycos. Lycos further understands that the applicable state securities laws may
impose additional constraints upon the sale of securities. As a consequence,
Lycos understands that Lycos may have to bear the economic risk of an investment
in the GlobeComm Stock to be received by Lycos pursuant to the transactions
contemplated hereby for an indefinite period of time.
(g) The certificate(s) evidencing the GlobeComm Stock to be issued
pursuant to the transactions contemplated hereby shall bear the following
legend.
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state
securities laws and may not be sold or transferred in the absence of
such registration or an exemption therefrom under the Securities Act
of 1933, as amended, and applicable state securities laws."
(h) Except for the representations and warranties contained herein,
Lycos makes no express or implied representations or warranties.
4. (a) Lycos further agrees that it shall file promptly but in no event in
more than 10 business days after the date hereof (the "Option Exercise Date")
with the U.S. Securities and Exchange Commission (the "SEC") a registration
statement on Form S-3 (or any successor form to Form S-3) for a public resale
offering of the Lycos Shares and shall use commercially reasonable efforts to
cause such registration statement, and any necessary amendments thereto, to
become and remain effective for the period ending on the first to occur of (x)
the date of the resale of all Lycos Shares registered thereunder is complete or
(y) the first anniversary of the effective date of such registration statement.
If for any reason Lycos is not eligible to file such registration on Form S-3
(or any successor form to Form S-3), Lycos shall effect such registration using
such form as Lycos is then eligible to use. Lycos shall keep GlobeComm advised
of the initiation and completion of any registration pursuant to this paragraph.
If for any reason Lycos has not successfully registered the Lycos Shares for
resale within 60 days after the Option Exercise Date, GlobeComm shall have the
right, exercisable by written notice to Lycos, to put the Lycos Shares issued
hereunder back to Lycos in exchange for $4,000,000 in cash, which Lycos shall
pay by wire transfer within seven (7) days after the written notice of exercise
is received by Lycos. Other than the obligations described in the previous
sentence (which shall terminate sooner), Lycos' obligation pursuant to this
Paragraph 4 shall terminate upon the first anniversary of the Option Exercise
Date. Lycos and
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<PAGE>
GlobeComm agree that the rights set forth in this Paragraph 4 are not assignable
or transferable. Lycos agrees to execute and deliver such further instruments or
documents and to take such further action reasonably requested by GlobeComm or
its underwriter/broker or dealer in connection with the resale offering of the
Lycos Shares.
(b) Lycos agrees to indemnify and hold harmless, to the extent permitted
by law, GlobeComm and its underwriter/broker or dealer against all damages
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to Lycos by such GlobeComm expressly for
use therein or by GlobeComm's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after Lycos has
furnished such holder with a sufficient number of copies of the same. If the
foregoing indemnity is not available for any reason, then the Parties agree to
contribute to the damages of each other in proportion to their relative fault.
(c) In connection with any registration statement in which it is
participating, GlobeComm agrees to furnish to Lycos in writing such information
and affidavits as Lycos reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law, will
indemnify and hold harmless Lycos, its directors and officers and each Person
who controls Lycos (within the meaning of the Securities Act) against all
damages resulting from any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only in the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by GlobeComm specifically for use in such registration statement.
(d) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any consent to the entry of any judgment or any
settlement made by the indemnified party without its consent (but such consent
will not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
-8-
<PAGE>
5. GlobeComm agrees to provide Lycos with all necessary and reasonable
assistance in the preparation and filing of the registration statement required
to be prepared and filed by Lycos and all other obligations of Lycos under this
Letter Agreement. Lycos' obligations under this Letter Agreement are conditioned
in all respects on the provision of all necessary and reasonable assistance to
Lycos by GlobeComm. Lycos agrees to pay the expenses incurred as if in complying
with its obligations under Paragraph 4, including all registration and filing
fees, exchange listing fees, fees and expenses of counsel for Lycos, and fees
and expenses of accountants for Lycos.
6. Lycos shall have the right, upon the advice of the Board of Directors
of Lycos (the "Board"), upon giving written notice to GlobeComm of the exercise
of such right, to require GlobeComm not to sell any shares pursuant to the
registration statement filed pursuant to Paragraph 4 for a reasonable period (as
determined in good faith by the Board) from the date on which such notice is
given (a "blackout period"). If (i)(A) Lycos is engaged in or proposes to engage
within ten days in discussions or negotiations with respect to, or has proposed
or taken a substantial step to commence, or there otherwise is pending, any
merger, acquisition, other form of business combination, divestiture, tender
offer, financing or other transaction, or there is an event or state of facts
relating to Lycos, in each case which is material to Lycos (as reasonably
determined by the Board) (any such negotiation, step, event or state of facts
being herein called "Material Activity"), (B) in the reasonable judgments of the
Board, after consultation with and acting upon the written advice of outside
counsel, disclosure of such Material Activity would be necessary or advisable
under applicable securities laws and (C) such disclosure would, in the
reasonable judgment of the Board, the adverse to the interest of Lycos, or (ii)
the Board, in its reasonable judgment, deems it necessary to file a
post-effective amendment to such registration statement or to prepare a
supplement to, or otherwise amend, the form of prospectus contained therein.
During any such black-out period, GlobeComm agrees not to sell any Lycos Shares
under such registration statement for such period of time as the Board, acting
on the written advice of outside counsel, may in good faith deem advisable;
provided, however, that no single black-out period will be longer than thirty
(30) calendar days and, in the aggregate all black-out periods in any twelve
(12) month period shall not include more than ninety (90) calendar days.
7. GlobeComm and the Majority Stockholders listed on the signature pages
hereto (the "Majority Stockholders") hereby agree to alert, within 15 days of
the date on which the Lycos Shares are registered pursuant to Paragraph 4 above,
and continue to elect until the earlier of (i) GlobeComm's completion of an
initial public offering, (ii) Lycos' ownership reducing to less than 50% of the
GlobeComm Stock, or (iii) Lycos' offering email services at the lycos.com site
competitive to those offered by GlobeComm, a representative of Lycos (as
designated by Lycos in writing) to the GlobeComm Board of Directors by written
consent or otherwise. If such action requires any amendment to the GlobeComm
By-Laws, the Majority Stockholders agree to take any actions required to effect
the intent of this paragraph, including voting to so amend such By-laws. At each
annual meeting of the shareholders of GlobeComm, and at each special meeting of
the
-9-
<PAGE>
shareholders of GlobeComm called for the purpose of electing directors of
GlobeComm, and at any time at which shareholders of GlobeComm shall have the
rights to, or shall, vote for directors of GlobeComm, then, and in each event,
the Majority Shareholders shall vote all shares of GlobeComm capital stock held
by them for the election of the Lycos designee to the GlobeComm Board of
Directors.
8. Until such time as GlobeComm has completed an initial public offering,
if any of the Majority Stockholders, either individually or collectively
(referred to herein as the "Take-Along Group"), determine to sell or exchange
(in a business combination or otherwise) 100% of the then outstanding shares of
GlobeComm, in one or a series of bona fide arms-length transactions to a third
party, for a per share twice greater than $4.00 per share of Class A Preferred
Stock (on an as-converted basis and as adjusted for any stock splits, stock
dividends or similar transactions), then upon five (5) days written notice by
the Take Along Group to Lycos, which notice shall include reasonable details of
the proposed sale or exchange including the proposed time and place of closing
and the consideration to be received by the Take Along Group (such notice being
referred to as the "Sale Request"), then Lycos shall be obligated to, and shall,
sell, transfer and deliver, or cause to be sold, transferred and delivered, to
such third party on the same terms as the Take Along Group, all (but not less
than all) the Class A Preferred Stock then held by Lycos. Lycos shall (i)
deliver certificates for such GlobeComm shares at the closing of the proposed
transfer, free and clear of all claims, liens and encumbrances and (ii) if
stockholder approval of the transaction is required, vote its GlobeComm shares
in favor thereof.
9. Until such time as GlobeComm has completed an initial public offering,
no Majority Stockholder shall transfer more than 1% of the outstanding shares of
GlobeComm to a third party without complying with the terms and conditions set
forth below:
(a) If any Majority Stockholder declares to transfer shares (the
"Transferor"), such Majority Stockholder shall give Lycos not less than fifteen
(15) days prior written notice of such intended transfer. Such notice (the
"Participation Notice") shall set forth the terms and conditions of such
proposed transfer, including the name of the prospective transferee, the number
of GlobeComm shares proposed to be transferred (the "Participation Securities")
by the Transferor, the purchase price per share proposed to be paid therefor and
the payment terms and type of transfer to be effectuated. Within ten (10) days
following the delivery of the Participation Notice by the Transferor to Lycos,
Lycos may indicate its desire to participate in such proposed transfer, by
written notice to the Transferor, and shall have the opportunity, and right to
sell to the purchasers in such proposed transfer (upon the same terms and
conditions as the Transferor) up to that number of common stock equivalents
owned by Lycos as shall equal the product of (i) a fraction, the numerator of
which is the number of common stock equivalents owned by Lycos as of the date of
such proposed transfer and the denominator of which is the number of common
stock equivalents actually owned as of the date of such Participation Notice by
the Transferor and Lycos multiplied by (ii) the number of Participation
-10-
<PAGE>
Securities. The amount of Participation Securities to be sold by the Transferor
shall be reduced to the extent necessary to provide for such sale of shares by
Lycos.
(b) At the closing of any proposed transfer is respect of which a
Participation Notice has been delivered, the Transferor, together with Lycos,
shall deliver to the proposed transferee certificates evidencing the shares to
be sold thereto duly endorsed with stock powers and shall receive in exchange
therefor the consideration to be paid or delivered by the proposed transferee in
respect of such shares as described in the Participation Notice.
