<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 2000
REGISTRATION NO. 333-32556
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
INTERLAND, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
GEORGIA 7389 58-1632664
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
101 MARIETTA STREET, SUITE 200
ATLANTA, GEORGIA 30303
404-720-8301
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
H. CHRISTOPHER COVINGTON
SENIOR VICE PRESIDENT, GENERAL COUNSEL
101 MARIETTA STREET, SUITE 200
ATLANTA, GEORGIA 30303
404-720-8301
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
DAVID A. STOCKTON, ESQ. JOHN D. WATSON, JR., ESQ.
KILPATRICK STOCKTON LLP LATHAM & WATKINS
1100 PEACHTREE STREET, N.E., SUITE 2800 1001 PENNSYLVANIA AVENUE, N.W., SUITE 1300
ATLANTA, GEORGIA 30309 WASHINGTON, D.C. 20004-2505
404-815-6500 202-637-2200
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being 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 of 1933, 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 of 1933, 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 of 1933, 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
under the Securities Act of 1933, check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON A DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON A DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY 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 BECOMES EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES NOR A
SOLICITATION OF AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY , 2000
PRELIMINARY PROSPECTUS
5,000,000 SHARES
(INTERLAND LOGO)
COMMON STOCK
---------------------------
This is an initial public offering of 5,000,000 shares of common stock of
Interland, Inc. We are selling all of the shares of common stock offered under
this prospectus.
We currently estimate that the initial public offering price will be between
$12.00 and $14.00 per share. We have applied to have our common stock approved
for listing on the Nasdaq National Market under the symbol "ILND."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 ABOUT RISKS YOU SHOULD CONSIDER BEFORE
BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------------
<TABLE>
<CAPTION>
Per
Share Total
----------- -----------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to us............................ $ $
</TABLE>
---------------------------
The underwriters may purchase up to an additional 750,000 shares of common stock
from us at the initial public offering price less the underwriting discount to
cover over-allotments.
The underwriters expect to deliver the shares against payment in New York, New
York on , 2000.
---------------------------
BEAR, STEARNS & CO. INC. THOMAS WEISEL PARTNERS LLC
PAINEWEBBER INCORPORATED
The date of this prospectus is , 2000.
<PAGE> 3
[Inside Front Cover]
The inside of the front cover begins with the sentence, "AWARD WINNING
COMPANY ENABLING 36,000 CUSTOMERS TO ACTIVATE AND MANAGE 60,000 WEBSITES AS OF
MARCH 31, 2000." Underneath the sentence are three graphics representing awards
that Interland has won. The graphic on the left is the "PC MAGAZINE EDITORS'
CHOICE" logo. The middle graphic is the "Inc./Cisco Growing with Technology
Awards 2000" logo. The graphic on the right is the "WINDOWS NT MAGAZINE
EDITOR'S CHOICE" logo. Below the three graphics is the Interland logo followed
by the sentence, "We make the Web work for you." In the lower right-hand corner
of the background is a depiction of a globe.
<PAGE> 4
PROSPECTUS SUMMARY
This summary contains basic information about us and this offering. Because
it is a summary, it does not contain all the information that you should
consider before investing. You should read the entire prospectus carefully,
including the section entitled "Risk Factors" and our financial statements and
the accompanying notes included elsewhere in this prospectus.
Interland provides a broad range of web and applications hosting and other
related web-based business solutions specifically designed to meet the needs of
small to medium-sized businesses. Our solutions are secure, reliable, and
affordable and can be easily upgraded to provide additional capacity and
functions. Our web and applications hosting services include the computer
hardware, software, network technology and systems management necessary to
support our customers' web sites and web-based applications. Our hosting
services are based mainly on the Microsoft NT and Red Hat Linux operating
systems, providing diversity and flexibility to our customers. We generally sell
our services to customers under fully pre-paid contracts that are typically
between three months and two years in length. We are committed to providing
superior customer service and believe that this commitment is among the reasons
that our web hosting services were selected as the "Editor's Choice" by Windows
NT magazine in September 1999 and by PC Magazine in December 1999. We were also
selected as one of ten finalists for the Inc./Cisco Growing with Technology
Awards for 2000 in the category of Innovators in Customer Service.
Our web hosting business began in September 1997 and as of March 31, 2000
had 61,442 customer accounts, an increase of approximately 269% compared to
March 31, 1999. Our revenues have grown from approximately $1.4 million in 1998
to over $9.1 million in 1999, and from $1.0 million for the three months ended
March 31, 1999 to $6.3 million for the three months ended March 31, 2000,
representing increases of over 550% and 521%, respectively. We have achieved
this growth without making any acquisitions and with less than $6.8 million of
total invested cash capital until December 1999, when we closed a $25.0 million
round of venture financing. However, we experienced net losses of approximately
$16.8 million for the year ended December 31, 1999 and $10.8 million for the
quarter ended March 31, 2000 and we anticipate continuing and increasing losses.
The following are among the key factors that we believe will continue to drive
our growth:
- A broad and expanding range of high quality services designed to enable
us to provide one-stop shopping for the specific hosting and related
needs of small to medium-sized businesses.
- Key strategic relationships with Microsoft, Network Solutions, and Bell
Atlantic, all of which have made equity investments in Interland, and
with Road Runner, which holds a warrant to purchase shares of our common
stock.
- State-of-the-art data centers which provide a secure operating
environment and facilitate the delivery of our high quality, reliable
services.
- Global expansion to serve foreign small and medium-sized businesses in
Europe, Asia and South America.
- A creative, highly aggressive multimedia advertising campaign designed to
establish Interland as the first commonly recognized brand in the hosting
industry.
- An experienced direct sales force that is motivated to meet quotas,
trained in consultative selling and skilled in assessing the needs of
small and medium-sized businesses.
- Our proprietary customer management system that allows our salespeople to
activate a web site or provide other services for a customer during the
order process -- that is, in "real-time."
1
<PAGE> 5
OUR SOLUTION
For a number of small and medium-sized businesses, many of whom do not have
internal technical resources dedicated to Internet services, establishing a
presence on the Internet and realizing the various benefits of the Internet has
proven to be a complicated and time consuming task. We are dedicated to
providing small to medium-sized businesses with a comprehensive bundle of
services, which enables them to quickly, easily and affordably capitalize on the
benefits of the Internet. The key elements of our solution include:
- A broad range of high-quality web and applications hosting and other
related web-based solutions;
- Services which are affordable, quick to deploy, and easy to use;
- State-of-the-art security and reliability; and
- Personalized customer service and technical support available 24 hours a
day, seven days a week.
OUR STRATEGY
Our goal is to become a leading global provider of web and applications
hosting and related business solutions to the small and medium-sized business
market. Our strategy for achieving our goal has the following key components:
Provide a Broad Range of Services on Multiple Operating Systems. We
intend to continue to provide additional services in order to better serve
the expanding needs of our existing customers and further enhance our
ability to attract new customers.
Expand Sales Capabilities and Distribution Channels. We intend to
grow our revenue through the continued expansion of our direct sales force,
our reseller network and our strategic relationships.
Expand International Presence. In April 2000, we opened a sales and
customer service center in Amsterdam which will enable us to sell and
support our services throughout Western Europe from a centrally based
location. We also intend to pursue opportunities to expand our reach to
other parts of the world, including Asia and Latin America.
Increase Brand Awareness and Market Presence. We believe that we have
an opportunity to be one of the first hosting providers to establish a
meaningful brand name in the web and applications hosting industry. We
intend to continue to build our brand recognition by continuing to
implement our aggressive multimedia advertising campaign.
Take Advantage of Innovative and Proprietary Technology. We have
developed proprietary technology, which assists in our customer support
efforts and our internal processes. We intend to continue to develop
specialized technology and systems to give us advantages in delivering
high-quality, price competitive services to our customers.
Pursue Additional Strategic Alliances and Relationships. We intend to
opportunistically pursue strategic alliances and acquisitions that will
enable us to expand our services, our technological capabilities and our
customer base.
---------------------------
We incorporated our company as a Georgia corporation on August 21, 1985,
and we capitalized our business and commenced web hosting operations in
September 1997. The address of our principal executive offices is 101 Marietta
Street, Suite 200, Atlanta, Georgia 30303, and our telephone number is (404)
720-8301. Our web site address is www.interland.net. We do not intend for the
information on our web site to be a part of this prospectus.
2
<PAGE> 6
THE OFFERING
Common stock offered................ 5,000,000 shares
Common stock to be outstanding after
the offering........................ 46,432,542 shares
Use of proceeds..................... We intend to use the net proceeds from
this offering to enhance and expand our
network infrastructure and for other
capital expenditures, to build our
brand through marketing and advertising
activities, both domestically and
internationally, and to fund operating
losses, working capital requirements
and general corporate purposes.
Proposed Nasdaq National Market
symbol.............................. ILND
We have calculated the number of shares that will be outstanding after this
offering based on the 24,903,153 shares outstanding as of May 10, 2000, plus:
- 5,000,000 shares of common stock we are selling in this offering;
- 14,337,082 shares of common stock we will issue at the completion of this
offering upon the conversion of all of our outstanding convertible
preferred stock; and
- assuming a public offering price of $13.00, 576,923, 461,538 and
1,153,846 shares of common stock that Microsoft, Network Solutions, and
Bell Atlantic respectively, have agreed to purchase at the time of this
offering.
The number of shares of common stock that will be outstanding after this
offering excludes:
- 750,000 shares of common stock issuable if the underwriters exercise the
over-allotment option in full;
- 5,241,996 shares of common stock issuable upon the exercise of
outstanding options at a weighted average exercise price of $4.16 as of
May 10, 2000;
- 2,750,004 shares of common stock reserved in connection with future
grants under our stock option plan as of May 10, 2000;
- 540,000 shares of common stock reserved under our employee stock purchase
plan;
- up to 1,317,413 shares of common stock issuable upon the exercise of
currently outstanding warrants with a weighted average exercise price of
$6.27 per share. We have issued five-year, fully vested warrants to
purchase a total of 918,893 shares of our common stock to Microsoft and
Network Solutions in connection with their investments in our company. We
have also issued a warrant to purchase up to 376,920 shares of our common
stock to Road Runner in connection with a co-marketing agreement. Of the
shares subject to this warrant, 108,000 vested immediately upon the
execution of our co-marketing agreement on January 27, 2000 and the
balance vests in equal increments on June 30, 2000, September 30, 2000,
December 31, 2000, and December 31, 2001, subject to performance
criteria. We have also issued a warrant to purchase up to 21,600 shares
of our common stock at $8.33 per share in connection with an equipment
financing transaction; and
- assuming a public offering price of $13.00, up to 778,845 shares of
common stock issuable upon the exercise of additional warrants that we
have agreed to grant to Microsoft and Network Solutions at the time of
this offering.
3
<PAGE> 7
The number of shares outstanding after the offering also excludes any
shares that we may issue under a warrant that we may also grant to Bell Atlantic
to purchase up to 3,132,000 shares of common stock as part of our proposed
strategic relationship. The exercise price per share for the common stock
underlying this warrant is expected to equal 150% of the actual per share public
offering price of the common stock sold in this offering.
We have retroactively adjusted all share information in this prospectus to
reflect a proposed 1.08 for one stock split that we plan to implement prior to
the completion of the offering.
4
<PAGE> 8
SUMMARY FINANCIAL DATA
The following table shows our summary financial data for the period from
inception (September 18, 1997) to December 31, 1997, for the years ended
December 31, 1998 and 1999 and for the three months ended March 31, 1999 and
2000. We have derived the financial data for the period from inception
(September 18, 1997) to December 31, 1997 and for the years ended December 31,
1998 and 1999 from financial statements that Arthur Andersen LLP, independent
public accountants, has audited. We derived the financial data for the three
months ended March 31, 1999 and March 31, 2000 from our unaudited financial
statements. In our opinion this data includes all adjustments consisting of only
normal and recurring adjustments necessary for a fair presentation of the
information. The financial data may not necessarily be indicative of our results
for the year ending December 31, 2000. You should read this data together with
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," our financial statements and accompanying notes and
the other financial data included elsewhere in this prospectus. The following
data is in thousands, except per share, share, web site, customer, and average
monthly revenue per customer data.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION THREE MONTHS ENDED
(SEPTEMBER 18, YEAR ENDED YEAR ENDED -----------------------
1997) TO DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
DECEMBER 31, 1997 1998 1999 1999 2000
----------------- ------------ ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................. $ 5 $ 1,387 $ 9,121 $ 1,009 $ 6,268
Operating expenses........ (119) (3,708) (25,891) (2,434) (17,308)
----------- ----------- ----------- ---------- ----------
Operating loss............ (114) (2,321) (16,770) (1,425) (11,040)
Interest income (expense),
net..................... -- (18) (14) (11) 251
----------- ----------- ----------- ---------- ----------
Net loss.................. (114) (2,339) (16,784) (1,436) (10,789)
Preferred stock beneficial
conversion and
dividends............... -- -- (9,559)(1) -- (586)
----------- ----------- ----------- ---------- ----------
Net loss applicable to
common shareholders..... $ (114) $ (2,339) $ (26,343) $ (1,436) $ (11,375)
=========== =========== =========== ========== ==========
Basic and diluted net loss
per common share........ $ (0.01) $ (0.13) $ (1.23) $ (0.07) $ (0.48)
=========== =========== =========== ========== ==========
Shares used in computing
net loss per share...... 17,631,191 18,316,449 21,461,161 19,654,296 23,936,350
OTHER DATA:
EBITDA(2)................. $ (114) $ (2,206) $ (12,221) $ (1,213) $ (9,048)
Net cash used in operating
activities.............. (110) (30) (2,397) (54) (2,645)
Net cash used in investing
activities.............. (2) (1,102) (8,752) (682) (7,785)
Net cash provided by
financing activities.... 139 1,811 34,953 966 4,859
Number of web sites....... 0 10,611 45,731 16,658 61,442
Number of customers....... 0 6,796 27,173 10,186 36,469
Average monthly revenue
per customer............ 0 $ 34.26 $ 45.49 $ 39.73 $ 65.66
</TABLE>
- ---------------
(1) This amount consists of approximately $9.4 million associated with the
beneficial conversion of our preferred stock into common stock and
approximately $150,000 in an accrued preferred stock dividend. The
beneficial conversion is a result of the difference between the initial
purchase price paid by the preferred stock holders and the actual conversion
price of the preferred stock into common stock.
5
<PAGE> 9
(2) Earnings before interest, taxes, depreciation and amortization, or EBITDA,
consists of net loss excluding interest income (expense), net, depreciation
and amortization, non-cash stock compensation expense and non-cash operating
expenses incurred as a result of the issuance of equity securities to third
parties in the total amount of $3.6 million, $101,000 and $1.4 million for
the year ended December 31, 1999, and the three months ended March 31, 1999
and 2000, respectively. EBITDA does not represent funds available for
discretionary use and is not intended to represent cash flow from operations
as measured under generally accepted accounting principles. EBITDA should
not be considered as an alternative to net loss or net cash used in
operating activities, but may be useful to investors as an indication of
operating performance. Our calculations of EBITDA may not be consistent with
similarly titled calculations used by other companies.
The following balance sheet data is presented:
- on a pro forma basis to reflect the conversion upon the completion
of this offering of all convertible preferred stock outstanding at
March 31, 2000 into 13,137,083 shares of common stock; and
- on a pro forma as adjusted basis to reflect the sale of 1,199,999
shares of our preferred stock to Bell Atlantic, (and the subsequent
conversion to common stock upon the completion of this offering) the
accrual of preferred stock dividends, the sale of 576,923, 461,538
and 1,153,846 shares of our common stock at an assumed price of
$13.00 per share to Microsoft, Network Solutions and Bell Atlantic,
respectively at the time of this offering, the $1.5 million payment
in cash of related dividends, the grant of warrants to purchase up
to 778,845 shares of common stock to Microsoft and Network Solutions
at the time of this offering, the exercise on April 14, 2000 of an
option to purchase 540,000 shares of our common stock and the sale
of 5,000,000 shares of our common stock we are offering under this
prospectus, at an assumed initial offering price of $13.00 per
share, after deducting the underwriting discount and estimated
offering expenses that we will pay.
<TABLE>
<CAPTION>
MARCH 31, 2000
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $18,939 $ 18,939 $116,732
Total assets................................................ 42,717 42,717 140,510
Working capital............................................. 1,555 1,555 100,295
Total long-term liabilities................................. 4,994 4,994 4,994
Preferred stock............................................. 40,630 -- --
Other stockholders' equity.................................. (28,959) 11,671 110,411
</TABLE>
We have derived the following summary financial and operating data for our
most recent five quarters in part from our unaudited consolidated financial
statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED(1)
-------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1999 1999 1999 1999 2000
--------- -------- --------- -------- ---------
(IN THOUSANDS, EXCEPT WEB SITE, CUSTOMER DATA AND
AVERAGE MONTHLY REVENUE PER CUSTOMER)
<S> <C> <C> <C> <C> <C>
Revenue......................................... $ 1,009 $ 1,688 $ 2,582 $ 3,842 $ 6,268
Operating expenses.............................. 2,434 5,280 7,457 10,720 17,308
Net loss........................................ (1,436) (3,610) (4,887) (6,851) (10,789)
Number of web sites............................. 16,658 24,235 33,705 45,731 61,442
Number of customers............................. 10,186 14,357 19,822 27,173 36,469
Average monthly revenue per customer............ $ 39.73 $ 45.86 $ 50.36 $ 54.50 $ 65.66
</TABLE>
- ---------------
(1) The operating results for any quarter are not necessarily indicative of
results for any future period. See "Risk Factors -- Our quarterly and annual
results may fluctuate, resulting in fluctuations of the price of our common
stock" and "Management's Discussion and Analysis of Financial Conditions and
Results of Operations -- Selected Quarterly Operating Results."
6
<PAGE> 10
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described below and all
other information contained in this prospectus before deciding to purchase
shares of our common stock. While we have described all risks and uncertainties
that we believe to be material to our business, it is possible that other risks
and uncertainties that affect our business will arise or become material in the
future.
If we are unable to effectively address these risks and uncertainties, our
business, financial condition or results of operations could be materially and
adversely affected. In this event, the trading price of our common stock could
decline and you could lose part or all of your investment.
OUR BUSINESS AND PROSPECTS ARE DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED
OPERATING HISTORY AND OUR BUSINESS MODEL IS STILL EVOLVING.
We began operations as a web hosting business in September 1997. As a
result, we have a limited operating history and our business model is still
evolving. Our limited operating history therefore makes predicting our future
results difficult and makes it difficult to evaluate the execution of our
business model thus far. You should consider our ability to execute our plans
and our prospects in light of the risks, expenses and difficulties that
companies in the new and rapidly evolving market for web hosting and
applications hosting services encounter. We may not achieve a significant rate
of future revenue growth and may not achieve or sustain profitability in future
quarterly or annual periods.
WE HAVE A HISTORY OF SIGNIFICANT LOSSES AND EXPECT THESE LOSSES TO CONTINUE IN
THE FORESEEABLE FUTURE.
We have experienced operating losses and negative cash flows from
operations in each quarterly and annual period since we began operations as a
web hosting business in 1997. As of March 31, 2000, our accumulated losses since
September 17, 1997 have amounted to approximately $30.0 million. We had net
losses of $16.8 million for the year ended December 31, 1999 and $10.8 million
for the three months ended March 31, 2000. While our revenues have grown in
recent periods, future growth will depend upon the success of our expansion
plans. In connection with our expansion plans, we anticipate making significant
investments in sales, marketing, technical and customer support personnel, as
well as in our data center infrastructure. As a result of our expansion plans,
we expect our net losses and negative cash flow from operations to continue for
the foreseeable future.
WE MAY NOT EFFECTIVELY EXECUTE OUR STRATEGY AND AS A RESULT, OTHERS MAY SEIZE
THE MARKET OPPORTUNITY THAT WE HAVE IDENTIFIED.
If we fail to execute our strategy in a timely or effective manner, our
competitors may be able to seize the opportunity we have identified to address
web hosting needs of small and medium-sized businesses. Our business strategy is
complex and requires that we successfully and simultaneously complete many
tasks, and the failure to complete any one of these may jeopardize our strategy
as a whole. Execution of our strategy may be more difficult because our
management team has worked together for less than six months. In order to be
successful, we will need to:
- market our services and build our brand name effectively;
- provide reliable and cost-effective services that can be expanded to meet
the demands of our customers;
- continue to grow our infrastructure to accommodate additional customers
and increased use of our network bandwidth;
- expand our channels of distribution and our international operations;
- continue to respond to competitive developments; and
- attract, retain and motivate qualified personnel.
7
<PAGE> 11
WE OPERATE IN AN EXTREMELY COMPETITIVE MARKET, AND OUR BUSINESS WILL SUFFER IF
WE ARE UNABLE TO COMPETE EFFECTIVELY.
The web hosting and applications hosting markets are highly competitive and
are becoming more so. There are few substantial barriers to entry, and we expect
that we will face additional competition from existing competitors and new
market entrants in the future. We may not have the resources, expertise or other
competitive factors to compete successfully in the future.
Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
As a result, these competitors may be able to:
- develop and expand their network infrastructures and service offerings
more rapidly;
- adapt to new or emerging technologies and changes in customer
requirements more quickly;
- take advantage of acquisition and other opportunities more readily; and
- devote greater resources to the marketing and sale of their services and
adopt more aggressive pricing policies than we can.
In an effort to gain market share, some of our competitors have offered web
hosting services similar to ours at lower prices than ours or with incentives
not matched by us, including free start-up and domain name registration, periods
of free service, low-priced Internet access or free software. In addition, some
of our competitors may be able to provide customers with additional benefits,
including reduced communications costs, which could reduce the overall costs of
their services relative to ours. We may not be able to reduce the pricing of our
services or offer incentives in response to the actions of our competitors
without harming our business. Because of the fierce competition in the web
hosting and applications hosting industry, the number of competitors could lead
to a surplus in service providers, leading to further reductions in the prices
of services. We also believe that the market in which we compete is likely to
encounter consolidation in the near future, which could result in increased
price and other competition that could damage our business.
Our current and potential competitors in the market include web hosting
service providers, applications hosting providers, Internet service providers,
telecommunications companies, large information technology firms that provide a
wide array of information technology services and computer hardware suppliers.
Our competitors may operate in one or more of these areas and include companies
such as AT&T Corp., Concentric Network Corporation, Data Return Corp., Dell
Computer Corporation, Digex Corporation, EarthLink, Inc., Exodus Communications,
Inc., Gateway, Inc., Globix Corporation, and Navisite, Inc. See
"Business -- Competition."
OUR QUARTERLY AND ANNUAL RESULTS MAY FLUCTUATE, RESULTING IN FLUCTUATIONS IN THE
PRICE OF OUR COMMON STOCK.
As our business develops and expands, we may experience significant
quarterly fluctuations in our results of operations. Because of these
fluctuations, comparisons of our operating results from period to period are not
necessarily meaningful and should not be relied upon as an indicator of future
performance. We expect to continue to experience significant fluctuations in our
quarterly and annual results of operations due to a variety of factors, many of
which are outside our control. These factors include:
- demand for and market acceptance of our services;
- introductions of products or services or enhancements by us and our
competitors;
- the mix of services we sell;
- customer retention;
- the timing and success of our advertising and marketing efforts and
service introductions and the timing and success of the marketing efforts
and service introductions of our resellers;
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- the timing and magnitude of capital expenditures, including construction
costs relating to the expansion of operations;
- increased competition in the web hosting and applications hosting
markets;
- changes in our pricing policies and the pricing policies of our
competitors;
- gains or losses of key strategic relationships; and
- other general and industry-specific economic factors.
In addition, a relatively large portion of our expenses is fixed in the
short-term, and therefore our results of operations are particularly sensitive
to fluctuations in revenues. Also, if we were unable to continue using
third-party products in our services offerings, our service development costs
could increase significantly.
WE MAY NEED ADDITIONAL CAPITAL TO FUND OUR OPERATIONS AND FINANCE OUR GROWTH,
AND WE MAY NOT BE ABLE TO OBTAIN IT ON TERMS ACCEPTABLE TO US OR AT ALL.
We believe that our existing capital resources, including the anticipated
proceeds of this offering plus an additional $28.5 million in proceeds from
sales of our common stock to parties with whom we have strategic relationships
that will be received at the time of this offering, will enable us to implement
our current business plan through at least the end of 2001. However, we may
require additional funds during or after that period. Any required financing may
not be available or may be available only on terms that are not favorable to us.
Further, sales of our equity securities to raise additional funds would dilute
the percentage ownership of our shareholders. Any new equity securities may have
rights, preferences or privileges senior to those of our common stock. The
failure to generate sufficient cash flows or to raise sufficient funds may
require us to delay or abandon some or all of our development and expansion
plans or otherwise forego market opportunities and may make it difficult for us
to respond to competitive pressures, any of which could harm our business.
THE INTERNATIONAL MARKET FOR OUR SERVICES IS UNPROVEN, AND AS A RESULT, THE
REVENUE GENERATED BY ANY CURRENT OR FUTURE INTERNATIONAL OPERATIONS MAY NOT BE
ADEQUATE TO OFFSET THE EXPENSE OF ESTABLISHING AND MAINTAINING THOSE OPERATIONS.
The international market for web site and applications hosting and
management services is unproven, and we may not be able to market, sell and
provide our services successfully to small and medium-sized businesses outside
the United States. In addition, our particular approach to providing hosting
services is unproven in international markets and may not be successful outside
the United States. In fiscal 1999, we derived approximately 8% of our revenues
from customers located outside the United States, and we are seeking to expand
our presence overseas. In April 2000, we opened a sales and support center in
Amsterdam as part of our plan to expand our European operations. Our continued
success depends in part on expanding our international customer base and
successfully operating data centers in foreign markets.
IF WE ARE UNABLE TO EXPAND OUR NETWORK INFRASTRUCTURE TO MEET INCREASING DEMAND,
WE COULD LOSE CUSTOMERS AND WE MAY NOT BE ABLE TO SUSTAIN OR INCREASE OUR
REVENUES.
We must continue to expand and adapt our network infrastructure to meet the
increase in the number of users and the amount of information they wish to
transport and to meet changing customer requirements. The expansion and
adaptation of our telecommunications infrastructure will require substantial
financial, operational and management resources as we negotiate
telecommunications capacity with existing and other network infrastructure
suppliers. Significant and rapid expansion of our network due to increased usage
will place additional stress upon our network hardware and traffic management
systems. The ability of our network to connect and manage a substantially larger
number of customers at high transmission speeds is as yet unknown. In addition,
our ability to expand our network to its expected customer levels while
maintaining superior performance is unknown.
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IF WE ARE UNABLE TO CONTINUE TO OBTAIN SUFFICIENT TELECOMMUNICATIONS NETWORK
CAPACITY AT REASONABLE COSTS, WE MAY NOT BE ABLE TO PROVIDE OUR SERVICES AT
PRICES ACCEPTABLE TO OUR CUSTOMERS, THEREBY REDUCING DEMAND FOR OUR SERVICES.
Our success will depend upon the capacity, expandability, reliability and
security of our network infrastructure, including the capacity leased from our
telecommunications network suppliers. Our operating results depend, in part,
upon the pricing and availability of telecommunications network capacity from a
limited number of providers. If capacity is not available to us as our
customers' usage increases, our network may not be able to achieve or maintain
sufficiently high data transmission capacity, reliability or performance. In
addition, our business would suffer if our network suppliers increased the
prices for their services and we were unable to pass along any increased costs
to our customers. Any failure on our part or the part of our third-party
suppliers to achieve or maintain high data transmission capacity, reliability or
performance could significantly reduce customer demand for our services, damage
our business reputation and increase our costs.
WE MAY NOT BE ABLE TO DELIVER OUR SERVICES IF OUR THIRD-PARTY SUPPLIERS DO NOT
PROVIDE US WITH KEY COMPONENTS OF OUR NETWORK INFRASTRUCTURE ON REASONABLE TERMS
OR AT ALL.
We depend on other companies to supply key components of our network
infrastructure. Any failure to obtain needed products or services in a timely
fashion or at an acceptable cost could adversely affect our business. We have no
guaranteed supply arrangements with our vendors and do not carry significant
inventories. In the event of equipment failure, we may not have the necessary
hardware or parts on hand and may not be able to obtain them from our suppliers
in a timely manner. Our inability or failure to obtain the necessary hardware or
parts on a timely basis could result in sustained equipment failure and a loss
of revenue due to customer loss or claims for service credits under our service
level guarantees. In addition, the inability to obtain equipment or technical
services on terms acceptable to us would force us to spend time and money
selecting and obtaining new equipment, training our personnel to use different
equipment and deploying alternative components needed to integrate the new
equipment.
WE DEPEND ON OUR RESELLER SALES CHANNEL TO MARKET AND SELL MANY OF OUR SERVICES.
WE DO NOT CONTROL OUR RESELLERS, AND IF WE FAIL TO DEVELOP OR MAINTAIN GOOD
RELATIONS WITH RESELLERS, WE MAY NOT ACHIEVE THE GROWTH IN CUSTOMERS AND
REVENUES THAT WE EXPECT.
An element of our strategy for growth is to continue to develop our use of
third parties who resell our services. Many of our resellers are web development
or web consulting companies that also sell our web hosting services, but that
generally do not have established customer bases to which they can market our
services. Therefore, in those markets where we do not focus our direct marketing
efforts -- mainly international markets -- we are dependent on third parties to
stimulate demand for our services. Although we attempt to provide our resellers
with incentives such as price discounts on our services that the resellers seek
to resell at a profit, the failure of our services to be commercially accepted
in some markets, whether as a result of a reseller's performance or otherwise,
could cause our current resellers to discontinue their relationships with us,
and we may not be successful in establishing additional reseller relationships
as needed.
BECAUSE WE OPERATE IN A NEW AND EVOLVING MARKET WITH UNCERTAIN PROSPECTS FOR
GROWTH, WE MAY BE UNABLE TO SUSTAIN GROWTH IN OUR CUSTOMER BASE.
The market for web hosting and applications hosting services for small and
medium-sized businesses has only recently begun to develop and is evolving
rapidly. Our future growth, if any, will depend upon the willingness of small
and medium-sized businesses to outsource web hosting and applications hosting
services and our ability to increase our average revenue per customer and our
customers' willingness to execute long-term contracts for hosting services. The
market for our services may not develop further, our services may not be more
widely adopted, and significant numbers of businesses or organizations may not
use the Internet for commerce and communication. If this market fails to develop
further or develops
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more slowly than expected, or if our services do not achieve broader market
acceptance, we will not be able to grow our customer base.
In addition, we must be able to differentiate ourselves from our
competition through our service offerings and brand recognition in order to
attract customers and to grow our average revenue per customer. These activities
may be more expensive than we anticipate, and we may not be successful in
differentiating ourselves, achieving market acceptance of our services or
selling additional services to our existing customer base. We may also
experience difficulties that could delay or prevent the successful development,
introduction or marketing of these services. If we are unable, for technical or
other reasons, to develop and introduce new services or products or enhancements
to existing services in a timely manner, or if new services do not achieve
market acceptance in a timely manner or at all, it would be difficult for us to
attract customers or to grow our average revenue per customer.
WE MAY NOT BE ABLE TO ADAPT TO EVOLVING TECHNOLOGIES AND CUSTOMER DEMANDS.
In the web and applications hosting industry, service providers must keep
pace with evolving technologies in order to offer relevant, sophisticated
services on a timely basis to meet rapidly changing customer demands. Our future
success will depend, in part, upon our ability to offer services that
incorporate leading technologies, address the increasingly sophisticated and
varied needs of our current and prospective web and applications hosting
customers and respond to technological advances and emerging industry standards
and practices on a timely and cost-effective basis. The market for our services
is characterized by rapidly changing and unproven technologies, evolving
industry standards, changes in customer needs, emerging competition and frequent
new service introductions. To be successful, we must continually improve the
performance, features and reliability of our services, including our proprietary
technologies, and modifying our business strategies accordingly. We could also
incur substantial costs if we need to modify our services or infrastructure in
order to adapt to these changes. Technological advances may have the effect of
encouraging some of our current or future customers to rely on in-house
personnel and equipment to furnish the services that we currently provide.
IF WE ARE UNABLE TO MAINTAIN THE COMPATIBILITY OF OUR SERVICES WITH PRODUCTS
OFFERED BY OUR VENDORS, WE COULD LOSE OR FAIL TO ATTRACT CUSTOMERS.
We believe that our ability to compete successfully also depends upon the
continued compatibility of our services with products offered by various
vendors. Enhanced or newly developed third-party products may not be compatible
with our infrastructure, and such products may not adequately address the needs
of our customers. Although we currently intend to support emerging standards,
industry standards may not be established, and, even if they are established, we
may not be able to conform to these new standards in a timely fashion in order
to maintain a competitive position in the market. Our failure to conform to the
prevailing standard, or the failure of a common standard to emerge, could cause
us to lose customers or fail to attract new customers. In addition, products,
services or technologies developed by others could render our services
noncompetitive or obsolete.
OUR RECENT GROWTH HAS STRAINED OUR RESOURCES, AND IF WE ARE UNABLE TO MANAGE OUR
ANTICIPATED GROWTH, WE MAY NOT BE ABLE TO MAINTAIN THE QUALITY OF OUR SERVICES
AND OPERATIONS OR CONTROL OUR COSTS EFFECTIVELY.
We are currently experiencing a period of rapid expansion of our customer
base. In addition, the number of our employees increased from 17 on March 31,
1998 to 471 on May 5, 2000. This growth has placed and, if it continues, will
place a significant strain on our financial, management, operational and other
resources. In addition, we must manage relationships with a growing number of
third parties as we seek to complement our service offerings and increase our
indirect sales efforts. Our management,
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personnel, systems, procedures and controls may not be adequate to support our
existing and future operations. Our ability to manage our growth effectively
will require us to continue:
- enhancing management information systems and forecasting procedures;
- further developing our operating, administrative, financial, billing, and
accounting systems and controls;
- maintaining close coordination among our engineering, accounting,
finance, marketing, sales and operations organizations;
- expanding, training and managing our employee base; and
- expanding our finance, administrative and operations staff.
The failure to manage our growth effectively could adversely affect the
quality of our services, our business and our financial condition. We may not be
able to maintain the quality of our operations, to control our costs and to
expand our internal systems in order to support our desired growth.
IF INTERNET USAGE DOES NOT CONTINUE TO INCREASE OR IF THE INTERNET FAILS TO
PERFORM RELIABLY, WE MAY NOT BE ABLE TO ATTRACT CUSTOMERS.
Use of the Internet for retrieving, sharing and transferring information
among businesses, consumers, suppliers and partners has recently begun to
increase rapidly. The adoption of the Internet for information retrieval and
exchange, commerce and communications, particularly by those enterprises that
have historically relied upon alternative means of information gathering,
commerce and communications, generally requires the adoption of a new medium of
conducting business and exchanging information. If the Internet as a commercial
or business medium fails to develop further or develops more slowly than
expected, we would not be able to grow our customer base as quickly as desired
and our customers would be less likely to require more complex, higher revenue
services from us.
As a web and applications hosting company, our success depends in large
part on continued growth in the use of the Internet, and our business would be
adversely affected if Internet usage does not continue to grow. Internet usage
and growth may be inhibited for a number of reasons, such as:
- inadequate network infrastructure;
- security concerns;
- uncertainty of legal and regulatory issues concerning the use of the
Internet;
- inconsistent quality of service;
- lack of availability of cost-effective, reliable, high-speed service; and
- failure of Internet use to expand internationally.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth, or its performance and
reliability may decline. For example, web sites have experienced interruptions
in service as a result of outages and other delays occurring throughout the
Internet network infrastructure. If these outages or delays occur frequently,
use of the Internet as a commercial or business medium could in the future grow
more slowly or decline.
WE COULD EXPERIENCE SYSTEM FAILURES WHICH COULD HARM OUR REPUTATION, CAUSE
CUSTOMERS TO SEEK REIMBURSEMENT FOR SERVICES, AND CAUSE CUSTOMERS TO SEEK
ANOTHER PROVIDER FOR SERVICES.
We must be able to operate our network management systems around the clock
without interruption. Our operations depend upon our ability to protect our
network infrastructure, equipment and customer files against damage from human
error, fire, earthquakes, hurricanes, floods, power loss, telecommunications
failures, sabotage, intentional acts of vandalism and similar events. Despite
precautions we have taken, and plan to take, we do not have a formal disaster
recovery plan and the occurrence of a natural disaster or
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other unanticipated problems at our data centers could result in interruptions
in our services. Although we have attempted to build redundancy into our
network, our network is currently subject to various points of failure, and a
problem with one of our routers (devices that move information from one computer
network to another) or switches could cause an interruption in our services to a
portion of our customers. In the past we have experienced periodic interruptions
in service. In addition, failure of any of our telecommunications providers to
provide the data communications capacity we require, as a result of human error,
a natural disaster or other operational disruption, could result in
interruptions in our services. Any future interruptions could:
- cause customers or end users to seek damages for losses incurred;
- require us to replace existing equipment or add redundant facilities;
- damage our reputation for reliable service;
- cause existing customers to cancel their contracts; or
- make it more difficult for us to attract new customers.
We currently offer to all customers a 99.9% service level warranty. Under
this policy, we guarantee that each customer's Web site will be available at
least 99.9% of the time in each calendar month for as long as the customer is
using our web hosting services. If we were to experience widespread system
failures, we could incur significant costs under this warranty.
OUR DATA CENTERS AND NETWORKS MAY BE VULNERABLE TO SECURITY BREACHES.
A significant barrier to electronic commerce and communications is the need
for secure transmission of confidential information over public networks. Some
of our services rely on security technology licensed from third parties that
provides the encryption and authentication necessary to effect the secure
transmission of confidential information. Despite our design and implementation
of a variety of network security measures, unauthorized access, computer
viruses, accidental or intentional actions and other disruptions could occur. In
the past, we have experienced and may in the future experience delays or
interruptions in service as a result of the accidental or intentional actions of
Internet users, current and former employees or others. In addition,
inappropriate use of the network by third parties could also potentially
jeopardize the security of confidential information, such as credit card and
bank account numbers stored in our computer systems. These security problems
could result in our liability and could also cause the loss of existing
customers and potential customers. In addition, third parties could interfere
with the operation of our customers' web sites through intentional attacks
including causing an overload of traffic to these web sites.
Although we intend to continue to implement industry-standard security
measures, third parties may be able to overcome any measures that we implement.
The costs required to eliminate computer viruses and alleviate other security
problems could be prohibitively expensive and the efforts to address such
problems could result in interruptions, delays or cessation of service to our
customers, and harm our reputation and growth. Concerns over the security of
Internet transactions and the privacy of users may also inhibit the growth of
the Internet, especially as a means of conducting commercial transactions.
DISRUPTION OF OUR SERVICES CAUSED BY UNKNOWN SOFTWARE DEFECTS COULD HARM OUR
BUSINESS AND REPUTATION.
Our service offerings depend on complex software, including our proprietary
software tools and software licensed from third parties. Complex software often
contains defects, particularly when first introduced or when new versions are
released. We may not discover software defects that affect our new or current
services or enhancements until after they are deployed. Although we have not
experienced any material software defects to date, it is possible that defects
may occur in the software. These defects could cause service interruptions,
which could damage our reputation or increase our service costs, cause us to
lose revenue, delay market acceptance or divert our development resources.
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PROVIDING SERVICES TO CUSTOMERS WITH CRITICAL WEB SITES AND WEB-BASED
APPLICATIONS COULD POTENTIALLY EXPOSE US TO LAWSUITS FOR CUSTOMERS' LOST PROFITS
OR OTHER DAMAGES.
Because our web hosting and applications hosting services are critical to
many of our customers' businesses, any significant interruption in our services
could result in lost profits or other indirect or consequential damages to our
customers. Although the standard terms and conditions of our customer contracts
disclaim our liability for any such damages, a customer could still bring a
lawsuit against us claiming lost profits or other consequential damages as the
result of a service interruption or other web site or application problems that
the customer may ascribe to us. A court might not enforce any limitations on our
liability, and the outcome of any lawsuit would depend on the specific facts of
the case and legal and policy considerations even if we believe we would have
meritorious defenses to any such claims. In such cases, we could be liable for
substantial damage awards. Such damage awards might exceed our liability
insurance by unknown but significant amounts, which would seriously harm our
business.
WE MAY NOT BE ABLE TO SUCCESSFULLY SUSTAIN OUR GROWTH IF WE ARE UNABLE TO
ATTRACT AND RETAIN ADDITIONAL HIGHLY SKILLED PERSONNEL.
We are currently experiencing rapid growth and intend to continue
expanding. Since beginning our operations as a web hosting business in September
1997, we have grown to 471 employees as of May 5, 2000. We believe that we will
need to hire approximately 200 additional personnel in all areas of our business
over the next 12 months. Our future success will also depend on our ability to
attract, train, retain and motivate highly qualified technical, marketing, sales
and management personnel. Competition for qualified personnel among
Internet-related businesses is intense, and we may not be able to attract and
retain key personnel.
IF OUR MANAGEMENT TEAM, WHICH HAS WORKED TOGETHER FOR ONLY A BRIEF TIME, IS
UNABLE TO WORK TOGETHER EFFECTIVELY, WE MAY NOT BE ABLE TO IMPLEMENT OUR PLANS
SUCCESSFULLY.
We have recently hired key employees and officers, including our Executive
Vice President -- Operations, Chief Financial Officer, Senior Vice
President -- Sales, Marketing and Business Development, General Counsel, and
Chief Technical Officer. As a result, our management team has worked together
for only a brief time. Our success depends in significant part upon the
continued services of our senior management personnel. Any of our officers or
employees can terminate his or her relationship with us at any time. We
currently have employment agreements with only our most senior management
personnel and we carry key-man life insurance only for our President and Chief
Executive Officer.
IMPAIRMENT OF OUR INTELLECTUAL PROPERTY RIGHTS COULD NEGATIVELY AFFECT THE
REPUTATION OF OUR BRAND OR COULD ALLOW COMPETITORS TO MINIMIZE ANY ADVANTAGE
THAT OUR PROPRIETARY TECHNOLOGY GIVES US.
We rely on a combination of copyright, trademark, service mark and trade
secret laws and contractual restrictions to establish and protect proprietary
rights in our services, particularly including the name "Interland" and our
proprietary customer management system. We have filed trademark registration
applications in the U.S. that, even if granted, may not fully protect our
ability to use these trademarks in all areas of the U.S. In addition, we have
spent and expect to continue to invest significant amounts to build brand
recognition of our name, and the return on this significant marketing investment
could be lost if we were to lose or be restricted in the use of the Interland
name to market our services. Third parties may object to our use of some of our
trademarks, service marks, trade names, slogans or other devices, which could
require that those indicia be changed or altered. At this point, we have no
patented technology that would preclude or inhibit competitors from entering our
market. While we contemplate that we will file several patent applications on
particular aspects of our technology, we cannot be sure that we will receive any
patents. We have entered into confidentiality and other agreements with our
employees and contractors, including agreements in which they assign their
rights in inventions to us. We have also entered into nondisclosure agreements
with our suppliers, distributors and some of customers in order to limit access
to and disclosure of our proprietary information. These contractual arrangements
or the other steps we have taken to protect our intellectual property may not
prove sufficient to prevent
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misappropriation of our technology or to deter independent third-party
development of similar technologies. The laws of some foreign countries may not
protect our services or intellectual property rights to the same extent as do
the laws of the United States. For example, there may be potential conflicts
with the use of our name in other countries. We do not know what the impact of
being unable to use our name in other countries may be, although this inability
may cause us to incur significant additional expenses to build brand recognition
in those countries.
We also rely on several technologies that we license from third parties.
These third-party technology licenses may not continue to be available to us on
commercially reasonable terms. The loss of the ability to use such technology
could require us to obtain the rights to use substitute technology, which could
be more expensive or offer lower quality or performance.
WE MAY BE ACCUSED OF INFRINGING THE PROPRIETARY RIGHTS OF OTHERS, WHICH COULD
SUBJECT US TO COSTLY AND TIME CONSUMING LITIGATION.
In addition to the technologies we develop or have developed, we license
technologies from third parties and may license additional technologies in the
future. To date, we have not been notified that our services infringe on the
proprietary rights of any third parties, but third parties could claim
infringement by us with respect to current or future services. We expect that
participants in our markets will be increasingly subject to infringement claims
as the number of services and competitors in our industry segment grows. Any
such claim, whether meritorious or not, could be time-consuming, result in
costly litigation, cause service installation delays or require us to enter into
royalty or licensing agreements. These royalty or licensing agreements might not
be available on terms acceptable to us or at all. In addition, third parties may
change the terms of their license agreements in ways that would prevent us from
using technologies licensed from them on commercially reasonable terms or that
would prevent us from using them at all. We may not be able to replace those
technologies with technologies that have the same features or functions on
commercially reasonable terms or at all.
WE COULD FACE LIABILITY FOR INFORMATION DISSEMINATED THROUGH OUR NETWORK.
The law relating to the liability of on-line services companies for
information carried on or disseminated through their networks is currently
unsettled. Claims could be made against on-line services companies under both
United States and foreign law for defamation, negligence or copyright or
trademark infringement, or other theories based on the nature and content of the
materials disseminated through their networks. Several private lawsuits seeking
to impose such liability upon other entities are currently pending against other
companies. In addition, we may become subject to proposed legislation that would
impose liability for or prohibit the transmission over the Internet of some
types of information. Other countries may also enact legislation or take action
that could impose liability on us or cause us not to be able to operate in those
countries. The imposition upon us and other on-line services of potential
liability for information carried on or disseminated through our systems could
require us to implement measures to reduce our exposure to such liability, which
may require us to expend substantial resources, or to discontinue service
offerings. The increased attention focused upon liability issues as a result of
these lawsuits and legislative proposals also could affect the growth of
Internet use.
OUR BUSINESS MAY BE IMPACTED BY GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES.
We are not currently subject to direct federal, state or local government
regulation, other than regulations that apply to businesses generally. Only a
small body of laws and regulations currently applies specifically to access to,
or commerce on, the Internet. Due to the increasing popularity and use of the
Internet, however, laws and regulations with respect to the Internet may be
adopted at federal, state and local levels, covering issues such as user
privacy, freedom of expression, pricing, characteristics and quality of products
and services, taxation, advertising, intellectual property rights, information
security and the convergence of traditional telecommunications services with
Internet communications. We cannot fully predict the nature of future
legislation and the manner in which government authorities may interpret and
enforce. As a result, we and our customers could be subject to potential
liability under future legislation
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which in turn could have a material adverse effect on our business, results of
operations and financial condition. For example, if legislation that makes
transacting business over the Internet, such as e-commerce, less favorable or
otherwise curtails the growth of the Internet is adopted in the U.S. or
internationally, our business would suffer. The adoption of any such laws or
regulations might decrease the growth of the Internet, which in turn could
decrease the demand for our services or increase the cost of doing business or
in some other manner harm our business.
In addition, applicability to the Internet of existing laws governing
issues such as property ownership, copyright and other intellectual property
issues, taxation, libel, obscenity and personal privacy is uncertain. These laws
generally pre-date the advent of the Internet and related technologies and, as a
result, do not contemplate or address the unique issues of the Internet and
related technologies. Changes to laws intended to address these issues could
create uncertainty in the marketplace that could reduce demand for our services
or increase the cost of doing business as a result of costs of litigation or
increased service delivery costs, or could in some other manner have a material
adverse effect our business, results of operations and financial condition. In
addition, because our services are available over the Internet virtually
worldwide, and because we facilitate sales by our customers to end users located
in multiple states and foreign countries, such jurisdictions may claim that we
are required to qualify to do business as a foreign corporation in each such
state or that we have a permanent establishment in each such foreign country.
WE FACE RISKS INHERENT IN DOING BUSINESS IN INTERNATIONAL MARKETS THAT COULD
ADVERSELY AFFECT THE SUCCESS OF OUR INTERNATIONAL OPERATIONS.
Although we have historically derived a portion of our revenues from
foreign sales, we have just recently commenced business in our first foreign
location and must now deal more directly with the risks inherent in doing
business in international markets. These risks include different regulatory
requirements, trade barriers, challenges in staffing and managing foreign
operations, currency risk, different tax structures which may adversely impact
earnings, and foreign political and economic instability, any of which could
adversely affect the success of our international operations. We also expect
that many of the costs of staffing and managing our international operations
will be greater than for comparable U.S. based operations, including higher
employee costs, longer accounts receivable collection periods and greater
difficulty in collecting accounts receivable.
In addition, as a web and applications hosting company, we face challenges
in offering these services to customers in foreign markets that can differ
significantly from the challenges we face in the United States, such as:
- different Internet access fees;
- different technology standards;
- different privacy, censorship and service provider liability standards
and regulations; and
- less protective intellectual property laws.
Any of these risks could adversely affect our ability to operate or expand
internationally, which would limit the growth of our business. In addition, we
could suffer significant operating losses if the revenue generated by our
current sales and support center or any future international data center or
other operations is not adequate to offset the expense of establishing and
maintaining those international operations.
WE HAVE BROAD DISCRETION IN THE USE OF THE NET PROCEEDS FROM THIS OFFERING AND
IF WE FAIL TO USE THE NET PROCEEDS EFFECTIVELY, WE MAY NOT BE SUCCESSFUL IN OUR
EFFORTS TO GROW OUR BUSINESS AND REVENUES.
As of the date of this prospectus, we cannot specify with certainty the
particular uses for the net proceeds we will receive from this offering. We
currently intend to apply the net proceeds from the offering as described under
"Use of Proceeds" in this prospectus, but our management will have broad
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discretion in the application of the net proceeds. If our management fails to
apply these funds effectively, we may not be successful in our efforts to grow
our business and revenues.
OUR PRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS WILL OWN
APPROXIMATELY 73% OF OUR COMMON STOCK, WHICH MAY ALLOW THEM TO EXERT INFLUENCE
OVER US OR TO PREVENT A CHANGE OF CONTROL.
After this offering our shareholders who currently own over 5% of our
common stock, our directors and our executive officers will beneficially own
approximately 73% of our outstanding common stock. These shareholders will be
able to exercise significant influence over all matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions. This concentration of ownership may also delay or
prevent a change in control of us even if beneficial to our shareholders.
SOME PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS MAY DISCOURAGE
TAKEOVERS THAT YOU MAY BELIEVE ARE IN YOUR INTEREST.
Our articles of incorporation and bylaws contain some provisions that may
delay, discourage or prevent an attempted acquisition or change in control. Our
articles and bylaws establish:
- the authority of the board of directors to issue series of preferred
stock with special powers, preferences and rights without shareholder
approval;
- the authority of the board of directors to consider constituencies other
than the shareholders -- including employees, customers, suppliers and
the community -- in making decisions, including decisions regarding
control of Interland;
- the right of the board of directors to alter our bylaws without prior
shareholder approval; and
- the right of the board of directors to elect a director to fill a vacancy
created by the expansion of the board of directors.
In addition, our bylaws establish three classes of directors to serve three year
staggered terms. These provisions of our articles of incorporation and bylaws
could discourage tender offers or other transactions that might otherwise result
in your receiving a premium over the market price for your common stock. See
"Description of Capital Stock" in this prospectus for more information about our
articles of incorporation and bylaws.
Before the completion of this offering, we intend to adopt a shareholder
rights plan. This plan will entitle our shareholders to acquire additional
shares of our preferred stock when a third party acquires % of our common
stock or commences or announces its intent to commence a tender offer for at
least % of our common stock. This plan could delay, deter, or prevent a
change of control.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price of our common stock is substantially
higher than the net tangible book value of our common stock. Therefore, if you
purchase our common stock in this offering, you will incur immediate dilution of
approximately $10.62 in the net tangible book value per share of common stock
from the assumed initial public offering price of $13.00 per share. We have
agreed to sell Microsoft and Network Solutions shares of our common stock at a
price that is the lesser of $13.00 or the actual price to the public of common
stock sold in this offering. This price could be less than the price you pay and
you may suffer additional dilution. You will also experience additional dilution
upon the exercise of outstanding stock options and warrants at prices below the
initial public offering price.
17
<PAGE> 21
, OR %, OF OUR TOTAL OUTSTANDING SHARES ARE RESTRICTED FROM
IMMEDIATE RESALE BUT MAY BE SOLD INTO THE MARKET IN THE NEAR FUTURE, WHICH COULD
ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
After this offering is completed, there will be 46,432,542 issued and
outstanding shares of our common stock, assuming no exercise of the
underwriters' over-allotment option. All of the shares of our common stock sold
in this offering will be freely tradable unless purchased by our "affiliates."
In connection with this offering, our officers, directors and some of our
shareholders who together own approximately shares of our common
stock agreed to refrain from selling any shares of our common stock for a period
of 180 days after the date of this prospectus. However, these restrictions may
be waived in some circumstances. The market price of our common stock could drop
due to sales of a large number of shares of our common stock in the market after
this offering or the perception that these sales could occur. These factors
could also make it more difficult for us to raise funds through future offerings
of our common stock.
THE RELIABILITY OF MARKET DATA INCLUDED IN THIS PROSPECTUS IS UNCERTAIN. WE HAVE
NOT INDEPENDENTLY VERIFIED THIS DATA, AND IF IT IS INACCURATE THE GROWTH
POTENTIAL OF OUR BUSINESS AND MARKETS MAY BE LESS THAN ANTICIPATED.
Since we operate in a new and rapidly changing market, we have included
market data from industry publications. The reliability of these data cannot be
assured. Market data used throughout this prospectus were obtained from internal
company surveys and industry publications. Industry publications generally state
that the information contained in these publications has been obtained from
sources believed to be reliable, but that its accuracy and completeness is not
guaranteed. Although we believe market data used in this prospectus to be
reliable, it has not been independently verified. Similarly, internal company
surveys, which we believe to be reliable, have not been verified by any
independent sources.
FORWARD-LOOKING STATEMENTS
This prospectus contains statements about future events and expectations
which we refer to as forward-looking statements. Forward-looking statements are
based on management's beliefs, assumptions and expectations of our future
economic performance, taking into account the information currently available to
them. These statements are not statements of historical fact. Forward-looking
statements involve risks and uncertainties that may cause our actual results,
performance or financial condition to differ materially from the expectations of
future results, performance or financial condition we express or imply in any
forward-looking statements. Factors that could contribute to these differences
include those discussed in "Risk Factors" and in other sections of this
prospectus. The words believe, may, will, should, anticipate, estimate, expect,
intend, objective, seek, strive or similar words, or the negatives of these
words, identify forward-looking statements. We qualify any forward-looking
statements entirely by these cautionary factors.
18
<PAGE> 22
USE OF PROCEEDS
We estimate that our net proceeds from the sale of our common stock in this
offering will be approximately $59.3 million, based on an assumed initial public
offering price of $13.00 per share, after deducting the estimated underwriting
discount and our estimated offering expenses. If the underwriters' exercise
their over-allotment option in full, we estimate that our net proceeds will be
approximately $68.4 million.
We expect to use the net proceeds from this offering as follows:
- approximately $30.0 million over the next two years to enhance and
expand our network infrastructure and for other capital
expenditures;
- approximately $20.0 million over the next two years, to build our
brand through marketing and advertising both domestically and
internationally; and
- to fund operating losses, working capital requirements and general
corporate purposes.
The actual amounts of proceeds used for these purposes may differ
significantly from the above estimates. Our management will retain broad
discretion in the allocation of the net proceeds of this offering. Although we
may use a portion of the net proceeds to pursue possible acquisitions or
strategic investments in complementary businesses, technologies or products in
the future, there are no current plans, agreements or commitments with respect
to any acquisitions or investments of this type. Until we use the proceeds of
this offering for the above purposes, we intend to invest the funds in
short-term, investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We anticipate that
we will retain earnings to support operations and to finance the growth and
development of our business. Therefore, we do not expect to pay cash dividends
in our foreseeable future.
19
<PAGE> 23
CAPITALIZATION
The following table shows our capitalization as of March 31, 2000:
- on an actual basis;
- on a pro forma basis to reflect the conversion upon the completion of
this offering of all convertible preferred stock outstanding at March 31,
2000 into 13,137,083 shares of common stock; and
- on a pro forma, as adjusted basis to reflect the sale of 1,199,999 shares
of our preferred stock to Bell Atlantic (and the subsequent conversion to
common stock upon the completion of this offering), the accrual of
preferred stock dividends, the sale of 576,923, 461,538 and 1,153,846
shares of our common stock at an assumed price of $13.00 per share to
Microsoft, Network Solutions and Bell Atlantic, respectively, at the time
of this offering, the $1.5 million payment in cash of related dividends,
the grant of warrants to purchase up to 778,845 shares of common stock
that will be issued to Microsoft and Network Solutions at the time of
this offering, the exercise on April 14, 2000 of an option to purchase
540,000 shares of our common stock and the sale of 5,000,000 shares of
our common stock we are offering under this prospectus at an assumed
initial offering price of $13.00 per share, after deducting the
underwriting discount and estimated offering expenses that we will pay.
You should read the following capitalization data together with "Use of
Proceeds," "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the financial statements and
accompanying notes and the other financial data included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 18,939 $ 18,939 $116,732
======== ======== ========
Long-term capital lease obligation.......................... $ 2,935 $ 2,935 $ 2,935
-------- -------- --------
Shareholders' equity:
Preferred stock; no par value, 25,000,000 shares
authorized; 13,137,083 shares issued and outstanding,
actual; no shares issued and outstanding, pro forma and
pro forma, as adjusted................................. 40,630 -- --
Common stock; no par value, 100,000,000 shares authorized,
24,363,153 shares issued and outstanding, actual;
37,500,236 shares issued and outstanding, pro forma;
and 46,432,542 shares issued and outstanding, pro
forma, as adjusted..................................... 7,022 47,652 146,962
Warrants.................................................. 5,242 5,242 11,285
Deferred product development costs(1)..................... (2,026) (2,026) (5,383)
Deferred marketing costs(1)............................... (4,603) (4,603) (7,289)
Deferred compensation..................................... (4,568) (4,568) (4,568)
Accumulated deficit....................................... (30,026) (30,026) (30,596)
-------- -------- --------
Total shareholders' equity............................. 11,671 11,671 110,411
-------- -------- --------
Total capitalization.............................. $ 14,606 $ 14,606 $113,346
======== ======== ========
</TABLE>
- ---------------
(1) These amounts relate to the value of equity securities issued to Microsoft
and Network Solutions. For further discussion see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity
and Capital Resources."
20
<PAGE> 24
DILUTION
As of March 31, 2000, our net tangible book value was approximately $11.7
million or $0.48 per share of outstanding common stock. Our pro forma net
tangible book value as of March 31, 2000 was $11.7 million, or $0.31 per share
of outstanding common stock, after giving effect to the conversion upon
completion of this offering of all convertible preferred stock outstanding at
March 31, 2000 into common stock. The pro forma net tangible book value per
share represents our total tangible assets less total liabilities, divided by
the total number of shares of common stock outstanding on a pro forma basis
before this offering. Net tangible book value has also been adjusted to reflect
the adjustments shown in the pro forma as adjusted column under
"Capitalization," which includes the effect of the sale of 1,199,999 shares of
our preferred stock to Bell Atlantic (and the subsequent conversion to common
stock upon the completion of this offering), the accrual of preferred stock
dividends, the sale of 576,923, 461,538 and 1,153,846 shares of our common stock
at an assumed price of $13.00 per share to Microsoft, Network Solutions and Bell
Atlantic, respectively at the time of this offering, the $1.5 million payment in
cash of related dividends, the grant of warrants to purchase up to 778,845
shares of common stock that will be issued to Microsoft and Network Solutions at
the time of this offering, the exercise on April 14, 2000 of an option to
purchase 540,000 shares of our common stock and the sale of 5,000,000 shares of
our common stock we are offering under this prospectus at an assumed initial
offering price of $13.00 per share, after deducting underwriting discount and
estimated offering expenses that will pay. Dilution per share represents the
difference between the amount per share paid by investors in this offering and
the pro forma as adjusted net tangible book value per share after this offering.
After giving effect to this offering, our adjusted pro forma as adjusted net
tangible book value as of March 31, 2000 would have been $100.4 million, or
$2.38 per share. This represents an immediate increase in net tangible book
value of $2.07 per share to existing shareholders and an immediate dilution in
net tangible book value of $10.62 per share to new investors purchasing shares
at an assumed initial public offering price. The following table illustrates the
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Net tangible book value per share at March 31, 2000....... $ 0.48
Change in net tangible book value due to pro forma
conversion of preferred stock.......................... (0.17)
Change in net tangible book value due to other
adjustments............................................ 2.07
------
Pro forma as adjusted net tangible book value per share
after this offering....................................... 2.38
------
Dilution per share to new investors......................... $10.62
======
</TABLE>
The following table summarizes, on a pro forma, as adjusted basis as of May
10, 2000, the difference between existing shareholders and new investors with
respect to the number of shares of common stock purchased, the total
consideration paid and the average price per share paid. These amounts do not
include estimated underwriting discount and offering expenses that we will pay.
The table assumes that the initial public offering price will be $13.00 per
share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders................... 41,432,542 89.2% $ 87,652,000 57.4% $ 2.12
New investors........................... 5,000,000 10.8 65,000,000 42.6 $13.00
---------- ---- ------------ -----
Total......................... 46,432,542 100% $152,652,000 100%
========== ==== ============ =====
</TABLE>
The foregoing table assumes no exercise of stock options or warrants. As of
May 10, 2000, there were options outstanding to purchase 5,241,996 shares of
common stock at a weighted exercise price of $4.16 per share, and warrants to
purchase up to 1,317,413 shares of our common stock at a weighted average
exercise price of $6.27 per share. We have also agreed to grant additional
warrants to Microsoft and Network Solutions at the time of this offering. To the
extent outstanding options and warrants are exercised, there will be further
dilution to new investors.
21
<PAGE> 25
SELECTED FINANCIAL DATA
The following table shows our selected financial data for the period from
inception (September 18, 1997) to December 31, 1997, for the years ended
December 31, 1998 and 1999 and for the three months ended March 31, 1999 and
2000. We have derived the financial data for the period from inception
(September 18, 1997) to December 31, 1997 and for the years ended December 31,
1998 and 1999 from our audited financial statements, which Arthur Andersen LLP,
independent public accountants has audited. We have derived the financial data
for the three months ended March 31, 1999 and March 31, 2000 from our unaudited
financial statements. In our opinion, this data includes all adjustments
consisting of only normal and recurring adjustments necessary for a fair
presentation of the information. The financial data may not necessarily be
indicative of our results to be expected for the year ended December 31, 2000.
You should read the following selected financial data together with "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," the consolidated financial statements and accompanying
notes and the other financial data included elsewhere in this prospectus. The
following data is in thousands, except per share, share, web site, customer and
average monthly revenue per customer data.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
INCEPTION THREE MONTHS ENDED
(SEPTEMBER 18, YEAR ENDED YEAR ENDED -------------------------
1997) TO DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
DECEMBER 31, 1997 1998 1999 1999 2000
------------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. $ 5 $ 1,387 $ 9,121 $ 1,009 $ 6,268
Operating expenses.................... (119) (3,708) (25,891) (2,434) (17,308)
----------- ----------- ----------- ----------- -----------
Operating loss........................ (114) (2,321) (16,770) (1,425) (11,040)
Interest income (expense), net........ -- (18) (14) (11) 251
----------- ----------- ----------- ----------- -----------
Net loss.............................. (114) (2,339) (16,784) $ (1,436) $ (10,789)
Preferred stock beneficial conversion
and dividends....................... -- -- (9,559)(1) -- (586)
----------- ----------- ----------- ----------- -----------
Net loss applicable to common
shareholders........................ $ (114) $ (2,339) $ (26,343) $ (1,436) $ (11,375)
=========== =========== =========== =========== ===========
Basic and diluted net loss per common
share............................... $ (0.01) $ (0.13) $ (1.23) $ (0.07) $ (0.48)
=========== =========== =========== =========== ===========
Shares used in computing net loss per
share............................... 17,631,191 18,316,449 21,461,161 19,654,296 23,936,350
OTHER DATA:
EBITDA(2)............................. $ (114) $ (2,206) $ (12,221) $ (1,213) $ (9,048)
Net cash used in operating
activities.......................... (110) (30) (2,397) (54) (2,645)
Net cash used in investing
activities.......................... (2) (1,102) (8,752) (682) (7,785)
Net cash provided by financing
activities.......................... 139 1,811 34,953 966 4,859
Number of web sites................... 0 10,611 45,731 16,658 61,442
Number of customers................... 0 6,746 27,173 10,186 36,469
Average monthly revenue per
customer............................ $ 0 $ 34.26 $ 45.49 $ 39.73 $ 65.66
</TABLE>
- ---------------
(1) This amount consists of approximately $9.4 million associated with the
beneficial conversion feature of our preferred stock into common stock and
approximately $150,000 in an accrued preferred stock dividend. The
beneficial conversion is a result of the difference between the initial
purchase price paid by the preferred stock holders and actual conversion
price of the preferred stock into common stock.
(2) Earnings before interest, taxes, depreciation and amortization, or EBITDA,
consists of net loss excluding interest income (expense), net, depreciation
and amortization, non-cash stock compensation expense and non-cash operating
expenses incurred as a result of the issuance of equity securities to third
parties in the total amount of $3.6 million, $101,000 and $1.4 million for
the year ended December 31, 1999, and the three months ended March 31, 1999
and 2000, respectively. EBITDA does not represent funds available for
management's discretionary use and is not intended to represent cash flow
from operations as measured under generally accepted accounting principles.
EBITDA should not be considered as an alternative to net loss or net cash
used in operating activities, but may be useful to investors as an
indication of operating performance. Our calculations of EBITDA may not be
consistent with similarly titled calculations used by other companies.
22
<PAGE> 26
The following balance sheet data is presented:
- on a pro forma basis to reflect the conversion upon the completion of
this offering of all convertible preferred stock outstanding at March 31,
2000 into 13,137,083 shares of common stock; and
- on a pro forma as adjusted basis to reflect the sale of 1,199,999 shares
of our Series A Preferred Stock to Bell Atlantic (and subsequent
conversion to common stock upon completion of this offering), the accrual
of preferred stock dividends, the sale of 576,923, 461,538 and 1,153,846
shares of our common stock at an assumed offering price of $13.00 per
share to Microsoft, Network Solutions and Bell Atlantic, respectively at
the time of this offering, the $1.5 million payment in cash of related
dividends, the grant of warrants to purchase up to 778,845 shares of
common stock that will be issued to Microsoft and Network Solutions at
the time of this offering, the exercise on April 14, 2000 of an option to
purchase 540,000 shares of our common stock, and the sale of 5,000,000
shares of our common stock we are offering under this prospectus, at an
assumed initial offering price of $13.00 per share, after deducting the
underwriting discount and estimated offering expenses that we will pay.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998 MARCH 31, 2000
------------ ------------ ---------------------------------
PRO FORMA
ACTUAL ACTUAL ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $28 $ 706 $18,939 $18,939 $116,732
Total assets.............................. 30 1,781 42,717 42,717 140,510
Working capital........................... 24 (1,627) 1,555 1,555 100,295
Total long-term liabilities............... -- 350 4,994 4,994 4,994
Preferred stock........................... -- -- 40,630 -- --
Other stockholders' equity................ 26 (938) (28,959) 11,671 110,411
</TABLE>
23
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read together with the financial statements and the
accompanying notes included elsewhere in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in those
forward-looking statements as a result of certain factors, including, but not
limited to, those described under and included in other portions of the
prospectus.
OVERVIEW
We provide a broad range of web hosting and applications hosting and other
related web-based business solutions specifically designed to meet the needs of
small and medium-sized businesses. Our business is rapidly evolving and we have
limited operating history. As a result, we believe that period-to-period
comparisons of our revenue and operating results, including our cost of revenue
and other operating expenses as a percentage of total revenue, are not
meaningful and should not be relied upon as indicators of future performance. We
do not believe that our historical growth rates are indicative of future
results. See "Risk Factors" beginning on page 7 for a discussion of risks
related to buying shares of our common stock.
Currently, we derive a substantial majority of our revenues from shared and
dedicated hosting services. We also derive revenue from applications hosting and
consulting services. Our strategy is to grow our customer base and revenues by
marketing value-added services to small and medium-sized businesses. We expect
that our number of customer accounts will grow rapidly, and that the revenue
from the sale of higher margin services, such as dedicated hosting, applications
hosting and consulting services, will increase more rapidly than our base shared
hosting revenue. Currently, most of our hosting revenues are generated from
recurring monthly fees. The remainder is derived from one-time-set-up fees for
installation. We currently sell our services under agreements having terms of
three months to two years. Most of our customer agreements may be canceled
within the first thirty days. We receive payment in advance typically for the
full contract amount by direct charges to credit or debit cards. We recognize
all revenues, including set-up fees, ratably over the term of the contract.
Our expenses consist of:
- Cost of revenue, which is mainly comprised of compensation and
related expenses for technical operations, internet connectivity and
other related telecommunications expense, lease expense in
particular related to our data centers, and depreciation of
equipment;
- Sales and marketing, which is mainly comprised of compensation costs
and costs associated with marketing our products and services.
Compensation costs include salaries and related benefits,
commissions and bonuses. Our marketing expenses include the costs of
direct mail, advertising and other mass market programs; and
- General and administrative, which is mainly comprised of
compensation and related expenses, occupancy costs, and non-cash
stock compensation expense, which relates to stock and options
granted before March 31, 2000 at exercise prices less than the fair
market value of our common stock at the time of grant.
We have incurred significant losses and experienced negative cash flow from
operations since our inception and, as of March 31, 2000, had an accumulated
deficit of approximately $30.0 million. We intend to invest heavily in sales and
marketing, the continued development of our network infrastructure and
technology, and the expansion of our international operations. We expect to
expand our operations and workforce, including our network operations, technical
support, sales, marketing and administrative resources. We expect to continue to
incur substantial losses for the foreseeable future. Our ability to achieve
profitability and positive cash flow from operations will be dependent upon our
ability to grow our revenues substantially and achieve operating efficiencies.
24
<PAGE> 28
RESULTS OF OPERATIONS
The following table shows percentage of revenue data for the years ended
December 31, 1998 and 1999 and for the three months ended March 31, 1999 and
2000.
<TABLE>
<CAPTION>
% OF REVENUES
-----------------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
------------------------------------- -------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1999 MARCH 31, 1999 MARCH 31, 2000
----------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues............................ 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of revenue................... 79.0 86.6 85.3 106.6
Sales and marketing............... 130.0 86.6 88.8 89.0
General and administrative........ 58.3 110.7 67.1 80.5
------ ------ ------ ------
Operating loss...................... (167.3) (183.9) (141.2) (176.1)
Interest income................... 0.1 2.3 .7 5.6
Interest expense.................. (1.4) (2.4) (1.8) (1.6)
------ ------ ------ ------
Net loss.................. (168.6)% (184.0)% (142.3)% (172.1)%
====== ====== ====== ======
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
Revenues
Our revenues increased $5.3 million, or 521%, to $6.3 million during the
three months ended March 31, 2000 from $1.0 million during the three months
ended March 31, 1999. This increase was due mainly to the growth of our business
and number of customers served.
Cost of revenue
Our cost of revenue increased $5.8 million to $6.7 million, or 106.6% of
revenue, during the three months ended March 31, 2000 from $861,000, or 85.3% of
revenue during the three months ended March 31, 1999, due to the growth of our
business and related expenses, including $1.8 million in increased salary
expense related to data center and customer support personnel, non-cash expense
of $810,000, increased telecommunication and internet connection costs of
$612,000, increased depreciation expense of $302,000, increased lease expense of
$582,000, and increased license fee payments of $850,000. The non-cash expense
largely relates to deferred expenses associated with our strategic relationships
with Microsoft and Network Solutions. We expect our cost of revenue to continue
to increase as our overall business expands.
Sales and marketing
Sales and marketing expenses increased $4.7 million to $5.6 million, or
89.0% of revenues, during the three months ended March 31, 2000 from $896,000,
or 88.8% of revenues, during the three months ended March 31, 1999. This
increase was due mainly to a $757,000 increase in salary expense from a higher
number of sales personnel and a $3.9 million increase in advertising expense. We
intend to significantly increase our sales and marketing expenditures in 2000.
General and administrative
General and administrative expense increased $4.4 million to $5.0 million,
or 80.5% of revenue, during the three months ended March 31, 2000 from $677,000,
or 67.1% of revenue, for the three months ended March 31, 1999. The main factors
contributing to this increase include an increase in salary expense of $1.6
million, a $238,000 increase in travel expenses, a $494,000 increase in non-cash
compensation charges and increased consulting and professional fees. The
non-cash charges largely relate to amortization of deferred compensation arising
from stock options granted to employees and consultants. We expect to
25
<PAGE> 29
significantly increase our general and administrative expenditures in the future
to support a higher level of operations.