(c) The provisions of this Paragraph shall not apply to any transfer
pursuant to Paragraph 8.
10. (a) GlobeComm will maintain true books and records of account in which
full and correct entries will be made of all its business transactions pursuant
to a system of accounting established and administered in accordance with
generally accepted accounting principles consistently applied and will set aside
on its books all such proper accruals and reserves as shall be required under
generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of GlobeComm,
and in any event within one hundred and twenty (120) days thereafter, GlobeComm
will furnish to Lycos a balance share of GlobeComm, as at the end of such fiscal
year, and a statement of income and a statement of cash flows of GlobeComm, for
such year, all prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail. Such
financial statements shall be accompanied by a report and opinion thereon by
independent public accountants of national standing selected by GlobeComm's
Board of Directors.
(c) GlobeComm will furnish Lycos, as soon as practicable after the end of
the first, second and third quarterly accounting periods in each fiscal year of
GlobeComm, and in any event within sixty (60) days thereafter, a balance sheet
of GlobeComm as of the end of each such quarterly period, and a statement of
income and a statement of cash flows of GlobeComm for such period, and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
(d) Deleted
(e) Lycos shall have the right to visit and inspect any of the properties
of GlobeComm or any of its subsidiaries, and in discuss the affairs, finances
and accounts of GlobeComm or any of its subsidiaries with its officers, and to
review such information as is reasonably requested all at such reasonable times
and as often as
-11-
<PAGE>
may be reasonably requested provided that GlobeComm shall not be required to
disclose information that it reasonably deems proprietary.
(f) All information furnished to Lycos, in accordance with this Section 10
shall be deemed confidential (the "Confidential Information"). Lycos
acknowledges that the Confidential Information is a valuable asset of GlobeComm
and shall not disclose any Confidential Information to any person or use any
Confidential Information for its benefit or the benefit of any other person,
except with the prior written approval of GlobeComm or as required by law.
11. (a) GlobeComm agrees that if at any time after the date hereof it
and/or any of its subsidiaries and/or one or more of its officers, directors or
holders of 5% of its outstanding Common Stock intend to offer equity securities
of GlobeComm to the public for cash pursuant to any type of registration under
the Securities Act, GlobeComm will notify Lycos in writing at least forty-five
(45) days prior to the initial filing of a registration statement relating to
such offering with the Securities and Exchange Commission ("Registration
Statement"). Thereafter, GlobeComm will, at its sole cost and expense, use its
best efforts to include in such registration statement, in accordance with the
Securities Act, such shares of GlobeComm Common Stock as Lycos shall request
within thirty (30) days of receipt of notification from GlobeComm of its
intention to file such registration statement; provided, that the inclusion
thereof will not preclude GlobeComm's use of the registration form intended to
be utilized by GlobeComm; and further provided that the foregoing requirements
shall not apply in the event that GlobeComm proposes to file a registration
statement in connection with (i) any issuance of securities pursuant to any
stock option, stock purchase or other employee benefit plan; or (ii) any
issuance of securities in connection with any business combination, whether by
way of merger, consolidation, purchase of stock or assets or otherwise. If the
proposed registration statement is initiated by GlobeComm for an underwritten
public offering of equity securities for such account and, in the opinion of the
managing underwriter, the inclusion of more than a specified amount of such
equity securities proposed to be registered by Lycos and such other holders to
the extent, if any, that the number of equity securities proposed to be offered
by GlobeComm is less than such specified number. If the proposed registration
statement is initiated by other holders of equity securities of GlobeComm
pursuant to registration rights provided for in agreement with GlobeComm and, in
the opinion of the managing underwriter of any underwritten public offering of
such equity securities, the inclusion of more than a specified number of units
of equity securities in such registration statement might adversely affect such
offering, then the initiating holders, Lycos and other holders having
registration rights may include equity securities in such registration statement
pro rata according to the respective numbers of all equity securities proposed
to be
-12-
<PAGE>
registered by such initiating holders, Lycos and such other holders. Any opinion
of a managing underwriter referred to in this Section 11 shall be evidenced in a
writing delivered to Lycos.
(b) GlobeComm agrees to use its best efforts to the end that each
registration of the shares required to be made by GlobeComm pursuant to this
Section 11 shall become effective as promptly as practicable and shall remain
effective until Lycos has disposed of the equity securities registered
thereunder. Each registration and blue sky qualification hereunder shall be at
the sole cost and expense of GlobeComm provided, however, that GlobeComm shall
not be obligated to bear the expense of any underwriting discounts or
commissions with respect to the shares covered by the Registration Statement.
(c) In connection with each registration hereunder, GlobeComm agrees (i)
to supply Lycos with such number of copies of preliminary and final prospectuses
as such holders shall reasonably request and (ii) to use its best efforts to
qualify the securities being registered under the securities or blue sky laws of
such states as Lycos may reasonably request. Lycos agrees to furnish to
GlobeComm such information in connection with such registration statement as
GlobeComm may reasonably request.
(d) GlobeComm shall indemnify and hold harmless Lycos, and each
underwriter, within the meaning of the Securities Act, who may purchase from or
sell for any such holder any Warrants and/or Warrant Shares from and against any
and all loses, claims, damages and liabilities caused by any licensed statement
or alleged or untrue statement of material fact contained in the Registration
Statement or any post-effective amendment thereto or any Registration Statement
under the Act or any prospectus included therein required to be filed or
furnished by reason of this Section 11 or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements thereof not misleading, except insofar as such
loses, claims, damages or liabilities are caused by any such untrue statement or
alleged untrue statement or omission or alleged omission based upon information
furnished or required to be furnished in writing to GlobeComm by such holder or
each person, if any, who controls any such holder and underwriter within the
meaning of such Act or by Lycos' failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after GlobeComm
furnished such holder with a sufficient number of copies of the same; provided,
however, that GlobeComm shall not be obligated to so indemnify any such holder
or underwriter or controlling person unless such holder or underwriter shall at
the same time indemnify GlobeComm, its directors, each officer signing the
registration statement and each persons, if any, who controls GlobeComm within
the meaning of such Act from and against any and all loses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of
material fact contained in any Registration Statement or any prospectus required
to be filed or furnished by reason of this Section 11 or caused by any omission
-13-
<PAGE>
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, insofar as such loses, claims,
damages or liabilities are caused by any untrue statement or alleged untrue
statement or omission based upon information furnished in writing to GlobeComm
by any such holder or underwriter expressly for use therein by Lycos' failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after GlobeComm has furnished such holder with a sufficient
number of copies of the same.
Agreed to and accepted:
LYCOS, INC. GLOBECOMM, INC.
By: \s\ Edward M. Philip By: \s\ Gary Millin
------------------------------- -------------------------------------
Name: Edward M. Philip Name: Gary Millin
Title: COO/CFO Title President
Date: 3/9/98 Date: 3/9/98
Majority Stockholder
By: \s\Gerald Gorman Mar 9/1998
---------------------
Name: Gerald Gorman
-14-
<PAGE>
Schedule 2G ...........GlobeComm Capital Structure .......................3/6/98
<PAGE>
<TABLE>
<CAPTION>
Class B Class A Exercisable
Name Preferred Preferred Common Options Total % of Total
- ---- --------- --------- ------ ------- ----- ----------
<S> <C> <C> <C> <C> <C>
Gerald Gorman 5,000,000 546,250 142,736 5,688,986 56.0%
Gary Millin 40,000 610,000 157,601 807,601 8.0%
David Milligan 50,000 525,000 44,272 619,272 6.1%
Eric Woodward 62,500 312,500 106,789 481,789 4.7%
Lon Otremba 52,189 52,189 0.5%
Walden 1,250 1,250 0.0%
Other Employee Stock 10,000 5,000 464,253 479,253 4.7%
Other Stock 165,000 50,000 -- 215,000 2.1%
Jack Kuehler 39,861 39,861 0.4%
Bill Donaldson 39,861 39,861 0.4%
First Closing-Outside Investors(1) 1,225,000 1,225,000 12.1%
Second Closing-Outside Investors(2) 505,000 505,000 5.0%
- ---------------------------------------------------------------------------------------------------------------------------
Total 5,000,000 2,057,500 2,048,750 1,048,812 10,155,062 100%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
First Closing - Outside Investors(1)
Jeff Barbakow 87,500
Hoyt Davidson 50,000
David Dennis 87,500
lhsan Essaid 10,000
Trevor Fetter 50,000
Dan Flatley 150,000
Gerald Gorman 200,000
Tony James 50,000
Stephen Ketchum 112,500
Ryan kim 2,500
Joe Low 42,500
Marsha Plotnitsky 125,000
Andrew Rush 20,000
Arvind Sanger 25,000
Tim Weller 25,000
Vincent Degiaimo 37,500
William Donaldson 50,000
Jack Kuehler 50,000
Tripp Smith 25,000
Rens Lipsius 12,500
Arkady Plotnitsky 12,500
- ------------------ ---------
Total 1,225,000
Second Closing - Outside Investors(2)
John Chalsty 125,000
Joe Roby 100,000
Craig Sim 50,000
Pat Durtin 30,000
lhsan Essaid 5,000
Mark Piegza 37,500
Brian McGloughlin 75,000
Chris Kurcheon 12,500
Imag Partners 25,000
Brian Zimmet 10,000
Frank Connley 5,000
Mike Stevens 5,000
Norman Greenberg 10,000
Brian Ehrlich 10,000
John Sommerer 5,000
- ------------- -------
Total 505,000
Notes:
1. Unvested Options - 1,141,878 options have not been vested. The vesting
period for employee options is four years with limited exceptions.