We recorded non-cash stock compensation expense of $596,000 during the
three months ended March 31, 2000 in connection with the grant of stock options
to employees. This amount relates to the difference between the fair market
value of our common stock (as calculated consistent with applicable accounting
principles) and the exercise price of the options granted on the dates the
options were granted. During the three months ended March 31, 2000 we granted
options to purchase 1,544,940 shares of our common stock to employees at
exercise prices ranging from $5.37 to $8.33 per share. We recorded deferred
compensation expense of approximately $4.2 million to additional paid in
capital, which will be amortized over the vesting period of the options, which
is generally three years. Upon completion of this offering, 241,120 of these
options will vest immediately. As a result, we expect to recognize non-cash
stock compensation expense of $1.4 million, $1.0 million, $1.1 million and
$720,000, in the years ending December 31, 2000, 2001, 2002 and 2003,
respectively.
Interest income (expense), net
Interest income (expense), net consists primarily of interest income on our
cash balances and interest expense on our capital lease obligations. Interest
earned on our cash and cash equivalents increased $343,000 to $350,000 during
the three months ended March 31, 2000 from $7,000 during the three months ended
March 31, 1999. This increase was primarily due to the closing of private
placements of equity securities in December 1999, which resulted in higher cash
balances available for investment. During the three months ended March 31, 2000
we incurred interest expense in the amount of $99,000 on capital lease
obligations.
Income taxes
No provision for federal income taxes has been recorded as we have incurred
net operating losses from inception through March 31, 2000. We have recorded a
valuation reserve for all our net deferred tax benefit in the three month
periods ended March 31, 2000 and 1999 due to uncertainty that we will generate
sufficient taxable income during the carry forward period to realize the benefit
of our net deferred tax asset.
Net Loss
Our net loss increased $9.4 million to $10.8 million during the three
months ended March 31, 2000 from $1.4 million during the three months ended
March 31, 1999. Our net loss increased mainly as a result of increased cost of
revenues, sales and marketing, and general and administrative expense. These
increases were partially offset by an increase in revenue of $5.3 million to
$6.3 million during the three months ended March 31, 2000 from $1.0 million
during the three months ended March 31, 1999.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1999
Revenues
Our revenues increased $7.7 million, or 557.6%, to $9.1 million during 1999
from $1.4 million during 1998. This increase was mainly due to the growth of our
business and number of customers served. The number of customer accounts
increased from 10,611 at December 31, 1998 to 45,731 at December 31, 1999.
Approximately 42% of our fiscal 1999 revenue was recognized in the fourth
quarter.
Cost of revenue
Our cost of revenue increased $6.8 million to $7.9 million, or 86.6% of
revenue, during 1999 from $1.1 million, or 79.0% of revenue during 1998, due to
the growth of our business and related expenses, including increased salary
costs of $3.2 million related to additional systems and customer support
personnel, increased telecommunication and Internet connection costs of $1.3
million, higher depreciation and lease expense of $1.2 million and increased
license fee payments of $655,000. We expect our cost of
26
<PAGE> 30
revenue to continue to increase as we increase capacity to meet customer demand.
We anticipate, however, that these costs will decline as a percentage of
revenues as we expand our facilities and achieve a more cost-effective scale of
operations.
Sales and marketing
Sales and marketing expenses increased $6.1 million to $7.9 million, or
86.6% of revenues, during 1999 from $1.8 million, or 130.0% of revenues during
1998. This increase was largely due to a $1.8 million increase in salary expense
due to an increase in the number of sales personnel at higher compensation
levels and increased placement of advertising of $4.0 million. We intend to
significantly increase our sales and marketing expenditures in 2000.
General and administrative
General and administrative expense increased $9.3 million to $10.1 million,
or 110.7% of revenue, during 1999 from $809,000, or 58.3% of revenue, during
1998. This increase was mostly due to increased salary expense of $2.0 million,
increased professional fees of $401,000 and travel costs of $419,000, as well as
severance expense of $660,000 related to the termination of an officer.
We also recorded non-cash deferred stock compensation expense in 1999 of
$4.5 million in connection with the grant of stock options and issuance of
common stock to consultants and employees. In the case of stock option grants,
this amount represents the difference between the fair market value of our
common stock (as calculated consistent with applicable accounting principles)
and the exercise price of the options granted on the dates the options were
granted. In those cases where common stock was issued, this amount represents
the fair market value of our common stock on the date of issuance as determined
by our board of directors. This amount is included as a reduction of
shareholders' equity and is being amortized ratably over the vesting period. For
the year ended December 31, 1999 we recorded $3.6 million in non-cash stock
compensation expense, as general and administrative expense, leaving $954,000 to
be recognized over the remaining vesting periods of the stock options.
There were no stock based compensation awards before 1999 and accordingly
there was no non-cash stock compensation expense in 1998. We expect to
significantly increase our general and administrative expenditures in the future
to support anticipated higher levels of operations.
Interest income (expense), net
Interest expense, net consists of interest income on our cash balances less
interest expense on our capital lease obligations. Interest earned on our cash
and cash equivalents increased $204,000 to $206,000 during 1999 from $2,000
during 1998. This increase was mainly due to the closing of private placements
of preferred stock in December 1999, which resulted in higher cash balances
available for investment. During the year ended December 31, 1999 we incurred
interest expense of $220,000, compared to $20,000 in 1998.
Income taxes
No provision for federal income taxes has been recorded as we have incurred
net operating losses from inception through December 31, 1999. As of December
31, 1999, we had approximately $19.8 million of federal net operating loss
carry-forwards available to offset future taxable income which expire in varying
amounts beginning in 2013. We have recorded a valuation reserve for all our net
deferred tax benefit for the period ended December 31, 1999 due to uncertainty
that we will generate sufficient taxable income during the carry-forward period
to realize the benefit of our net deferred tax asset.
Net Loss
Our net loss increased $14.5 million to $16.8 million during 1999 from $2.3
million during 1998. Our net loss increased mainly as a result of increased cost
of revenues, sales and marketing, and general and
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<PAGE> 31
administrative expense in 1999 from 1998. These increases were partially offset
by an increase in revenue of $7.7 million to $9.1 million for 1999 from $1.4
million for 1998.
COMPARISON OF THE PERIOD FROM INCEPTION (SEPTEMBER 18, 1997) TO DECEMBER 31,
1997 AND THE YEAR ENDED DECEMBER 31, 1998
We did not conduct any significant operations or realize any significant
revenue for the period from inception (September 18, 1997) to December 31, 1997.
During this period we incurred general and administrative expenses of
approximately $119,000, consisting mainly of rent and salaries, as we commenced
operations.
No comparison of the period from inception (September 18, 1997) to December
31, 1997 to the year ended December 31, 1998 is provided as it would not be
meaningful due to the startup nature of our operations and the insignificance of
the related expenses during 1997.
SELECTED QUARTERLY OPERATING RESULTS
The following table shows unaudited statement of operations data for each
of the five quarters in the period ended March 31, 2000, as well as the
percentage of our revenue represented by each item. This data has been derived
from unaudited interim financial statements prepared on the same basis as the
audited financial statements contained in this prospectus. The interim financial
statements include all adjustments, consisting of normal recurring adjustments,
that we consider necessary for a fair presentation of such information when read
together with our financial statements and notes thereto appearing elsewhere in
this prospectus. The operating results for any quarter should not be considered
indicative of the results for any future period. The following data is in
thousands, except web site, customer, and average monthly revenue per customer
data. For a definition of EBITDA and related cautionary language, see note (2)
on page 6 and note (2) on page 22.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------
MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1999
----------------- ----------------- ------------------- -----------------
% OF % OF % OF % OF
$ REVENUE $ REVENUE $ REVENUE $ REVENUE
------- ------- ------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......................... $ 1,009 100.0% $ 1,688 100.0% $ 2,582 100.0% $ 3,842 100.0%
------- ------ ------- ------ ------- ------ ------- ------
Operating expenses:
Cost of revenues................ 861 85.3 1,484 87.9 2,177 84.3 3,375 87.8
Sales and marketing............. 896 88.8 1,504 89.1 2,371 91.8 3,130 81.5
General and administrative...... 677 67.1 2,292 135.8 2,909 112.7 4,215 109.7
------- ------ ------- ------ ------- ------ ------- ------
Total operating
expenses................. 2,434 241.2 5,280 312.8 7,457 288.8 10,720 279.0
------- ------ ------- ------ ------- ------ ------- ------
Operating loss................... (1,425) (141.2) (3,592) (212.8) (4,875) (188.8) (6,878) (179.0)
Other income (expense):
Interest income................. 7 0.7 14 0.8 30 1.2 155 4.0
Interest expense................ (18) (1.8) (32) (1.9) (42) (1.6) (128) (3.3)
------- ------ ------- ------ ------- ------ ------- ------
Net loss.................. $(1,436) (142.3)% $(3,610) (213.9)% $(4,887) (189.2)% $(6,851) (178.3)%
======= ====== ======= ====== ======= ====== ======= ======
EBITDA........................... $(1,213) $(2,182) $(3,316) $(5,510)
======= ======= ======= =======
Number of web sites.............. 16,658 24,325 33,705 45,731
Number of customers.............. 10,186 14,357 19,822 27,173
Average monthly revenue per
customer........................ $ 39.73 $ 45.86 $ 50.36 $ 54.50
<CAPTION>
QUARTER ENDED
------------------
MARCH 31, 2000
------------------
% OF
$ REVENUE
-------- -------
<S> <C> <C>
Revenues......................... 6,268 100.0%
-------- ------
Operating expenses:
Cost of revenues................ 6,685 106.6
Sales and marketing............. 5,579 89.0
General and administrative...... 5,044 80.5
-------- ------
Total operating
expenses................. 17,308 (276.1)
-------- ------
Operating loss................... (11,040) (176.1)
Other income (expense):
Interest income................. 350 5.6
Interest expense................ (99) (1.6)
-------- ------
Net loss.................. $(10,789) (172.1)
======== ======
EBITDA........................... $ (9,048)
========
Number of web sites.............. 61,442
Number of customers.............. 36,469
Average monthly revenue per
customer........................ $ 65.66
</TABLE>
Revenues increased 41.5% during the quarter ended March 31, 1999, 67.3%
during the quarter ended June 30, 1999, 53.0% during the quarter ended September
30, 1999, 48.8% during the quarter ended December 31, 1999 and 63.1% for the
quarter ended March 31, 2000, as the number of new customers rose significantly
during each quarter. Cost of revenue increased in each quarter relatively
proportional to the increased revenue. Sales and marketing and general and
administrative increased quarter over quarter mainly due to the addition of
personnel as our business increased.
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<PAGE> 32
We expect to experience significant fluctuations in our future results of
operations due to a variety of factors, many of which are outside of our
control, including:
- demand for and market acceptance of our products and services may decline
or fail to increase enough to offset our costs;
- introductions of new products and services or enhancements by us and our
competitors may increase our costs or make our existing products and
services obsolete;
- the mix of products and services we sell may change, and the new mix may
generate less revenue and gross margin;
- the gain or loss of a significant number of customers;
- the timing and success of advertising, marketing efforts and new service
introductions, both by us and our resellers;
- the timing and magnitude of our capital expenditures, including
construction costs related to the expansion of operations, may vary from
quarter to quarter;
- the prices we charge our customers may decline due to price competition;
- utilization of our network may increase beyond our capacity and we may
incur expenses to increase our capacity;
- the availability and cost of bandwidth may reduce our ability to increase
bandwidth as necessary, reducing our revenue;
- the gain or loss of a key strategic relationship; and
- conditions specific to the Internet industry and other economic factors
may affect the prices we can charge or the expenses we incur.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations to date mainly through private equity
placements and capital leases from vendors. At March 31, 2000 we had an
accumulated deficit of $30.0 million and unrestricted cash and cash equivalents
of $18.9 million. This balance of cash and cash equivalents is largely the
result of our raising net proceeds of $23.4 million from the sale of preferred
stock in the fourth quarter of 1999 and an additional $4.0 million from the sale
of preferred stock in the first quarter of 2000.
During the quarter ended March 31, 2000 and the years ended December 31,
1999 and 1998, we used cash to fund operations of $2.6 million, $2.4 million and
$30,000, respectively. The increase in cash used in operations was due mainly to
working capital requirements and net losses, offset by increases in accounts
payable, deferred revenue and accrued expenses. Net cash used in investing
activities was $7.8 million for the quarter ended March 31, 2000 and $8.8
million for the year ended December 31, 1999 and is comprised mainly of
equipment purchases of $7.6 million and $7.8 million, respectively. Net cash
provided by financing activities was $4.9 million during the quarter ended March
31, 2000 and $35.0 million during the year ended December 31, 1999 and is
related mainly to the sale of our Series A preferred stock and common stock, as
well as borrowings under capital leases. Total borrowings under our capital
lease obligations as of March 31, 2000 were approximately $4.5 million.
On December 24, 1999, we entered into a stock purchase agreement with
Microsoft Corporation. In connection with this financing transaction, we issued
2,484,000 shares of Series A preferred stock to Microsoft, at a purchase price
of $2.02 per share. We also issued a warrant to Microsoft to purchase 546,480
shares of common stock at an exercise price of $5.37 per share. In addition,
under the stock purchase agreement, on the day following the effective date of
the registration statement of which this prospectus is a part, we will issue the
number of shares of common stock to Microsoft equal to $7.5 million divided by
the lesser of $13.00 or the actual price to the public of common stock sold in
the offering. In connection with this issuance, we will issue an additional
warrant to purchase a number of
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<PAGE> 33
shares of common stock equal to 75% of the number of shares sold to Microsoft at
an exercise price equal to the price paid at the closing. In connection with
this investment, we entered into a five-year co-marketing agreement with
Microsoft. We recorded deferred development costs for the value of the warrant
issued on December 24, 1999 of approximately $2.1 million. We will also record
additional deferred expense for the value of the warrants to be issued upon the
second closing of approximately $3.4 million and for the difference, if any,
between $13.00 and the offering price. This deferred expense will be amortized
over the five-year term of the co-marketing agreement to cost of revenue. Other
than payments we will make to Microsoft in connection with the sale of software
that we have licensed to Microsoft, we do not have any further financial
obligations during the term of the co-marketing agreement.
On January 28, 2000, we issued a warrant to purchase up to 376,920 shares
of our common stock to Road Runner whose cable affiliates include Time Warner,
Media One, and Cox Cable, in connection with a co-marketing agreement. Of the
shares subject to this warrant, 108,000 vested immediately upon the execution of
our co-marketing agreement and the balance vest in equal installments on June
30, 2000, September 30, 2000, December 31, 2000 and December 31, 2001, subject
to performance criteria. In January 2000, we recorded expense of approximately
$650,000 associated with the vested portion of the warrant. We will record
additional expense to cost of revenue in the future based on the fair value of
the portion of the warrant that has been earned and that vests in each period
based on meeting the performance criteria. We do not have any further financial
obligations to Road Runner during the term of the co-marketing agreement.
On March 15, 2000, we entered into a stock purchase agreement with Network
Solutions. In connection with this financing transaction, we issued 744,827
shares of Series A preferred stock to Network Solutions, at a purchase price of
$5.37 per share, for a total proceeds of $4.0 million. We also issued a warrant
to Network Solutions to purchase 372,413 shares of common stock at an exercise
price of $5.37 per share. In addition, under the stock purchase agreement, on
the day following the effective date of the registration statement of which this
prospectus is a part, we will issue the number of shares of common stock to
Network Solutions equal to $6.0 million divided by the lesser of $13.00 or the
actual price to the public of common stock sold in the offering. In connection
with this issuance, we will issue an additional warrant to purchase a number of
shares of common stock equal to 75% of the number of shares sold to Network
Solutions at an exercise price equal to the price paid at the closing. In
connection with this investment, we entered into a four year premier program
agreement with Network Solutions. We will record deferred expense of
approximately $2.5 million for the value of the warrant issued on March 15, 2000
of approximately $2.5 million and deferred expense of approximately $2.2 million
for the difference between the purchase price of $5.37 per share and the fair
value of our common stock on that date of $8.33 per share. We will also record
additional deferred expense for the value of the warrants to be issued upon the
second closing of approximately $2.7 million and for the difference, if any,
between the midpoint of the expected offering range and the offering price. This
deferred expense will be amortized over the four year term of the premier
program agreement to cost of revenue. We do not have any further financial
obligations during the term of the premier program agreement.
On May 8, 2000 we entered into a stock purchase agreement with a subsidiary
of Bell Atlantic Corporation. In connection with this financing transaction, we
issued 1,199,999 shares of Series A preferred stock to Bell Atlantic, at a
purchase price of $8.33 per share, for total proceeds of $10 million. In
addition, under the stock purchase agreement, on the third day following the
effective date of the registration statement of which this prospectus is a part,
we will sell to Bell Atlantic the number of shares of common stock equal to $15
million divided by $13.00 or the actual price to the public of common stock sold
in the offering.
We also executed a letter of intent with Bell Atlantic to enter into
co-marketing and reseller relationships with minimum initial terms of three
years. If these relationships are finalized, in return for access to Bell
Atlantic's customer base and for other consideration, we would issue a warrant
to Bell Atlantic to purchase 3,132,000 shares of our common stock. This warrant
would vest immediately and be priced at 150% of the actual price to the public
of common stock sold in this offering. The letter of intent
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<PAGE> 34
is non-binding and is subject to the negotiation and execution of definitive
agreements and other conditions. We therefore cannot be sure that we will reach
definitive agreements with Bell Atlantic.
We will record deferred expense for the difference, if any, between $13.00
and the offering price. We would record additional deferred expense in the
future based upon the fair value of the warrant to purchase 3,132,000 shares of
our common stock. This deferred expense would be amortized over the initial
three-year term of the business agreement to cost of revenue.
We are pursuing an aggressive internal growth strategy that we anticipate
will require significant additional funding before we begin to generate positive
cash flow. We believe that our current cash and cash equivalent balances, $28.5
million in additional proceeds from the strategic alliances discussed above that
will be received at the time of this offering, and the proceeds of this offering
will be sufficient to fund execution of our current business plan at least
through the end of 2001. However, the execution of our business plan may require
additional capital to fund our operating losses, working capital needs, sales
and marketing expenses, lease payments and capital expenditures. In view of
future expansion plans, we will consider our financing alternatives, which may
include the incurrence of debt, additional public or private equity offerings,
or an equity investment by a strategic partner. Actual capital requirements may
vary based upon the timing and success of the expansion of our operations. Our
capital requirements may also change based upon technological and competitive
developments. In addition, several factors may affect our capital requirements:
- demand for our services or our anticipated cash flow from operations
being less than expected;
- our development plans or projections proving to be inaccurate;
- our engaging in strategic relationships or acquisitions; and
- our acceleration of, or otherwise altering, the schedule of our expansion
plan.
At March 31, 2000 we have made commitments of approximately $5.0 million in
capital expenditures outstanding for expanded network and facilities. The
expansion of our network and facilities began in 1999 and should be completed
during the second quarter of 2000. The assets were classified as construction in
progress as of December 31, 1999 and March 31, 2000. On May 15, 2000, we
executed a loan agreement in the amount of $3.0 million to finance a portion of
these capital expenditures. The loan is secured by the related assets, bears
interest at 16.1% per year and has a three year term.
If additional funds are raised through the sale of equity or convertible
securities, the percentage ownership of our shareholders will be reduced and our
shareholders may experience additional dilution. There can be no assurance that
additional financing, if required, will be available on satisfactory terms, or
at all. If we do not obtain additional financing, we believe that our existing
cash balances may be adequate to continue expanding the operations on a reduced
scale.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 established accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
is effective for fiscal years beginning after June 15, 2000. We do not believe
the adoption of SFAS 133 will have a material effect on our results of
operations or financial condition.
IMPACT OF YEAR 2000
In late 1999 we completed our remediation and testing of systems for the
Year 2000 problem. As a result of those planning and implementation efforts, we
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believe those systems
successfully responded to the Year 2000 date change. Expenses in connection with
remediating our systems were not significant. We are not aware of any material
problems resulting from Year 2000 issues, either with our products, our internal
systems, or the products and services of third parties. We will
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<PAGE> 35
continue to monitor our mission critical computer applications and those of our
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
All of our customer contracts are currently denominated in U.S. dollars,
and we do not currently invest in derivative financial instruments. However, we
invest our excess cash balances in cash equivalents and are therefore subject to
market risk related to changes in interest rates. We believe, but cannot be
certain, that the effect on our financial position, results of operations and
cash flows of any reasonably likely changes in interest rates would not be
material.
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<PAGE> 36
BUSINESS
Interland provides a broad range of web and applications hosting and other
related web-based business solutions specifically designed to meet the needs of
small to medium-sized businesses. Our web hosting services were selected as the
"Editor's Choice" by Windows NT magazine in September 1999 and by PC Magazine in
December 1999. We were also selected as one of the ten finalists for the
Inc./Cisco Growing with Technology Awards for 2000 in the category of Innovators
in Customer Service.
Since we began operations as a web hosting business in September 1997, we
have experienced growth in the number of our customer accounts and revenue. The
following are among the key factors that we believe will continue to drive our
growth:
- A broad and expanding range of high quality services designed to enable
us to provide one-stop shopping for the specific hosting and related
needs of small to medium-sized businesses. Our goal is to deliver a
bundle of services that not only meets a customer's needs today, but that
also can easily and seamlessly be augmented to provide greater capacity
and functions to address the customer's growing needs in the future. In
so doing, we expect to maintain our high customer retention rate, while
continuing to increase our average revenue per customer.
- Key strategic relationships with Microsoft, Network Solutions and Bell
Atlantic, all of which have made equity investments in Interland, and
with Road Runner, which holds a warrant to purchase shares of our common
stock. Microsoft has invested $5.0 million in our convertible preferred
stock and has agreed to invest an additional $7.5 million in our common
stock at the time of this offering. Network Solutions has invested $4.0
million in our convertible preferred stock and has agreed to invest an
additional $6.0 million in our common stock at the time of this offering.
Bell Atlantic has invested $10.0 million in our convertible preferred
stock and has agreed to invest an additional $15.0 million in our common
stock at the time of this offering. We have also issued warrants to
Microsoft and Network Solutions to purchase shares of our common stock in
connection with these investments. In addition we have strong business
relationships with leading technology providers including Cisco, Cobalt
Networks, Hewlett-Packard, Red Hat and Road Runner.
- State-of-the-art data centers which provide a secure operating
environment and facilitate the delivery of high quality, reliable
services. In addition, because our current data centers are located in
close proximity to the major access points of our Internet connectivity
providers, we are able to provide our customers with greater data speeds
while we enjoy lower overall connectivity costs.
- Global expansion to serve foreign small and medium-sized businesses in
Europe, Asia and South America. We believe the web hosting market in
these areas represents a growth opportunity as great or greater than the
domestic market. To take advantage of this opportunity, we have opened
our first international sales and customer service center in Amsterdam
and will continue to evaluate other locations as well as foreign
strategic relationships and acquisition candidates.
- A creative, highly aggressive multimedia advertising campaign designed to
establish Interland as the first commonly recognized brand in the hosting
industry.
- An experienced, direct sales force that is motivated to meet quotas,
trained in consultative selling and skilled in assessing the needs of
small and medium-sized businesses. Once a customer makes contact with an
Interland salesperson, that salesperson is the primary ongoing contact
for the customer. Through a continuing dialogue, the salesperson assesses
the customer's needs and works with the customer to create tailored
solutions. The salesperson will continually monitor the customer's
account to proactively offer additional products and services as the
customer's needs change and expand. In addition, we also have created a
growing network of resellers who provide us with a highly effective
distribution channel for our services. Our current largest private label
reseller is Road Runner, whose cable affiliates include Time Warner,
Media One, and Cox Cable. Under our exclusive private label agreement
with Road Runner, we have agreed to provide web hosting services to the
customers of Road Runner under Road Runner's name.
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- Our proprietary customer management system that allows our salespeople,
during the order process, to activate a web site or provide other
services for a customer in real time. This system also supports and
integrates our internal functions such as customer relationship
management, administration of accounts, billing and reporting. We believe
these systems allow us to activate and support our customers at a lower
cost compared to our competitors, and enables us to sell additional and
more complex services to our existing customer base.
THE INDUSTRY
The Internet
The Internet continues to experience significant growth. International Data
Corporation (IDC) estimates that the number of Internet users world-wide will
grow from approximately 97.3 million at the end of 1998 to 319.8 million by the
end of 2002. This represents a compound annual growth rate of 34.6%. The number
of Internet users in the United States is predicted to increase from
approximately 51.6 million at the end of 1998 to 135.9 million by the end of
2002, a 27.4% compound annual growth rate. This indicates that the international
market is expected to grow faster than the United States market.
One of the many reasons for the overall growth in Internet users has been
the rapid emergence of the Internet as a global business-to-business and
business-to-consumer commerce medium. Since the commercialization of the
Internet in the early 1990s, businesses have rapidly established web sites as a
means to expand customer reach and improve communications and operational
efficiency. As businesses become more familiar with the Internet as a
communications and commerce platform, an increasing number of businesses have
begun to implement more complex and critical applications over the Internet.
These applications include sales, customer service, customer acquisition and
retention programs, communication tools such as e-mail and messaging, and
business-to-business and business-to-consumer e-commerce.
The increasing reliance on the Internet and the growing complexity of web
sites and the number of functions available on web sites has made the management
and maintenance of web sites an increasingly complex task. As a result, many
businesses, particularly small and medium-sized businesses, have elected to
contract with third parties for the implementation and management of their web
sites. We believe that the practice of contracting with third parties to provide
key services, also known as outsourcing, can provide a business with a number of
benefits including:
- Lower start-up and operating costs;
- Faster time to market;
- Greater security and reliability; and
- Less attention diverted from a company's core business activities.
Web Hosting Market
IDC predicts that the United States market for web hosting will grow from
$806 million in 1998 to $17.7 billion in 2003, representing a compound annual
growth rate of 85.4%. IDC also estimates that the international market for web
hosting services will grow at a faster rate, from $16.5 million in 1998 to $1.3
billion in 2003, a compound annual growth rate of 138.7%.
According to IDC, small businesses, those with less than 100 employees,
accounted for 46% of the total web hosting market in 1998 in the U.S., and IDC
predicts this percentage will grow to 61% by 2003, at which time small
businesses are projected to account for $10.7 billion of the total $17.7 billion
U.S. web hosting market. In addition, IDC predicts that the small business
segment of the market will grow at a compound annual growth rate of
approximately 96% between 1998 and 2003, versus 73% for medium and 78% for the
large business segments. According to IDC, at the end of 1998 only 17% of an
estimated 7.4 million small businesses in the U.S. had web sites. IDC predicts
that by the end of 2003, the number of small businesses in the U.S. will grow to
8.2 million, 62% of which are estimated to have web sites.
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Applications Hosting Market
Applications hosting enables software applications to be deployed, managed,
supported and upgraded from an applications service provider's centrally located
servers, rather than on individual desktop computers. Applications service
providers typically rent software applications over the Internet to customers
for a monthly fee. Advantages of applications hosting to customers include
reduced upfront capital expenditures, lower operating costs and faster
applications implementation. Due to these advantages, the applications hosting
market is growing rapidly. Forrester Research, Inc. projects that the
applications services market will grow to over $11.3 billion in 2003 from less
than $1 billion in 1999 and that e-commerce applications will account for 42% or
$4.7 billion of this market in 2003. In particular, Forrester predicts that the
application services market for small businesses will grow to over $3.8 billion
in 2003 from $316 million in 1999 while the market for medium-sized businesses
will grow to over $6.6 billion in 2003 from $562 million in 1999. Forrester also
projects that 22% of all U.S.-based applications revenue will flow through
applications service providers in 2003.
Current Market Fragmentation
Both the web and applications hosting markets today are fragmented and
consist of the following types of providers:
- Small web hosting providers who do not have the capital, resources and
focus to develop and offer a broad selection of high quality services and
support at competitive prices;
- Large providers whose core service offerings tend to be geared toward
large businesses or only toward those businesses which seek to implement
or maintain the most complex types of web sites;
- National and local Internet service providers or ISPs whose core business
focus centers around the provision of Internet connectivity rather than
hosting; and
- Web design and consulting firms for which hosting is not their core
expertise.
OUR OPPORTUNITY
We believe that small to medium-sized businesses, while representing a
large and rapidly growing segment of the market, have traditionally been
underserved by web and applications hosting companies. For a number of small and
medium-sized businesses, many of whom do not have internal technical resources
dedicated to Internet services, establishing a presence on the Internet and
realizing the various benefits of the Internet has proven to be a complicated
and time consuming task. In addition, many small and medium-sized businesses
have not had access to the type and quality of Internet-based services that
larger, more sophisticated companies currently enjoy. We therefore believe that
a significant market opportunity exists for us to deliver a comprehensive and
easy-to-use suite of services designed to address the specific needs of the
small and medium-sized business customer.
OUR SOLUTION
We are dedicated to providing small to medium-sized businesses with a
comprehensive bundle of services, which enables them to quickly, easily and
affordably capitalize on the benefits of the Internet. The key elements of our
solution include:
- A full suite of high-quality web and applications hosting and other
related services;
- Solutions which are affordable, quick to deploy, and easy to use;
- State-of-the-art security and reliability; and
- Personalized customer service and technical support that is available 24
hours a day, seven days a week.
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OUR STRATEGY
Our goal is to become the leading global provider of web and applications
hosting and related business solutions to the small and medium-sized business
market. Our strategy for achieving our goal is comprised of the following key
components:
Provide a Broad Range of Services on Multiple Operating Systems. A key
element of our growth to date has been our ability to provide and support a wide
variety of hosting services on multiple hardware and software platforms.
Currently, we have four key service areas comprised of shared hosting, dedicated
hosting, applications hosting and e-commerce solutions, and consulting services.
Within these service categories, we believe we have a solution which can
effectively address the web hosting and related needs of most small and
medium-sized businesses, both now and as their needs evolve and expand. For
example, many of our customers may outgrow the capabilities of shared hosting
services and may ultimately need a dedicated service. When this need arises, we
are able to provide this service for them with relative ease. In addition, a
business that begins a relationship with us as a dedicated hosting customer may
desire access to the applications we host or the e-commerce services we provide.
We intend to continue to provide additional services in order to better serve
our existing customers and further enhance our ability to attract new customers.
We have also developed the technical expertise to provide our services on
multiple operating systems, including Microsoft Windows NT and Red Hat Linux. We
can therefore offer our customers additional flexibility in deploying their web
sites and applications. In short, our goal is to ensure that a customer or
potential customer need never look beyond Interland to fulfill any hosting or
e-commerce need.
Expand Sales Capabilities and Distribution Channels. We intend to grow our
revenue through the continued expansion of our sales and distribution channels.
Our sales efforts currently occur through a number of channels, including our
direct sales force, active resellers and strategic relationships we have
developed. We will expand all of these efforts. Specifically, we will continue
to hire new sales employees for our internal direct sales efforts. To complement
our direct sales efforts, we will also distribute our services through a network
of over 100 active resellers. These resellers typically offer our services under
the Interland brand name to their existing and new customers and retain
responsibility for most of their clients' customer service needs. We believe
this reseller network, which accounted for 16% of our revenue for the year ended
December 31, 1999, is a highly effective distribution channel for our services
with minimal cost to us. Some of our most valued resellers offer our services
under their own private label brand names. Our recent agreement with Road
Runner, which provides access to the Internet through the cable operations of
Time Warner, Cox Media, Media One and other cable operators, is an example of
this strategy. We will also continue to seek strategic relationships that enable
us to reach new customers. For example, our marketing arrangements with
Hewlett-Packard, Microsoft, and Network Solutions allow us to introduce our
services to potential customers that we might not otherwise reach. All of these
efforts should increase the exposure of our service offerings to potential
customers.
Expand International Presence. For the year ended December 31, 1999, we
derived approximately 8% of our revenues from customers outside the United
States. We believe that the hosting services needs of many foreign small and
medium-sized businesses located outside the U.S. are not being adequately served
and therefore represent a significant growth opportunity. In order to capitalize
on these opportunities, we opened a sales and customer service center in
Amsterdam in April 2000. This facility will be staffed with multilingual
professionals enabling us to sell and support our services throughout Western
Europe from a centrally based location. Initially, we intend to host web sites
and applications for our European customers from our servers located in the U.S.
As a result of this arrangement, we expect to have lower operating costs than
companies that have data centers and connection to the Internet in Europe. We
also expect to be able to defer significant capital expenditures associated with
building additional international data centers, and to offer our services at
lower prices than our competitors in Europe. We will, however, continually
reassess the need for a data center in Europe. In addition, we intend to
identify suitable foreign acquisition candidates and will strive to develop
relationships in other international markets. To date, we have been able to
retain international resellers in over 50 countries
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without a significant marketing effort. We believe that all of these efforts
could potentially lead to a significant expansion in our customer base in
international markets.
Increase Brand Awareness and Market Presence. We believe that we have a
unique opportunity to be one of the first hosting providers to establish a
meaningful brand name in the web and applications hosting industry. We intend to
continue to build our brand recognition by continuing to implement our intensive
multimedia advertising campaign. We also intend to take advantage of our
strategic co-marketing relationships with industry leaders such as Microsoft,
Hewlett-Packard, Network Solutions and Road Runner. We believe these programs
will enable us to continue to expand our customer base and assist us in our
customer retention efforts.
Take Advantage of Innovative and Proprietary Technology. We have developed
proprietary technology that assists in our customer support efforts and our
internal processes. For example, an internally developed tool provides an
auto-provisioning function that allows our customers to alter their sites
through the Internet without having to contact us. We have also developed a
platform for complex web sites that allows our customers to incorporate
sophisticated Internet functions into their web sites easily, including
e-commerce, merchant capabilities, on-line transactions and e-mail. We believe
these technologies help us attract and support our customers at a lower cost
compared to our competitors. Our integrated customer manager system supports our
internal processes with features such as customer relationship management,
automated installation and provisioning of services, administration of accounts,
billing, and reporting. We also use these tools to offer additional services to
our existing customer base. We will continue to develop specialized technology
and systems to give us advantages in delivering quality and price competitive
services to our customers.
Pursue Additional Strategic Alliances and Relationships. We will continue
to pursue strategic alliances and acquisitions that will enable us to expand our
services, our technological capabilities and our customer base. In December
1999, we entered into a license, development and marketing agreement with
Microsoft. In January 2000, we entered into an agreement with Road Runner to
provide web hosting services for the cable customers of its affiliates. In March
2000, we entered into a premier program agreement with Network Solutions. In May
2000, we entered into a non-binding letter of intent with Bell Atlantic to enter
into co-marketing and reseller relationships. We intend to seek additional
opportunities like these as well as to explore possible acquisitions.
OUR SERVICES
We offer an integrated suite of web and applications hosting and related
business services designed to specifically address the needs of small and
medium-sized businesses. These services include:
- shared hosting;
- dedicated hosting (including high availability hosting);
- applications hosting; and
- consulting services.
During the three month period ended March 31, 2000, we derived 66% of revenues
from our shared services, 19% from dedicated services and 15% from applications
hosting and consulting services.
Shared Hosting. Shared hosting services are entry-level service plans
designed for web sites with relatively low volumes of traffic. Our shared
hosting packages minimize the cost for customers by providing hosting services
for multiple customers on a single shared server, spreading the cost of the
service over many users. Shared hosting is particularly attractive to small to
medium-sized businesses looking to build their presence on the web. Our shared
hosting service plans also include many standard features and more complex
options for database support, e-commerce support, multi-media services and
extensive e-mail support. The large majority of our customers currently use our
shared hosting services. Our intention is to reassess continually the needs of
our shared hosting customers and, when appropriate, to encourage them
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to add capacity and the ability to provide additional functions to their web
sites by migrating to dedicated and high availability hosting services.
Dedicated Hosting. Dedicated hosting services are designed for customers
with complex requirements and high traffic volumes. Web sites on dedicated
servers typically have database driven content that requires multiple
applications and database servers to operate. Our dedicated service plans
provide each customer with a complete web site hosting solution including all of
the hardware, software, network equipment and support necessary to run the web
site. These service plans offer a number of advantages to our customers in
addition to those received in our shared hosting packages, including:
- Capacity -- the customer receives greater processing and storage
resources;
- Reliability -- the customer's web site is located on its own server
reducing the possibility of server related difficulties;
- Flexibility -- we can custom configure a specific customer's server or
servers to optimize performance and enhance security; and
- Speed -- dedicated servers can reduce response time and increase
processing speed of the customer's web site, allowing for faster access
to the web sites information and services and an improved experience for
the end-user.
We also offer our high availability, dedicated services to customers whose
web sites typically require sophisticated databases for critical application
needs or typically experience high user traffic volumes. This service allows
customers to use multiple servers and is designed to allow our customers'
applications to continue operating in the event of a server failure. The use of
multiple servers therefore provides enhanced reliability and performance to our
customers so that they may securely and efficiently distribute web site content
and related data. Our high performance, high availability dedicated hosting
service plans provide each customer with hardware, software, network equipment
and high-end customer support necessary to run the web site.
As our customer base continues to migrate from shared hosting to more
sophisticated, higher margin services such as dedicated hosting, we believe our
average revenues per customer will continue to increase.
Applications Hosting. Our applications hosting services allow our
customers to outsource to us the deployment, configuration, hosting, management
and support of various software applications. Our applications hosting services
allow our customers to deploy a software application more quickly and with
reduced up-front costs. In addition, many small and medium-sized businesses do
not have the internal technical resources to support multiple software
applications. We therefore believe that outsourcing these functions to us is a
desirable and increasingly preferred alternative for these businesses. The types
of applications we host for our customers include collaboration tools, business
tools, mail-service tools, and
e-commerce applications. Currently, the applications we host consist mainly of
Microsoft Exchange Server, Office Server Extension and various e-commerce and
security products.
Consulting Services. Our consulting and professional services provide
assistance to customers with unique requirements. These services include:
- web site design and re-modeling or enhancement of existing sites to
optimize performance;
- e-commerce enabling;
- system configuration and integration; and
- provisioning of customized applications.
Our consulting engagements typically range from a few hours to a few days
depending upon the complexity of the services needed. Because many of our
customers are new to the Internet, we believe these services are critical to the
success of our customers and are necessary for us to be a complete hosting
services provider. We bill most of the services on an hourly basis that we
pre-package and price in standard blocks.
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Pricing
We sell our services under contracts which typically range from three
months to two years in length. We typically require payment for the full
contract amount at the initiation of the service. Our web site hosting offerings
and prices for new installations as of May 10, 2000 are generally described in
the table below.
<TABLE>
<CAPTION>
SERVICE TYPE SERVICE LEVEL SET-UP FEE MONTHLY FEE(1)
- ------------ ---------------------------- --------------------- ---------------------
<S> <C> <C> <C>
Shared Hosting
Services.............. Feature Plan $40.00 $19.95-$29.95
Feature Plus $40.00 $39.95-$49.95
Business Plan $149.95-$199.95 $149.95-$199.95
Enterprise Plan $349.95-$699.95 $399.95
Dedicated Hosting
Services.............. Basic Business $599.00-$699.00 $499.00
Select Business $699.00-$899.00 $799.00
Select Business Plus $1,199.00-$1,399.00 $999.00
Corporate Business $2,299.00-$2,499.00 $1,499.00
Corporate Business Plus $2,799.00-$2,999.00 $1,999.00
High Availability Business $3,499.00-$6,599.00 $3,999.00-$7,599.00
High Availability Corporate $8,599.00-$11,599.00 $9,599.00-$12,599.00
High Availability Enterprise $14,599.00-$17,599.00 $15,599.00-$18,599.00
</TABLE>
- ---------------
(1) The monthly fees listed above are for short-term contracts. We typically
offer our customers discounts for longer-term contracts.
Our applications hosting services are also provided on a monthly basis. The
fees for these services vary depending on the applications being provided.
To further simplify the purchasing process for our customers, we describe
all web hosting service plans, including features and prices, on our web site
except for our high availability corporate and enterprise services, which will
be included in the near future. This enables our customers to evaluate the
various service offerings before contacting one of our sales representatives,
which in turn shortens our selling cycle, reduces our customer acquisition costs
and ultimately enhances customer satisfaction by making readily available the
necessary technical and business information for choosing the appropriate
service level. We upgrade our web site regularly to provide more product
information and enhanced purchasing capabilities for our existing and
prospective customers.
ADVERTISING AND MARKETING
We actively advertise and market our comprehensive hosting services to
small and medium-sized businesses in the U.S. and intend to increase the
frequency of our advertising and marketing into other countries. Our advertising
strategy is based on the primary foundation of building brand recognition and
increasing market share. In addition to our internal advertising and marketing
efforts, we have engaged the services of a leading technology advertising firm.
This firm is helping us plan, design and execute an integrated advertising and
marketing communication plan. Our current marketing campaign incorporates:
- Advertising (print, on-line, outdoor, TV and radio);
- Direct marketing by mail and telephone;
- Public relations;
- Product/service promotions;
- Product/service literature;
- Trade show/event marketing; and
- Web/electronic marketing.
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Our product marketing team supports the direct advertising and marketing
activities that we conduct. The focus of this team is to develop and launch a
range of products and services that will meet our customer's needs. Product
marketing activities include product strategy and definition, pricing,
competitive analysis, product launch, channel program management and product
life cycle management. By aligning the product marketing organization around our
four key services, we are able to focus and deliver product and services
quickly.
SALES AND DISTRIBUTION
We utilize multiple sales and distribution channels in an effort to
maximize our market share. These channels include direct sales through sales
professionals, indirect sales through reseller and private-label arrangements,
co-marketing relationships, and other channels.
Direct Sales
Our direct sales efforts are carried out by two primary groups, in-bound
and out-bound sales professionals.
In-Bound Sales Force. Our in-bound sales force responds to incoming
inquiries about our services. Our sales force is trained in a relationship
selling methodology that allows them to better assess the needs of customers and
to recommend tailored solutions. This methodology gives our customers a
one-on-one consultative relationship with a sales professional in which the
specific desires of the customer are appropriately addressed. As this
relationship develops and our customer grows, the salesperson can assess the
customer's needs and work to provide the customer with tailored services. The
salesperson can also carefully monitor the customer's account to make sure that
we are proactive in offering additional products and services as the customer's
needs change and expand.
Out-Bound Sales Force. Our out-bound sales force generates sales leads
through direct contact with potential customers. These sales specialists
generate new business through telemarketing, direct mail and Internet contact.
These sales specialists are also provided specific training so that they can
effectively consult and sell to potential customers.
In addition to initial training, every sales specialist must attend two
hours per week of on-going training. This training helps to educate all of our
sales personnel about our technological advances and our latest service
offerings.
Resellers and Private Label Relationships
We currently have a network of resellers consisting of businesses including
system integrators, value added hardware and software resellers, web developers
and web consulting companies and Internet service providers. These resellers
allow us to cost-effectively address a large customer audience that we could not
otherwise reach.
One of the recent additions to our reseller channel is Road Runner. Road
Runner provides Internet access through several cable companies including the
cable operations of Time Warner, Cox Cable, Media One and other cable operators.
We have agreed to provide shared and dedicated web hosting services for
customers of Road Runner under the Road Runner brand name. Road Runner has
designated us as the exclusive provider of these services, although Road Runner
may end the exclusive nature of our relationship at any time.
Other Sales and Distribution Channels
We also pursue sales through a number of other indirect channels, including
Internet marketing, customer referrals, and industry referrals.
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Internet Marketing. A portion of our new customers come to us through
on-line registrations. Our Internet marketing sales programs offer an automated
on-line sales interface to potential customers. This enables our customers to
purchase services at any time from our web site.
Customer Referrals. We believe that customer referrals are an excellent
source of new customers. Many new customers have come to us through referrals
from other customers who have had a good relationship with us. While we reward
our customers for these referrals with discounts on their services, we also
believe that our reputation for excellent customer service leads to many of
these referrals.
Industry Referrals. We received many referral customers from other
providers of Internet related services, including web designers. Web designers
and other Internet industry professionals who work with us on a regular basis
have experience and knowledge of our services that make them a valuable source
of new customers.
Customer Manager System
All of our sales efforts are supported by our customer manager system, a
proprietary system that helps us manage our entire relationship with our
customers. After a customer has initiated service with us, the customer manager
system automatically provisions the service on the web server the customer has
selected, verifies correct setup, e-mails the customer its contract and service
information, prints a label to mail the new customer information (including a 30
page manual), and queues the customer for future billing. All calls for customer
service and any invoicing are also stored inside the customer manager system,
along with usage statistics, referral information, and other pertinent customer
information. The system automatically invoices, debits checking accounts and
credit cards, generates late notices, initiates human follow-up calls, and
cancels delinquent accounts. The system also provides us with useful information
to spot troubled servers, estimate cost of customer acquisitions by advertising
medium or lead source, and spot abusive users, among dozens of other reports.
KEY STRATEGIC RELATIONSHIPS
We have established and will continue to forge strategic relationships with
leading technology providers, including major software, hardware, development
and Internet marketing organizations, to enhance our products and services.
These relationships enable us to gain quicker access to innovative technologies,
provide more creative solutions for our customers, and allow us to offer our
customers many of the same resources that would otherwise be prohibitively
expensive for them to acquire. We are also able to build upon the research and
development and expertise of these companies in developing and launching new
products. We therefore believe that these relationships will enable us to
continue to provide our customers with the necessary tools to create, host and
maintain a successful web presence and have access to sophisticated e-commerce
and applications solutions. These relationships also provide us with unique
marketing and sales opportunities to customers to which we might not otherwise
have access.
Microsoft Corporation
We are a Microsoft Certified Solution Partner and are currently engaged in
several initiatives with Microsoft. We recently entered into a development,
license and co-marketing agreement with Microsoft. We agreed to develop software
and related materials that will enable the installation of packaged hosted
service on Microsoft's Window NT platform and have granted Microsoft a
perpetual, irrevocable license to the software. We will pay Microsoft five
percent of the total gross revenues that we receive from licensing or otherwise
exploiting the software for five years following Microsoft's acceptance of the
software. In return, Microsoft will provide us with an opportunity to be
involved in beta programs and training initiatives for Microsoft's IIS program
and the Windows 2000 and Exchange Server products. In addition, Microsoft has
agreed to include us at trade show events. The agreement will continue until
terminated by either party for cause or by Microsoft if we fail to deliver the
software or related documentation. At the same time we entered into this
agreement, Microsoft invested $5.0 million in our convertible preferred stock
and agreed to invest an additional $7.5 million in our common stock at the time
of this offering. We
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have also issued warrants to Microsoft to purchase shares of our common stock in
connection with these investments.
We have also entered into a separate co-marketing agreement in which
Microsoft agreed to include a special offer advertisement in every FrontPage
2000 product box that is packaged for retail sale. FrontPage 2000 is a software
product which enables a company to design its web site. The agreement also
allows us to distribute a CD that includes a 45-day trial version of FrontPage
2000, packaged with our set-up software and other useful tools. Our CD is
periodically mailed to prospective customers and enables them to design a web
site and host it with us.
Other initiatives include:
- Application Services. We have entered into an application services
agreement which establishes the framework by which we can obtain and
license various Microsoft products to use in our applications hosting
services. Under this framework we have licensed server software,
including Exchange Server and Office Server Extension. Depending upon the
specific software we license, we pay a license fee on either a per server
or per user basis. The term of this agreement is through June 30, 2000,
although we can extend it for two years to allow us to continue to
provide our customers access to hosted software.
- Microsoft Big Day. Microsoft has chosen us to be the exclusive hosting
service partner for the Microsoft Big Day Seminars, a series of seminars
that will travel to 230 cities over 6 months. The average seminar
attracts 130 small business owners. The purpose of the seminar is to
educate small business owners as to Microsoft Technology, the Internet,
how to build a web site, and how to take advantage of the new ASP model.
We will be the direct resource for web hosting, web site maintenance,
database management, and domain registrations for these seminars. Compaq
and Softchoice are also involved in this project.
- Microsoft ISP Telemarketing. Microsoft selected us as one of two
companies to use in promoting Windows 2000 shared hosting solutions to
over 1,000 Internet service providers. Microsoft will be promoting sales
of Windows 2000 and our dedicated hosting solutions to a select group of
Internet service providers beginning in the first quarter of 2000.
Network Solutions
We have entered into a strategic alliance with Network Solutions, the
premier domain registration entity. We have entered a premier program agreement
with Network Solutions whereby Network Solutions will process domain names that
we request for our customers, license access to their domain name servers and
databases to us, and promote us as a member of their program. In return, we will
use Network Solutions as our exclusive registrar of second-level domain names
and promote Network Solutions' services. We will each pay referral fees to the
other when customers sign up for the other's services. The term of the agreement
is for four years and will renew automatically for one year terms. We also use
the services of Image-Cafe and ID Names, both of which are owned by Network
Solutions. Image-Cafe gives our customers access to a variety of web design
templates. Through ID Names, our customers can search for and secure worldwide
domain registrations, including country code top level domain services to our
customers.
In addition, Network Solutions has recently invested $4.0 million in our
convertible preferred stock and has agreed to invest $6.0 million in our common
stock at the time of this offering. We have also issued warrants to Network
Solutions to purchase shares of our common stock in connection with these
investments.
Road Runner
We have recently entered into an exclusive relationship with Road Runner.
Road Runner is a joint venture among affiliates of Time Warner Inc., Media One
Group, Inc., Microsoft, Compaq and Advance/Newhouse. Road Runner provides
high-speed Internet access through the cable television
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infrastructure, including through the cable television operations of Time
Warner, Media One, Cox Communications, Bend Cable, and Cable Atlantic. One of
the services Road Runner offers to its customers is web hosting. Pursuant to our
agreement, Road Runner has engaged us as the exclusive provider of these
services. These services will be branded under the Road Runner brand, but we
will be providing all web hosting and support services. Road Runner is
responsible for the collection of payments from its customers and will pay us
with respect to each of its customers. We will also provide training for the
sales and support representatives of Road Runner. The term of this agreement is
for two years, but may be terminated by either party upon 120 days written
notice. In connection with this relationship, we have granted a warrant to Road
Runner to purchase up to 376,920 shares of our common stock based on its
achievement of performance criteria.
Hewlett-Packard
Hewlett-Packard manufactures hardware equipment, including servers that we
utilize in our hosting operations. We have entered into several arrangements
with Hewlett-Packard, including an Electronic Services Strategic Alliance
Agreement. Under this agreement, Hewlett-Packard provides us its Millennium
Commerce Solution, which consists of a package of hardware and software
products. We market this package as a complete e-commerce solution, with
redundancy, firewall protection, web-based configuration, complete reporting,
instantaneous credit card processing, and high availability services. The
arrangement enables us to provide our customers with the type of sophisticated
e-commerce services that would generally be prohibitively expensive for the
small to medium-sized business. We offer this package to our customers whose web
sites and other applications run on Linux platforms and we pay Hewlett-Packard a
percentage of the fees we receive from our customers when they use these
services. In addition, Hewlett-Packard has agreed to fund 50% of the advertising
cost allocated towards this project and provide all hardware and software at no
cost to us. The term of the agreement is for three years and automatically
renews for additional one-year terms, unless terminated by either of the parties
sixty days prior to the end of the initial or any renewal term.
Bell Atlantic
We have signed a letter of intent to enter into a business relationship
with Bell Atlantic, Inc., a leading provider of communications and information
services. The business relationship is intended to consist of a marketing
channel relationship and a reseller relationship. Under the marketing channel
relationship, we would jointly market and promote a co-branded version of our
products and services to some of Bell Atlantic's customers. In return for Bell
Atlantic's identification of customers, we would pay Bell Atlantic 12.5% of
revenue received by us under the marketing channel relationship. Under the
reseller relationship, Bell Atlantic would have the right to market and resell a
co-branded version of our products and services to its business customers. The
letter of intent contemplates that we would be the only shared web hosting
service provider with which Bell Atlantic would enter into a co-branded
marketing arrangement, other than Bell Atlantic's existing arrangements. The
terms of the business relationship would be for three years and would
automatically renew for three year terms. The letter of intent is a non-binding
agreement and is subject to the negotiation and execution of definitive
agreements and other conditions. In connection with our business relationship,
we intend to issue a warrant to Bell Atlantic to purchase 3,132,000 shares of
our common stock.
In addition, Bell Atlantic has purchased $10.0 million in our convertible
preferred stock and has agreed to purchase an additional $15.0 million of our
common stock at the time of this offering.
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Other Co-Marketing and Supplier Arrangements
We have entered into a number of other co-marketing and supplier
relationships. Some of these relationships include:
<TABLE>
<CAPTION>
CO-MARKETING RELATIONSHIPS SUPPLIER RELATIONSHIPS REFERRAL RELATIONSHIPS
- -------------------------- ---------------------- ----------------------
<S> <C> <C>
E-Commerce Exchange Allaire (Software -- Cold Fusion) International Webmasters
Netscape Communications Cisco (Hardware) Association
(At Web) Cobalt Networks (Hardware) Small Business Alliance
Stamps.com Elemental Software (Elemental World Organization of
Drumbeat 2000) Webmasters
Red Hat (Linux platform)
SoftQuad Software Inc.
(Software -- HotMetal Pro 6.0)
</TABLE>
The nature of these relationships is generally to enable us to further promote
our brand identity while seeking cost-effective access to a larger addressable
market. Some of these relationships impose mutual minimum levels of advertising
expenditure commitment.
CUSTOMERS
We began our operations in the web solutions market in September 1997. As
of March 31, 2000 we were delivering services to approximately 61,442 customer
web sites. A large majority of our customers are located in the United States
and are traditional small and medium-sized businesses. Less than 10% of our
customers are in other countries with some of them being local Internet service
providers in their countries.
The number of our customer web sites grew from 10,611 at December 31, 1998
to 61,442 at March 31, 2000, a growth of 479%. This growth resulted from the
internal development of our customer base through advertising and reseller
efforts. We believe that a significant percentage of our new customers switched
to us from our competitors and we tend to lose relatively few customers.
We enter into contracts with customers, the majority of which range from
three months to two years. As of March 31, 2000, we had contracts with an
average length of 11.6 months and approximately 64% of our contracts have a
length of at least 12 months. These contracts are typically prepaid at the time
they are initiated. If the contract is canceled in the first thirty days we give
the customer a full refund.
CUSTOMER SERVICE AND SUPPORT
We believe customer service and support is critical to our future success
and growth. We offer superior customer service by understanding the technical
requirements and business objectives of our customers and by fulfilling their
needs proactively on an individual basis. Our customer service staff is focused
on direct and indirect customer service and support. We provide customer support
24 hours a day, seven days a week, 365 days a year, and have developed a
customized, life-cycle support management approach to our operations.
In servicing and supporting our customers, we utilize a number of
sophisticated automated systems, including a problem resolution and
trouble-ticketing system, an enterprise system monitoring platform,
sophisticated telephone system, on-line trouble management system, and workforce
management system. We also conduct customer satisfaction surveys on a regular
basis to help us improve our support and product offerings. We believe that our
approach to customer service and our ability to respond rapidly to customer
needs provides us with a significant competitive advantage.
NETWORK AND TECHNOLOGY INFRASTRUCTURE
We designed our high performance server network to provide superior
availability and reliability for our customers' hosting operations. The network
currently consists of two data centers in Atlanta connected
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by a high performance network to the Internet. Within the data centers, a
virtual local-area-network provides redundant, high-speed internal connectivity.
Data Centers
Our two data centers are secure, redundant, and high-speed hosting
facilities. Due to the current growth of our business, we opened our second data
center in Atlanta in March 2000. As with our first data center, the new data
center is in close proximity to all major carrier network centers. This new data
center is a secure, redundant, fault tolerant, high-speed network capable of
supporting any of the current and future products we plan to deploy. We maintain
two backup systems for each component of the hosting process ranging from backup
servers to multiple access lines. Additionally, we have purchased several power
generators to ensure that even in the event of a power failure, our facilities
will continue to operate. Our server computer rooms have cooling and fire
suppression systems. We remove all tape backups to a remote facility for storage
in a fireproof facility. We also have a highly trained and experienced technical
staff that continually monitors the operations of the network and servers on a
24 hours a day, seven days a week basis through our network operations center.
We plan to have third data center in the western U.S. in the next 12 months and
may consider opening a data center in Europe in the future.
Customer Load Balancing
We maintain a customer ratio on our shared servers that allows quick access
to our shared customers' web sites, even under heavy loads. More importantly, as
our customer's web sites become more interactive, our customer ratio will allow
the web server to handle the additional loads without further hardware
investment. We believe that this future planning will offer significant
advantages over competitors who have higher customer ratios and central
processing unit utilization. We believe these competitors will have to purchase
additional hardware and move customers onto multiple web servers as the sites
become more interactive, and thus more central processing unit intensive.
Proprietary Technology
We have developed various proprietary technologies that address the
back-end processing and customer interface components of our services, allowing
customers to order, change and manage their web hosting accounts easily
regardless of their level of technical expertise. We designed our auto-provision
technology to let customers make modifications to their sites from the Internet
without having to contact one of our support staff members. For example, we
provide customers with the ability to change passwords, protect specific
directories, and create database sources without interacting with one of our
representatives. The technology allows us to provide graphical statistics free
to all customers. These statistics provide detailed reports on web site usage,
including categories such as top referring sites, number of unique web hits,
origin of web hits, and periods of highest usage. In sum, our proprietary
technology allows us to provide flexibility to our customers and help them
create the services they need.
Our proprietary technology also results in greater operational efficiency
for us. We have developed innovative billing technology that simplifies the
accounting process and leads to effective cash management.
Connectivity
We utilize multiple DS-3 connections to the Internet. Our data centers are
provisioned directly off Packet of Sonet interconnections to the major Internet
carriers. Our new facility opened in March 2000 with multiple OC3 connections,
and we are planning for the addition of multiple OC12 connections in the next
two months.
We designed our high-speed network and high-speed Internet backbone to have
sufficient capacity to assure that our customers' web site traffic is processed
as quickly as possible. By utilizing top tier connectivity, we are able to offer
highly resilient, redundant, and high-speed connectivity between the Internet
and our data centers.
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<PAGE> 49
Location Advantage
An important component of our connectivity is our Atlanta location. We use
multiple connectivity providers, including UUnet, Qwest, and Digex, to prevent
any single failure point. We are in the process of adding another connectivity
provider to build in further redundancy.
Our proximity to our connectivity providers provides us with several
benefits. First, it enhances the connection speed to the Internet as the
distance to the providers has been reduced. Second, the cost of connecting to
our connection points of our major providers is minimized. Third, we are able to
add capacity to our connections to Internet access providers more quickly as our
needs expand. We therefore believe that our location provides us with a
competitive advantage over hosting companies located in remote locations,
relative to major Internet connection points. These competitors may experience
delays in adding capacity to handle increased demand and will probably pay
premiums to have the capacity delivered to their locations.
Network Operations Center
We fully staff our Atlanta network operations center 24 hours a day, seven
days a week with technical experts in Windows NT and Linux operating platforms.
The network operations center personnel monitor each piece of equipment,
including routers, switches, and servers. The design and systems used in the
network operations center allow our systems engineers and administrators and
support staff to be promptly alerted to problems. We have documented procedures
for rapidly resolving any technical problems that arise. The network operations
center and our customer care center are fully integrated and have documented
communication and escalation procedures. Our network operations center is also
responsible for monitoring all Internet and communication connections to make
sure they are functional and properly loaded.
Network Security
Our network incorporates host-based security with Cisco router access
control lists, as well as SecurID token-based authentication. In addition to
these physical security measures, we have a formal security policy in place,
including employee training, that governs all facets of our business and
guidelines governing internal and external access to information housed in our
network system.
COMPETITION
The markets in which we compete are highly competitive. Because there are
no substantial barriers to entry, we expect that we will face competition from
both existing competitors and new market entrants in the future. We believe that
participants in these markets must grow rapidly and achieve a significant
presence to compete effectively. We believe that the primary competitive factors
determining success in our markets include:
- Technical expertise in developing advanced web hosting solutions;
- Internet system engineering and technical expertise;
- Quality of service, including speed, network capability, expansion
capability, reliability, security and ability to support multiple
functions;
- Brand name recognition;
- Competitive pricing;
- Ability to maintain and expand distribution channels;
- Customer service and support;
- Broad geographic presence;
- A complete range of services and products;
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<PAGE> 50
- Timing of introductions of new and enhanced services and products;
- Network security and reliability;
- Financial resources; and
- Conformity with industry standards.
As a developing company, we may lack the financial and other resources,
expertise or capabilities to capture increased market share in this environment
in the future.
Our current and prospective competitors include:
- Web site hosting and related services providers, including Digex
Corporation, Globix Corporation, Interliant, Inc., Data Return Corp.,
Navisite, Inc. and USinternetworking, Inc. and a large number of local
and regional hosting providers;
- Application-specific hosting service providers such as Critical Path;
- Co-location providers such as AboveNet Communications, Inc., Exodus,
Digital Island and Frontier GlobalCenter Inc.;
- National and regional Internet service providers, including Concentric
Network Corporation, EarthLink, Inc., PSINet Inc., UUnet, and Verio,
Inc.;
- Customized Internet application service providers, including AppNet
Systems, Inc., CORIO, Inc., USinternetworking, Inc. and USWeb/CKS;
- Application developers and Internet application software vendors,
including Open Market, Inc., DoubleClick Inc. and Broadcast.com, inc.;
- Large system integrators and information technology outsourcing firms,
including Electronic Data Systems Corporation and International Business
Machines Corporation;
- Global telecommunications companies, including AT&T Corp., MCI WorldCom,
Inc. and Sprint Corporation, and regional and local telecommunications
companies, including MediaOne Group, Inc. and regional Bell operating
companies; and
- Computer hardware providers, including Dell Computer Corporation,
Gateway, Inc., Compaq Computer Corporation and Micron Technology.
Although it is impossible to quantify our relative competitive position in
our market, many of these competitors have substantially greater financial,
technical and marketing resources, larger customer bases, longer operating
histories, greater name recognition and more established relationships in the
industry than we have. As a result, many of these competitors may be able to
develop and expand their network infrastructures and service offerings more
rapidly, adapt to new or emerging technologies and changes in customer
requirements more quickly, take advantage of acquisitions, consolidation
opportunities and other opportunities more readily, devote greater resources to
the marketing and sale of their services and adopt more aggressive pricing
policies than we can. In addition, these competitors have entered and will
likely continue to enter into joint ventures or consortia to provide additional
services competitive with those provided by us.
INTELLECTUAL PROPERTY RIGHTS
We rely on a combination of trademark, service mark, copyright and trade
secret laws and contractual restrictions to establish and protect our
proprietary rights and promote our reputation and the growth of our business. We
do not own any patents that would prevent or inhibit competitors from using our
technology or entering our market although we are evaluating whether to apply
for patent protection on aspects of our technology and business. While it is our
practice to require all of our employees to enter into agreements containing
non-disclosure, non-competition and non-solicitation restrictions and covenants,
and while our agreements with some of our customers and suppliers include
provisions prohibiting or
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<PAGE> 51
restricting the disclosure of proprietary information, we can not assure you
that these contractual arrangements or the other steps taken by us to protect
our proprietary rights will prove sufficient to prevent misappropriation of our
proprietary rights or to deter independent, third-party development of similar
proprietary assets. In addition, we provide our services in other countries
where the laws may not afford adequate protection for our proprietary rights.
We license or lease many technologies used in our Internet application
services. Our technology suppliers may become subject to third-party
infringement claims which could result in their inability or unwillingness to
continue to license their technology to us. The loss of some of our technologies
could impair our ability to provide services to our customers or require us to
obtain substitute technologies of lower quality or performance standards or at
greater cost. We expect that we and our customers increasingly will be subject
to third-party infringement claims as the number of web sites and third-party
service providers for web-based businesses grows. Although we do not believe
that our technologies or services otherwise infringe the proprietary rights of
any third parties, we cannot assure you that third parties will not assert
claims against us in the future or that these claims will not be successful. Any
infringement claim as to our technologies or services, regardless of its merit,
could be time-consuming, result in costly litigation, cause delays in service,
installation or upgrades, adversely impact our relationships with suppliers or
customers or require us to enter into royalty or licensing agreements.
GOVERNMENT REGULATION
We are not currently subject to direct federal, state or local government
regulation, other than regulations applicable to businesses generally. There is
currently only a limited body of laws and regulations directly applicable to
businesses that provide access or commerce on the Internet.
The "Digital Millennium Copyright Act" became effective in October 1998 and
provides a limitation on liability of on-line service providers for copyright
infringement for transmitting, routing or providing connections, transient
storage, caching or storage at the direction of a user, if the service provider
had no knowledge or awareness that the transmitted or stored material was
infringing and meets other conditions. Since this law is new and does not apply
outside of the United States, we are unsure of how it will be applied to limit
any liability we may face in the future for any possible copyright infringement
or copyright-related issues. This new law also requires service providers to
follow "notice and take-down" procedures and to meet other conditions in order
to be able to take advantage of the limitation on liability. We have recently
implemented the procedures and believe we meet the conditions to qualify for the
protection provided by the Digital Millennium Copyright Act. Moreover, our
customers are subject to an acceptable use policy which prohibits them from
transmitting, storing or distributing material on or through any of our services
which, in our sole judgment is (1) in violation of any United States local,
state or federal law or regulation, or infringes on the copyright of a third
party (2) fraudulent on-line marketing or sales practices or (3) fraudulent
customer information, including identification and payment information. Although
this policy is designed to promote the security, reliability and privacy of our
systems and network, we cannot be certain that our policy will accomplish this
goal or effectively limit our liability.
Despite enactment of the Digital Millennium Copyright Act, the law relating
to the liability of on-line services companies and Internet access providers for
information carried on or disseminated through their networks remains largely
unsettled. It is possible claims could be made against on-line services
companies and Internet access providers under both United States and foreign law
for defamation, obscenity, negligence, copyright or trademark infringement, or
other theories based on the nature and content of the materials disseminated
through their networks. Several private lawsuits seeking to impose such
liability upon on-line services companies and Internet access providers are
currently pending.
Although sections of the Communications Decency Act of 1996 that proposed
to impose criminal penalties on anyone distributing indecent material to minors
over the Internet were held to be unconstitutional by the U.S. Supreme Court, in
October 1998, Congress passed the Child Online Privacy Protection Act, which
sought to make it illegal to communicate, for commercial purposes, information
that
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is harmful to minors. In February 1998, the United States District Court judge
issued a preliminary injunction against the enforcement of the Child Online
Protection Act on constitutional grounds. An appeal from the District Court's
ruling is pending. While we cannot predict the ultimate outcome of this
proceeding, even if the Child Online Protection Act is ruled unconstitutional,
similar laws may be proposed, adopted, or upheld in the future. The nature of
future legislation and the manner in which it may be interpreted and enforced
cannot be fully determined and, therefore, legislation similar to the
Communications Decency Act could subject us and/or our customers to potential
liability, which in turn could harm our business. The adoption of any of these
types of laws or regulations might decrease the growth of the Internet, which in
turn could decrease the demand for our services or increase our cost of doing
business or in some other manner harm our business.
The Children's Online Privacy Protection Act of 1998, and the rules
promulgated by the Federal Trade Commission implementing the provisions of the
act, regulate the collection, use or disclosure of personally identifiable
information from and about children on the Internet by operators of web sites or
on-line services directed to children, and operators of general audience web
sites who knowingly collect information from children. The act and the FTC rules
require the operators of such web sites and on-line services to (1) provide
notice of its information collection, use, and disclosure practices, (2) obtain
parental consent before any collection, use or disclosure of personal
information collected from children, (3) provide an opportunity for parental
review of personal information collected from children and the right to prohibit
further use or maintenance of that information, (4) not condition a child's
participation in any on-line activity on disclosing more personal information
than is necessary, and (5) to establish and maintain reasonable procedures to
protect the confidentiality, security and integrity of personal information
collected from children. An operator will be deemed to be in compliance with the
requirements of the act and the FTC rules if the operator complies with any
industry self-regulatory guidelines approved by the FTC. The FTC is authorized
to bring enforcement actions and impose civil penalties for violations of the
FTC rule. We may operate web sites that are directed to children on behalf of
some of our customers. The Children's Online Privacy Protection Act and the FTC
rules implementing it will go into effect on April 21, 2000. We have not yet
taken affirmative steps to adopt or comply with any FTC-approved industry
self-regulatory guidelines.
In February 1995, the European Union adopted Directive 95/46/EC on the
protection of individuals with regard to the processing of personal data and on
the free movement of such data. As a result of this directive the 15 member
countries of the European Union are required to pass specific privacy protection
legislation by October 1998 regarding the collection and use of personally
identifiable information. One section of the directive requires member states to
ensure that personally identifiable information is only transferred outside of
the EU to countries with adequate privacy protection. In response to the
directive, the U.S. Department of Commerce has proposed seven "Safe Harbor"
principles designed to serve as guidelines for United States companies. In light
of the "Safe Harbor" principles, the EU announced in the fall of 1998 that it
would avoid disrupting the exchange of information with the United States by
allowing its member countries to transfer information to the U.S. so long as it
continues good faith negotiations with the EU. However, if an EU member country
determines that a web site administered by a U.S. company has a significant
presence in the country and is in violation of the Safe Harbor Principles, it
may nonetheless prosecute and sanction the U.S. company through its regulatory
agency for improper data collection. Most EU member countries, including the
United Kingdom, have enacted legislation consistent with the directive that has
forced some U.S. companies to take actions to comply with the directive.
Although we currently provide services over the Internet in the United Kingdom
and other countries that are members of the EU, we have not taken affirmative
steps to comply with the "Safe Harbor" principles announced by the Department of
Commerce.
While there currently are relatively few laws or regulations directly
applicable to the Internet or to applications hosting providers, due to the
increasing popularity of the Internet and Web-based applications it is likely
that such laws and regulations may be adopted. These laws may cover a variety of
issues including, for example, user privacy and the pricing, characteristics and
quality of products and services.
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The adoption or modification of laws or regulations relating to commerce over
the Internet could substantially impair the future growth of our business or
expose us to unanticipated liabilities. Moreover, the applicability of existing
laws to the Internet and Internet application service providers is uncertain.
These existing laws could expose us to substantial liability if they are found
to be applicable to our business. For example, we provide services over the
Internet in many states in the United States and in the United Kingdom, and we
facilitate the activities of our customers in those jurisdictions. As a result,
we may be required to qualify to do business, be subject to taxation or be
subject to other laws and regulations in these jurisdictions, even if we do not
have a physical presence or employees or property there. The application of
existing laws and regulations to the Internet or our business, or the adoption
of any new legislation or regulations applicable to the Internet or our
business, could materially adversely affect our financial condition and
operating results.
EMPLOYEES
As of May 5, 2000, we had 471 employees, of which 146 were in sales,
distribution and marketing, 23 were in programming, 246 were in customer service
and technical support and 56 were in finance, billing and administration. None
of our employees is represented by a labor union, and management believes that
employee relations are good.
FACILITIES
Our executive offices and new data center are located in Atlanta, Georgia
and consist of approximately 72,400 square feet leased under an agreement that
expires in July 2009. Our original data center and our network operations center
are located in a nearby building in Atlanta and consists of approximately 17,000
square feet leased under agreements that expire in the year 2009. We have
recently entered into a lease for additional office space in Atlanta, Georgia
that consists of approximately 51,000 square feet under an agreement that
expires in May 2010. We have an option for an additional 124,000 square feet of
space under this lease. We also lease a facility in Amsterdam that serves as a
sales and customer service center for our European operations.
In addition, we are currently planning to lease an additional facility in
the western United States that will serve as a redundant network operations
center. This facility should be open and operational in the latter part of 2000.
LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings that we believe are
likely to have a material adverse affect on our results of operation or
financial condition.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES
The following contains information concerning our directors and executive
officers as of March 31, 2000, each of whom will continue to serve in the
following capacities for both us and our operating subsidiary after this
offering:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Kenneth Gavranovic......................... 29 Chairman of the Board, President and Chief
Executive Officer
Rahim Shah................................. 38 Executive Vice President -- Operations and
Director
David N. Gill.............................. 45 Executive Vice President, Chief Financial
Officer and Director
H. Christopher Covington................... 50 Senior Vice President, General Counsel and
Secretary
Mark K. Alexander.......................... 34 Senior Vice President -- Sales, Marketing
and Business Development
Robert Malally............................. 29 Chief Technology Officer
Clyde A. Heintzelman....................... 61 Director
Andrew E. Jones............................ 36 Director
Gregg A. Mockenhaupt....................... 30 Director
William E. Whitmer......................... 66 Director
OTHER KEY EMPLOYEES:
Maryjane Stevens........................... 43 Senior Vice President, Finance
Richard Coleman............................ 34 Vice President of Engineering
Chris Rogers............................... 27 Vice President of Sales, North America
E. Dean Holland............................ 46 Vice President of Operations
Fabrice Klein.............................. 32 Vice President of Corporate Development
</TABLE>
EXECUTIVE OFFICERS AND DIRECTORS
Kenneth Gavranovic has served as our Chairman of the Board of Directors
since March 2000, President and Chief Executive Officer since December 1999, a
director since September 1997, and is one of our co-founders. During his ten
years of technology related entrepreneurial experience, Mr. Gavranovic served as
Vice President with Worldwide Internet Publishing Corporation, a web hosting
company that he co-founded, from 1995 to 1997. From 1992 to 1994, he served as
Vice President with Interactive Media Solutions, a company he founded to allow
international callers to arbitrage the difference between long-distance calling
rates in the United States and abroad through the use of his exclusively
developed proprietary software.