2. Contingent and Unvested Options - 287,360 options that are contingent on
meeting milestones and are unvested. Key managers have the ability to earn
these options upon meeting milestones and these vest over a 3-4 year
period at an exercise price between $4 and $8.
3. Anti-dilution /Ratchets - The investment terms for the Outside Investors
provide for the grant of additional shares in the event GlobeComm should
fail to meet milestone return requirements or should subsequently issue
shares at less than $2 per share.
<PAGE>
Schedule 2H ..............GlobeComm Balance Sheet .......................9/30/98
.........................GlobeComm Income Statement ....................9/30/98
<PAGE>
03/06/98 Globe Comm, Inc.
Balance Sheet
As of September 30, 1997
Sep 30, '97
------------
ASSETS
Current Assets
Checking/Savings
105-0-0 . Current Assets 1,233,645.82
------------
Total Checking/Savings 1,233,645.82
Accounts Receivable
113-0-0 . Misc. A/R 300.00
115-0-0 . S/H Call Receivable -499.90
------------
Total Accounts Receivable -199.90
------------
Total Current Assets 1,233,445.92
Fixed Assets
125-0-0 . Property & Equipment
297,155.20
------------
Total Fixed Assets 297,155.20
Other Assets
118-0-0 . Minority Investments 10,000.00
119-0-0 . Domains Assets 565,565.51
140-0-0 . Accum. Depr. & Amort -39,125.71
------------
Total Other Assets 536,439.80
------------
TOTAL ASSETS 2,067,040.92
============
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Other Current Liabilities
201-0-0 . Accounts Payable 33,553.77
------------
Total Other Current Liabilities 33,553.77
------------
Total Current Liabilities 33,553.77
Long Term Liabilities
251-0-0 . Long-Term Liabilities 110,232.00
------------
Total Long Term Liabilities 110,232.00
------------
Total Liabilities 143,785.77
Equity
300-0-0 . Retained Earnings -438,119.88
Net Income -1,353,624.97
301 -0 . Capital Stock 1,365,000.00
302-0-0 . Paid-in-Capital 2,350,000.00
------------
Total Equity 1,923,255.15
------------
TOTAL LIABILITIES & EQUITY 2,067,040.92
============
Page 1
<PAGE>
Globe Comm, Inc.
03/06/98 Profit and Loss
January through September 1997
Jan - Sep `97
-------------
Ordinary Income/Expense
Income
401-0-1 . NAME Subscript-Revenues 233,654.64
401-0-2 . Name-Advertising 316.29
401-0-3 . Name Custom Domains 14,841.93
403-0-2 . Best Dom. Revenues 23,881.10
404-0-3 . Vanity Mail Revenues -363.73
------------
Total Income 272,330.23
Expense
500-0-0 . General & Administrative 120,981.63
508-0-0 . Employee Comp/Benefits 918,132.45
520-0-0 . Sales/Marketing 381,205.18
555-0-0 . Technology/Leases/Repairs 128,261.58
565-0-0 . Travel& Entertainment 49,862.99
575-0-0 . Depreciation & Amortization 17,322.36
590-0-0 . Domains 17,276.79
------------
Total Expense 1,633,042.98
------------
Net Ordinary Income -1,360,712.75
Other Income/Expense
Other Income
420-0-0 . Interest Income 3,711.83
421-0-0 . Other Income 2,982.20
422-0-0 . Interest from Loans 393.75
------------
Total Other Income 7,087.78
------------
Net Other Income 7,087.78
------------
Net Income -1,353,624.97
============
Page 1
<PAGE>
Schedule 21 .................GlobeComm Liabilities .......................3/6/98
<PAGE>
GLOBECOMM INC.
ASSETS UNDER LEASE:
Operating Leases:
<TABLE>
<CAPTION>
Vendor Start Date Rate Term Yearly Payments
------ ---------- ---- ---- ---------------
<S> <C> <C> <C> <C>
1 GNP 7/1/96 6.50% 36 Mos. $ 7,224.00
2 Anixter 9/1/96 7.30% 35 Mos. $ 1,332.00
3 Interactive Futures 11/1/96 5.70% 48 Mos. $ 24,720.00
4 DNA 10/1/96 6.50% 48 Mos. $ 14,820.00
5 Consan/DV 10/1/96 7.70% 48 Mos. $ 2,904.00
6 Sun/Toshiba 3/1/97 7.90% 48 Mos. $ 18,960.00
7 Oracle 11/1/96 11.00% 36 Mos. $ 14,616.00
8 Oracle 3/1/97 10.00% 36 Mos. $ 20,160.00
9 Various Vendors 3/1/97 8.50% 48 Mos. $ 13,536.00
10 Oracle 6/1/97 10.50% 36 Mos. $ 20,340.00
11 Various Vendors 6/1/97 5.60% 48 Mos. $ 42,060.00
12 Oracle 9/1/97 10.30% 36 Mos. $ 20,280.00
13 Various Vendors 9/1/97 8.80% 48 Mos. $ 32,940.00
14 Various Vendors 10/1/97 7.50% 48 Mos. $ 25,140.00
15 Various Vendors 12/1/97 8.20% 48 Mos. $ 27,960.00
16 Computer Connection 12/1/97 8.40% 48 Mos. $ 6,636.00
17 Interactive Futures 12/1/97 8.50% 48 Mos. $ 4,644.00
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
18 US Tech 12/1/97 9.10% 48 Mos. $ 5,160.00
19 Computer Connection 2/1/98 7.80% 48 Mos. $ 3,420.00
20 CCNY/Interactive 3/1/98 6.60% 48 Mos. $ 17,220.00
21 Computer Connection 1/1/98 -- 48 Mos. $ 19,711.92
22 Interactive Futures 1/1/98 -- 48 Mos. $ 6,649.68
Total $ 350,433.60
================
</TABLE>
(Items 1 through 6 and 8 to 20 are leased under Leasetec Systems Credit. Item 7
is leased under Bankvest Capital Corp. Items 21 and 22 are leased under Colonial
Pacific Leasing.)
<PAGE>
Schedule 21 ...............GlobeComm Intellectual Property ...............3/6/98
...............Trademark
...............Domain Names
<PAGE>
[LETTERHEAD OF ARI GOLDBERGER]
March 6, 1998
Gary Millin, President
GlobeComm, Inc.
11 Broadway, Suite 660
New York, NY 10004
Re: iName Trademark, Serial No. 75/082557
Dear Gary:
Attached is the latest correspondence received from the U.S. Patent
and Trademark Office regarding the iName trademark application. I contacted the
Patent and Trademark Office today and received confirmation that they have
received GlobeComm's Statement of Use and that the trademark registration will
be issued shortly.
Sincerely,
/s/ Ari Goldberger
Ari Goldberger
<PAGE>
UNITED STATES DEPARTMENT OF COMMERCE
ASSISTANT COMMISSIONER FOR TRADEMARKS
2900 CRYSTAL DRIVE
ARLINGTON, VIRGINIA 22202-3513
Nov 22, 1997
NOTICE OF APPROVAL OF EXTENSION REQUEST
ATTORNEY
Robin J. Adelson TM1O4 REFERENCE NUMBER:
Cowan, Liebowitz & Latman, P.C.
1133 Avenue of the Americas
New York, NY 10036-6799
- --------------------------------------------------------------------------------
SERIAL NUMBER: 75/082557
MARK: INAME
OWNER: Globecomm, Inc.
EXTENSION REQUEST NUMBER: 1 NOTICE OF ALLOWANCE DATE: Apr 22, 1997
- --------------------------------------------------------------------------------
THE ABOVE NUMBERED EXTENSION REQUEST FOR FILING A STATEMENT OF USE HAS
BEEN APPROVED BY THIS OFFICE.
THE APPLICANT HAS 12 MONTHS FROM THE MAILING DATE OF THE NOTICE OF
ALLOWANCE TO FILE A STATEMENT OF USE. THE STATEMENT OF USE SHOULD BE CLEARLY
MARKED TO THE ATTENTION OF "ITU" AND MAILED TO THE ABOVE ADDRESS.
================================================================================
<PAGE>
Exhibit 10.32
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAW. THE WARRANTS HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE, DISPOSED OF IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE WARRANTS UNDER THE
ACT OR AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION AS EVIDENCED BY AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED AS TO SUCH OFFER, SALE, TRANSFER, PLEDGE, HYPOTHECATION OR DISPOSITION.
THE STOCK TRANSFER AGENT, IF ANY, OF THE COMPANY WILL BE ORDERED TO EFFECTUATE
TRANSFERS OF THE WARRANTS ONLY IN ACCORDANCE WITH THE ABOVE RESTRICTIONS.
MAIL.COM, INC.
WARRANT TO PURCHASE CAPITAL STOCK
Initial Warrantholder: CNET, Inc.
150 Chestnut Street
San Francisco, CA 94111
No. of Shares of Common Stock
to be issued upon exercise in full: 990,000
FOR VALUE RECEIVED, Mail.com, Inc., a Delaware company (the "Company"),
promises to issue to the Initial Warrantholder, its nominees, successors or
assigns (the "Warrantholder") NINE HUNDRED NINETY THOUSAND (990,000)
nonassessable shares (the "Shares") of the Common Stock at any time on or prior
to an Expiration Date (as defined herein) upon payment by the Warrantholder to
the Company of the purchase price per share in the amount of five dollars
($5.00) (the "Specified Price") or, if the initial public offering price is less
than the Specified Price, at a price per share equal to the initial public
offering price per share of the Common Stock pursuant to the registration of the
Common Stock (such purchase price, the "Purchase Price"), and to deliver to the
Warrantholder a certificate or certificates representing the Shares purchased.