Rahim Shah has served as our Executive Vice President -- Operations since
October 1999 and a director since December 1999. Mr. Shah previously served as
the Director of Enterprise Resource Management and Director of Mass Market and
Business Customer Operations for the Internet division of BellSouth from
November 1997 to October 1999. From November 1996 to November 1997, he served as
the Director of Customer Service and Sales for the Long Distance Division of
Frontier Corporation. From 1989 to 1996, Mr. Shah served in various capacities
with MCI Communication Corporation, including Managing Director of Quality
Management Consulting. Mr. Shah received a B.S. in Civil Engineering and an MBA
in Finance and Marketing from Southern Illinois University at Edwardsville.
David N. Gill has served as our Executive Vice President, Chief Financial
Officer and a director since March 2000. Mr. Gill served as Chief Financial
Officer from July 1996 to March 2000 and as Chief Operating Officer from
February 1997 to March 2000 of Novoste Corporation, a publicly traded medical
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device company. From August 1995 to June 1996, he served as Chief Financial
Officer of SPEA Software AG before its sale to Diamond Multimedia, Inc. From
1992 to 1995, Mr. Gill served as President and director of Dornier Medical
Systems, Inc., a medical device company and a member of the Daimler Benz Group,
and from 1990 to 1992 he served as Dornier's Vice President of Finance. Mr. Gill
received an M.B.A. from Emory University and a B.S. degree in Accounting from
Wake Forest University, and is a Certified Public Accountant.
H. Christopher Covington has served as our Senior Vice President, General
Counsel and Secretary since February 2000. From October 1990 to February 1999,
Mr. Covington served in various capacities for Vanstar Corporation, a publicly
traded seller of computer products and services. These capacities included
Senior Vice President, General Counsel and Secretary from August 1994 to
February 1999, Vice President from March 1993 to August 1994 and Assistant
General Counsel from November 1990 to August 1994. Mr. Covington received a B.A.
degree in Political Science from the University of California at Santa Barbara,
a J.D. from the University of the Pacific, McGeorge School of Law and an L.L.M.
from the University of the Pacific, McGeorge School of Law.
Mark K. Alexander has served as our Senior Vice President -- Sales,
Marketing and Business Development since April 2000. From October 1998 to April
2000, he was employed by the international division of BellSouth Corporation as
the Vice President of Marketing from December 1999 to April 2000 and Executive
Director of Marketing from October 1998 to November 1999. Before joining
BellSouth, Mr. Alexander was employed by Scientific-Atlanta from August 1994 to
October 1998. At Scientific-Atlanta, Mr. Alexander served as the Managing
Director of the Asia Pacific region from July 1995 to October 1998 and the
Regional Sales Director of the Europe, Middle East and Africa region from August
1994 to July 1995. Mr. Alexander received a B.S. in Management from the Georgia
Institute of Technology and an MBA from Emory University.
Robert Malally has served as our Chief Technology Officer since February
2000. From March 1999 to February 2000 he was employed by Sprint Paranet as
Chief Network Architect. From March 1997 to March 1999, Mr. Malally served as
Senior WAN Technical Consultant for Sun Data, Inc. In addition, from December
1996 to March 1997, he was employed by Universal Data Consultants as WAN
technical consultant and from August 1994 to December 1996, Mr. Malally was
employed by IBM as a network specialist. Mr. Malally received a B.S. in Applied
Physics from Auburn University.
Clyde A. Heintzelman has served as a director since December 1999. Mr.
Heintzelman has served as the President of Net2000 Communications, Inc., a
publicly traded telecommunications company, since November 1999. Mr. Heintzelman
has been a director of Net2000 since March 1997. From December 1998 to November
1999, Mr. Heintzelman served as President and Chief Executive Officer of SAVVIS
Communications Corporation, a national Tier 1 Internet service provider. From
May 1995 to September 1997, he was President and Chief Operating Officer of
DIGEX Incorporated, an Internet service provider providing service to markets
among the 50 largest metropolitan areas in the U.S. In mid-1997, DIGEX was sold
to Intermedia Communications, Inc., a national CLEC, and from October 1997 to
November 1998, he served as a retained business consultant to Intermedia. In
addition, from 1964 to 1992, Mr. Heintzelman was in several executive capacities
with Bell Atlantic Corporation and its predecessor companies (AT&T). Mr.
Heintzelman also serves on the boards of directors of Optelecom, Inc., a fiber
optic device company, and SAVVIS Communications. Mr. Heintzelman received a B.A.
in Marketing from University of Delaware and attended graduate school at
Wharton, the University of Pittsburgh, and the University of Michigan.
Andrew E. Jones has served as a director since December 1999. Mr. Jones is
a General Partner of Boulder Ventures Limited, a venture capital investing firm.
Prior to joining Boulder Ventures in January 1999, Mr. Jones was an Investment
Analyst with Grotech Capital Group from March 1996 through December 1998. Prior
to joining Grotech, Mr. Jones was a manager with the telecommunications practice
of Deloitte & Touche Consulting Group from 1992 through 1996. Before working at
Deloitte & Touche, Mr. Jones was with Andersen Consulting from 1990 through
1992. Mr. Jones currently serves on several private company boards of directors.
Mr. Jones received a B.S. in Electrical Engineering from Cornell
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University, a Master of Electrical Engineering from Cornell University, and an
MBA from the University of Chicago.
Gregg A. Mockenhaupt has served as a director since December 1999. Since
March 1996, Mr. Mockenhaupt has served as a Managing Director of Crest
Communications Holdings, LLC, a private investment firm that was formed in 1996
to focus on communications-related investments and which is the manager of Crest
Communications Partners, L.P. and Crest Entrepreneurs Fund, L.P. Before joining
Crest in March 1996, Mr. Mockenhaupt was an Associate in the Mergers &
Acquisitions Group of Smith Barney Inc. from June 1994 to March 1996. Mr.
Mockenhaupt currently serves on several private company boards of directors. Mr.
Mockenhaupt received a B.S. in Economics from the Wharton School of the
University of Pennsylvania.
William E. Whitmer has served as a director since March 2000. He retired in
1992 as a Certified Public Accountant and management consultant. From 1989 until
his retirement in 1992, he was a partner of Ernst & Young, having served as the
Associate Managing Director of that firm's southern United States management
consulting group. From 1968 through 1989, Mr. Whitmer was a partner of Arthur
Young & Company, having served as the Managing Partner of its East and Southeast
United States regions of the management consulting practice from 1975 through
1989. Mr. Whitmer has served on the board of directors of Novoste Corporation, a
medical device company, since October 1992. Mr. Whitmer received a B.A. in
Economics from Denison University.
OTHER KEY EMPLOYEES
Maryjane Stevens has served as our Senior Vice President, Finance since
March 1999 and as a director from December 1999 to March 2000. From August 1996
to February 1999, she was employed by Vanstar Corporation in the roles of
Finance Director, Mergers and Acquisitions and Internal Audit Director. Before
her employment with Vanstar, from 1983 to 1994, Ms. Stevens served in a number
of financial positions with Digital Equipment Corporation. Ms. Stevens received
a B.S. in Accounting from Bentley College in Waltham, Massachusetts.
Richard Coleman has served as our Vice President of Network Operations
since January 1999, and is responsible for managing the Company's network of
UNIX web servers. From October 1994 to January 1998, Mr. Coleman served as the
Network Administrator at the Georgia Institute of Technology. He has also been
employed as a Software Engineer at General Electric Aerospace. Mr. Coleman
received a B.S. and M.S. in Applied Mathematics from Georgia Institute of
Technology.
Chris Rogers has served as our Vice President of Sales since January 2000
and as our Director of Sales from May 1999 to January 2000. Mr. Rogers joined
Interland as a sales representative in October 1998. Before that time, Mr.
Rogers served as the director of sales for Profession Management Technologies,
Inc., a technology consulting firm providing network solutions to law firms from
August 1996 to October 1998. Mr. Rogers had previously served as an independent
technology consultant to law firms. Mr. Rogers received a B.A. from Georgia
Southern University.
E. Dean Holland has served as our Vice President of Operations since
December 1999. Before joining us, Mr. Holland was employed by the Internet
division of BellSouth Corporation from October 1995 to December 1999. At
BellSouth.net, Mr. Holland served as the Senior Manager of Provisioning
Engineering from February 1997 to December 1999 and the Network Operation Center
Manager from 1995 to 1997. From 1975 to 1995, Mr. Holland was employed in
various capacities with The Southern Company, including as the Manager of the
Network Operations Center from 1991 to 1995. Mr. Holland attended DeKalb
Community College in Atlanta, Georgia and has received numerous industry
certifications.
Fabrice Klein has served as our Vice President of Corporate Development
since March 2000. Before joining Interland, Mr. Klein was a Vice President in
Chase H&Q's Global Telecom and Media group where he focused on the Internet
sector. Before joining Chase Securities in 1998, Mr. Klein managed the
development of Internet banking services in Chase.com's Electronic Commerce
group. From 1994 to 1997, Mr. Klein was with Coopers & Lybrand Consulting,
focusing on Internet strategy for clients in the media
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and telecom industries. Mr. Klein previously served in the French Army as a
Lieutenant. Mr. Klein graduated with honors from the Institut Superieur de
Gestion in Paris, France, and received an MBA from the Yale School of
Management.
EXECUTIVE COMPENSATION
The table below provides information concerning the total compensation of
our Chief Executive Officer who is the only executive officer whose total salary
and bonus for 1999 exceeded $100,000. In addition, we have provided information
for our Executive Vice President who commenced employment on October 26, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------- ------------------------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION AWARD(S) OPTIONS SATION
--------------------------- ---- -------- ------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Kenneth Gavranovic,........... 1999 $142,154 $23,190 -- -- 324,000 --
Chief Executive Officer and
President
Rahim Shah,................... 1999 $ 25,385 -- $12,000(1) -- 189,000 --
Executive Vice President
</TABLE>
- ---------------
(1) Mr. Shah's employment with us commenced on October 26, 1999. We paid Mr.
Shah a signing bonus of $12,000.
The following table shows information concerning stock option grants to
each of the named officers during the fiscal year ended December 31, 1999.
STOCK OPTION GRANTS IN 1999 (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
-------------------------------------------------------------------- ---------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES ASSUMED
OPTION IN FISCAL EXERCISE OFFERING EXPIRATION
NAME GRANTED YEAR PRICE PRICE DATE 5% 10%
---- ------------ ----------------- -------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Kenneth Gavranovic........ 324,000(3) 10.7% $2.78 $ 13.00 7/1/09 $495,178 $1,364,236
Rahim Shah................ 81,000(3) 2.7 2.78 13.00 11/1/09 123,794 341,059
108,000(4) 3.6 2.78 13.00 12/1/09 165,059 454,745
</TABLE>
- ---------------
(1) We granted options to purchase 3,037,500 shares of our common stock under
our Stock Incentive Plan in the year ended December 31, 1999. The options
expire ten years after the date of the grant.
(2) Potential realizable value is based on the assumption that our common stock
appreciates at the annual rate shown, compounded annually, from the date of
grant until expiration of the ten-year term. These numbers are calculated
based on SEC requirements and do not reflect our projection or estimate of
future stock price growth. Potential realizable values are computed by
multiplying the number of shares of common stock subject to a given option
by the fair market value of the common stock on the date of grant,
determined to be $2.78 as of July 1, 1999, November 1, 1999, and December 1,
1999, and assuming that the aggregate stock value derived from that
calculation compounds at the annual 5% or 10% rate shown in the table for
the entire ten-year term of the option and subtracting from that result the
aggregate option exercise price. The fair market value of our common stock
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<PAGE> 58
on each date of grant was determined by the board of directors based in part
on the per share sales price of common stock that we issued in substantially
concurrent private transactions. Actual realizable value, if any, will be
dependent on the future price of the common stock on the actual date of
exercise, which may be earlier than the stated expiration date.
(3) These options vest in 33 1/3% increments beginning at the earlier of July 1,
2000 or the closing of this offering and continuing thereafter on the
anniversary date of the earlier of July 1, 2000 or closing of this offering.
(4) These options vest beginning one year from the date of grant in 33 1/3%
increments on the anniversary of the date of grant.
The following table shows information concerning stock options held by each
of the named officers at December 31, 1999. There were no option exercises in
1999.
1999 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1999 AT DECEMBER 31, 1999(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kenneth Gavranovic........................... -- 324,000 -- $839,160
Rahim Shah................................... -- 189,000 -- 489,510
</TABLE>
- ---------------
(1) Calculated using $5.37 per share, the fair market value of our common stock
at December 31, 1999 as determined by our board of directors based on the
facts and circumstances in light of the completion of negotiations of our
strategic relationship with Microsoft.
STOCK PLANS
Stock Incentive Plan
In July 1999, we adopted our Stock Incentive Plan to provide our key
employees, officers, directors, contractors and consultants an opportunity to
own our common stock and to provide incentives for these persons to promote our
financial success. Awards under the Stock Incentive Plan may be structured in a
variety of ways, including as "incentive stock options" as defined in Section
422 of the Internal Revenue Code, as amended, non-qualified stock options,
restricted stock, stock awards, stock appreciation rights, and performance share
awards. Incentive stock options may be granted only to our employees (including
officers). Other awards may be granted to any person employed by or performing
services for us, including directors and consultants. The Stock Incentive Plan
provides for the issuance of options and awards for up to 7,560,000 shares of
common stock.
Incentive stock options are also subject to limitations prescribed by the
Internal Revenue Code, including the requirement that such options may not be
granted to employees who own more than 10% of the combined voting power of all
classes of our voting stock, unless the option price is at least 110% of the
fair market value of the common stock subject to the option, and may be
exercised for no more than five years from the grant date. Our board of
directors (or a committee designated by the board) otherwise generally has
discretion to interpret and administer the plan and to set the terms and
conditions of options and other awards, including the term, exercise price and
vesting conditions, if any, to select the persons who receive such grants and
awards.
As of May 10, 2000 we had granted options to purchase an aggregate of
4,966,056 shares of common stock under the Stock Incentive Plan, including
options for 324,000 shares to Mr. Gavranovic, 189,000 shares to Mr. Shah,
486,000 shares to Mr. Gill, 216,000 shares to Mr. Covington, 189,000 shares to
Mr. Alexander, and 135,000 shares to Mr. Malally. The options to Mr. Gavranovic
and Mr. Shah are exercisable at $2.78 per share, the options to Mr. Gill, Mr.
Covington, and Mr. Malally are exercisable at $5.37 per share, and the options
to Mr. Alexander are exercisable at $8.33 per share.
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<PAGE> 59
Employee Stock Purchase Plan
On March 15, 2000 we adopted an Employee Stock Purchase Plan under which
qualified employees will have the right to purchase shares of our common stock
on a quarterly basis through payroll deductions by the employee. The
compensation committee of our board of directors will administer the plan. The
price per share of common stock under the plan is 85% of the fair market value
of a share of common stock at the beginning or the end of each quarterly
purchase period, whichever is lower. The amount of any participant's payroll
deductions or cash contributions made under the stock purchase plan may not
exceed 10% of the participant's total annual compensation and may not exceed
$25,000 per year. We may issue up to 540,000 shares of common stock under the
plan. The board of directors may terminate or amend the plan. The board cannot,
however, amend the plan so as to disqualify the stock purchase plan under
Section 423 of the Internal Revenue Code or without the consent of a
participant, materially impair the rights of the participant with respect to any
shares of common stock previously purchased for him or her under the plan.
Under applicable tax rules, participants will not recognize income when
they acquire shares under the plan. With some exceptions, when a participant
disposes of shares, he or she will recognize a capital gain equal to the
difference between the acquisition price and the amount realized on such
disposition. We will not receive deductions with respect to any shares
transferred to a participant under the plan.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Kenneth Gavranovic, our
Chairman, President and Chief Executive Officer; Rahim Shah, our Executive Vice
President; David N. Gill, our Executive Vice President and Chief Financial
Officer; H. Christopher Covington, our Senior Vice President, General Counsel
and Secretary; Mark K. Alexander, our Senior Vice President, Sales, Marketing
and Business Development; and Robert Malally, our Chief Technology Officer. Each
agreement is for a three-year term. In addition to the specific terms of each
agreement that are described below, each of the agreements provides for
participation in benefits of the type normally provided to our key executives,
including participation in our Stock Incentive Plan. Specific terms of each
executive's employment agreement are as follows:
- Mr. Gavranovic's agreement, which expires December 2, 2002, provides for
a base salary of $250,000. In addition, Mr. Gavranovic's agreement
provides for an annual stock option bonus for a minimum number of shares
of common stock equal to $200,000 divided by the fair market value of our
common stock on the date of grant.
- Mr. Shah's agreement, which expires November 1, 2002, provides for an
initial base salary of $150,000, which was increased to $200,000
effective March 1, 2000. Mr. Shah's agreement provides for an annual
bonus of up to 15% of his base salary, and in connection with the
commencement of his employment, Mr. Shah was also granted an option for
189,000 shares of our common stock.
- Mr. Gill's agreement, which expires February 16, 2003, provides for an
initial base salary of $250,000. Mr. Gill's agreement provides for an
annual bonus of up to 20% of his base salary, and a one-time grant of an
option to purchase 486,000 shares of our common stock.
- Mr. Covington's agreement, which expires February 14, 2003, provides for
an initial base salary of $200,000. Mr. Covington's agreement provides
for an annual bonus of up to 15% of his base salary, and a one-time grant
of an option to purchase 216,000 shares of our common stock.
- Mr. Alexander's agreement, which expires April 1, 2003, provides for an
initial base salary of $175,000. Mr. Alexander's agreement provides for
an annual bonus of up to 20% of his base salary, and a one-time grant of
an option to purchase 189,000 shares of our common stock.
- Mr. Malally's agreement, which expires February 15, 2003, provides for an
initial base salary of $150,000. Mr. Malally's agreement provides for an
annual bonus of up to 15% of his base salary, and a one-time grant of
option to purchase 135,000 shares of common stock.
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<PAGE> 60
Under each agreement, if the executive's employment is terminated without
cause, or is terminated by the executive as a result of disability or other good
reason as described in the agreement, the executive will continue to receive
payment of his base salary for the greater of one year or the unexpired portion
of the term of the agreement. Each executive also has agreed not to compete with
us during the term of their respective agreements, and for a period of one year
following the termination of their employment. The agreements contain customary
proscriptions against solicitation of our employees and the misuse of our
confidential information, and contain work-for-hire provisions addressing works,
inventions or other ideas developed by each executive during their respective
terms of employment.
DIRECTOR COMPENSATION
Directors who are employees or affiliated with principal shareholders
receive no additional compensation for their services as directors. We plan to
compensate other directors as follows: $1,000 for each Board or committee
meeting attended in person, and $500 for each Board or committee meeting
attended by telephone. We reimburse all of our directors for the travel and
other expenses they incur in connection with attending Board or committee
meetings. Non-employee directors are also eligible to participate in our Stock
Incentive Plan at the discretion of the full board of directors. We have granted
Messrs. Heintzelman and Whitmer options to purchase 56,700 shares of our common
stock at $5.37 and $8.33 per share, respectively. These options vest monthly
over the first 24 months after the date of grant.
BOARD COMPOSITION
In connection with the sale of our Series A preferred stock, all our
founding shareholders and the purchasers of the Series A preferred stock entered
into a shareholders agreement. This agreement provides for, among other things,
the nomination of and voting for a total of eight directors of Interland, as
follows:
- two representatives designated jointly by Boulder Ventures III, L.P.,
Crest Communications Partners, L.P., and Crest Entrepreneurs Fund,
L.P. -- these representatives are Messrs. Jones and Mockenhaupt;
- four representatives designated by the management of Interland -- these
representatives are Messrs. Gavranovic, Shah, Gill, and Whitmer; and
- two representatives designated by the management of Interland who are not
employees of Interland -- one of these representatives is Mr. Heintzelman
and the other has not yet assumed his responsibilities as a director.
The shareholders agreement requires each stockholder to vote all securities
over which they have voting control and to take all other necessary or desirable
action within their control to effect the preceding election of directors. The
provisions of the shareholders agreement regarding the nomination and election
of directors automatically terminate upon the closing of this offering.
Our board of directors is divided into three classes, each of whose members
will serve for a staggered three-year term. Messrs. Jones and Shah will serve as
Class I directors whose terms will expire at the annual meeting of shareholders
held in 2001. Messrs. Whitmer and Mockenhaupt will serve as Class II directors
whose terms will expire at the annual meeting of shareholders held in 2002.
Messrs. Gavranovic, Heintzelman and Gill will serve as Class III directors whose
terms will expire at the annual meeting of shareholders held in 2003.
BOARD COMMITTEES
Our board of directors has appointed an audit committee and a compensation
committee.
The audit committee will review, act on and report to the board of
directors on various auditing and accounting matters, including the
recommendation of our independent auditors, the scope of the annual audits, fees
to be paid to the independent auditors, the performance of our independent
auditors and our accounting practices. The members of the audit committee are
William E. Whitmer, Gregg A.
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<PAGE> 61
Mockenhaupt and Andrew E. Jones. Mr. Whitmer has been designated as the chairman
of the audit committee.
The compensation committee will determine the salaries and benefits for our
employees, consultants, directors and other individuals compensated by our
company. The compensation committee will also administer our stock incentive
plan, including determining the stock option grants for our employees,
consultants, directors and other individuals, however, the entire board of
directors will determine stock option grants to our executive officers. The
members of the compensation committee are Kenneth Gavranovic, Gregg A.
Mockenhaupt and Clyde A. Heintzelman.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We did not have a compensation committee of our board of directors during
1999. Instead, our entire board of directors, including our present Chief
Executive Officer, who is also a director, determined the compensation of our
executive officers.
As noted above, the members of our compensation committee are now Messrs.
Gavranovic, Mockenhaupt, and Heintzelman. Mr. Gavranovic is our Chairman,
President and Chief Executive Officer. Mr. Mockenhaupt is a Managing Director of
Crest Communications Holdings, LLC, which is the manager of Crest Communications
Partners, L.P. and Crest Entrepreneurs Fund L.P., which purchased a total of
3,963,303 shares of our Series A Preferred Stock on December 2, 1999 for $8.0
million.
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<PAGE> 62
PRINCIPAL SHAREHOLDERS
The following table presents information regarding the beneficial ownership
of common stock as of May 10, 2000 by (1) each of our directors and named
executive officers; (2) each person who beneficially owns more than 5% of our
common stock; and (3) all current executive officers and directors as a group.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission.
To our knowledge, except under applicable community property laws or as
otherwise indicated, the persons named in the table have sole voting and sole
investment control with regard to all shares beneficially owned. The number of
shares and the applicable percentage ownership for each shareholder before the
offering is based on 39,240,235 shares of common stock outstanding as of May 10,
2000 after giving effect to the conversion of all of our outstanding shares of
convertible preferred stock into common stock. The conversion will occur
automatically upon completion of this offering. The applicable percentage
ownership for each shareholder after the offering gives effect to the issuance
of 5,000,000 shares in this offering and the purchase of an aggregate of
2,192,307 shares of our common stock that are committed to be purchased at the
time of this offering, assuming an offering price equal to the midpoint of the
range of offering prices in this prospectus.
<TABLE>
<CAPTION>
PERCENT
BENEFICIALLY OWNED
-------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF SHAREHOLDERS BENEFICIALLY OWNED OFFERING OFFERING
- -------------------------------- ------------------ -------- --------
<S> <C> <C> <C>
Kenneth Gavranovic (1)...................................... 9,110,523 23.15% 19.58%
Rahim Shah (2).............................................. 27,000 * *
David N. Gill (3)........................................... 162,000 * *
Andrew E. Jones (4)......................................... 1,733,945 4.42% 3.73%
Clyde A. Heintzelman (5).................................... 14,178 * *
Gregg A. Mockenhaupt (6).................................... 3,963,302 10.10% 8.54%
William E. Whitmer (7)...................................... 14,178 * *
Waldemar Fernandez (8)...................................... 9,272,523 23.47% 19.85%
Crest Partners II, LLC (9).................................. 3,963,302 10.10% 8.54%
Microsoft Corporation (10).................................. 3,030,480 7.62% 8.52%
BancBoston Ventures Inc. (11)............................... 2,477,064 6.31% 5.33%
Bell Atlantic Investments, Inc. (12)........................ 1,199,999 3.06% 5.07%
All Executive Officers and Directors as a group (8 persons)
(13)...................................................... 15,092,400 38.08% 32.23%
</TABLE>
- ---------------
* Less than one percent.
(1) Includes 108,000 shares of common stock issuable pursuant to options
exercisable upon the closing of this offering and within 60 days of the
date of this prospectus. Does not include an aggregate of 21,600 shares of
common stock issuable to Mr. Gavranovic's mother pursuant to options
exercisable within the 60-day period following the date of this prospectus,
with respect to which Mr. Gavranovic disclaims beneficial ownership. Does
not include an aggregate of 11,666 shares of common stock issuable to Mr.
Gavranovic's fiancee, pursuant to options exercisable within the 60-day
period following the date of this prospectus, with respect to which Mr.
Gavranovic disclaims beneficial ownership. Mr. Gavranovic's address is 101
Marietta Street, Suite 200, Atlanta, GA 30303.
(2) Includes 27,000 shares of common stock issuable pursuant to options
exercisable upon the closing of this offering and within 60 days of the
date of this prospectus.
(3) Includes 162,000 shares of common stock issuable pursuant to options
exercisable upon the closing of this offering and within 60 days of the
date of this prospectus.
(4) Includes 1,733,945 shares of common stock beneficially owned by BV Partners
III, L.L.C., of which Andrew E. Jones is a general partner, and with
respect to which he disclaims beneficial ownership. The 1,733,945 shares
consist of 1,634,595 shares of common stock held by Boulder Ventures III,
L.P. and 99,350 shares of common stock held by Boulder Ventures III
(Annex), L.P. BV Partners III, L.L.C. serves as the general partner of both
Boulder Ventures III, L.P. and Boulder Ventures III (Annex), L.P.
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<PAGE> 63
(5) Includes 14,178 shares of common stock issuable pursuant to options
exercisable upon the closing of this offering and within 60 days of the
date of this prospectus.
(6) Includes 3,963,302 shares of common stock beneficially owned by Crest
Partners II, LLC, of which Mr. Mockenhaupt is a member, and which is the
general partner of Crest Communications Partners L.P., which owns 3,851,432
shares, and Crest Entrepreneurs Fund L.P., which owns 111,870 shares. Mr.
Mockenhaupt disclaims beneficial ownership of the shares of common stock
held by these funds, except to the extent of his proportionate pecuniary
interest in such funds.
(7) Includes 14,178 shares of common stock issuable pursuant to options
exercisable upon the closing of this offering and within 60 days of the
date of this prospectus.
(8) Includes 270,000 shares of common stock issuable pursuant to options
exercisable upon the closing of this offering and within 60 days of the
date of this prospectus. Does not include an aggregate of 216,000 shares of
common stock owned by Mr. Fernandez' daughter, with respect to which Mr.
Fernandez disclaims beneficial ownership. Mr. Fernandez' address is 6268
Jericho Turnpike, Commack, New York 11725.
(9) The 3,963,302 shares of common stock consists of 3,851,432 shares of common
stock held by Crest Communications Partners L.P. and 111,870 shares of
common stock held by Crest Entrepreneurs Fund L.P. Crest Partners II, LLC
serves as the general partner of both Crest Communications Partners L.P.
and Crest Entrepreneurs Fund L.P. The address of Crest Partners II, LLC is
320 Park Avenue, New York, New York 10022.
(10) The 3,030,480 shares of common stock beneficially owned by Microsoft
Corporation consist of 2,484,000 outstanding shares and 546,480 shares of
common stock subject to a warrant that is exercisable within the 60-day
period following the date of this prospectus. At the time of this offering,
in exchange for $7.5 million in cash from Microsoft, we will issue a number
of shares of common stock to Microsoft equal to $7.5 million divided by the
lesser of $13.00 or the actual price to the public of common stock sold in
this offering. In connection with this issuance, we will also issue an
additional warrant to purchase a number of shares of common stock equal to
75% of the number of shares sold to Microsoft at an exercise price equal to
the price paid at the closing. Based on an assumed public offering price of
$13.00, we will issue 576,923 shares of common stock and a warrant to
purchase 432,692 shares of common stock to Microsoft in this transaction.
The address of Microsoft Corporation is One Microsoft Way, Redmond, WA
98052-6399.
(11) BancBoston Ventures, Inc. is a wholly-owned subsidiary of Bank Boston,
N.A., which is a wholly-owned subsidiary of Fleet Boston Corporation. The
address of BancBoston Ventures, Inc. is 100 Federal Street, Boston, MA
02110.
(12) At the time of this offering, in exchange for $15.0 million in cash from
Bell Atlantic, we will issue a number of shares of common stock to Bell
Atlantic equal to $15.0 million divided by the lesser of $13.00 or the
actual price to the public of common stock sold in this offering. Based on
an assumed public offering price of $13.00, we will issue 1,153,846 shares
of common stock to Bell Atlantic in this transaction. Bell Atlantic
Investments, Inc. is a wholly-owned subsidiary of Bell Atlantic, Inc. The
address of Bell Atlantic Investments, Inc. is .
(13) Includes an aggregate of 397,355 shares of common stock issuable pursuant
to options exercisable upon the closing of the offering and within 60 days
of the date of this prospectus.
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CERTAIN TRANSACTIONS
LOANS
In December 1998, we loaned $25,000, and in May 1999, we loaned $200,000 to
each of Kenneth Gavranovic, our President and Chief Executive Officer, and
Waldemar Fernandez, our former Chairman and one of our principal shareholders.
Each loan is evidenced by a full-recourse promissory note which bears interest
at the rate of 10% per annum. The principal balances of Mr. Gavranovic's notes
are payable on demand, the principal balance of Mr. Fernandez' $25,000 note is
payable on demand and the principal balance of Mr. Fernandez' $200,000 note is
payable at the earlier of 6 months after the effective date of the registration
statement of which this prospectus is a part, and November 19, 2004. Interest on
each of the notes is payable quarterly on the first day of the calendar month
following the quarter in which it accrues. The rate of interest payable under
each promissory note may be increased upon the occurrence of any event of
default, as specified in the notes.
Each note is secured by a separate stock pledge agreement, whereby Mr.
Gavranovic and Mr. Fernandez each pledged 432,000 of his shares of common stock
to secure his obligations under his respective notes. The stock pledge
agreements permit us to dispose of the pledged shares upon the occurrence of an
event of default, as that term is described in the stock pledge agreements. The
proceeds of any disposition will be applied first to any unpaid balance due
under the respective note, and any remaining surplus will be distributed to the
respective borrower.
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK FINANCINGS
On December 2, 1999, our board of directors designated shares of our
authorized but unissued preferred stock as Series A convertible participating
preferred stock and Series A-1 convertible participating preferred stock.
Additionally, on that date we issued 9,908,256 shares of our Series A stock at a
stated value per share of $2.02 for total cash consideration to us of
approximately $20.0 million. In this transaction, we sold 3,851,432 shares to
Crest Communications Partners L.P., 111,870 shares to the Crest Entrepreneurs
Fund L.P., 1,634,595 shares to Boulder Ventures III, L.P., 99,350 shares to
Boulder Ventures III (Annex), L.P., 2,477,064 shares to BancBoston Ventures,
Inc., and 1,733,945 shares to Private Equity Co-Invest Ltd. Gregg A.
Mockenhaupt, one of our directors, is a Managing Director of Crest
Communications Holdings, LLC, which is the manager of Crest Communications
Partners, L.P. and Crest Entrepreneurs Fund L.P. Andrew E. Jones, one of our
directors, is a general partner of BV Partners III, L.L.C., the general partner
of Boulder Ventures III, L.P. and Boulder Ventures III (Annex), L.P.
On December 24, 1999, we entered into a Stock Purchase Agreement with
Microsoft Corporation. In connection with this financing transaction, we issued
2,484,000 shares of our Series A preferred stock to Microsoft, at a purchase
price of $2.02 per share. We also issued a warrant to Microsoft to purchase
546,480 shares of our common stock at an exercise price of $5.37 per share,
subject to customary anti-dilution provisions. Microsoft may exercise its rights
under the warrant, in whole or in part, at any time until December 24, 2004. In
the alternative, Microsoft may surrender the warrant in exchange for a number of
shares of our common stock equal to quotient obtained by dividing (1) the
product of (a) the total number of shares issuable under the warrant and (b) the
difference between the fair market value of our common stock and the exercise
price per share under the warrant by (2) the fair market value of our common
stock. The number of shares subject to the warrant may be adjusted to prevent
dilution, and each warrant will expire five years after its date of issuance.
Shares purchased by Microsoft under the warrant are subject to a lock-up
agreement, and may not be sold until 180 days after the date of this offering.
Microsoft paid a total of $5.0 million for the Series A preferred stock and the
warrant.
In addition, under the Stock Purchase Agreement, on the day following the
effective date of the registration statement of which this prospectus is a part,
in exchange for an additional $7.5 million in cash from Microsoft, we will issue
a number of shares of common stock to Microsoft equal to $7.5 million divided by
the lesser of $13.00 or the actual price to the public of common stock sold in
this offering. In
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connection with this issuance, we will also issue an additional warrant to
purchase a number of shares of common stock equal to 75% of the number of shares
sold to Microsoft at an exercise price equal to the price paid at that closing.
The warrant will be subject to the same terms as the warrant we issued in
connection with Microsoft's initial investment. Based on an assumed public
offering price of $13.00, Microsoft would acquire 576,923 shares under the stock
purchase agreement and the warrant would entitle Microsoft to acquire 432,692
additional shares at an exercise price of $13.00 per share.
On March 15, 2000, we entered into a stock purchase agreement with Network
Solutions. In connection with this financing transaction, we issued 744,827
shares of our Series A preferred stock to Network Solutions, at a purchase price
of $5.37 per share. We also issued a warrant to Network Solutions to purchase
372,413 shares of our common stock at an exercise price of $5.37 per share,
subject to customary anti-dilution provisions. Network Solutions may exercise
its rights under the warrant, in whole or in part, at any time until March 15,
2005. In the alternative, Network Solutions may surrender the warrant in
exchange for a number of shares of our common stock equal to quotient obtained
by dividing (1) the product of (a) the total number of shares issuable under the
warrant and (b) the difference between the fair market value of our common stock
and the exercise price per share under the warrant by (2) the fair market value
of our common stock. The number of shares subject to the warrant may be adjusted
to prevent dilution and each warrant will expire five years after its issuance.
Shares purchased by Network Solutions under the warrant are subject to a lock-up
agreement, and may not be sold until 180 days after the date of this offering.
Network Solutions paid a total of $4.0 million for the Series A preferred stock
and the warrant.
In addition, under the Stock Purchase Agreement, on the day following the
effective date of the registration statement of which this prospectus is a part,
in exchange for an additional $6.0 million in cash from Network Solutions, we
will issue a number of shares of common stock to Network Solutions equal to $6.0
million divided by the lesser of $13.00 or the actual price to the public of
common stock sold in this offering. In connection with this issuance, we will
also issue an additional warrant to purchase a number of shares of common stock
equal to 75% of the number of shares sold to Network Solutions at an exercise
price equal to the price paid at that closing. The warrant will be subject to
the same terms as the warrant we issued in connection with Network Solution's
initial investment. Based on an assumed public offering price of $13.00, Network
Solutions would acquire 461,538 shares under the stock purchase agreement and
the warrant would entitle Network Solutions to acquire 346,153 additional shares
at an exercise price of $13.00 per share.
On May 8, 2000, we entered into a stock purchase agreement with a
subsidiary of Bell Atlantic. In connection with this financing transaction, we
issued 1,199,999 shares of our Series A preferred stock to Bell Atlantic, at a
purchase price of $8.33 per share. The shares purchased by Bell Atlantic are
subject to a lock-up agreement, and may not be sold until 180 days after the
date of this offering. Bell Atlantic paid a total of $10.0 million for the
Series A preferred stock.
In addition, under the stock purchase agreement, on the day following the
effective date of the registration statement of which this prospectus is a part,
in exchange for an additional $15.0 million in cash from Bell Atlantic, we will
issue a number of shares of common stock to Bell Atlantic equal to $15.0 million
divided by the lesser of $13.00 or the actual price to the public of common
stock sold in this offering. Based on an assumed public offering price of
$13.00, Bell Atlantic would acquire 1,153,846 shares under the stock purchase
agreement.
Holders of our Series A preferred stock will receive dividends at a rate of
9% compounded annually, payable on a semi-annual basis in additional shares of
Series A-1 preferred stock or in cash at our option. The Series A preferred
stock will also participate on an as-converted basis in any common stock
dividends or distributions. The shares of Series A preferred stock rank senior
to any other series or class of the Company's capital stock, whether now
existing or created after the issuance of the Series A preferred stock, except
for any series of preferred stock that is established by the our board of
directors with a rank that is senior to the Series A preferred stock, with
respect to rights upon liquidation, winding up, dissolution, and redemption and
distribution rights. As such, the holders of shares of the Series A
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preferred stock are generally entitled to the return of an amount equal to the
stated value per share plus any accrued and unpaid dividends before any
distribution, redemption or liquidation, and may also participate in such
distribution, redemption or liquidation on an as-converted basis. Each holder of
preferred stock votes with the holders of common stock on an on-converted basis.
In addition, the holders of the Series A preferred stock also possess a veto
power to prevent some transactions that effect the shares of the Series A
preferred stock, but we may override any such veto by converting the shares of
the Series A preferred stock into either three or four times (determined by the
date on the which the transaction takes place) the number of shares of common
stock into which they might otherwise be converted. Under the conversion rate
set forth in the terms of the preferred stock, the preferred stock was
originally convertible into common stock on a one-for-one basis. However, to the
extent we implement a stock split before this offering, the conversion rate will
automatically adjust to take into account the split.
Immediately before the completion of this offering, the outstanding shares
of Series A stock issued in these transactions will automatically convert into
14,337,082 shares of our common stock. At that time, rights and restrictions
applicable to the Series A stock, including special voting rights, will
terminate and be of no further force and effect. Holders of the Series A stock
will be entitled to "piggy-back" and demand registration rights with respect to
the shares of common stock into which the shares of Series A stock are
converted. For additional information, see "Description of Capital Stock."
OPTION GRANTS TO NEW EXECUTIVES
In February 2000, we granted an option to purchase 216,000 shares of our
common stock to H. Christopher Covington, our Senior Vice President, General
Counsel and Secretary, in connection with his employment with us. In February
2000, we granted an option to purchase 135,000 shares of our common stock to
Robert Malally, our Chief Technology Officer, in connection with his employment
with us. In March 2000, we granted an option to purchase 486,000 shares of
common stock to David Gill, our Executive Vice President, Chief Financial
Officer and a director, in connection with his employment with us. In April
2000, we granted an option to purchase 189,000 shares of our common stock to
Mark K. Alexander, our Senior Vice President, Sales, Marketing and Business
Development, in connection with his employment with us. These options are
exercisable at an exercise price of $5.37 per share, except for the option to
Mr. Alexander which is exercisable at an exercise price of $8.33 per share.
SEPARATION AGREEMENT WITH FORMER CHAIRMAN
In connection with the resignation of Waldemar Fernandez as chairman of our
board of directors, we entered into a separation agreement with Mr. Fernandez on
November 19, 1999. Under the agreement, we paid Mr. Fernandez $330,000, and will
make additional payments of $165,000 to Mr. Fernandez on each of the first two
anniversaries of the agreement as severance and consideration for the releases
and non-competition covenants from him and the termination of all obligations by
us in connection with Mr. Fernandez' employment. In addition, Mr. Fernandez was
granted registration rights under the agreement, including piggy-back
registration rights effective after the completion of this offering, and we
agreed to accelerate the vesting of Mr. Fernandez' options such that they will
become fully exercisable as of the effective date of this offering.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Our articles of incorporation authorize the issuance of up to 100,000,000
shares of common stock and 25,000,000 shares of preferred stock, the rights and
preferences of which may be established from time to time by our board of
directors. Immediately before this offering, 24,903,153 shares of common stock
and 14,337,082 shares of preferred stock were issued and outstanding. Upon
completion of this offering, 46,432,542 shares of common stock and no shares of
preferred stock will be outstanding. As of March 31, 2000, we had 132 holders of
common stock and 8 holders of preferred stock.
The following summary of our capital stock does not purport to be complete.
It is qualified in its entirety by reference to our amended and restated
articles of incorporation and our its amended and restated bylaws, filed as
exhibits to the registration statement of which this prospectus forms a part,
and the applicable provisions of the Georgia Business Corporation Code.
COMMON STOCK
Holders of common stock are entitled to one vote per share on any issue
submitted to a vote of the shareholders and do not have cumulative voting rights
in the election of directors. Accordingly, the holders of a majority of the
outstanding shares of common stock voting in an election of directors can elect
all of the directors then standing for election, if they choose to do so. All
shares of common stock are entitled to share equally in any dividends our board
of directors may, in its discretion, declare out of sources legally available
therefor. If Interland dissolves, liquidates or winds up, holders of common
stock are entitled to receive on a ratable basis all of our assets available for
distribution, in cash or in kind, after payment or provision for payment of all
of our debts and liabilities and any preferential amount due to holders of
preferred stock. Holders of common shares do not have preemptive or other
subscription rights, conversion or redemption rights, or any rights to share in
any sinking fund. All currently outstanding common stock shares are, and the
shares offered hereby (when sold in the manner contemplated by this prospectus)
will be, fully paid and nonassessable.
PREFERRED STOCK
Our articles of incorporation authorize the board of directors, from time
to time, to issue shares of preferred stock in one or more series. They may
establish the number of shares to be included in any such series, and may fix
the designations, powers, preferences and rights (including voting rights) of
the shares of each such series and any qualifications, limitations, or
restrictions on preferred shares. No shareholder authorization is required for
the issuance of these shares of preferred stock unless imposed by then
applicable law. Shares of preferred stock may be issued for any general
corporate purposes, including acquisitions. The board of directors may issue one
or more series of preferred stock with rights more favorable with regard to
voting, dividends and liquidation than the rights of holders of common stock.
Issuance of a series of preferred stock also could be used for the purpose of
preventing a hostile takeover of Interland, even if the takeover is considered
to be desirable by the holders of the common stock. Issuance of a series of
preferred stock could otherwise adversely affect the voting power of the holders
of common stock, and could serve to perpetuate the board of directors' control
of Interland under some circumstances. Other than the issuance of the series of
preferred stock previously authorized by the board of directors in connection
with the Series A convertible preferred stock, all of which converts to common
stock upon the completion of this offering, and our shareholder rights plan
described below, we have no current plans that would result in the issuance of
any shares of preferred stock.
WARRANTS
We have issued warrants to Microsoft Corporation and Network Solutions and
will issue a second warrant to each of them to purchase shares of our common
stock at the time of this offering. For
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additional information about these warrants, see "Certain Transactions -- Series
A Convertible Participating Preferred Stock Financings."
We have issued a warrant to Road Runner to purchase shares of our common
stock. The warrant, issued on January 27, 2000, entitles Road Runner to purchase
up to 376,920 shares of our common stock at an exercise price of $8.33 per share
based upon its achievement of performance criteria. The number of shares subject
to the warrant may be adjusted to prevent dilution, and the warrant expires on
December 3, 2002. We have also issued a warrant to an affiliate of TransAmerica
Business Credit Corporation to purchase shares of our common stock. The warrant,
issued on May 16, 2000, entitles TransAmerica to purchase up to 21,600 shares of
our common stock at an exercise price of $8.33 per share. The number of shares
subject to the warrant may be adjusted to prevent dilution, and the warrant
expires on May 16, 2005.
OPTIONS
We have granted options to purchase a total of 4,966,056 shares of our
common stock under our Stock Incentive Plan, including options for 1,539,000
shares to our executive officers. The weighted average exercise price of the
options to purchase the 4,966,056 shares is $4.28 as of March 31, 2000.
CERTAIN PROVISIONS OF GEORGIA LAW AND THE COMPANY'S ARTICLES OF INCORPORATION
AND BYLAWS
Staggered Board of Directors; Removal; Filling Vacancies
Our bylaws provide that our Board of Directors will consist of between five
and fifteen directors. Our Board currently consists of seven directors, four of
whom are not employees of Interland. Our Board of Directors is divided into
three classes of directors serving staggered three-year terms. The
classification of directors has the effect of making it more difficult for
shareholders to change the composition of our Board of Directors. We believe,
however, that the longer time required to elect a majority of a classified Board
of Directors will help to ensure the continuity and stability of our management
and policies. The classification provisions could also have the effect of
discouraging a third party from accumulating large blocks of our stock or
attempting to obtain control of Interland, even though such an attempt might be
beneficial to us and to you. Accordingly, you could be deprived of some
opportunities to sell your shares of common stock at a higher market price than
might otherwise be the case. Our shareholders will be entitled to vote on the
election or removal of directors, with each share entitled to one vote.
Our bylaws provide that, unless our Board of Directors otherwise
determines, any vacancies may be filled by the affirmative vote of a majority of
the remaining directors, even if less than a quorum. A director may be removed
with or without cause by the vote of the holders of a majority of the shares
entitled to vote for the election of directors at a special meeting of the
shareholders called for the purpose of removing such director. A vacancy
resulting from an increase in the number of directors may be filled by action of
our Board of Directors.
Shareholder Rights Plan
We intend to adopt a shareholder rights plan to help ensure that our
shareholders receive fair and equal treatment in the event of any proposed
acquisition of Interland. Under the rights plan, our Board of Directors will
declare a dividend of one preferred share purchase right for each outstanding
share of our common stock. Each preferred share purchase right entitles the
registered holder to purchase one one-hundredth of a share of our Series B
junior participating cumulative preferred stock, par value $0.01 per share at a
price of $ per share, subject to adjustments to the exercise price and
the number of preferred shares issuable upon exercise from time to time to
prevent dilution. These rights are not exercisable until the earlier to occur of
(1) ten days following a public announcement that a person or group of
affiliated or associated persons have acquired beneficial ownership of 15% or
more of our outstanding common stock or (2) ten business days following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding shares of our
common stock.
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If we are acquired in a merger or other business combination transaction or
50% or more of our assets or earning power is sold after a person or group
acquires % or more of our outstanding common stock or announces an
intention to make a tender offer or exchange offer that would result in the
beneficial ownership of % or more of our outstanding shares of common
stock, proper provision will be made so that each holder of a preferred share
purchase right, other than those rights beneficially owned by the acquiring
person (which will become void), will then have the right to receive upon
exercise that number of shares of common stock having a market value of
times the exercise price of the right.
Shares of Series B junior participating cumulative preferred stock
purchasable upon exercise of the preferred share purchase rights will not be
redeemable. Each share of preferred stock will be entitled to a minimum
preferential quarterly dividend payment of $ per share but will be
entitled to an aggregate dividend of one one-hundredth times the dividend
declared per share of our common stock. In the event of liquidation, the holders
of the preferred stock will be entitled to a minimum preferential liquidation
payment of $ per share but will be entitled to an aggregate payment of
one one-hundredth times the payment made per share of our common stock. Each
share of preferred stock will have one one-hundredth of a vote, voting together
with the shares of our common stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of our common stock are
exchanged, each share of preferred stock will be entitled to receive one
one-hundredth times the amount received per share of our common stock. These
rights are protected by customary antidilution provisions.
Unless the preferred share purchase rights are either triggered or expire,
the rights may not be detached or transferred separately from our common stock.
The preferred share purchase rights will expire on , 2010, unless
this date is extended or unless we redeem or exchange the preferred share
purchase rights earlier. At any time before the acquisition by a person or group
of affiliated or associated persons of beneficial ownership of % or more of
our outstanding common stock, our Board of Directors may redeem the preferred
share purchase rights in whole, but not in part, at a price of $ per
right. Immediately upon any redemption of the preferred share purchase rights,
the right to exercise these rights will terminate and the only right of the
holders of those rights will be to receive the redemption payment.
Ability to Consider Other Constituencies
Our Articles of Incorporation permit our Board of Directors, in determining
what is believed to be in our best interest, to consider the interests of our
employees, customers, suppliers and creditors, the communities in which our
offices or other establishments are located and all other factors the directors
consider pertinent, in addition to considering the effects of any actions on
Interland and our shareholders. This provision permits our Board of Directors to
consider numerous judgmental or subjective factors affecting a proposal,
including some non-financial matters, and on the basis of these considerations
may oppose a business combination or other transaction which, viewed exclusively
from a financial perspective, might be attractive to some, or even a majority,
of our shareholders.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of approximately 14,337,085
shares of our common stock, and rights to acquire our common stock, will be
entitled to rights with respect to the registration of those shares under the
Securities Act of 1933, as amended. Under the terms of the Registration Rights
Agreement we entered with the holders of these registrable shares, following the
completion of this offering, if we propose to register any additional securities
under the Securities Act, the holders must be notified and will be entitled to
have their shares of common stock included in the registration. In addition, the
holders of the registrable shares are also entitled to specified demand
registration rights. These demand registration rights permit the holders to
require us, on up to two separate occasions, to file a registration statement
with respect to their shares of common stock and to use our best efforts to
cause the registration statement to be declared effective. In addition, under
the Registration Rights Agreement, subject to various conditions, the holders of
registrable shares may require us to file an unlimited number of additional
registration statements on Form S-3, but no more than two in any eighteen month
period.
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The rights granted under the Registration Rights Agreement are subject to
various conditions and limitations, among them the right of Interland and the
underwriters of an offering to limit the number of shares included in a
registration and our right to delay registration if within 180 days before a
request for registration, a registration of our securities has been effected in
which the requesting holder had a right to participate, or if a holder's request
is received less than 90 days before the anticipated effective date of a
proposed underwritten offering approved by our board of directors before receipt
of the request. Holders of registrable securities must pay any transfer taxes
and any underwriting discounts or commissions associated with the sale of their
shares. Otherwise, we will bear all expenses incident to the registration of
shares under the Registration Rights Agreement. We do not expect that the
expenses we will incur in connection with any exercise of these registration
rights will exceed the expenses customarily incurred by companies registering
their securities. Subject to some conditions, if the holders of registration
rights request that we withdraw a requested registration statement, those
holders will be obligated to reimburse us for the expenses of that registration.
INDEMNIFICATION AND LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS
We plan to enter into indemnification agreements with each of our directors
and executive officers. The form of indemnification agreement provides that we
will indemnify our directors and executive officers for expenses incurred
because of their status as a director or officer, to the fullest extent
permitted by Georgia law, our articles of incorporation and our bylaws.
Our bylaws provide for indemnification of each of our directors and
officers, and our Amended and Restated Articles of Incorporation eliminate, to
the extent permitted by the Georgia Business Corporation Code, the personal
liability of our directors to us and to our shareholders for monetary damages
for some breaches of fiduciary duty and the duty of care. The indemnification
provided by our bylaws may be available for liabilities arising in connection
with this offering. To the extent that indemnification for liabilities under the
Securities Act of 1933, as amended, may be permitted to directors, officers or
controlling persons under our bylaws, we have been informed that, in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
At present there is no pending material litigation or proceeding involving any
director, officer, employee or agent of Interland in which indemnification will
be required or permitted.
Our bylaws provide for indemnification of our directors and officers with
respect to any liability and reasonable expense incurred by such person in
connection with any civil or criminal action, suit or proceeding to which such
person was (or is made or threatened to be made) a party or is otherwise
involved, by reason of the fact that such person is or was one of our directors
or officers, and such person acted in a manner he believed to be in good faith
and not opposed to our best interests, and had no reasonable cause to believe
that his conduct was unlawful. Our bylaws obligate us to indemnify each of our
directors and officers to the extent that they are successful in the defense of
any action, suit or proceeding. In addition, our bylaws may obligate us, under
some circumstances, to advance reasonable expenses incurred by each director or
officer in the defense of any civil or criminal action, suit or proceeding for
which indemnification may be sought. However, we will not indemnify any director
or officer to the extent that they are adjudged liable to us, or liable for the
receipt of improper personal benefit. Under conditions described in our bylaws,
any determination with respect to indemnification will be made by our board of
directors or a committee thereof, by special legal counsel appointed by our
board of directors or a committee thereof, or by our shareholders.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is SunTrust Bank.
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SHARES ELIGIBLE FOR FUTURE SALE
Before this offering there has been no public market for our common stock,
and we cannot predict the effect, if any, that sales of our common stock or the
availability of common stock for sale will have on its market price.
Nevertheless, sales of substantial amounts of our common stock in the public
market, or the perception that such sales could occur, could negatively affect
the market price of our common stock and impair our ability to raise capital
through the sale of our equity securities in the future.
Upon completion of this offering and the transactions at an assumed sale
price of $13.00 per share with Microsoft, Network Solutions, and Bell Atlantic,
we will have 46,432,542 shares of common stock outstanding. Of these shares, the
5,000,000 shares sold in this offering will be freely transferable without
restriction or further registration under the Securities Act, unless held by
affiliates of our company, as that term is defined in Rule 144 under the
Securities Act. For purposes of Rule 144, an affiliate is a person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with, Interland. The remaining
41,432,542 shares of common stock are "restricted securities" within the meaning
of Rule 144 under the Securities Act. The restricted securities generally may
not be sold unless they are registered under the Securities Act or sold under an
exemption from registration, such as the exemption provided by Rule 144.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year is entitled
to sell, within any three-month period, a number of shares that is not more than
the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 464,325 shares immediately after this offering, or
- the average weekly trading volume of the common stock during the four
calendar weeks before a notice of the sale is filed.
Sales under Rule 144 must also comply with manner of sale provisions and
notice requirements and to the availability of current public information about
us. Under Rule 144(k), a person who has not been one of our affiliates at any
time during the 90 days before a sale, and who has beneficially owned the
restricted shares for at least two years, is entitled to sell the shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 may be relied upon regarding the resale of securities
originally purchased from us by our employees, directors, officers, consultants
or advisors before the date we become subject to the reporting requirements of
the Exchange Act, under written compensatory benefit plans or written contracts
relating to compensation of those persons. In addition, the SEC has indicated
that Rule 701 will apply to the typical stock options granted by an issuer
before it becomes subject to the reporting requirements of the Securities
Exchange Act of 1934, along with the shares acquired upon exercise of these
options, including exercises after the date of this prospectus. Securities
issued in reliance on Rule 701 are restricted securities and beginning 90 days
after the date of this prospectus, may be sold (1) by persons other than
affiliates, subject only to the manner of sale provisions of Rule 144, and (2)
by affiliates under Rule 144 without compliance with its one-year holding period
requirement. Based on stock option grants as of the date of this prospectus,
options for shares will be exercisable upon the expiration of the
90-day restricted period.
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
between us and the underwriters named below, for which Bear, Stearns & Co. Inc.,
Thomas Weisel Partners LLC and PaineWebber Incorporated are acting as
representatives, the underwriters have severally agreed to purchase from us the
following respective numbers of shares of common stock at the public offering
price less the underwriting discount set forth on the cover page of this
prospectus.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Bear, Stearns & Co. Inc.....................................
Thomas Weisel Partners LLC..................................
PaineWebber Incorporated....................................
---------
Total............................................. 5,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of legal matters by their counsel and to
customary conditions, including the effectiveness of the registration statement,
the continuing correctness of our representations to them, the receipt of a
comfort letter from our accountants, the listing of the common stock on the
Nasdaq National Market and no occurrence of an event that would have a material
adverse effect on our business. The underwriting agreement obligates the
underwriters to purchase and accept delivery of all the shares, other than those
covered by the over-allotment option described below, if they purchase any of
the shares.
We have granted to the underwriters an option, exercisable for 30 days from
the date of the underwriting agreement, to purchase up to additional shares at
the public offering price less the underwriting discount. The underwriters may
exercise such option solely to cover over-allotments, if any, made in connection
with this offering. To the extent that the underwriters exercise such option,
each underwriter will become obligated, subject to conditions, to purchase a
number of additional shares approximately proportionate to such underwriter's
initial purchase commitment.
The underwriters propose to initially 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 dealers at the public offering price less a
concession not in excess of $ per share. The underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share on
sales to other dealers. After the initial offering of the shares to the public,
the representatives of the underwriters may change the public offering price and
such concessions. The underwriters do not intend to confirm sales to any
accounts over which they exercise discretionary authority.
The following table shows the underwriting discount to be paid to the
underwriters by us 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 the common stock.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share................................................... $ $
Total............................................. $ $
</TABLE>
The underwriting discount per share is equal to the public offering price
per share of common stock less the amount paid by the underwriters to us per
share of common stock.
We estimate that our total expenses in connection with this offering, other
than the underwriting discount, will be approximately $ million.
At our request, the underwriters have reserved for sale at the initial
public offering price up to
shares of our common stock to be sold in this offering for sale to persons we
designate. The number of shares available for sale to the general public will be
reduced to the extent that any reserved shares are purchased. The underwriters
will offer any reserved shares not so purchased on the same basis as the other
shares offered hereby.
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Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on 166 filed
public offerings of equity securities, of which 113 have been completed, and has
acted as a syndicate member in an additional 92 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors or other controlling persons, except with
respect to its contractual relationship with us under the underwriting agreement
entered into in connection with this offering.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the common stock. Specifically, the underwriters may over-allot
shares of the common stock in connection with this offering, thereby creating a
short position in the common stock for their own account. Additionally, to cover
such over-allotments or to stabilize the market price of the common stock, the
underwriters may bid for, and purchase, shares of the common stock in the open
market. Finally, the representatives, on behalf of the underwriters, also may
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
We have agreed to indemnify the underwriters against liabilities specified
in the underwriting agreement, including liabilities under the Securities Act.
We have applied to list our common stock on the Nasdaq National Market
under the symbol "ILND."
Before this offering, there has been no public market for our common stock.
As a result, the initial public offering price for our common stock will be
determined by negotiation among us and the representatives of the underwriters.
Among the factors to be considered in determining the public offering price will
be:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stages of development of generally
comparable companies; and
- estimates of our business potential.
In connection with this offering, our existing officers and directors and
some of our shareholders, who will own a total of shares of
common stock after the offering, have entered into lock-up agreements in which
they have agreed not to offer or sell any shares of common stock for a period of
180 days after the date of this prospectus without the prior written consent of
Bear, Stearns & Co. Inc., which may in its sole discretion, at any time and
without notice, waive any of the terms of these lock-up agreements. Bear,
Stearns & Co. Inc. presently has no intention to allow any shares of common
stock to be sold or otherwise offered before the expiration of the 180 day
lock-up period, although it may decide to do so in light of the purpose for
which any such shares are requested to be sold or otherwise offered, prevailing
market conditions and any other factor which Bear, Stearns & Co. Inc., in its
sole discretion, may deem to be relevant. Following the lock-up period, these
shares will not be eligible for sale in the public market without registration
under the Securities Act unless such sale meets the conditions and restrictions
of Rule 144.
In addition, we have agreed that for a period of 180 days after the date of
this prospectus, we will not sell or offer to sell or otherwise dispose of any
shares of common stock without the prior written consent of Bear, Stearns & Co.
Inc., except that we may issue, and grant options to purchase, shares of common
stock under our stock option and employee stock purchase plans.
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LEGAL MATTERS
Kilpatrick Stockton LLP, Atlanta, Georgia is passing on legal matters with
respect to the validity of common stock offered hereby. Kilpatrick Stockton LLP
owns 16,764 shares of our common stock. Latham & Watkins, Washington, D.C., is
acting as counsel to the underwriters in connection with the offering.
EXPERTS
The financial statements of Interland, Inc. as of December 31, 1999 and
1998 and for the period from inception (September 18, 1997) to December 31, 1997
and for the years ended December 31, 1999 and 1998 included in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, and
are included in this prospectus in reliance upon the authority of said firm as
experts in, giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-1 that
Interland has filed with the SEC covering the shares of common stock that
Interland is offering. This prospectus does not contain all of the information
presented in the registration statement, and you should refer to that
registration statement with its exhibits for further information. Statements in
this prospectus describing or summarizing any contract or other document are not
complete, and you should review the copies of those documents filed as exhibits
to the registration statement for more detail. You may read and copy the
registration statement at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. For information on the operation of the Public
Reference Room, call the SEC at 1-800-SEC-0330. You can also inspect our
registration statement on the Internet at the SEC's web site,
http://www.sec.gov.
After this offering, we will be required to file annual, quarterly, and
current reports, proxy and information statements and other information with the
SEC. You can review this information at the SEC's Public Reference Room or on
the SEC's web site, as described above.
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INTERLAND, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets as of December 31, 1998 and 1999 and March
31, 2000 (unaudited)...................................... F-3
Statements of Operations for the Period From Inception
(September 18, 1997) to December 31, 1997 and for the
Years Ended December 31, 1998 and 1999 and the three
months ended March 31, 1999 and 2000 (unaudited).......... F-4
Statements of Shareholders' Equity (Deficit) for the Period
From Inception (September 18, 1997) to December 31, 1997
and for the Years Ended December 31, 1998 and 1999 and the
three months ended March 31, 2000 (unaudited)............. F-5
Statements of Cash Flows for the Period From Inception
(September 18, 1997) to December 31, 1997 and for the
Years Ended December 31, 1998 and 1999 and the three
months ended March 31, 1999 and 2000 (unaudited).......... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 76
After the stock split discussed in Note 7 to the financial statements of
Interland, Inc. is implemented, we expect to be in a position to render the
following audit report.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
May 16, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO INTERLAND, INC.:
We have audited the accompanying balance sheets of INTERLAND, INC. (a
Georgia corporation) as of December 31, 1998 and 1999 and the related statements
of operations, shareholders' equity (deficit), and cash flows for the period
from inception (September 18, 1997) to December 31, 1997 and for the years ended
December 31, 1998 and 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Interland, Inc. as of
December 31, 1998 and 1999 and the results of its operations and its cash flows
for the period from inception (September 18, 1997) to December 31, 1997 and for
the years ended December 31, 1998 and 1999 in conformity with accounting
principles generally accepted in the United States.
F-2
<PAGE> 77
INTERLAND, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1998 1999 2000
-------- -------- -----------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 706 $ 24,510 $18,939
Restricted cash........................................... -- 1,007 1,200
Accounts receivable....................................... -- 655 1,579
Prepaid commissions....................................... 36 825 1,174
Other current assets...................................... -- 730 4,715
-------- -------- -------
Total current assets................................ 742 27,727 27,607
-------- -------- -------
PROPERTY AND EQUIPMENT:
Internet access and computer equipment.................... 770 4,072 5,780
Construction in progress.................................. -- 2,499 5,442
Other furniture and equipment............................. 85 660 2,556
Office computer equipment................................. 223 445 828
Purchased software........................................ 26 451 537
Leasehold improvements.................................... -- 398 974
-------- -------- -------
1,104 8,525 16,117
Less accumulated depreciation and amortization............ (115) (982) (1,569)
-------- -------- -------
Property and equipment, net............................. 989 7,543 14,548
-------- -------- -------
OTHER LONG-TERM ASSETS:
Notes receivable -- related parties....................... 50 481 493
Deposits and other long-term assets....................... -- 225 69
-------- -------- -------
Total other long-term assets........................ 50 706 562
-------- -------- -------
Total assets........................................ $ 1,781 $ 35,976 $42,717
======== ======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 1,022 $ 3,387 $ 6,994
Accrued expenses.......................................... 328 2,863 5,966
Capital lease obligation.................................. 124 1,185 1,557
Unearned revenue.......................................... 895 7,042 11,535
-------- -------- -------
Total current liabilities........................... 2,369 14,477 26,052
UNEARNED REVENUE............................................ 38 1,433 1,894
CAPITAL LEASE OBLIGATION.................................... 312 2,406 2,935
OTHER LONG-TERM LIABILITIES................................. -- 165 165
COMMITMENTS AND CONTINGENCIES (NOTE 6)
<CAPTION>
PRO FORMA
MARCH 31, 2000
NOTE 7
--------------
(UNAUDITED)
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value, 25,000,000 shares
authorized:
Series A, $2.02 stated value, 15,000,000 shares
authorized; 12,392,258 and 13,137,083 shares issued and
outstanding as of December 31, 1999 and March 31, 2000,
respectively; no shares issued and outstanding, pro forma... -- 34,423 40,630 --
Series A-1, 2,100,000 shares authorized, no shares
issued and outstanding as of December 31, 1998 and 1999 and
March 31, 2000.............................................. -- --
Common stock, no par value; 100,000,000 shares authorized
at December 31, 1998 and 1999; 19,443,175, 23,590,413 and
24,363,153 shares issued and outstanding as of December 31,
1998 and 1999 and March 31, 2000, respectively, and
37,500,263 shares outstanding, pro forma.................... 1,515 3,252 7,022 47,652
Warrants.................................................. -- 2,144 5,242 5,242
Deferred product development costs........................ -- (2,133) (2,026) (2,026)
Deferred marketing costs.................................. -- -- (4,603) (4,603)
Deferred compensation..................................... -- (954) (4,568) (4,568)
Accumulated deficit....................................... (2,453) (19,237) (30,026) (30,026)
-------- -------- ------- -------
Total shareholders' equity (deficit)................ (938) 17,495 11,671 11,671
-------- -------- ------- -------
Total liabilities and shareholders' equity
(deficit)................................................... $ 1,781 $ 35,976 $42,717 $42,717
======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 78
INTERLAND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD THREE MONTHS
FROM INCEPTION YEARS ENDED ENDED
(SEPTEMBER 18, 1997) DECEMBER 31, MARCH 31,
TO DECEMBER 31, ------------------------- -------------------------
1997 1998 1999 1999 2000
-------------------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES........................... $ 5 $ 1,387 $ 9,121 $ 1,009 $ 6,268
OPERATING EXPENSES:
Cost of revenues (including
non-cash expense of $810 for
the three months ended March
31, 2000)...................... -- 1,096 7,897 861 6,685
Sales and marketing.............. -- 1,803 7,901 896 5,579
General and administrative
(including non-cash stock
compensation expense of $3,557,
$101, and $595 for the year
ended December 31, 1999, and
the three months ended March
31, 1999 and 2000,
respectively).................. 119 809 10,093 677 5,044
----------- ----------- ----------- ----------- -----------
Total operating
expenses................ 119 3,708 25,891 2,434 17,308
----------- ----------- ----------- ----------- -----------
OPERATING LOSS..................... (114) (2,321) (16,770) (1,425) (11,040)
OTHER INCOME (EXPENSE):
Interest income.................. -- 2 206 7 350
Interest expense................. -- (20) (220) (18) (99)
----------- ----------- ----------- ----------- -----------
Total other expense....... -- (18) (14) (11) 251
----------- ----------- ----------- ----------- -----------
NET LOSS........................... (114) (2,339) (16,784) (1,436) (10,789)
PREFERRED STOCK BENEFICIAL
CONVERSION AND DIVIDENDS......... -- -- (9,559) -- (586)
----------- ----------- ----------- ----------- -----------
NET LOSS APPLICABLE TO COMMON
SHAREHOLDERS..................... $ (114) $ (2,339) $ (26,343) $ (1,436) $ (11,375)
=========== =========== =========== =========== ===========
BASIC AND DILUTED NET LOSS PER
COMMON SHARE..................... $ (0.01) $ (0.13) $ (1.23) $ (0.07) $ (0.48)
=========== =========== =========== =========== ===========
SHARES USED IN COMPUTING NET LOSS
PER SHARE........................ 17,631,191 18,316,449 21,461,161 19,654,296 23,936,350
=========== =========== =========== =========== ===========
Pro forma basic and diluted net
loss per common share............ $ (1.18) $ (0.31)
=========== ===========
Shares used in computing pro forma
net loss per share............... 22,302,836 36,459,567
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 79
INTERLAND, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 18, 1997)
TO DECEMBER 31, 1997,
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999,
AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
PREFERRED PREFERRED COMMON COMMON DEFERRED
STOCK STOCK STOCK STOCK DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT WARRANTS COSTS
---------- --------- ---------- ------- -------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 18, 1997........ -- $ -- -- $ -- $ -- $ --
Issuance of common stock.......... -- -- 17,631,167 139 -- --
Net loss.......................... -- -- -- -- -- --
---------- ------- ---------- ------- ------ -------
BALANCE, DECEMBER 31, 1997......... -- -- 17,631,167 139 -- --
Issuance of common stock.......... -- -- 1,811,984 1,376 -- --
Net loss.......................... -- -- -- -- -- --
---------- ------- ---------- ------- ------ -------
BALANCE, DECEMBER 31, 1998......... -- -- 19,443,151 1,515 -- --
Issuance of common stock.......... -- -- 4,003,228 8,441 -- --
Issuance of Series A preferred
stock........................... 12,392,258 25,014 -- (1,657) -- --
Issuance of options and stock to
consultants and bankers......... -- -- 144,009 4,212 -- --
Issuance of options to employee at
below fair value................ -- -- -- 300 -- --
Issuance of warrants in connection
with development agreement...... -- -- -- -- 2,144 (2,144)
Dividends on preferred stock...... -- -- -- (150) -- --
Beneficial conversion of preferred
stock........................... -- 9,409 -- (9,409) -- --
Amortization of deferred
development costs............... -- -- -- -- -- 11
Amortization of deferred
compensation.................... -- -- -- -- -- --
Net loss.......................... -- -- -- -- -- --
---------- ------- ---------- ------- ------ -------
BALANCE, DECEMBER 31, 1999......... 12,392,258 34,423 23,590,388 3,252 2,144 (2,133)
Exercise of common stock options... -- -- 756,000 7 -- --
Issuance of common stock for
services rendered................. -- -- 16,765 139 -- --
Issuance of options to employees at
below fair value.................. -- -- -- 4,210 -- --
Amortization of deferred
development costs................. -- -- -- -- -- 107
Amortization of deferred
compensation...................... -- -- -- -- -- --
Issuance of Series A preferred
stock............................. 744,827 4,000 -- -- -- --
Issuance of warrants and stock in
connection with marketing
agreement......................... -- 2,207 -- -- 2,444 --
Issuance of warrants............... -- -- -- -- 654 --
Amortization of deferred marketing
costs............................. -- -- -- -- -- --
Dividends on preferred stock....... -- -- -- (586) -- --
Net loss........................... -- -- -- -- -- --
---------- ------- ---------- ------- ------ -------
Balance, March 31, 2000
(unaudited)....................... 13,137,085 $40,630 24,363,153 $7,022 $5,242 $(2,026)
========== ======= ========== ======= ====== =======
<CAPTION>
TOTAL
DEFERRED SHAREHOLDERS'
MARKETING DEFERRED ACCUMULATED EQUITY
COSTS COMPENSATION DEFICIT (DEFICIT)
--------- ------------ ----------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
BALANCE, SEPTEMBER 18, 1997........ $ -- $ -- $ -- $ --
Issuance of common stock.......... -- -- -- 139
Net loss.......................... -- -- (114) (114)
------- ------- -------- --------
BALANCE, DECEMBER 31, 1997......... -- -- (114) 25
Issuance of common stock.......... -- -- -- 1,376
Net loss.......................... -- -- (2,339) (2,339)
------- ------- -------- --------
BALANCE, DECEMBER 31, 1998......... -- -- (2,453) (938)
Issuance of common stock.......... -- -- -- 8,441
Issuance of Series A preferred
stock........................... -- -- -- 23,357
Issuance of options and stock to
consultants and bankers......... -- (890) -- 3,322
Issuance of options to employee at
below fair value................ -- (300) -- --
Issuance of warrants in connection
with development agreement...... -- -- -- --
Dividends on preferred stock...... -- -- -- (150)
Beneficial conversion of preferred
stock........................... -- -- -- --
Amortization of deferred
development costs............... -- -- -- 11
Amortization of deferred
compensation.................... -- 236 -- 236
Net loss.......................... -- -- (16,784) (16,784)
------- ------- -------- --------
BALANCE, DECEMBER 31, 1999......... -- (954) (19,237) 17,495
Exercise of common stock options... -- -- -- 7
Issuance of common stock for
services rendered................. -- -- -- 139
Issuance of options to employees at
below fair value.................. -- (4,210) -- --
Amortization of deferred
development costs................. -- -- -- 107
Amortization of deferred
compensation...................... -- 596 -- 596
Issuance of Series A preferred
stock............................. -- -- -- 4,000
Issuance of warrants and stock in
connection with marketing
agreement......................... (4,651) -- -- --
Issuance of warrants............... -- -- -- 654
Amortization of deferred marketing
costs............................. 48 -- -- 48
Dividends on preferred stock....... -- -- -- (586)
Net loss........................... -- -- (10,789) (10,789)
------- ------- -------- --------
Balance, March 31, 2000
(unaudited)....................... $(4,603) $(4,568) $(30,026) $ 11,671
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 80
INTERLAND, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE YEARS ENDED FOR THE THREE MONTHS
INCEPTION DECEMBER 31, ENDED MARCH 31,
(SEPTEMBER 18, 1997) TO -------------------- --------------------
DECEMBER 31, 1997 1998 1999 1999 2000
----------------------- -------- --------- -------- ---------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................ $(114) $(2,339) $(16,784) $(1,436) $(10,789)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization.... -- 115 992 111 587
Amortization of non-cash stock
compensation expense........... -- -- 3,557 101 1,250
Loss on disposal of property and
equipment...................... -- -- 198 -- --
Amortization of deferred
development and marketing
costs.......................... -- -- 11 -- 155
Changes in operating assets and
liabilities:
Accounts receivable............ -- -- (655) -- (923)
Prepaid commissions............ -- (36) (789) (82) (348)
Other current assets........... -- -- (730) (189) (3,798)
Note receivable--related
party....................... -- (50) (431) -- (12)
Other assets................... -- -- (225) (21) 156
Accounts payable and accrued
liabilities................. 4 1,347 4,752 654 6,125
Unearned revenue............... -- 933 7,542 808 4,952
Other long-term liabilities.... -- -- 165 -- --
----- ------- -------- ------- --------
Total adjustments........... 4 2,309 14,387 1,382 8,144
----- ------- -------- ------- --------
Net cash used in operating
activities................ (110) (30) (2,397) (54) (2,645)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment........................ (2) (1,102) (7,745) (682) (7,592)
Deposit of restricted cash.......... 0 -- (1,007) -- (193)
----- ------- -------- ------- --------
Net cash provided by
investing activities...... (2) (1,102) (8,752) (682) (7,785)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common
stock............................ 139 1,376 8,441 785 7
Net proceeds from issuance of
preferred stock.................. -- -- 23,357 -- 4,000
Borrowings on capital lease
obligations...................... -- 491 3,628 236 1,118
Payments on capital lease
obligations...................... -- (56) (473) (55) (266)
----- ------- -------- ------- --------
Net cash provided by
financing activities...... 139 1,811 34,953 966 4,859
----- ------- -------- ------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS......................... 27 679 23,804 230 (5,571)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR............................. -- 27 706 706 24,510
----- ------- -------- ------- --------
CASH AND CASH EQUIVALENTS, END OF
YEAR................................ $ 27 $ 706 $ 24,510 $ 936 $ 18,939
===== ======= ======== ======= ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest.............. $ -- $ 20 $ 178 $ 12 $ 71
===== ======= ======== ======= ========
NON CASH DISCLOSURE:
Issuance of stock and options for
consultant and employee
compensation..................... $ -- $ -- $ 4,511 $ -- $ 4,210
===== ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 81
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
NATURE OF BUSINESS
Interland, Inc. (the "Company") commenced operations on September 18, 1997.