The Warrantholder shall have the right to exercise this warrant (the "Warrant")
in whole or in part at any time or times on or prior to the Expiration Date.
SECTION 1. (a) DEFINITIONS. The following terms as used in this
certificate shall have the following meanings:
<PAGE>
"Common Stock" means the Company's Class A Common Stock, par value $.01
per share.
"Expiration Date" means the earlier of (i) December 31, 1999 and (ii)
the Preregistration Expiration Date.
"Escrow Agreement" means the Escrow Agreement by and among the parties
hereto and the Escrow Agent (as defined therein) dated as of the date hereof.
"Offering Notice" means the notice provided by the Company to the
Warrantholder of the Company's intention to file an S-1 registration statement
to register its Common Stock in an initial public offering. The Offering Notice
shall be effective if it includes the name of the lead underwriter.
"Preregistration Expiration Date" means (i) three (3) business days
after an Offering Notice is given if such Offering Notice is given by April 26,
1999, and (ii) fourteen (14) calendar days after an Offering Notice is given if
such Offering Notice is given after April 26, 1999; provided, however, that the
Preregistration Expiration Date shall not be deemed to have occurred with
respect to any Offering Notice if (i) the S-1 registration statement is not
filed within thirty (30) days after such Offering Notice is given or (ii) if the
Company files a Form S-1 registration statement and an initial public offering
is not consummated within four (4) months after filing such Form S-1
registration statement.
(b) OTHER DEFINITIONAL PROVISIONS.
(i) Except as otherwise specified herein, all references
herein (A) to any person other than the Company, shall be deemed to include such
person's successors and assigns, (B) to the Company shall be deemed to include
the Company's successors and (C) to any applicable law defined or referred to
herein, shall be to such applicable law as the same may have been or may be
amended or supplemented from time to time.
(ii) When used in this certificate, the words "herein",
"hereof" and "hereunder", and words of similar import, shall refer to this
certificate as a whole and not to any provision of this certificate, and the
words "Section" and "Exhibit" shall refer to Sections of, and Exhibits to, this
certificate unless otherwise specified. Whenever the context so requires the
neuter gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
SECTION 2. COVENANTS OF THE COMPANY. The Company will at all times
reserve and keep available out of its authorized shares of Common Stock or its
treasury shares, solely for the purpose of issuing upon the exercise of this
Warrant as herein provided, such number of shares of Common Stock as shall then
be issuable upon the exercise of this Warrant. The Company covenants that all
shares of Common Stock which shall be so issued shall be duly and validly issued
and fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
2
<PAGE>
SECTION 3. EXERCISE OF WARRANT; LEGENDS; WARRANTHOLDER REPRESENTATIONS.
(a) In order to exercise this Warrant, the Warrantholder shall deliver to the
Company (i) a written notice of such holder's election to exercise this Warrant,
in the form of the Subscription Notice attached as Exhibit A hereto, which
notice shall specify the number of shares of Common Stock to be purchased and
(ii) payment in cash or by a certified or cashier's check (A) to the Company or
(B) if such exercise is in connection with an Offering Notice, to the Escrow
Agent pursuant to the Escrow Agreement. The exercise of the Warrant shall be
deemed to be a representation by the Warrantholder that the Shares are being
purchased for its own account and not with a view to the distribution thereof.
After receipt of written notice and upon the payment of the Purchase Price to
the Company by the Warrantholder or by the Escrow Agent pursuant to the Escrow
Agreement upon the release thereof in accordance with the terms of the Escrow
Agreement, the Company shall as promptly as practicable execute or cause to be
executed and delivered to such holder a certificate or certificates representing
the aggregate number of Shares purchased. If this Warrant shall have been
exercised only in part, the Company shall also deliver a new warrant of like
tenor evidencing the rights of such holder to purchase the remaining Shares
called for by this Warrant.
(b) The Warrantholder understands that the certificates evidencing
the Shares shall bear the following legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares have been
acquired not with a view to distribution and may not be offered, sold,
transferred, pledged, or hypothecated in the absence of an effective
registration statement for the shares under the Act and under any
applicable state securities laws, or an exemption therefrom evidenced
by an opinion of counsel reasonably satisfactory to the Company that
such registration is not required as to such sale or offer, except that
no such opinion shall be required in connection with a sale pursuant to
Rule 144 or Rule 144A under the Securities Act of 1933. The stock
transfer agent has been ordered to effectuate transfers of this
certificate only in accordance with the above instruction."
(c) The Warrantholder has made, either alone or together with its
advisors, such independent investigation of the Company, its management and
related matters as it deems to be, or such advisors have advised to be,
necessary or advisable in connection with an investment in the Company through
the transactions contemplated by this Agreement; and it and its advisors have
received all information and data that it and its advisors believe to be
necessary in order to reach an informed decision as to the advisability of an
investment in the Warrant and the Shares pursuant to the transactions
contemplated by this Agreement. The Warrantholder has completed to its
satisfaction such independent investigation of the books and records of the
Company and understands the nature of the potential risks and potential rewards
of its ownership interest in the Company. The Warrantholder is a sophisticated
investor with investment experience in the area
3
<PAGE>
of venture capital and, in the event of any liquidation or winding up of the
Company, has the ability to bear complete loss of its investment.
SECTION 4. ADJUSTMENTS. The number of shares of Common Stock
deliverable upon exercise of this Warrant shall be subject to adjustment from
time to time as follows:
(a) In the event the Company shall (i) take a record of the
holders of Common Stock for the purpose of entitling them to receive a dividend
payable in shares of Common Stock, (ii) subdivide its outstanding shares of
Common Stock into a greater number of shares, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its Common Stock any shares of the Company of any class or
series, the Warrantholder shall thereafter be entitled to receive upon the
exercise of this Warrant the number of shares of Common Stock which the
Warrantholder would have owned or have been entitled to receive had the Warrant
been exercised immediately prior to the happening of such event, such adjustment
to become effective immediately after the opening of business on the day
following such record date or the day upon which such subdivision, combination
or reclassification becomes effective. Upon any adjustment in the number of
Shares issuable upon exercise of the Warrant under this Section 4(a), the
Specified Price shall be appropriately adjusted.
(b) In the event that the Company takes a record of holders of
Common Stock for the purpose of entitling them to receive a dividend payable in
any security convertible into Common Stock and the Warrantholder thereafter
exercises the purchase rights hereunder, such Warrantholder shall be entitled to
receive upon such exercise, in addition to the shares of Common Stock
deliverable to the Warrantholder in accordance with the provisions hereof, the
number of shares or principal amount of such security convertible into Common
Stock as the Warrantholder would have been entitled to receive if the
Warrantholder had converted immediately prior to the taking of such record.
(c) No adjustment in the number of shares purchasable upon
exercise of this Warrant shall be required unless such adjustment would require
an increase or decrease of at least one-tenth of a share in the number of shares
for which this Warrant is exercisable; provided, however, that any adjustment
which by reason hereof is not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(d) No fractional shares of Common Stock shall be issued upon
exercise of this Warrant, but, instead, to the extent that any fraction of a
share would otherwise be issuable, the Purchase Price shall be proportionately
reduced.
SECTION 5. NOTICE OF ADJUSTMENT. Upon any event requiring an adjustment
of the number of Shares exercisable by this Warrant, then and in each such case
the Company shall promptly give written notice thereof to the Warrantholder,
which notice shall specify the number of Shares exercisable by this Warrant
after giving effect to such adjustment and shall set forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
4
<PAGE>
SECTION 6. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any capital reorganization or reclassification of the capital stock of
the Company, or any consolidation or merger of the Company with another Company,
or the sale of all or substantially all of its assets to another Company shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then as a condition of such reorganization, reclassification,
consolidation, exercise, merger or sale, lawful and adequate provisions shall be
made whereby the Warrantholder shall thereafter have the right to receive upon
the basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock of the Company immediately theretofore receivable upon
the exercise of this Warrant, such shares of stock, securities or assets as may
be issued or, payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore receivable upon the exercise of this Warrant had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case, appropriate provision shall be made with respect to the
rights and interests of the Warrantholder to the end that the provisions hereof
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise of such
conversion.
SECTION 7. EXCHANGE OF WARRANTS. This certificate is exchangeable upon
the surrender hereof by the holder at such office or agency of the Company, for
a new certificate of like tenor representing in the aggregate the right to
subscribe for and purchase the number of Shares which may be subscribed for and
purchased hereunder from time to time after giving effect to all the provisions
hereof, each of such new certificates to represent the right to subscribe for
and purchase such number of Shares as shall be designated by said holder hereof
at the time of such surrender.
SECTION 8. LOST, STOLEN, MUTILATED OR DESTROYED. If this certificate is
lost, stolen, mutilated or destroyed, the Company shall, on such terms as to
indemnity or otherwise as it may in its discretion impose (which shall, in the
case of a mutilated certificate, include the surrender thereof), issue a new
certificate of like denomination and tenor as the certificate so lost, stolen,
mutilated or destroyed. Any such new certificate shall constitute an original
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated or destroyed certificate shall be at any time enforceable by
anyone.