The Company provides a broad range of web site and application hosting and other
related web based business solutions specifically to meet the needs of small to
medium-sized businesses. The Company focuses on delivering high-quality,
reliable, and flexible services that are backed by customer support 24 hours a
day, 7 days a week, and 365 days a year. The Company offers its solutions
directly and through third-party dealers that resell the Company's web hosting
services.
HISTORY OF OPERATING LOSSES
The Company has incurred net losses since it commenced operations. As of
December 31, 1999, the Company had an accumulated deficit of $28,796,000. These
losses have occurred, in part, because of the costs incurred by the Company to
develop its products, build a customer support infrastructure, and expand its
market share in an extremely competitive market. The Company does not expect to
generate positive cash flow from its operations for several years. The Company's
success depends on its ability to achieve profitability and on its ability to
raise additional funds. As a result, the Company intends to continue to seek
funding from external sources. The Company plans to continue to increase its
operating expenses in order to fund higher levels of market share, increase its
sales and marketing efforts, broaden its customer support capabilities, and
expand its administrative resources in anticipation of future growth. To the
extent that increases in such expenses precede or are not offset by increased
revenues, the Company's business, results of operations, and financial condition
would be materially adversely affected.
INTERIM UNAUDITED FINANCIAL INFORMATION
The financial statements as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 are unaudited. However, in the opinion of
management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the unaudited financial statements for
these interim periods have been included. The results of interim periods are not
necessarily indicative of the results to be obtained for a full year.
NETWORK INFRASTRUCTURE
The Company must expand and adapt its network infrastructure to meet the
increasing number of users and the amount of information they wish to transport
to meet changing customer requirements. This expansion depends on financial,
operational and management resources as well as telecommunications capacity and
pricing and third party suppliers. Any failure of these could adversely affect
our business.
OTHER RISK FACTORS
The Company faces other risk factors including, but not limited to, the
following: quarterly and annual fluctuations in results of operations and
financial position, inability to manage anticipated growth, dependence on
Internet usage, dependence on key personnel, and potential disruption of
services due to systems failures, security breaches or unknown software defects.
INITIAL PUBLIC OFFERING
The Company is planning an initial public offering (the "Offering") of its
common stock which is targeted for completion in the second quarter of 2000.
There can be no assurance that the Offering will be completed in this time
period or at all.
F-7
<PAGE> 82
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be the equivalent of cash for the
purpose of balance sheet and statement of cash flows presentation. Cash
equivalents, which consist primarily of money market accounts, are carried at
cost, which approximates market value.
RESTRICTED CASH
At December 31, 1999 and March 31, 2000 the Company held several
certificates of deposits which have maturities ranging from 6 to 12 months.
These investments are restricted to use by certain vendors for insurance, rent,
credit card processing, lease payments and other items. These deposits have been
classified as restricted cash in the accompanying balance sheet. No such
deposits were held as of December 31, 1998.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents and
accounts receivable. The Company maintains cash and cash equivalents with
various major financial institutions. The Company believes that the
concentrations of credit risk with respect to accounts receivable are limited
due to the large number of entities comprising the Company's customer base. As
of December 31, 1999, the Company had no foreign currency assets or liabilities.
PREPAID COMMISSIONS
The Company typically pays commissions to its sales representatives within
three months after cash for the sale is collected; however, the revenue for the
service provided is deferred and recognized ratably over the customer service
period. The Company defers commissions paid prior to the revenue being earned
and amortizes those commissions over the same period for which revenue is
recognized.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the various classes
of property, which is three years for all software, computer and Internet
equipment, including capital leases and seven years for other furniture and
equipment. Leasehold improvements are amortized over the lesser of the useful
life of the asset or the term of the lease. Construction in progress represents
primarily computer equipment and leasehold improvements to expand the Company's
network and facilities that have not been placed in operation as of December 31,
1999. Total depreciation and amortization expense for the period from inception
(September 18, 1997) to December 31, 1997, and the years ended December 31, 1998
and 1999 was $0, $115,000 and $992,000, respectively. Total depreciation and
amortization expense for the three months ended March 31, 1999 and 2000 was
$111,000 and $587,000, respectively.
F-8
<PAGE> 83
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Expenditures for maintenance and repairs are charged to expense as
incurred, and the costs of renewals and betterments are capitalized. Cost and
the related accumulated depreciation of assets sold or retired are removed from
the respective accounts. Any resulting gain or loss is reflected in the
statements of operations.
The Company leases certain Internet access and computer equipment under
capital leases. Equipment recorded under capital leases is amortized using the
straight-line method over the lease term. See Note 6 for further discussion.
The Company periodically reviews the cost basis of long-lived assets based
on the undiscounted future cash flow to be generated by those assets to
determine whether any permanent impairment exists. Management believes that the
long-lived assets in the accompanying balance sheets are appropriately valued.
The Company adopted the American Institute of Certified Public Accountants
Statement of Position No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," effective January 1, 1998. The Company
capitalizes certain external costs related to software and implementation
services in connection with its internal-use software systems.
ACCRUED LIABILITIES
Accrued liabilities include the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1998 1999 2000
---- ------ ---------
<S> <C> <C> <C>
Accrued compensation and employee benefits................. $118 $ 886 $1,412
Accrued construction in progress........................... -- 1,297 2,184
Other accrued liabilities.................................. 210 680 2,370
---- ------ ------
$328 $2,863 $5,966
==== ====== ======
</TABLE>
During 1999 the Company recorded accrued severance of approximately
$330,000 related to the termination of an officer. Of the total accrual,
$165,000 is included in other long- term liabilities in the accompanying balance
sheet, as it will be paid in November 2001.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The book values of cash and cash equivalents, accounts receivable, accounts
payable, and other financial instruments approximate their fair values,
principally because of the short-term maturities of these instruments.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement on Accounting Standards No. 131, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," the Company reviews its long-lived assets for impairment when events or
changes in circumstances indicate the carrying value of such assets may not be
recoverable. This review consists of a comparison of the carrying value of the
asset with the asset's expected future undiscounted cash flows without interest
costs. In estimating the expected future cash flows, assets are grouped at the
lowest level for which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets. Estimates of expected
future cash flows represent management's best estimate based on reasonable and
supportable assumptions and projections. If the expected future cash flow
exceeds the carrying value of the asset, no impairment indicator is considered
F-9
<PAGE> 84
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
present. If the carrying value exceeds the future cash flow, an impairment
indicator is considered present. Such impairment would be measured and
recognized using a discounted cash flow method.
SOFTWARE DEVELOPMENT
In 1999, the Company did not have any significant software development
projects but did capitalize approximately $400,000 related to finance and
accounting software and call center software to be used internally. These costs
primarily related to external direct costs of materials and services used in
obtaining the internal-use software. The Company did not incur significant
payroll and payroll-related costs for employees. Internal training costs and
maintenance costs are expensed as incurred.
The Emerging Issues Task Force has issued Issue No. 200-02 regarding
web-site development costs. The Company has not incurred significant web-site
development costs to date; however, the Company will continue to monitor changes
in the treatment of these costs.
REVENUE RECOGNITION
The Company realizes revenue from providing shared and dedicated hosting,
application hosting and consulting services. The Company recognizes revenues
when the services are provided. The Company's hosting contracts typically
require up-front payment for service periods ranging from 3 to 24 months. The
Company follows the guidance in Staff Accounting Bulletin No. 101 regarding
revenue recognition. Therefore, fees received from the customer, including
set-up fees for hosting services, are deferred and recognized ratably over the
contract period. Substantially all of the end-user subscribers pay for services
with major credit cards for which the Company receives daily remittances from
the credit card carriers. Deferred revenues represent the liability for advance
billing to customers for services not yet provided. Consulting revenue is
recognized as the services are performed, provided that no significant
obligations remain. The Company generally receives all payments for consulting
services prior to the services being performed; therefore, collection is
considered probable. Total consulting revenue was $235,695 for the year ended
December 31, 1999 and $331,330 for the three months ended March 31, 2000,
respectively. No consulting revenue was earned in 1997 or 1998.
The Company provides a 30 day money back guarantee to its customers and
offers its customers a 99.9% service level warranty. The Company records an
allowance for returns and an accrual for warranty claims on a monthly basis
based on historical experiences. The Company has not experienced significant
returns or warranty claims to date and does not have a significant returns or
warranty claims reserve as of December 31, 1998 or 1999 or March 31, 2000.
ADVERTISING COSTS
The Company expenses the costs of advertising as incurred. Advertising
expenses included in sales and marketing expense is $1,438,000 and $5,473,000
for 1998 and 1999, respectively. Advertising expense for the three months ended
March 31, 1999 and 2000 was $585,000 and $4,436,000, respectively.
INCOME TAXES
The Company uses the liability method of accounting for income taxes, as
set forth in SFAS No. 109, "Accounting for Income Taxes." Under the liability
method, deferred tax assets or liabilities are determined based on the
differences between the financial reporting and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to be settled or realized.
F-10
<PAGE> 85
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
BASIC AND DILUTED NET LOSS PER SHARE
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share." That statement requires the disclosure of basic
net income (loss) per share and diluted net income (loss) per share. Basic net
income (loss) per share is computed by dividing net income (loss) available to
common shareholders by the weighted-average number of common shares outstanding
during the period and does not include any other potentially dilutive
securities. Diluted net income (loss) per share gives effect to all potentially
dilutive securities. The Company's convertible preferred stock, stock options
and stock warrants are potentially dilutive securities and are not included in
historical diluted net loss per share in any periods presented as they would
reduce the loss per share.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 98, for periods prior to the Company's anticipated initial public offering,
basic net loss per share is computed by using the weighted average number of
shares of common stock outstanding during the period. Diluted net loss per share
is computed using the weighted average number of common stock outstanding during
the period and nominal issuances of common stock and common stock equivalents,
regardless of whether they are antidilutive, as well as the potential dilution
of common stock equivalents, if dilutive. The Company has not issued common
stock or common stock equivalents for considerations that management considers
nominal.
STOCK-BASED COMPENSATION PLAN
The Company accounts for its stock option plan under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company
adopted the disclosure option of SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 requires that companies which do not choose to
account for stock-based compensation as prescribed by the statement shall
disclose the pro forma effects on earnings and earnings per share as if SFAS No.
123 had been adopted.
OPTIONS AND STOCK ISSUED TO NON-EMPLOYEES
Transactions for goods or services in which consideration provided by the
Company is in the form of stock options or stock are treated in accordance with
SFAS No. 123. SFAS No. 123 requires the Company to record the fair value of the
equity instrument issued or the fair value of the services received, whichever
is readily measurable. When the fair value of the goods or services received can
not be reliably measured, the fair value of the equity instrument issued is
calculated using the Black-Scholes option pricing model.
SEGMENT REPORTING
The Company has adopted SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information," effective January 1, 1998. SFAS No. 131
establishes standards for the way that public business enterprises report
selected information about operating segments in annual and interim financial
statements. It also establishes standards for related disclosures about products
and services, geographical areas and major customers. SFAS No. 131 requires the
use of the "management approach" in disclosing segment information; based
largely on how senior management generally analyzes the business operations. The
Company currently operates in only one segment, and as such, no additional
disclosure is required. Additionally, the Company did not have any operations or
net assets or liabilities in foreign locations for the period from inception
(September 18, 1997) to December 31, 1999 or the three months ended March 31,
2000. The Company generated revenue of $690,000 and $442,000 from foreign
customers for the year ended December 31, 1999 and the three months ended March
31, 2000, respectively. All sales were denominated in U.S. dollars. No
significant revenue was generated from foreign customers in 1997 or 1998.
F-11
<PAGE> 86
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. RELATED-PARTY TRANSACTIONS
During December 1998 and May 1999 the Company loaned two shareholder
officers a total of $50,000 and $400,000, respectively. The notes are full
recourse and are also secured by the common stock of the Company owned by the
officers and bear interest at 10% per annum. Of the aggregate principal of
$450,000, $250,000 is due on demand and $200,000 is due on the earlier of six
months after the Offering or November 19, 2004. The notes and accrued interest
are reflected as notes receivable -- related parties in the accompanying balance
sheets.
On August 18, 1998 the Company sold computer equipment for the total amount
of $50,000 to Geneva Leasing Corporation (which is owned by a stockholder of the
Company). These assets were then leased back to the Company in the form of a
36-month capital lease. No gain or loss was recorded in this transaction. The
lease obligation amounted to $28,000 at December 31, 1999 and a total amount of
$27,000 was paid to the Geneva Leasing Corporation during 1999.
4. INCOME TAXES
Deferred tax assets and liabilities as of December 31, 1998 and 1999 are
determined based on the difference between the financial accounting and tax
bases of assets and liabilities. Deferred tax assets and liabilities at the end
of the year are determined using the enacted statutory tax rates expected to
apply to taxable income in the years in which the deferred tax assets or
liabilities are expected to be realized or settled.
The Company has incurred net operating losses ("NOL") since commencing
operations. As of December 31, 1999 the Company has total NOLs of approximately
$19,800,000 available to offset its future income tax liability. The NOL
carryforward begins expiring in 2012. A valuation allowance is provided when it
is determined that some portion or all of the deferred tax assets may not be
realized. Accordingly, since it currently is more likely than not that the net
deferred tax assets resulting from the remaining net operating loss
carryforwards ("NOLs") and other deferred tax items will not be realized, a
valuation allowance has been provided in the accompanying financial statements
as of December 31, 1998 and 1999. The Company established the valuation
allowance for the entire amount of the deferred tax assets attributable to the
NOL carryforwards as well as for the net deferred tax assets created as a result
of temporary differences between book and tax.
If there is a change in ownership of greater than 50% of the outstanding
shares of the Company's capital stock, the Company's ability to utilize its net
operating losses will be subject to limitations imposed by Internal Revenue Code
Section 382. These limitations could significantly affect the Company's
utilization of those net operating loss carryforwards. As of December 31, 1999,
the Company had experienced no such change. Significant components of the
Company's deferred tax assets and liabilities as of December 31, 1998 and 1999,
are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
----- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 878 $ 7,537
Deferred revenue.......................................... 31 283
Other..................................................... 12 75
----- -------
Net deferred tax assets before valuation allowance.......... 921 7,895
Valuation allowance......................................... (921) (7,895)
----- -------
Net deferred tax assets..................................... $ -- $ --
===== =======
</TABLE>
F-12
<PAGE> 87
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. SHAREHOLDERS' EQUITY
PREFERRED STOCK
The Company is authorized to issue 25,000,000 shares of preferred stock,
including 15,000,000 shares which are designated as Series A preferred stock and
947,421 shares which are designated as Series A-1 preferred stock. The remaining
preferred stock has not been designated by the Company.
The Series A and Series A-1 preferred stock are convertible and rank junior
to any other preferred stock that may be issued by the Company, but rank senior
to common stockholders upon liquidation. The Series A preferred stockholders
have the right to receive dividends equal to 9% of the stated value of the
preferred stock. The dividends accrue on a semi-annual basis with the dividend
period ending on the last day of May and November. Dividends are cumulative from
the date the Series A preferred stock is issued and accrue whether or not
declared by the Company. Dividends can be paid in cash, or in the form of Series
A-1 preferred stock or a combination of both at the option of the Company.
Series A-1 preferred stock is to be issued only as a dividend on Series A
preferred stock. The preferred stock is convertible at the then current
conversion price, which is equal to the stated value on the date of issuance.
The conversion price is adjusted from time to time as a result of stock splits,
recapitalizations or if the Company issues stock at prices below the stated
value of the preferred stock. Upon a qualified initial public offering, all of
the outstanding Series A and Series A-1 preferred stock automatically convert to
common stock at the then current conversion price.
On December 2, 1999 and December 24, 1999, the Company issued 9,908,258 and
2,484,000 shares, respectively, of Series A convertible preferred stock for
$2.02 per share for proceeds of $25,014,000. The convertible preferred stock was
issued to third party investors. The conversion price of the outstanding shares
as of December 31, 1999 was $2.02 per share. The Company had accrued dividends
of $150,000 and $736,000 at December 31, 1999 and March 31, 2000, respectively,
that were recorded through a direct charge to common stock. Prior to these
transactions, the Company sold common stock at $2.78 per share to third party
investors. As a result of the sale of the convertible preferred stock at
conversion prices below the prices sold to common shareholders, the Company
recorded a preferred stock dividend of $9,409,000 related to this beneficial
conversion feature in accordance with Emerging Issues Task Force Issue 98-5
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios." This dividend is reflected as an
adjustment to arrive at net income applicable to common shareholders in the
accompanying statement of operations.
In connection with the issuance of Series A preferred stock, the Company
incurred $1,656,978 in offering expenses that were recorded as a reduction of
the no par value common stock such that the preferred stock would be recorded at
its stated value of $2.02 per share.
COMMON STOCK
In March 1999 the Company amended its articles of incorporation and bylaws
to increase the number of authorized shares to 100,000,000. The accompanying
financial statements retroactively reflect this amendment in authorized shares.
During 1997 the Company issued 17,631,167 shares of common stock to two
founders for $139,000 or $0.01 per share, the deemed fair value on the date the
Company commenced operations.
Throughout 1998 the Company sold 1,811,984 shares of common stock to
third-party investors, the majority of which were unrelated to the Company, for
a total of $1,376,000 at prices ranging from $0.41 to $1.39 per share.
During 1999 the Company sold 4,003,228 shares of common stock for net
proceeds of $8,797,000. The common stock was sold to third-party investors and
consultants at prices ranging from $0.46 to $2.78
F-13
<PAGE> 88
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
per share. Of the total shares sold, 453,600 shares were sold to consultants at
prices less than fair market value. The Company recognized non cash compensation
expense of $516,000 related to these sales of common stock. The compensation
expense is included in general and administrative expense in the accompanying
statements of operations. During the third quarter of 1999 the Company issued
144,009 shares of common stock valued at $400,000 for costs related to sale of
the above mentioned common stock and paid cash expenses of $256,000. The payment
for stock issuance costs is reflected as a reduction of the proceeds from the
issuance of common stock in the accompanying balance sheets.
On July 1, 1999 the Company issued options to purchase 108,000 shares of
common stock to an employee at an exercise price of $0.01 per share. The fair
market value on the date of grant was estimated to be $2.78 per share. The
Company recorded deferred compensation of $300,000 related to this grant. The
deferred compensation will be amortized over the vesting period of the option,
which is three years from July 1, 1999. The Company amortized $50,000 of this
deferred compensation in 1999. The compensation expense is included in noncash
general and administrative compensation expense in the accompanying statements
of operations.
At various dates during 1999 the Company issued options to purchase
1,728,000 shares of common stock to consultants at exercise prices ranging from
$0.01 to $2.78 per share. The Company recognized non cash compensation expense
of $3,695,000 related to the issuance of these options. The options were valued
using the Black Scholes pricing model. As of December 31, 1999 the Company has
deferred compensation of $704,000 related to these option issuances. The
deferred compensation will be amortized over the remaining service period with a
consultant.
WARRANTS
On December 24, 1999 the Company issued warrants to purchase 546,480 shares
of common stock at an exercise price of $5.37 per share to Microsoft Corporation
("Microsoft"). This warrant was issued in connection with entering into a five
year Development, License, and Co-marketing Agreement (the "Agreement") with
Microsoft that expires December 23, 2004. The warrant can be exercised by paying
the cash exercise price or by surrendering common shares owned by Microsoft
equal to the exercise price. The Agreement grants to Microsoft a non-exclusive
perpetual license to proprietary installation tools for third-party hosted
applications on Windows NT or Windows 2000. Microsoft has the sole right to
terminate the Agreement if the Company fails to deliver the tools on a timely
basis or if the Company fails to correct any errors in the tools on a timely
basis and Microsoft will provide technical consulting and writing services
during the development of the tools. Additionally, in consideration of the
obligations of Microsoft, the Company agreed to pay Microsoft 5% of the total
gross revenues that the Company receives from third parties in consideration of
its licensing and other exploitation of the tools for the five years following
acceptance of the tools by Microsoft. The Company recorded the value of the
warrants, calculated using the Black-Scholes pricing model, of approximately
$2,144,000 as deferred development costs and will amortize this amount to the
cost of revenues over the five-year term of the Agreement. The Company will
periodically evaluate the recoverability of this deferred charge over the term
of the Agreement.
In connection with this agreement, Microsoft also agreed to invest an
additional $7,500,000 in common stock by dividing $7,500,000 by a number equal
to the lesser of the midpoint of the expected Offering range in the Company's
first filing with the Securities and Exchange Commission and the actual price to
the public in such offering. If the Offering is not completed within 120 days of
the date of the first filing with the Securities and Exchange Commission, the
number of shares purchased will be determined to be the midpoint of the Offering
range on the first filing. Microsoft will also receive an additional warrant at
the date of this second investment to purchase up to that number of common stock
equal to 75% of the number of additional shares purchased by Microsoft in the
second investment. The warrants will have an
F-14
<PAGE> 89
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
exercise price equal to the purchase price per share paid by Microsoft for the
additional shares. The value of the warrants of approximately $3,357,000 and the
difference, if any, between the midpoint of the expected Offering range and the
Offering price will be recorded as additional deferred development costs similar
to that discussed above which will be amortized over the remaining term of the
five-year Agreement.
On January 28, 2000 the Company issued warrants to purchase up to 376,920
shares of common stock of the Company at an exercise price of $8.33 per share.
These warrants were issued in connection with the entering into a web hosting
agreement. This agreement requires the Company to provide hosting services at
wholesale prices, to provide customers and technical support and to provide
other services. Upon signing the web hosting agreement, 108,000 of the warrants
vest immediately. The remaining 268,920 will vest at the end of each quarter of
2000 and at December 31, 2001 based on the number of new customers provided
through the web hosting agreement; therefore, the total remaining warrants may
never vest if the new customer targets are not met. In January 2000 the Company
recorded expense of approximately $650,000 related to the 108,000 warrants that
vested upon the signing of the agreement. The Company will record additional
expense in the future based on the number of warrants that vest based on
performance targets as valued using the Black-Scholes pricing model at the time
of vesting.
STOCK OPTIONS
During July 1999 the board of directors approved the Stock Incentive Plan
(the "Plan"). As of December 31, 1999, 4,860,000 shares of common stock are
reserved for the grant of qualified and nonqualified stock options and other
incentive awards to employees of the Company. Subsequent to December 31, 1999,
the total number of authorized shares under the Plan was increased to 7,560,000.
As of December 31, 1999 the Company has 1,865,160 options available for issuance
under the Plan. The Plan provides for the grant of options to eligible employees
and the board of directors determines the specific terms of each option grant,
including vesting period and exercise price. The options generally vest over a
three-year period. Additionally, the Company granted options to purchase
1,728,000 of common stock to certain consultants in 1999. These options had
exercise prices ranging from $0.01 to $2.78 per share and were 100% vested on
the date of issuance. The Company recorded expense associated with the issuance
of these options as discussed above.
In 1999 the Company granted options under the Plan to purchase 3,037,500
shares of common stock to employees at exercise prices ranging from $0.01 to
$5.37 per share, of which 936,900 vest ratably over a three-year period. The
remaining 2,100,600 options vest over a three year period beginning July 1,
2000. However, if the Company completes an initial public offering before July
1, 2000, the vesting accelerates to be 1/3 on the initial public offering date
and 1/3 one year from the initial public offering date and 1/3 two years from
the initial public offering date.
F-15
<PAGE> 90
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the issuance of options:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER RANGE OF AVERAGE
OF EXERCISE PRICE PER
OPTIONS PRICES SHARE
--------- ----------- ---------
<S> <C> <C> <C>
Outstanding at December 31, 1998..................... 0 $0.00
Granted............................................ 4,765,500 $0.01-$5.37 $2.53
Forfeited.......................................... (42,660) $2.78-$5.37 $3.18
---------
Outstanding at December 31, 1999..................... 4,722,840 $0.01-$2.78 $2.53
=========
Vested and exercisable at December 31, 1999.......... 1,728,000 $0.01-$2.78 $1.56
=========
Granted............................................ 1,562,436 $5.37-$8.33 $5.68
Forfeited.......................................... (60,480) $2.78-$8.33 $4.94
Exercised.......................................... (756,000) $0.01 $0.01
---------
Outstanding at March 31, 2000........................ 5,468,796 $ .93-$8.33 $3.74
=========
Vested and exercisable at March 31, 2000............. 972,000 $0.01 $0.01
=========
</TABLE>
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
In accordance with SFAS No. 123 the Company has computed, for pro forma
disclosure purposes, the estimated fair value of all options for shares of the
Company's common stock granted to employees during the year ended December 31,
1999 using the Black-Scholes option pricing model and based on the following
assumptions:
<TABLE>
<CAPTION>
1999
-----------
<S> <C>
Risk-free interest rate..................................... 5.85%-6.59%
Expected dividend yield..................................... 0%
Expected forfeiture rate.................................... 5%
Expected volatility......................................... 88%
</TABLE>
No options were granted for the period from commencement of operations
(September 18, 1997) to December 31, 1997 or for the year ended December 31,
1998. The total fair value of the options granted to employees during the year
ended December 31, 1999 was computed as $5,660,131, which would be amortized
over the vesting period of the options. If the Company had accounted for these
options in accordance with SFAS No. 123, the Company's reported pro forma net
loss attributable to common shareholders and net income (loss) per share
attributable to common shareholders for the year ended December 31, 1999 would
have been as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1999
--------
<S> <C>
Net loss:
As reported............................................... $(16,784)
Loss applicable to common shareholders.................... (26,343)
Loss applicable to common shareholders pro forma for SFAS
No. 123................................................ (26,829)
Net loss per share:
Loss applicable to common shareholders as reported........ (1.23)
Loss applicable to common shareholders pro forma for SFAS
No. 123................................................ (1.25)
</TABLE>
F-16
<PAGE> 91
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the exercise price range, weighted average
exercise price, and remaining contractual lives by year of grant for the number
of options outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE WEIGHTED REMAINING
NUMBER PRICE AVERAGE CONTRACTUAL
YEAR OF GRANT OF SHARES RANGE PRICE LIFE (YEARS)
- ------------- --------- ----------- -------- ------------
<S> <C> <C> <C> <C>
Options issued to employees at fair value:
1999.................................. 2,929,500 $2.78-$5.37 $3.16 9.65
Options issued to employees at less than
fair value:
1999.................................. 108,000 $0.93 $0.93 9.51
Options issued to consultants:
1999.................................. 1,728,000 $0.01-$2.78 $1.56 2.47
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company leases certain buildings and equipment under capital and
operating leases expiring at various dates through 2009. Some of the leases
contain bargain purchase options. The following details operating and capital
lease obligations as of December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
OPERATING
LEASES AND
OTHER FUTURE
CAPITAL MINIMUM
LEASES COMMITMENTS
------- ------------
<S> <C> <C>
2000........................................................ $1,519 $ 4,728
2001........................................................ 1,459 5,168
2002........................................................ 1,093 4,068
2003........................................................ 118 1,932
2004 and thereafter......................................... 20 9,595
------ -------
Total............................................. $4,209 $25,491
====== =======
</TABLE>
The total amount of assets under capital lease as of December 31, 1998 and
1999 was $495,000 and $4,119,000, respectively, and the total obligation related
to those capital leases was $436,000 and $3,591,000, respectively. Operating
rent expense was $36,000 for the period from commencement of operations
(September 18, 1997) to December 31, 1997 and $115,000 and $516,000 for the
years ended December 31, 1998 and 1999, respectively.
EQUIPMENT COMMITMENTS
The Company is party to a financing agreement with a vendor that allows for
the purchase of equipment under capital leases. The financing agreement provides
for the financing to occur in specified quarterly increments of $1,250,000 for
up to $5,000,000 over the 12 month period beginning with the fourth quarter of
1999. As of December 31, 1999 the Company had borrowed approximately $1,200,000
under this financing agreement. The financing bears interest at 11.3% and has a
term of three years.
As of December 31, 1999, the Company had commitments of approximately
$2,700,000 in capital expenditures outstanding for expanded network and
facilities.
F-17
<PAGE> 92
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING COMMITMENTS
As of December 31, 1999, the Company is party to advertising commitments of
$2,500,000 in 2000 and $250,000 in 2001.
7. SUBSEQUENT EVENTS
OPTIONS
In January, February and March 2000 the Company granted options to purchase
1,562,436 shares of common stock at exercise prices ranging from $5.37 to $8.33
per share. The Company plans to record deferred compensation expense of
approximately $4,210,000 on the options that were granted with exercise price
below the estimated fair value of $8.33 per share on the date of grant. This
expense will be amortized over the vesting period of the options.
PRO FORMA STOCKHOLDER'S EQUITY AND LOSS PER SHARE (UNAUDITED)
Simultaneous with the Company's initial public offering and pursuant to the
contractual agreements with the preferred stockholders, all shares of the
Company's Series A and Series A-1 preferred stock will be converted into shares
of common stock. Pro forma stockholder's (deficit) equity at March 31, 2000,
after giving effect to the conversion of the Series A and Series A-1 preferred
stock, would be approximately $11,700,000 and will be unchanged as a result of
the conversion. Had the conversion of the Series A and Series A-1 preferred
stock occurred at the time of the sale of the preferred stock, net loss per
share would have been $(1.18) and $(.31) for the year ended December 31, 1999
and the three months ended March 31, 2000, respectively.
INTERLAND B.V.
On February 7, 2000 the Company organized Interland B.V. in Amsterdam as a
wholly-owned subsidiary of the Company. Interland B.V. will serve as the
Company's headquarters for its European operations.
STOCK SPLIT
The Company's board of directors is actively considering the approval of a
1.08 for one stock split on the Company's common stock which will be affected in
the form of a stock dividend. All share and per share data in the accompanying
financial statements will be adjusted to reflect the split.
EMPLOYEE BENEFIT PLAN
On January 1, 2000 the Company adopted a 401(k) Plan, a defined
contribution plan covering substantially all employees of the Company. Under the
plan's deferred compensation arrangement, eligible employees who elect to
participate in the plan may contribute between 1% and 15% of eligible
compensation, as defined, to the plan. The Company, at its discretion, may elect
to provide for either a matching contribution or a discretionary profit-sharing
contribution or both.
EMPLOYEE STOCK PURCHASE PLAN
After the Offering, the Company intends to adopt an Employee Stock Purchase
Plan under which qualified employees will have the right to purchase common
stock on a quarterly basis through payroll deductions. The price to be paid for
each share of common stock under the plan is 85% of the fair market value at the
beginning or the end of each quarter, whichever is lower. Total payroll
deductions may not
F-18
<PAGE> 93
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
exceed 10% of the employee's annual compensation and may not exceed $25,000 per
year. Up to 540,000 shares of common stock have been reserved under the plan.
LOAN AGREEMENT
On May 15, 2000, the Company executed a loan agreement in the amount of
$3,024,000 to finance capital expenditures. The loan is secured by the related
assets, bears interest at 16.1% per year and has a three year term.
SALE OF PREFERRED STOCK AND WARRANTS (UNAUDITED)
On March 15, 2000, the Company entered into a stock purchase agreement with
Network Solutions. In connection with this financing transaction, the Company
issued 744,827 shares of Series A preferred stock to Network Solutions, at a
purchase price of $5.37 per share. The Company also issued a warrant to Network
Solutions to purchase 372,413 shares of common stock at an exercise price of
$5.37 per share. The number of shares subject to the warrant may be adjusted to
prevent dilution and each warrant will expire five years after its issuance. In
addition, under the stock purchase agreement, on the day following the effective
date of the Offering, in exchange for an additional $6,000,000 in cash from
Network Solutions, the Company will issue a number of shares of common stock to
Network Solutions equal to $6,000,000 divided by the lesser of $13.00 or the
actual price to the public of common stock sold in the offering. In connection
with this additional issuance, the Company will also issue an additional warrant
to purchase a number of shares of common stock equal to 75% of the number of
shares sold to Network Solutions at an exercise price equal to the price paid at
that closing. In conjunction with this investment, the Company entered into a 4
year premier program agreement with Network Solutions. The Company will record
deferred expense of approximately $2.5 million for the value of the warrant
issued on March 15, 2000 and deferred expense of approximately $2.2 million for
the difference between the purchase price of $5.37 per share and the fair value
of the Company's common stock on that date of $8.33 per share. The Company will
record additional deferred expense for the value of the warrants to be granted
upon the closing of the offering of approximately $2,686,000 and for the
difference, if any, between the midpoint of the expected offering range and the
offering price. This deferred expense will be amortized over the remaining 4
year term of the premier program agreement entered into with Network Solutions.
On May 8, 2000, the Company entered into a stock purchase agreement with
Bell Atlantic Investments, Inc. In connection with this financing transaction,
the Company issued 1,199,999 shares of Series A preferred stock to Bell Atlantic
at a purchase price of $8.33 per share. In addition, under the stock purchase
agreement, on the third day following the effective date of the offering, in
exchange for an additional $15,000,000 in cash from Bell Atlantic, the Company
will issue a number of shares of common stock to Bell Atlantic equal to
$15,000,000 divided by the lesser of $13.00 or the actual price to the public of
common stock sold in the Offering. The Company will record deferred expense for
the difference, if any, between the midpoint of the expected offering range and
the offering price. This deferred expense will be amortized over the 3 year life
of the business agreement that is expected to be entered into as indicated
below.