SECTION 9. NOTICE. All notices and other communications under this
Warrant shall (a) be in writing (which shall include communications by
telecopy), (b) be (i) sent by registered or certified mail, postage prepaid,
return receipt requested, (ii) sent by telecopier, or (iii) delivered by hand,
(c) be given at the following respective addresses and telecopier numbers and to
the attention of the following persons:
(i) if to the Company, to it at:
5
<PAGE>
Mail.com, Inc.
11 Broadway, Suite 660
New York, NY 10007
Attention: Gary Millin, President
Telephone No.: (212) 425-3477
Telecopier No.: (212) 425-3487
with a copy to:
Law Offices of Brian J. Zimmet
801 Second Avenue, 5th Floor
New York, NY 10017
Attention: Brian J. Zimmet
Telephone No.: (212) 922-1330
Telecopier No.: (212) 949-6916
and to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Attention: David W. Ambrosia
Telephone No.: (212) 858-1208
Telecopier No.: (212) 858-1500
(ii) if to the holder, to it at:
CNET, Inc.
150 Chestnut Street
San Francisco, CA 94111
Attention: Doug Woodrum
Telephone No.: (415) 395-7800
Telecopier No.: (415) 395-9205
with a copy to:
Hughes & Luce, LLP
1717 Main Street, Suite 2800
Dallas, TX 75201
Attention: R. Clayton Mulford
Telephone No.: (214) 939-5500
6
<PAGE>
Telecopier No.: (214) 939-5849
or at such other address or telecopier number or to the attention of such other
person as the party to whom such information pertains may hereafter specify for
the purpose in a notice to the other, and (d) be effective or deemed delivered
or furnished (i) if given by mail, on the fifth business day after such
communication is deposited in the mail, addressed as above provided, (ii) if
given by telecopier, when such communication is transmitted to the appropriate
number determined as above provided in this Section 9 and the appropriate answer
back is received or receipt is otherwise acknowledged, and (iii) if given by
hand delivery, when left at the address of the addressee addressed as above
provided.
SECTION 10. AMENDMENT AND WAIVER. No failure or delay on the part of
the Warrantholder in exercising any right, power or remedy under this Warrant
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
in this Warrant are cumulative and are not exclusive of any remedies that may be
available to the holder of the Warrant at law, in equity or otherwise.
SECTION 11. REMEDIES. The Company stipulates that the remedies at law
of the Warrantholder in the event of any default or threatened default by the
Company in the performance of or compliance with any terms hereof are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained in this Warrant or by an injunction against a violation
of any of the terms hereof.
SECTION 12. SUCCESSORS AND ASSIGNS. The Warrant and the rights
evidenced hereby shall inure to the benefits of and be binding upon the
successors and assigns of the Company and the Warrantholder evidenced hereby, to
the extent provided herein, and shall be enforceable by such Warrantholder.
Notwithstanding anything herein to the contrary, the Warrant and the rights
evidenced hereby are assignable in whole or in part by the Warrantholder.
SECTION 13. MODIFICATION AND SEVERABILITY. If, in any action before any
court or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any provision is unenforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions hereof, but this certificate shall be construed as if such
unenforceable provision had never been contained herein.
SECTION 14. GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflicts of laws principals thereof.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this certificate to be
executed by its duly authorized officers and its corporate seal to be hereunto
affixed as of the 1st day of March, 1999.
MAIL.COM, INC.
/s/ Gary Millin
---------------------------
By: Gary Millin
Title: President
ATTEST:
/s/ Gerald Gorman
- ----------------------------
By: Gerald Gorman
Title: Secretary
8
<PAGE>
EXHIBIT A TO
WARRANT CERTIFICATE
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
REGISTERED HOLDER DESIRES TO EXERCISE WARRANTS
MAIL.COM, INC.
The undersigned hereby exercises the right to purchase ______________
of the Shares covered by the Warrant certificate in accordance with the terms
and conditions thereof at the purchase price of Five dollars ($5.00) per Share
for an aggregate purchase price of ____________, (subject to adjustment as
provided in the Warrant certificate) and herewith tenders to the Company the
Warrant certificate.
WARRANTHOLDER
---------------------------
By:
Title:
Total No. of Shares
Being Purchased:
-----------
Dated:
---------------------
9
<PAGE>
Exhibit 10.33
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAW. THE WARRANTS HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE, DISPOSED OF IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE WARRANTS UNDER THE
ACT OR AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION AS EVIDENCED BY AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED AS TO SUCH OFFER, SALE, TRANSFER, PLEDGE, HYPOTHECATION OR DISPOSITION.
THE STOCK TRANSFER AGENT, IF ANY, OF THE COMPANY WILL BE ORDERED TO EFFECTUATE
TRANSFERS OF THE WARRANTS ONLY IN ACCORDANCE WITH THE ABOVE RESTRICTIONS.
MAIL.COM, INC.
WARRANT TO PURCHASE CAPITAL STOCK
Initial Warrantholder: NBC Multimedia, Inc.
c/o National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, NY 10112
No. of Shares of Common Stock
to be issued upon exercise in full: 510,000
FOR VALUE RECEIVED, Mail.com, Inc., a Delaware company (the "Company"),
promises to issue to the Initial Warrantholder, its nominees, successors or
assigns (the "Warrantholder") FIVE HUNDRED TEN THOUSAND (510,000) nonassessable
shares (the "Shares") of the Common Stock at any time on or prior to an
Expiration Date (as defined herein) upon payment by the Warrantholder to the
Company of the purchase price per share in the amount of five dollars ($5.00)
(the "Specified Price") or, if the initial public offering price is less than
the Specified Price, at a price per share equal to the initial public offering
price per share of the Common Stock pursuant to the registration of the Common
Stock (such purchase price, the "Purchase Price"), and to deliver to the
Warrantholder a certificate or certificates representing the Shares purchased.
The Warrantholder shall have the right to exercise this warrant (the "Warrant")
in whole or in part at any time or times on or prior to the Expiration Date.
SECTION 1. (a) DEFINITIONS. The following terms as used in this
certificate shall have the following meanings:
"Common Stock" means the Company's Class A Common Stock, par value $.01
per share.
<PAGE>
"Expiration Date" means the earlier of (i) December 31, 1999 and (ii)
the Preregistration Expiration Date.
"Escrow Agreement" means the Escrow Agreement by and among the parties
hereto and the Escrow Agent (as defined therein) dated as of the date hereof.
"Offering Notice" means the notice provided by the Company to the
Warrantholder of the Company's intention to file an S-1 registration statement
to register its Common Stock in an initial public offering. The Offering Notice
shall be effective if it includes the name of the lead underwriter.
"Preregistration Expiration Date" means (i) three (3) business days
after an Offering Notice is given if such Offering Notice is given by April 26,
1999, and (ii) fourteen (14) calendar days after an Offering Notice is given if
such Offering Notice is given after April 26, 1999; provided, however, that the
Preregistration Expiration Date shall not be deemed to have occurred with
respect to any Offering Notice if (i) the S-1 registration statement is not
filed within thirty (30) days after such Offering Notice is given or (ii) if the
Company files a Form S-1 registration statement and an initial public offering
is not consummated within four (4) months after filing such Form S-1
registration statement.
(b) OTHER DEFINITIONAL PROVISIONS.
(i) Except as otherwise specified herein, all references
herein (A) to any person other than the Company, shall be deemed to include such
person's successors and assigns, (B) to the Company shall be deemed to include
the Company's successors and (C) to any applicable law defined or referred to
herein, shall be to such applicable law as the same may have been or may be
amended or supplemented from time to time.
(ii) When used in this certificate, the words "herein",
"hereof" and "hereunder", and words of similar import, shall refer to this
certificate as a whole and not to any provision of this certificate, and the
words "Section" and "Exhibit" shall refer to Sections of, and Exhibits to, this
certificate unless otherwise specified. Whenever the context so requires the
neuter gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
SECTION 2. COVENANTS OF THE COMPANY. The Company will at all times
reserve and keep available out of its authorized shares of Common Stock or its
treasury shares, solely for the purpose of issuing upon the exercise of this
Warrant as herein provided, such number of shares of Common Stock as shall then
be issuable upon the exercise of this Warrant. The Company covenants that all
shares of Common Stock which shall be so issued shall be duly and validly issued
and fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
SECTION 3. EXERCISE OF WARRANT; LEGENDS; WARRANTHOLDER REPRESENTATIONS.
(a) In order to exercise this Warrant, the Warrantholder shall deliver to the
Company (i) a written notice of such holder's election to exercise this Warrant,
in the form of the Subscription Notice
2
<PAGE>
attached as Exhibit A hereto, which notice shall specify the number of shares of
Common Stock to be purchased and (ii) payment in cash or by a certified or
cashier's check (A) to the Company or (B) if such exercise is in connection with
an Offering Notice, to the Escrow Agent pursuant to the Escrow Agreement. The
exercise of the Warrant shall be deemed to be a representation by the
Warrantholder that the Shares are being purchased for its own account and not
with a view to the distribution thereof. After receipt of written notice and
upon the payment of the Purchase Price to the Company by the Warrantholder or by
the Escrow Agent pursuant to the Escrow Agreement upon the release thereof in
accordance with the terms of the Escrow Agreement, the Company shall as promptly
as practicable execute or cause to be executed and delivered to such holder a
certificate or certificates representing the aggregate number of Shares
purchased. If this Warrant shall have been exercised only in part, the Company
shall also deliver a new warrant of like tenor evidencing the rights of such
holder to purchase the remaining Shares called for by this Warrant.
(b) The Warrantholder understands that the certificates evidencing
the Shares shall bear the following legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares have been
acquired not with a view to distribution and may not be offered, sold,
transferred, pledged, or hypothecated in the absence of an effective
registration statement for the shares under the Act and under any
applicable state securities laws, or an exemption therefrom evidenced
by an opinion of counsel reasonably satisfactory to the Company that
such registration is not required as to such sale or offer, except that
no such opinion shall be required in connection with a sale pursuant to
Rule 144 or Rule 144A under the Securities Act of 1933. The stock
transfer agent has been ordered to effectuate transfers of this
certificate only in accordance with the above instruction."
(c) The Warrantholder has made, either alone or together with its
advisors, such independent investigation of the Company, its management and
related matters as it deems to be, or such advisors have advised to be,
necessary or advisable in connection with an investment in the Company through
the transactions contemplated by this Agreement; and it and its advisors have
received all information and data that it and its advisors believe to be
necessary in order to reach an informed decision as to the advisability of an
investment in the Warrant and the Shares pursuant to the transactions
contemplated by this Agreement. The Warrantholder has completed to its
satisfaction such independent investigation of the books and records of the
Company and understands the nature of the potential risks and potential rewards
of its ownership interest in the Company. The Warrantholder is a sophisticated
investor with investment experience in the area of venture capital and, in the
event of any liquidation or winding up of the Company, has the ability to bear
complete loss of its investment.
SECTION 4. ADJUSTMENTS. The number of shares of Common Stock
deliverable upon exercise of this Warrant shall be subject to adjustment from
time to time as follows:
3
<PAGE>
(a) In the event the Company shall (i) take a record of the
holders of Common Stock for the purpose of entitling them to receive a dividend
payable in shares of Common Stock, (ii) subdivide its outstanding shares of
Common Stock into a greater number of shares, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its Common Stock any shares of the Company of any class or
series, the Warrantholder shall thereafter be entitled to receive upon the
exercise of this Warrant the number of shares of Common Stock which the
Warrantholder would have owned or have been entitled to receive had the Warrant
been exercised immediately prior to the happening of such event, such adjustment
to become effective immediately after the opening of business on the day
following such record date or the day upon which such subdivision, combination
or reclassification becomes effective. Upon any adjustment in the number of
Shares issuable upon exercise of the Warrant under this Section 4(a), the
Specified Price shall be appropriately adjusted.
(b) In the event that the Company takes a record of holders of
Common Stock for the purpose of entitling them to receive a dividend payable in
any security convertible into Common Stock and the Warrantholder thereafter
exercises the purchase rights hereunder, such Warrantholder shall be entitled to
receive upon such exercise, in addition to the shares of Common Stock
deliverable to the Warrantholder in accordance with the provisions hereof, the
number of shares or principal amount of such security convertible into Common
Stock as the Warrantholder would have been entitled to receive if the
Warrantholder had converted immediately prior to the taking of such record.
(c) No adjustment in the number of shares purchasable upon
exercise of this Warrant shall be required unless such adjustment would require
an increase or decrease of at least one-tenth of a share in the number of shares
for which this Warrant is exercisable; provided, however, that any adjustment
which by reason hereof is not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(d) No fractional shares of Common Stock shall be issued upon
exercise of this Warrant, but, instead, to the extent that any fraction of a
share would otherwise be issuable, the Purchase Price shall be proportionately
reduced.
SECTION 5. NOTICE OF ADJUSTMENT. Upon any event requiring an adjustment
of the number of Shares exercisable by this Warrant, then and in each such case
the Company shall promptly give written notice thereof to the Warrantholder,
which notice shall specify the number of Shares exercisable by this Warrant
after giving effect to such adjustment and shall set forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
SECTION 6. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any capital reorganization or reclassification of the capital stock of
the Company, or any consolidation or merger of the Company with another Company,
or the sale of all or substantially all of its assets to another Company shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then as a condition of such reorganization, reclassification,
consolidation, exercise, merger or sale, lawful and adequate provisions shall be
made whereby the Warrantholder shall thereafter have the right to receive upon
the basis and upon the terms and
4
<PAGE>
conditions specified herein and in lieu of the shares of Common Stock of the
Company immediately theretofore receivable upon the exercise of this Warrant,
such shares of stock, securities or assets as may be issued or, payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately theretofore
receivable upon the exercise of this Warrant had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any such
case, appropriate provision shall be made with respect to the rights and
interests of the Warrantholder to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion.
SECTION 7. EXCHANGE OF WARRANTS. This certificate is exchangeable upon
the surrender hereof by the holder at such office or agency of the Company, for
a new certificate of like tenor representing in the aggregate the right to
subscribe for and purchase the number of Shares which may be subscribed for and
purchased hereunder from time to time after giving effect to all the provisions
hereof, each of such new certificates to represent the right to subscribe for
and purchase such number of Shares as shall be designated by said holder hereof
at the time of such surrender.
SECTION 8. LOST, STOLEN, MUTILATED OR DESTROYED. If this certificate is
lost, stolen, mutilated or destroyed, the Company shall, on such terms as to
indemnity or otherwise as it may in its discretion impose (which shall, in the
case of a mutilated certificate, include the surrender thereof), issue a new
certificate of like denomination and tenor as the certificate so lost, stolen,
mutilated or destroyed. Any such new certificate shall constitute an original
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated or destroyed certificate shall be at any time enforceable by
anyone.
SECTION 9. NOTICE. All notices and other communications under this
Warrant shall (a) be in writing (which shall include communications by
telecopy), (b) be (i) sent by registered or certified mail, postage prepaid,
return receipt requested, (ii) sent by telecopier, or (iii) delivered by hand,
(c) be given at the following respective addresses and telecopier numbers and to
the attention of the following persons:
(i) if to the Company, to it at:
Mail.com, Inc.
11 Broadway, Suite 660
New York, NY 10007
Attention: Gary Millin, President
Telephone No.: (212) 425-3477
Telecopier No.: (212) 425-3487
with a copy to:
Law Offices of Brian J. Zimmet
5
<PAGE>
801 Second Avenue, 5th Floor
New York, NY 10017
Attention: Brian J. Zimmet
Telephone No.: (212) 922-1330
Telecopier No.: (212) 949-6916
and to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Attention: David W. Ambrosia
Telephone No.: (212) 858-1208
Telecopier No.: (212) 858-1500
(ii) if to the holder, to it at:
NBC Multimedia, Inc.
c/o National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, NY 10112
Attention: Chris Glowacki
Telephone No.: (212) 664-4774
Telecopier No.: (212) 664-5561
with a copy to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, NY 10112
Attention: General Counsel
Telephone No.: (212) 664-4444
Telecopier No.: (212) 664-2648
or at such other address or telecopier number or to the attention of such other
person as the party to whom such information pertains may hereafter specify for
the purpose in a notice to the other, and (d) be effective or deemed delivered
or furnished (i) if given by mail, on the fifth business day after such
communication is deposited in the mail, addressed as above provided, (ii) if
given by telecopier, when such communication is transmitted to the appropriate
number determined as above provided in this Section 9 and the appropriate answer
back is received or receipt is otherwise acknowledged, and (iii) if given by
hand delivery, when left at the address of the addressee addressed as above
provided.
6
<PAGE>
SECTION 10. AMENDMENT AND WAIVER. No failure or delay on the part of
the Warrantholder in exercising any right, power or remedy under this Warrant
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
in this Warrant are cumulative and are not exclusive of any remedies that may be
available to the holder of the Warrant at law, in equity or otherwise.
SECTION 11. REMEDIES. The Company stipulates that the remedies at law
of the Warrantholder in the event of any default or threatened default by the
Company in the performance of or compliance with any terms hereof are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained in this Warrant or by an injunction against a violation
of any of the terms hereof.
SECTION 12. SUCCESSORS AND ASSIGNS. The Warrant and the rights
evidenced hereby shall inure to the benefits of and be binding upon the
successors and assigns of the Company and the Warrantholder evidenced hereby, to
the extent provided herein, and shall be enforceable by such Warrantholder.
Notwithstanding anything herein to the contrary, the Warrant and the rights
evidenced hereby are assignable in whole or in part by the Warrantholder.
SECTION 13. MODIFICATION AND SEVERABILITY. If, in any action before any
court or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any provision is unenforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions hereof, but this certificate shall be construed as if such
unenforceable provision had never been contained herein.
SECTION 14. GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflicts of laws principals thereof.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this certificate to be
executed by its duly authorized officers and its corporate seal to be hereunto
affixed as of the 1st day of March, 1999.
MAIL.COM, INC.
/s/ Gary Millin
------------------------
By: Gary Millin
Title: President
ATTEST:
/s/ Gerald Gorman
- ----------------------------
By: Gerald Gorman
Title: Secretary
8
<PAGE>
EXHIBIT A TO
WARRANT CERTIFICATE
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
REGISTERED HOLDER DESIRES TO EXERCISE WARRANTS
MAIL.COM, INC.
The undersigned hereby exercises the right to purchase _____________
of the Shares covered by the Warrant certificate in accordance with the terms
and conditions thereof at the purchase price of Five dollars ($5.00) per Share
for an aggregate purchase price of _____________, (subject to adjustment as
provided in the Warrant certificate) and herewith tenders to the Company the
Warrant certificate.
WARRANTHOLDER
--------------------------------
By:
Title:
Total No. of Shares
Being Purchased:
Dated:
-----------------
9
<PAGE>
Exhibit 10.34
CLASS A COMMON STOCK
PURCHASE AGREEMENT
AGREEMENT, dated as of the 7th day of July 1998, by and between
iName, Inc. (formerly named GlobeComm, Inc.), a Delaware corporation with its
principal place of business at 11 Broadway, Suite 660, New York, New York
(the "Company") and CNN Interactive, a division of Cable News Network, Inc.,
a Delaware corporation, with its principal place of business at One CNN
Center, Atlanta, Georgia (the "Purchaser"). The Company and the Purchaser are
collectively referred to as the "Parties."
WHEREAS, the Company and Purchaser are parties to the Agreement
Between iName and CNN dated July 7, 1998 (the "Underlying Agreement").
WHEREAS, pursuant to section 4.6 of the Underlying Agreement, the
Company is required to issue to Purchaser 126,766 shares of Class A Common
Stock of the Company upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual
agreements hereinafter contained, the Parties hereto do hereby agree as
follows:
SECTION 1. DEFINITIONS AND TERMS
1.1. DEFINITIONS. The following terms, as used herein, shall
have the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
"Agreement" means this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Agreement Date" means the date of the Underlying Agreement.
"Amended and Restated Certificate of Incorporation" shall mean the
document attached as Exhibit A as the same may be modified and amended in
accordance with its terms.
"Class A Common Stock" means the sixteen million (16,000,000) shares
of Class A Common Stock that the Company is authorized to issue by way of the
Amended and Restated Certificate of Incorporation.
"Class A Preferred Stock" means the six million (6,000,000) shares
of Class A Preferred
1
<PAGE>
Stock that the Company is authorized to issue by way of the Amended and
Restated Certificate of Incorporation..
"Class B Common Stock" means the five million (5,000,000) shares of
Class B Common Stock that the Company is authorized to issue by way of the
Amended and Restated Certificate of Incorporation..
"Company Stock" means any shares of any class of authorized capital
stock in the Company.
"Effective Date" means the date of this Agreement.
"Permitted Transferee" with respect to each Purchaser, means an
Affiliate of such Purchaser.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Purchaser" has the meaning set forth in the preface above, and
shall include, with respect to Purchaser, such Purchaser's Permitted
Transferee.
"SEC" means the Securities and Exchange Commission.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (A) liens for taxes not yet
due and payable or for taxes that the taxpayer is contesting in good faith
through appropriate proceedings, (B) purchase money liens securing rental
payments under capital lease arrangements, and (C) liens, charges,
encumbrances, easements, rights-of-way, building and use restrictions,
exceptions, reservations and limitations that do not in any material respect
adversely detract from the value of the property subject thereto or
materially impair the operation of the Company.
"Shares" means the 126,766 shares of Class A Common Stock issued to
the Purchaser pursuant to this Agreement (adjusted for any stock splits,
stock dividends or recapitalizations since the Agreement Date).
1.2. OTHER TERMS. Other terms may be defined elsewhere in the text
of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement or as set forth in the Underlying Agreement.
1.3. OTHER DEFINITIONAL PROVISIONS. The words herein, hereof, hereto
and hereunder and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of
this Agreement. The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa, and in such gender, as the
sense and circumstances require.
2
<PAGE>
SECTION 2. BASIC TRANSACTION
2.1. SALE OF SHARES. Subject to the terms and conditions of this
Agreement, in consideration for the Purchaser entering into the Underlying
Agreement, on the Effective Date, the Company shall have authorized and shall
issue and transfer to Purchaser the Shares. The Shares shall have the rights,
preferences and privileges set forth in the Amended and Restated Certificate
of Incorporation.
2.2. ACTIONS ON THE AGREEMENT DATE. On the Effective Date, the
Company shall issue to Purchaser the Shares in the name of the Purchaser by
delivering the certificates for the Shares duly issued, and such other
instruments as shall reasonably be required by the Purchaser to grant to the
Purchaser all rights, title and interest in the Shares.
2.3. PURCHASE PRICE OF THE SHARES. The Company and the Purchaser
hereby acknowledge and agree that the value of each share of Class A Common
Stock issued in accordance with this Agreement shall be ten dollars ($10.00).
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule of the Company
accompanying this Agreement (the "Disclosure Schedule") which will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3, the Company represents and warrants to Purchaser
as follows.
3.1. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware. The Company is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where
such qualification is required. The Company has full corporate power and
authority to carry on the business in which it is engaged and to own and use
the properties owned and used by it.
3.2. CAPITALIZATION. The total number of shares of all classes of
stock that the Company is authorized to issue as of the Effective Date is
twenty seven million (27,000,000), consisting of (i) sixteen million
(16,000,000) shares of Class A Common Stock with a par value of one cent
($.01) per share, of which 2,050,122 shares are issued and outstanding, (ii)
six million (6,000,000) shares of Class A Preferred Stock with a par value of
one cent ($.01) per share, of which 3,092,500 shares are issued and
outstanding, and (iii) five million (5,000,000) shares of Class B Common
Stock with a par value of one cent ($.01) per share, of which 5,000,000 are
issued and outstanding.
3.3. OUTSTANDING STOCK. All of the issued and outstanding shares of
capital stock of the Company have been duly authorized and are validly issued,
fully paid, and nonassessable. The
3
<PAGE>
Company is not and shall not be obligated to redeem or repurchase any shares
of capital stock of the Company, securities convertible into such shares,
options or warrants to purchase such shares, except as expressly contemplated
by the Amended and Restated Certificate of Incorporation in effect as of the
Effective Date. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Company to issue, sell,
or otherwise cause to become outstanding any of its capital stock.
3.4. SUBSIDIARIES. The Company does not presently own or control,
within the meaning of Section 15 of the Act, any other corporation,
association, or business entity.
3.5. AUTHORIZATION OF TRANSACTION. The Company has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its respective
terms and conditions.
3.6. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated thereby, will,
alone or merely with the passage of time, (A) violate the Company's Amended and
Restated Certificate of Incorporation, Bylaws, any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court applicable to the
Company, or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, or cancel, or require any notice under any agreement,
contract, lease, license, instrument or other arrangement to which the Company
is a party or by which it is bound or to which any of its properties or assets
is subject, or (C) result in the imposition of any Security Interest upon any of
its properties or assets.
3.7. VALIDITY OF SECURITIES. The Shares, issued, sold, and delivered in
accordance with the terms of this Agreement have been duly and validly issued,
fully paid, and nonassessable, and shall not be subject to any preemptive rights
or liens, claims, or encumbrances other than restrictions on transfer under
federal or state securities laws, and assuming the accuracy of each Purchaser's
representations and warranties, have been issued in compliance with all
applicable federal and state securities laws. Neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
adversely effect said compliance.
3.8. PROPERTY AND ASSETS. The Company has good and marketable title to
all of its properties and assets, and good and valid interest as lessee in all
properties held under lease, held in each case subject to no Security Interest.
With respect to the properties and assets it leases, the Company is in
compliance with the terms of such leases.
3.9. INSURANCE. The Company maintains and keeps in force, with good and
responsible insurance companies adequate amounts of fire, public liability,
property damage, workers' compensation, and such other insurance as is usual and
customary in the type of business conducted by the Company.
4
<PAGE>
3.10. BROKERS' FEES. The Company has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
3.11. GOVERNMENTAL CONSENTS; COMPLIANCE WITH LAWS. No consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
government authority is required on the part of the Company in connection
with the consummation of the transactions contemplated thereby. The Company
is in compliance with all applicable laws, regulations and orders, except for
any noncompliance which would, individually or in the aggregate, not have a
material adverse effect on the business or financial condition of the Company.
3.12. PATENTS; TRADEMARKS. The Company has all necessary right, title
and ownership of all patents, trademarks, service marks, trade names,
copyrights, licenses, information, proprietary rights, domain names and
processes, used in its business or operations without any conflict with the
rights of others. A list of all of the Company's domain names is set forth in
the Disclosure Schedule. The Company is able to obtain on reasonable terms all
permits, licenses and other authority necessary for the lawful conduct of its
business.
3.13. INVESTMENT COMPANY. The Company is not an "investment company"
or a company "controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
3.14. DISCLOSURE; GOOD FAITH ASSUMPTIONS. The Company has fully
provided Purchaser with all the information which Purchaser has requested in
deciding whether to purchase the Shares to be purchased hereunder. The
materials, information and projections presented to the Purchaser have been
prepared in a good-faith effort by the Company to describe the Company's
present and proposed products, operations, and projected growth and the
Company is not aware of any materially misleading statement or omissions
therein. While the projections were made by management in good faith based on
factual assumptions believed to be true, no representations are made in
respect to the accuracy or reliability of such projections.
3.15. NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the written
representations and warranties set forth herein, neither the Company nor any
other Person makes any express or implied representation or warranty on
behalf of the Company, and the Company hereby disclaims any such
representation or warranty whether made by Company, its Affiliates, officers,
directors, shareholders, employees, agents or representative or any other
Person.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows.
4.1. INVESTMENT REPRESENTATION. The Purchaser acknowledges that it is
aware that the
5
<PAGE>
Shares have not been registered under the Act. The Purchaser represents and
warrants to the Company that the Purchaser is acquiring the Shares for
investment purposes and not with a view to or for sale in connection with any
distribution thereof or with any present intention of selling the Shares in
connection with any distribution thereof or with any present intention of
selling the Shares in connection with a distribution.
4.2. RESTRICTED SECURITIES. The Purchaser is an "accredited
investor" as defined in Rule 501(a)(5) promulgated under the Act. The
Purchaser understands that the Shares will be "restricted securities" under
applicable federal securities laws and the rules of the SEC promulgated
thereunder. The Purchaser acknowledges that the Purchaser may dispose of such
Shares only pursuant to an effective registration statement under the Act or
an exemption from registration if available. The Purchaser further
understands that the Company has no obligation or intention to register the
sale of the Shares or take any other action so as to permit sales pursuant to
the Act. The Purchaser further understands that applicable state securities
laws may impose additional constraints upon the sale of securities.
4.3. LEGENDS. The Purchaser understands that the certificates
evidencing the Shares may bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares may not be offered, sold,
transferred, pledged, or hypothecated in the absence of an effective
registration statement for the shares under the Act and under any applicable
state securities laws, or an exemption therefrom evidenced by an opinion of
counsel to the Company that such registration is not required as to such sale or
offer. The stock transfer agent has been ordered to effectuate transfers of this
certificate only in accordance with the above instruction."
4.4. DUE DILIGENCE INVESTIGATION. The Purchaser and its advisors have
received all information and data that the Purchaser and such advisors believe
to be necessary in order to reach an informed decision as to the advisability of
the investment in the Company pursuant to the transactions contemplated by this
Agreement.
SECTION 5. MISCELLANEOUS
5.1. SURVIVAL. Except as set forth in this section, for a period of one
(1) year subsequent to the Effective Date, the warranties and representations of
the Company and the Purchaser contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement; provided, however,
that the warranties and representations set forth in Sections 3.2, 3.7 and 3.8,
shall survive indefinitely.
5.2. NO THIRD PARTY BENEFICIARIES. Except as set forth in this
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
(including the Permitted Transferees of the Shares).
6
<PAGE>
Nothing herein is intended to confer upon any party other than the Parties or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement. Subject to the terms set
forth herein, Purchaser shall be entitled to convey, transfer and assign all
or any portion of the Purchaser's Shares to its Permitted Transferees. In the
event of any such transfer, assignment or conveyance to any such person, such
person shall, for all purposes, be considered a Purchaser under this
Agreement.
5.3. LOCK-UP PERIOD. Purchaser agrees that it shall not, to the extent
requested by the underwriter of the Company, sell or otherwise transfer or
dispose of any Registrable Securities or any securities of the same or similar
class as securities being registered by the Company during the one hundred
eighty (180) day period following the effective date of a registration statement
filed by the Company; provided, however, that (A) such agreement shall be
applicable only to the first registration statement of the Company that covers
shares of the Company to be sold to the public in an underwritten offering, (B)
the holders of Class B Common Stock and the holders of at least ninety percent
(90%) of Class A Common Stock are subject to identical or substantially similar
time restrictions, (C) all officers and directors of the Company and all other
persons with registration rights enter into similar agreements, and (D) nothing
contained herein shall prohibit any holder of Company Stock from transferring
any Registrable Securities to a trust established for estate planning purposes.
5.4 PUBLIC ANNOUNCEMENTS. Except as required by law, neither party
hereto will make any public announcement relating to the subject matter of this
Agreement without the prior written approval of the other party.
5.5. DEFAULT. In the event a Party fails to comply with the terms of
this Agreement, any other Party to this Agreement shall be entitled to any
relief or remedy that may be available pursuant to this Agreement or at law or
equity.
5.6. HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect the construction and
interpretation of this Agreement.
5.7. SEVERABILITY. The invalidity of all or any part of any section of
this Agreement shall not render invalid the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
5.8. EXECUTION OF DOCUMENT. Each of the Parties hereto agrees to
execute and deliver, without cost or expense to any other Party, any and all
such further instruments or documents and to take any and all such further
action reasonably requested by such other of the Parties hereto as may be
necessary in order to effectuate this Agreement and the interests and purposes
thereof.
5.9. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
7
<PAGE>
5.10. CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
5.11. BINDING EFFECT. This Agreement shall not be assigned without the
prior written consent of the Company and the Purchaser; provided, however, that
in connection with a sale, conveyance, assignment or transfer by Purchaser of
the Shares to any person, such person may, except as provided herein, convey,
assign or transfer its rights and obligations hereunder to such person without
the consent of the Company to the extent relating to such Shares. This Agreement
shall be binding upon and inure to the benefit of the Parties, their heirs,
personal representatives, successors, and permitted assignees
5.12. ENTIRE AGREEMENT. This Agreement (including the Disclosure
Schedule and any and all Exhibits and Schedules hereto) contains the entire
agreement of the Parties with respect to the subject matters set forth herein or
therein. The Parties are not bound by any oral statements that are made outside
of this Agreement.
5.13. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of the conflict of laws thereof.
8
<PAGE>
WHEREAS, the Parties have executed this Agreement as of the date first
above written:
iName, Inc.
/s/ Gary Millin
----------------------
By: Gary Millin
Title: President
Purchaser
CNN Interactive, a division of Cable News Network, Inc.
/s/ Louis Lettes
----------------------
By: Louis Lettes
Title: VP Business Development
9
<PAGE>
Exhibit 11.1
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Three Months Ended
December 31, December 31, December 31, March 31,
1996 1997 1998 1999
------------ ------------ ------------ ------------------
<S> <C> <C> <C> <C>
Basic:
Net loss................... ($544,712) ($2,995,753) ($12,524,883) ($6,408,063)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Basic weighted average
shares outstanding......... 13,725,278 14,097,500 14,607,915 16,468,221
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Basic net loss per
common share............... ($0.04) ($0.21) ($0.86) (0.39)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Diluted:
Net loss................... ($544,712) ($2,995,753) ($12,524,883) (6,408,063)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Diluted weighted average
shares outstanding......... 13,725,278 14,097,500 14,607,915 16,468,221
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Diluted net loss per
common shares.............. ($0.04) ($0.21) ($0.86) (0.39)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Mail.com, Inc.:
We consent of the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
New York, New York
May 4, 1999
<PAGE>
Exhibit 23.3
CONSENT OF ELECTRONIC MAIL & MESSAGING SYSTEMS
The Board of Directors
Mail.com Inc.:
We consent to the use of one or more of the following statements attributable to
Electronic Mail & Messaging Systems in the initial and final prospectus for the
initial public offering of Mail.com:
At the end of 1998, Mail.com was the sixth largest provider of
emailboxes in the world, according to numbers compiled by ELECTRONIC
MAIL & MESSAGING SYSTEMS for its quarterly emailbox census.
According to ELECTRONIC MAIL & MESSAGING SYSTEMS, the total number of
emailboxes increased from approximately 198 million at the end of 1997
to approximately 325 million at the end of 1998.
According to this (ELECTRONIC MAIL & MESSAGING SYSTEMS) source, Webmail
accounts are the fastest growing category of emailboxes.
Webmail accounts are the fastest growing category of emailboxes,
according to ELECTRONIC MAIL & MESSAGING SYSTEMS.
According to this source (ELECTRONIC MAIL & MESSAGING SYSTEMS), the
number of Webmail accounts increased from 2.4 million at the end of
1996 to 82.7 million at the end of 1998.
At the end of 1998, there were approximately 325 million emailboxes
worldwide, an increase of 64% from a year before, according to numbers
compiled by ELECTRONIC MAIL & MESSAGING SYSTEMS for its quarterly
emailbox census.
Electronic Mail & Messaging Systems
By: /s/ Amy Fickling, M.E. EMMS
---------------------------
Date: 4/29/99
<PAGE>
Exhibit 23.4
March 10, 1999
Sybil Yang
Smith Solomon Barney
11 Broadway
Suite 604
New York, NY 10004
To Whom It May Concern:
Forrester Research, Inc. ("Forrester") consents to the inclusion of our name and
intellectual property in the preliminary prospectus and the final prospectus of
Smith Solomon Barney's client prepared in connection with that client's initial
public offering of securities.
Forrester does not consent to be an expert in the registration statement or as
having prepared or certified any part of the registation statement.
Respectfully,
\s\
Michael Shirer
Public Relations Manager
<PAGE>
Exhibit 23.5
CONSENT OF JUPITER COMMUNICATIONS
The Board of Directors
Mail.com Inc.:
We consent to the use of one or more of the following statements attributable to
Jupiter Communications in the initial and final prospectus for the initial
public offering of Mail.com:
Jupiter Communications projects that online advertising expenditures
will grow from $1.9 billion in 1998 to $7.7 billion in 2002.
According to an October 1998 Jupiter Communications survey,
approximately 93% of respondents reported using email regularly.
According to the Jupiter/NFO survey, there are over three times as many
online users who regularly use email as there are viewing or creating a
personal home page, visiting a sports-, music- or games-related site,
or participating in online chat.
Jupiter Communications projects that Internet advertising expenditures
will grow from $1.9 billion in 1998 to $7.7 billion in 2002.
Jupiter Communications projected that the amount of advertising dollars
spent on the Internet is expected to increase from approximately $1.9
billion in 1998 to $7.7 billion by 2002, a compound annual growth rate
of 42%.
The feature email users request most is universal access to their email
services, according to a survey conducted by Jupiter Communications/NFO
Interactive.
Only approximately 7% of Web sites surveyed by Jupiter Communications
in February 1999 were able to respond to customer queries within 24
hours with a personalized, signed message.
Jupiter Communications
By: /s/ Marla Kammer
----------------
Date: 4/29/99
-------
<PAGE>
Exhibit 23.6
CONSENT OF INTERNATIONAL DATA CORPORATION
The Board of Directors
Mail.com Inc.:
We consent to the use of one or more of the following statements attributable to
International Data Corporation in the initial and final prospectus for the
initial public offering of Mail.com:
The International Data Corporation (IDC) projects that the number of
Web users will increase from approximately 142 million worldwide at the
end of 1998 to approximately 502 million by the end of 2003.
International Data Corporation
By: /s/ Frank Gens
--------------
Date: 5/4/99
------
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