Additionally, on May 8, 2000, the Company entered into a non-binding letter
of intent with Bell Atlantic to enter into a business relationship. The
non-binding letter of intent indicates that the parties will work to complete
final versions of a marketing channel relationship agreement and a reseller
agreement. These agreements will provide for Bell Atlantic to promote and
co-brand the Company's products and services. The term of the agreements is
intended to be three years under the terms or the letter of intent, the Company
will pay to Bell Atlantic 12.5% of any revenue received customers with whom Bell
Atlantic
F-19
<PAGE> 94
INTERLAND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
originates contact. The Company will record this amount as an offset to revenue
in the income statement. In connection with the signing of the final agreement,
the Company will issue to Bell Atlantic a warrant to purchase 3,132,000 shares
of common stock at an exercise price equal to 150% of the initial public
offering price. The warrant will be exercisable for three years. The Company
will record the value of the warrants to be granted upon closing of the offering
as deferred expense to be amortized over the 3 year term of the agreements.
F-20
<PAGE> 95
[Inside Back Cover]
The inside of the back cover begins with the Interland logo. Below the logo is a
graphic depicting a globe surrounded by images of some of our customers' web
pages. At the bottom of the page is the sentence, "We make the web work for
you."
<PAGE> 96
- ------------------------------------------------------
- ------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER INTERLAND, INC. NOR ANY UNDERWRITER HAS AUTHORIZED ANYONE TO
PROVIDE PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL INFORMATION. THIS
PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE SUCH OFFER OR SALE IS NOT PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR ANY SALE OF
THESE SECURITIES.
---------------------------------
TABLE OF CONTENTS
---------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 7
Forward-Looking Statements......... 18
Use of Proceeds.................... 19
Dividend Policy.................... 19
Capitalization..................... 20
Dilution........................... 21
Selected Financial Data............ 22
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 24
Business........................... 33
Management......................... 51
Principal Shareholders............. 59
Certain Transactions............... 61
Description of Capital Stock....... 64
Shares Eligible for Future Sale.... 68
Underwriting....................... 69
Legal Matters...................... 71
Experts............................ 71
Where You Can Find More
Information...................... 71
Index to Financial Statements...... F-1
</TABLE>
---------------------
Until , 2000, (25 days after the date of this prospectus), all
dealers that effect transactions in these securities, 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.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(Interland Logo)
5,000,000 SHARES
COMMON STOCK
--------------------
PROSPECTUS
--------------------
BEAR, STEARNS & CO. INC.
THOMAS WEISEL PARTNERS LLC
PAINEWEBBER INCORPORATED
, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 97
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of the fees
and expenses (other than underwriting commissions and discounts) payable by
Interland, Inc. in connection with this offering.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee ................................... $ 30,360
National Association of Securities Dealers Inc. Registration Fee ...................... 12,000
Nasdaq National Market Listing Fees ................................................... 95,000
Blue Sky Fees and Expenses ............................................................ 7,500
Printing Expenses ..................................................................... 180,000
Legal Fees and Expenses ............................................................... 400,000
Accounting Fees and Expenses .......................................................... 210,000
Transfer Agent Fees and Expenses ...................................................... 10,000
Miscellaneous ......................................................................... 195,500
----------
Total ............................................................................ $1,140,360
==========
</TABLE>
*To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our bylaws provide for indemnification of each of our directors and
officers, and our Amended and Restated Articles of Incorporation eliminate, to
the extent permitted by the Georgia Business Corporation Code, the personal
liability of our directors to us and to our shareholders for monetary damages
for certain breaches of fiduciary duty and the duty of care. The
indemnification provided by our bylaws may be available for liabilities arising
in connection with this offering. Insofar as indemnification for liabilities
under the Securities Act of 1933, as amended, may be permitted to directors,
officers or controlling persons pursuant to our bylaws, we have been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Our bylaws provide for indemnification of our directors and officers with
respect to any liability and reasonable expense incurred by such person in
connection with any civil or criminal action, suit or proceeding to which such
person was (or is made or threatened to be made) a party or is otherwise
involved, by reason of the fact that such person is or was one of our directors
or officers, and such person acted in a manner he believed to be in good faith
and not opposed to our best interests, and had no reasonable cause to believe
that his conduct was unlawful. Our bylaws obligate us to indemnify each of our
directors and officers to the extent that they are successful in the defense of
any action, suit or proceeding. In addition, our bylaws may obligate us, under
certain circumstances, to advance reasonable expenses incurred by each director
or officer in the defense of any civil or criminal action, suit or proceeding
for which indemnification may be sought. However, we will not indemnify any
director or officer to the extent that they are adjudged liable to us, or
liable for the receipt of improper personal benefit.
We plan to enter into indemnification agreements with each of our directors
and executive officers. The form of indemnification agreement provides that we
will indemnify our directors and officers for expenses incurred because of their
status as a director or officer, to the fullest extent permitted by Georgia law,
our articles of incorporation and our bylaws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since September 18, 1997, we have issued and sold the following securities
(as adjusted for a 416.7835-for-one stock split effective March 8, 1999 and a
proposed 1.08-for-one stock split).
(1) On September 18, 1997, we issued 225,063 shares of our common stock to
Kenneth Gavranovic, our President and Chief Executive Officer at an
aggregate offering price of $1,250.
(2) On October 7, 1997, we issued 8,777,460 shares of our common stock to
Kenneth Gavranovic, our President and Chief Executive Officer, at an
aggregate offering price of $48,750 and 9,002,523 shares of our common
stock to Waldemar Fernandez at an aggregate offering price of $50,000.
(3) On November 11, 1998, we sold 108,000 shares of our common stock at an
aggregate offering price of $50,000 to an individual in a privately
negotiated transaction. On April 21, 1999 we sold an additional
108,000 shares of our common stock at an aggregate offering price of
$50,000. On May 13, 1999, we issued
II-1
<PAGE> 98
108,000 shares of our common stock to this same individual in
consideration for the termination of previously granted contractual
pre-emptive and anti-dilution rights.
(4) Between November, 1998 and June, 1999, we sold 3,270,935 shares of
our common stock at an aggregate offering price of $4,838,311 to 70
individuals, six corporations and one partnership in privately
negotiated transactions.
(5) Between June 1, 1999 and December 1, 1999, we granted options to
purchase 1,188,000 shares of our common stock to four individuals in
exchange for services they rendered to us. On January 28, 2000 one of
these individuals exercised an option to purchase 162,000 shares of
common stock for an aggregate purchase price of $1,500. On February
10, 2000 a second individual exercised an option to purchase 162,000
shares of common stock for an aggregate purchase price of $1,500. On
March 6, 2000, a third individual exercised an option to purchase
432,000 shares of common stock for an aggregate purchase price of
$4,000.
(6) On September 9, 1999, we issued 36,009 shares of our common stock to
the Santa Fe Capital Group of New Mexico, Inc. in exchange for
services provided.
(7) During September 1999 and October 1999, we sold 1,846,399 shares of
our common stock at an aggregate offering price of approximately
$5,000,000 to 52 individuals, three corporations, one limited
liability company, one partnership, and one family partnership in
privately negotiated transactions.
(8) On October 15, 1999, we granted options to purchase up to 540,000
shares of our common stock at an exercise price of $3.00 per share to
Southard Advisors, LLC. On April 14, 2000, Southard Advisors exercised
its option to purchase 540,000 shares of common stock for an aggregate
purchase price of $1.5 million.
(9) On December 2, 1999, we sold 9,908,256 shares of our Series A
Convertible Participating Preferred Stock at an aggregate offering
price of approximately $20.0 million to six investors in a privately
negotiated transaction. The distribution of shares was as follows:
3,851,432 shares to Crest Communications Partners L.P. for an
approximate purchase price of $7,774,187; 111,870 shares to Crest
Entrepreneurs Fund L.P. for an approximate purchase price of
$225,813; 1,634,595 shares to Boulder Ventures III, L.P. for an
approximate purchase price of 3,299,460; 99,350 shares to Boulder
Ventures III (Annex), L.P. for an approximate purchase price of
$200,540; 2,477,064 shares to BancBoston Ventures, Inc. for an
approximate purchase price of $5,000,000; and 1,733,945 shares to
Private Equity Co-Invest Ltd. for an approximate purchase price of
$3,500,000. Gregg Mockenhaupt, one of our directors, is a member of
Crest Partners II, LLC, the general partner of Crest Communications
Partners L.P. and Crest Entrepreneurs Fund L.P. Andrew E. Jones, one
of our directors, is a general partner of Boulder Ventures Limited,
the general partner of Boulder Ventures III, L.P. and Boulder
Ventures III (Annex), L.P.
(10) On December 24, 1999, we sold 2,484,000 shares of our Series A
Convertible Participating Preferred Stock at an aggregate offering
price of approximately $5.0 million to Microsoft Corporation. In
connection with the stock purchase, we also issued a warrant to
Microsoft for the purchase of 546,480 shares of our common stock at
an exercise price of $5.80 per share.
(11) On January 27, 2000, we issued a warrant to ServiceCo, LLC, d/b/a
Road Runner, for the purchase of 376,920 shares of our common stock
at an exercise price of $9.00 per share.
(12) On March 15, 2000, we sold 744,827 shares of our Series A Convertible
Participating Preferred Stock at an aggregate offering price of $4.0
million to Network Solutions, Inc. In connection with the stock
purchase, we also issued a warrant to Network Solutions for the
purchase of 372,413 shares of our common stock at an exercise price of
$5.80 per share.
(13) In March 2000, we issued 16,764 shares of common stock to our legal
counsel in return for services provided at a deemed price of $9.00 per
share.
(14) On March 15, 2000 we issued 108,000 shares of our common stock to an
individual in exchange for services rendered.
(15) Since September, 1997 we have granted to officers, directors and
employees options to purchase an aggregate of 4,966,056 shares of
our common stock at a weighted average exercise price of $4.28.
(16) On May 8, 2000, we sold 1,199,999 shares of our Series A Convertible
Participating Preferred Stock at an aggregate offering price of
$10.0 million to Bell Atlantic, Inc.
(17) On May 15, 2000, we issued 32,400 shares of our common stock
to Van de Pietermann pursuant to a settlement agreement and in
partial consideration for the acquisition of rights to use the domain
name "interland, nl" in the Netherlands.
(18) On May 16, 2000, we issued a warrant to an affiliate of TransAmerica
Business Credit Corporation for the purchase of 21,600 shares of our
common stock at an exercise price of $8.33 per share.
(19) At the time of this offering, in exchange for $7.5 million in cash, we
will issue a number of shares of common stock equal to $7.5 million
divided by the lesser of $13.00 or the actual price to the public of
common stock sold in this offering. At the time of this offering, we
will also issue a warrant to Microsoft to purchase a number of shares
of common stock up to 75% of the number of shares sold to Microsoft at
the time of this offering, at an exercise price equal to the price
paid at the closing of that sale. Based on the current range, we will
issue a warrant to purchase up to 432,692 shares of our common stock.
(20) At the time of this offering, in exchange for $6.0 million in cash we
will issue a number of shares of common stock to Network Solutions
equal to $6.0 million divided by the lesser of $13.00 or the actual
price to the public of common stock sold in this offering. Based on
the current range, we will issue 461,538 shares in this transaction.
At the time of this offering, we will also issue a warrant to Network
Solutions to purchase a number of shares of common stock up to 75% of
the number of shares sold to Network Solutions at the time of this
offering, at an exercise price equal to the price paid at the closing
of that sale. Based on the current range, we will issue a warrant to
purchase 346,153 shares of our common stock.
(21) At the time of this offering, in exchange for 15.0 million in cash we
will issue a number of shares of common stock to Bell Atlantic equal
to $15.0 million divided by the lesser of $13.00 or the actual price
to the public of common stock sold in this offering. Based on the
current range, we will issue 1,153,846 shares in this transaction.
II-2
<PAGE> 99
The sales of the securities listed above were exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, as transactions by an issuer not involving
a public offering or, with respect to issuances to employees, directors and
consultants, Rule 701 promulgated under Section 3(b) of the Securities Act
as written compensatory benefit plans and contracts relating to compensation or,
with respect to issuances made to foreign persons, Regulation S promulgated
under Section 5 of the Securities Act as sales made outside the United States.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits
EXHIBIT DESCRIPTION OF EXHIBIT
NUMBER
***1.1 - Form of Underwriting Agreement
*3.1(a) - Amended and Restated Articles of Incorporation of the
Company dated October 5, 1999
*3.1(b) - Articles of Amendment of the Company dated December 2, 1999
*3.1(c) - Articles of Amendment of the Company dated December 23, 1999
**3.1(d) - Articles of Amendment of the Company dated March 14, 2000
*3.2(a) - Bylaws of the Company
**3.2(b) - Amendment to Bylaws of the Company
***4.1 - Form of Certificate for Common Stock
***5.1 - Opinion of Kilpatrick Stockton, LLP, as to the legality of
the securities being registered
**10.1 - Stock Purchase Agreement among the Company, Crest
Communications Partners L.P., Crest Entrepreneurs Fund L.P.,
Boulder Ventures III, L.P. and other investors dated
December 2, 1999
*10.2 - Subscription Agreement dated December 24, 1999 between the
Company and Microsoft Corporation
**10.3 - Subscription Agreement dated March 15, 2000 between the
Company and Network Solutions, Inc.
**10.4(a) - Stockholders' Agreement among the Company, Crest
Communications Partners L.P., Crest Entrepreneurs Fund L.P.,
Boulder Ventures III, L.P. and other investors dated
December 2, 1999
**10.4(b) - Amendment to Stockholders' Agreement dated December 23,
1999
**10.4(c) - Amendment to Stockholders' Agreement dated March 15, 1999
**10.4(d) - Amendment to Stockholders' Agreement dated May 8, 2000
**10.5(a) - Registration Rights Agreement among the Company, Crest
Communications Partners, L.P., Crest Entrepreneurs Fund L.P.,
Boulder Ventures III, L.P. and other investors dated
December 2, 1999
**10.5(b) - Amendment to Registration Rights Agreement dated December 24,
1999
**10.5(c) - Amendment to Registration Rights Agreement dated March 15,
2000
**10.5(d) - Amendment to Registration Rights Agreement dated May 8, 2000
***10.6 - Employment Agreement dated December 2, 1999 between the
Company and Ken Gavranovic
*10.7 - Employment Agreement dated February 14, 2000 between the
Company and H. Christopher Covington
*10.8 - Employment Agreement dated February 16, 2000 between the
Company and David N. Gill
*10.9 - Employment Agreement dated February 24, 2000 between the
Company and Rahim Shah
*10.10 - Form of Indemnification Agreement for Officers and Directors
of the Company
*10.11(a) - Interland, Inc. Stock Incentive Plan
*10.11(b) - First Amendment to Interland, Inc. Stock Incentive Plan
*10.11(c) - Second Amendment to Interland, Inc. Stock Incentive Plan
***10.12 - Interland, Inc. Employee Stock Purchase Plan
***10.13 - Interland, Inc. Shareholder Rights Plan
**10.14 - Separation Agreement and General Release with Waldemar
Fernandez dated November 19, 1999
**10.15 - Promissory Note of Ken Gavranovic in favor of the Company
dated December 10, 1998
**10.16 - Promissory Note of Waldemar Fernandez in favor of the Company
dated December 15, 1998
**10.17 - Promissory Note of Ken Gavranovic in favor of the Company
dated May 14, 1999
**10.18 - Promissory Note of Waldemar Fernandez in favor of the Company
dated May 19, 1999
**10.19 - Stock Pledge Agreement between the Company and Ken Gavranovic
dated May 14, 1999
**10.20 - Stock Pledge Agreement between the Company and Waldemar
Fernandez dated May 19, 1999
**10.21(a) - Agreement of Lease between the Company and 34 Peachtree
Associates, L.P. dated November 19, 1997
**10.21(b) - First Amendment to Agreement of Lease between the Company
and TCB #4, L.L.C. (f/k/a 34 Peachtree Associates, L.P.)
dated July 6, 1998
**10.21(c) - Second Amendment to Agreement of Lease between the Company
and TCB #4, L.L.C. (f/k/a 34 Peachtree Associates, L.P.)
dated September 15, 1999
**10.22(a) - Amended and Restated Lease Agreement between the Company and
101 Marietta Street Associates dated September 29, 1999
**10.22(b) - First Amendment to Amended and Restated Lease between the
Company and 101 Marietta Street Associates dated November 23,
1999
**10.23 - Employment Agreement dated April 1, 2000 between the Company
and Mark K. Alexander
***10.24 - Employment Agreement dated February 15, 2000 between the
Company and Robert Malally
**10.25 - SunTrust Plaza Garden Offices Lease Agreement by and between
SunTrust Plaza Associates, LLC and the Company dated May 16,
2000
**10.26 - Stock Purchase Agreement dated May 8, 2000 between Bell
Atlantic Investments, Inc. and the Company
***23.1 - Consent of Kilpatrick Stockton LLP (will be included in the
opinion filed as Exhibit No. 5 to this Registration
Statement)
*23.2 - Consent of Arthur Andersen LLP
*24.1 - Powers of Attorney of certain officers and directors of the
Company (included on the signature pages of this
Registration Statement)
**27.1(a) - Financial Data Schedule for the period ended March 31, 1999
(for SEC use only)
**27.1(b) - Financial Data Schedule for the period ended March 31, 2000
(for SEC use only)
* Previously Filed.
** Filed herewith.
*** To be filed by amendment.
b. Financial Statement Schedules
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of Interland pursuant to the provisions of our Articles of Incorporation and
Bylaws or otherwise, Interland has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by a director, officer or
controlling person of Interland 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, Interland will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
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<PAGE> 100
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned undertakes that:
1. For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by Interland pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
2. For the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Interland
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
Atlanta, Georgia, on May 18, 2000.
INTERLAND, INC.
By: /s/ Ken Gavranovic
---------------------------------------------------
Kenneth Gavranovic, President and Chief Executive
Officer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
amendment no. 1 to the registration statement has been signed on May 18, 2000,
by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Position
- --------- --------
<S> <C>
/s/ Ken Gavranovic
- --------------------------------- President and Chief Executive Officer and Director
Kenneth Gavranovic (Principal Executive Officer)
/s/ David N. Gill
- --------------------------------- Executive Vice President, Chief Financial Officer
David N. Gill and Director
(Principal Financial and Accounting Officer)
*
- --------------------------------- Director
Clyde Heintzelman
*
- --------------------------------- Director
Andrew E. Jones
*
- --------------------------------- Director
Gregg A. Mockenhaupt
*
- --------------------------------- Director
Rahim Shah
*
- --------------------------------- Director
William E. Whitmer
*By: /s/ Ken Gavranovic
----------------------------
as attorney-in-fact
</TABLE>
II-5
<PAGE> 1
EXHIBIT 3.1(d)
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INTERLAND, INC.
1.
The name of the corporation is Interland, Inc. (hereinafter referred
to as the "Corporation").
2.
The powers, rights and preferences, and the qualifications,
limitations and restrictions thereof, of Series A Convertible Participating
Preferred Stock and Series A-1 Convertible Participating Preferred Stock, as
set forth at the end of Article IV of the Amended and Restated Articles of
Incorporation of the Corporation, are hereby deleted and restated in their
entirety as follows:
"SERIES A AND SERIES A-1 CONVERTIBLE PARTICIPATING
PREFERRED STOCK
The following sections set forth the powers, rights and preferences,
and the qualifications, limitations and restrictions thereof, of the
Corporation's Series A Convertible Participating Preferred Stock and the Series
A-1 Convertible Participating Preferred Stock.
SECTION 1. DESIGNATION AND AMOUNT.
1.1. Number of Shares. The designation of one of the series of
Preferred Stock, no par value per share, provided for herein shall be "Series A
Convertible Participating Preferred Stock" (hereinafter referred to as the
"Series A Preferred"), and the number of authorized shares constituting Series
A Preferred is 15,000,000. The designation of the other series of Preferred
Stock, no par value per share, provided for herein shall be "Series A-1
Convertible Participating Preferred Stock" (hereinafter referred to as the
"Series A-1 Preferred"), and the number of authorized shares constituting
Series A-1 Preferred is 2,100,000. The shares of Series A-1 Preferred shall
only be issued as dividends on the Series A Preferred
<PAGE> 2
pursuant to Section 2.2 hereof. The Series A-1 Preferred shall have all of the
same powers, preferences, rights, qualifications, limitations and restrictions
as the Series A Preferred and shall otherwise be identical and pari passu to
the Series A Preferred except as specifically provided in Section 5.1(b)
hereof. Unless expressly provided otherwise herein, the term "Series A
Preferred" shall refer to both the Series A Preferred and the Series A-1
Preferred.
1.2. Restrictions on Reissuance. All shares of Series A Preferred
redeemed, purchased or otherwise acquired by the Corporation shall be retired
and canceled and shall be restored to the status of authorized, but unissued
shares of Preferred Stock, without designation as to series, and may thereafter
be issued, but not as shares of Series A Preferred.
1.3. Stated Value Per Share. The Stated Value Per Share of the Series
A Preferred issued prior to March 14, 2000 shall be $2.18. The Stated Value Per
Share of the Series A Preferred issued on or after March 14, 2000 shall be
$5.80. Share certificates issued on or after March 14, 2000 shall reference the
applicable Stated Value Per Share.
1.4. Rank. The Series A Preferred shall, with respect to rights upon
liquidation, winding up or dissolution, and redemption rights, rank (a) junior
to any other series of Preferred Stock duly established by the Board of
Directors of the Corporation, the terms of which shall specifically provide
that such series shall rank prior to the Series A Preferred, whether now
existing or hereafter created (the "Senior Preferred Stock") and (b) prior to
any other class or series of Preferred Stock the terms of which shall
specifically provide that such series shall rank junior to the Series A
Preferred and prior to any other series of capital stock of the Corporation,
including all classes of the Common Stock, no par value per share, of the
Corporation, whether now existing or hereafter created (the "Common Stock"; all
of such classes or series of capital stock of the Corporation to which the
Series A Preferred ranks prior, including without limitation the Common Stock,
and including, without limitation, junior securities convertible into or
exchangeable for other junior securities or phantom stock representing junior
securities, are collectively referred to herein as "Junior Securities").
SECTION 2. DIVIDENDS.
2.1. General Obligation.
Subject to any prior preferences and other rights of any Senior
Preferred Stock and to the provisions of this SECTION 2.1, the record holders
of the Series A Preferred shall be entitled to receive when, as and if declared
by the Corporation's Board of Directors and to the extent permitted under the
Georgia Business Corporation Code, as amended (the "Act"), cumulative
preferential dividends on the shares of the Series A Preferred outstanding, at
a compounded annual rate per share of nine percent (9%) of the Stated Value Per
Share of the Series
<PAGE> 3
A Preferred. Dividends on the Series A Preferred shall accrue on a semi-annual
basis with the dividend periods ending on the last day of each of May and
November, with the first dividend period ending on May 31, 2000. Dividends on
the Series A Preferred shall be cumulative from the first date on which shares
of Series A Preferred are issued (the "Original Issue Date"), whether or not
declared and whether or not in any dividend period there shall have been net
profits or net assets of the Corporation legally available for the payment of
those dividends. After the holders of the Series A Preferred have received
their dividend preference as set forth above, the holders of the Series A
Preferred shall be entitled to receive, out of funds legally available
therefor, dividends at the same rate as dividends (other than dividends payable
in additional shares of Common Stock) are paid with respect to the Common Stock
(treating each share of Series A Preferred as being equal to the number of
shares of Common Stock (including fractions of a share) into which each share
of Series A Preferred is then convertible).
2.2. Payment of Dividends.
Any dividend on the Series A Preferred accrued and payable as provided
in this SECTION 2 shall be paid at, the option of the Corporation, (i) in cash,
(ii) by issuing a number of shares (or partial shares) of the Series A-1
Preferred for each such share (or partial share) of Series A Preferred then
outstanding equal to the dividend then payable on each such share (or partial
share) of Series A Preferred for the dividend period then ended (or such
shorter period for which dividends are so being paid) (expressed as a dollar
amount) divided by the Stated Value Per Share, or (iii) a combination thereof.
To the extent declared by the Board of Directors of the Corporation, dividends
accrued for each semi-annual period ending on the last day of the next
preceding May and November, respectively, shall be paid on the fifth day of
June or December, respectively (or if any such day is not a business day, the
next business day following such day) in each year (each such date being
referred to as a "Dividend Payment Date")). Dividends shall be paid to the
holders of record of Series A Preferred as of the last day of the month
immediately preceding the Dividend Payment Date. Any dividends not paid on a
Dividend Payment Date thereafter shall accumulate and shall be considered
"accrued but unpaid" for all purposes hereunder until paid. The amount of
dividends accruing for any period shorter or longer than a full semi-annual
dividend period shall be determined on the basis of twelve 30-day months and a
360-day year, and the actual number of days elapsed in the period for which a
dividend is payable. Dividends paid on the shares of Series A Preferred in an
amount less than the total amount of such dividends at the time accrued on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. Dividends for any past semi-annual dividend
period that are accrued but unpaid may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to the holders of
record on the record date for such dividend payment.
<PAGE> 4
2.3. Dividends or Distributions on Junior Securities.
The Corporation shall not declare and pay any dividends on Junior
Securities unless all accrued and unpaid dividends on the Series A Preferred
have been paid in full. The Corporation shall not repurchase, redeem or make
any distribution with respect to any Junior Securities unless all accrued and
unpaid dividends on the Series A Preferred have been paid in full.
SECTION 3. LIQUIDATION.
In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation"), the holders of
shares of Series A Preferred shall be entitled to receive for each share of
Series A Preferred the greater of (a) the Stated Value Per Share plus any
accrued but unpaid dividends on the Series A Preferred out of the assets of the
Corporation legally available for distribution to stockholders (whether
representing capital or surplus), before any payment or distribution shall be
made on the Common Stock or any other Junior Securities, but after distribution
of such assets among, or payment thereof over to, creditors of the Corporation
and to holders of the Senior Preferred Stock (the "Series A Preferred
Liquidation Distribution") or (b) the amount that each holder of Series A
Preferred would receive out of the remaining assets of the Corporation
available for distribution to stockholders (treating each share of Series A
Preferred as being equal to the number of shares of Common Stock (including
fractions of a share) into which each share of Series A Preferred is then
convertible) and Junior Securities in accordance with the respective rights of
such holders. If the assets distributable to holders of the Series A Preferred
upon such dissolution, liquidation or winding up shall be insufficient to pay
cash in an amount equal to the amount of the Series A Preferred Liquidation
Distribution to the holders of shares of Series A Preferred then such assets or
the proceeds thereof shall be distributed among the holders of the Series A
Preferred ratably in proportion to the respective amounts to which they
otherwise would be entitled. Upon the election of a majority of the shares of
the Series A Preferred (including fractional shares) then outstanding, in the
aggregate and given in writing or by vote at a meeting, and consenting or
voting separately as a single class, (i) the sale, conveyance, exchange or
transfer of all or substantially all of the property or assets of the
Corporation, (ii) the consolidation or merger of the Corporation with any other
corporation in which the Corporation's stockholders prior to the consolidation
or merger own less than a majority of the voting securities of the surviving
corporation or (iii) any capital reorganization or reclassification (any such
event a "Reorganization Event") will be deemed to be a Liquidation, provided
that (x) the holders of Series A Preferred, consenting or voting separately as
a class, have not previously approved the Reorganization Event, (y) the holders
of Series A Preferred, voting separately as a class, do not have the right to
approve the Reorganization Event pursuant to Section 4(a) below or (z) the
Corporation has not exercised its right, pursuant to Section 4, to convert all
of the Series A Preferred into Common Stock in connection
<PAGE> 5
with such a Reorganization Event.
SECTION 4. VOTING RIGHTS; PROTECTIVE PROVISIONS.
The holders of the Series A Preferred shall be entitled to notice of
all stockholder meetings in accordance with the Corporation's bylaws, and
except as otherwise required by law or these Articles, the holders of the
Series A Preferred shall vote on all matters submitted to the stockholders for
a vote together with the holders of the Common Stock as a single voting group,
and each share of Series A Preferred (including fractional shares) shall be
entitled to the number of votes equal to the number of votes which could be
cast in such vote by the number of shares of Common Stock that would be
issuable upon conversion of such share of Series A Preferred on the record date
for determining eligibility to participate in the action being taken. In
addition to any other rights provided by law, the consent of a majority of the
shares of the Series A Preferred (including fractional shares), which consent
will not in any event be unreasonably withheld, on an as if converted basis
then outstanding, in the aggregate and given in writing or by vote at a
meeting, and consenting or voting separately as a single class on an
as-if-converted basis, shall be required for the Corporation to:
(a) authorize or effect a Reorganization Event or
Liquidation, except for a Reorganization Event or Liquidation in which the
consideration per share of Series A Preferred (including shares Outstanding on
an As-Converted Basis (as defined below) if appropriate) is equal to or greater
than (i) $6.54 per share if the transaction takes place before December 2, 2002
or (ii) $8.72 per share if the transaction takes place on or after December 2,
2002 provided that the consideration consists of (i) cash, (ii) securities
listed on an established national securities exchange or automated quotation
system and registered under the Act or (iii) a combination thereof;
(b) authorize the issuance of unsecured debt in an
amount greater than $20 million;
(c) authorize the issuance of any equity securities
that are senior to or pari passu with the
Series A Preferred;
(d) materially alter the rights, preferences or
privileges of the Series A Preferred; or
(e) increase or decrease the number of authorized
shares of Series A Preferred.
In the event that the holders of the Series A Preferred do
not approve any of the matters set forth above, the Corporation shall have the
right to convert all of the outstanding shares of Series A Preferred into
Common Stock at a conversion ratio (which represents the number of shares of
Common Stock into
<PAGE> 6
which each share of Series A Preferred is convertible) determined by dividing
(A) the greater of (i) $6.54 per Share or (ii) the current market value of a
share of Common Stock as determined by a third-party unaffiliated investment
bank of national repute selected jointly by the Corporation and the holders of
a majority of the Series A Preferred by (B) the Conversion Price then in
effect. The Corporation must exercise its right to cause a conversion pursuant
to this SECTION 4 within sixty (60) days of the date upon which the Corporation
receives final written notification that the holders of Series A Preferred have
not consented to any of the matters set forth above and the conversion of the
Series A Preferred pursuant to this SECTION 4 shall be effected within thirty
(30) days of such election by the Corporation.
SECTION 5. OPTIONAL CONVERSION.
5.1. General.
(a) Series A Preferred. At any time and from time to
time after the issuance thereof, any holder of Series A Preferred may convert
any share of Series A Preferred held by such holder into a number of shares of
Common Stock determined by dividing the Stated Value Per Share of the Series A
Preferred by the Conversion Price then in effect. The initial Conversion Price
for the Series A Preferred issued prior to March 14, 2000 shall be $2.18. The
initial Conversion Price for the Series A Preferred issued on or after March
14, 2000 shall be $5.80. The Conversion Price from time to time in effect is
subject to adjustment as hereinafter provided.
(b) Series A-1 Preferred. Each share of Series A-1
Preferred shall convert into the same number of shares of Common Stock as each
share of Series A Preferred pursuant to which it was issued and the provisions
of this Section 5 shall apply to the Series A-1 Preferred, except as
specifically provided in this Section 5.1(b). In the event that the Corporation
has completed a "Qualified Equity Infusion" (as defined below) after the
issuance of the shares of Series A Preferred, any holder of Series A-1
Preferred may convert any shares of Series A-1 Preferred held by such holder
into a number of shares of Common Stock determined by dividing the Stated Value
Per Share by the price per share of Common Stock paid (or the value accorded
each share of Common Stock if the security purchased is other than Common
Stock) in the Corporation's most recent "Qualified Equity Infusion" (as defined
below) which occurred after the issuance by the Corporation of the shares of
Series A Preferred held by such holder. For purposes of this SECTION 5.1(B),
Qualified Equity Infusion shall mean the most recent (i) equity investment of
$5 million or more made by a "Strategic Investor" (as defined below) or (ii)
equity investment of $10 million or more by a non-Strategic Investor. For
purposes of this SECTION 5.1(B), "Strategic Investor" shall mean an investor in
the Corporation's securities which (i) is engaged in the same or a related
business as the Corporation, (ii) in the opinion of a majority of the Board of
Directors, is making the investment
<PAGE> 7
primarily for strategic business reasons rather than as a passive investment
and (iii) has a public market capitalization (based on the fair market value of
its outstanding publicly-traded securities) of at least $2 billion. For
purposes of this SECTION 5.1(B), an "equity investment" shall include an
investment in any shares of capital stock of the Corporation or any security
which is convertible into, exchangeable for, or exercisable for any shares of
capital stock of the Corporation.
5.2. Conversion Procedure
(a) Any holder of shares of Series A Preferred desiring
to convert any portion thereof into Common Stock shall surrender each
certificate representing one or more shares of the Series A Preferred to be
converted, duly endorsed in favor of the Corporation or in blank and
accompanied by proper instruments of transfer, at the principal business office
of the Corporation (or such other place as may be designated by the
Corporation), and shall give written notice to the Corporation at that office
of its election to convert the same, setting forth therein the name or names
(with the address or addresses) in which the shares of Common Stock are to be
issued. Conversion shall be effective upon receipt by the Corporation of the
notice and the share certificate or certificates contemplated by the preceding
sentence. In case of any Liquidation of the Corporation, such right of
conversion shall cease and terminate at the close of business on the business
day fixed for payment of the amount distributable to the holders of the Series
A Preferred pursuant to SECTION 3.
(b) As soon as possible after a conversion has been
effected (but in any event within five business days), the Corporation shall
deliver to the converting holder:
(i) a certificate or certificates representing
the number of shares of Common Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the converting
holder has specified; and
(ii) a certificate representing any shares of
Series A Preferred which were represented by the certificate or certificates
delivered to the Corporation in connection with such conversion but which were
not converted.
(c) The issuance of certificates for shares of
Common Stock upon conversion of Series A Preferred shall be made without charge
to the holders of such Series A Preferred for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
conversion and the related issuance of shares of Common Stock.
(d) The Corporation shall not close its books
against the transfer of Series A Preferred or of Common Stock issued or
issuable upon conversion of Series A Preferred in any manner which interferes
with the timely
<PAGE> 8
conversion of Series A Preferred. The Corporation shall assist and cooperate
(but the Corporation shall not be required to expend substantial efforts or
funds in excess of $5,000 in the aggregate) with any holder of Series A
Preferred required to make any governmental filings or obtain any governmental
approval prior to or in connection with any conversion of shares of Series A
Preferred hereunder (including, without limitation, making any filings required
to be made by the Corporation).
(e) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of issuance upon the conversion of the Series A Preferred, not less
than the number of shares of Common Stock issuable upon the conversion of all
outstanding Series A Preferred that may then be exercised. All shares of Common
Stock which are so issuable shall, when issued, be duly authorized and validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Corporation shall take all such actions as may be necessary to
ensure that all such shares of Common Stock may be so issued without violation
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Common Stock may be listed
(except for official notice of issuance which shall be immediately delivered by
the Corporation upon each such issuance).
5.3. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) the outstanding shares of one or more classes of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision shall be proportionately decreased to
account for such subdivision, and if the Corporation at any time combines (by
reverse stock split or otherwise) the outstanding shares of one or more classes
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased.
5.4. Reorganization, Reclassification, Consolidation, Merger or
Sale. In connection with any Reorganization Event, the holders of Series A
Preferred shall thereafter have the right to acquire and receive, in lieu of
(or in addition to, as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Series A Preferred, such shares of stock, securities, cash or other assets (or,
if not practicably attainable, the reasonable equivalent thereof) as such
holder would have received in connection with such Reorganization Event if such
holder had converted its Series A Preferred immediately prior to such
Reorganization Event. The Corporation shall make appropriate provisions to
ensure that the requirements of the previous sentence are effected. The
Corporation will not effect any such Reorganization Event unless prior to the
consummation thereof, the successor corporation (if other than the Corporation)
resulting from such Reorganization Event assumes, by written instrument, the
obligation to deliver each such holder such shares of stock,
<PAGE> 9
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.
5.5. Adjustment of Price Upon Issuance of Common Stock.
If and whenever the Corporation shall issue or sell, or is, in
accordance with subparagraphs 5.5(a) through 5.5(g), deemed to have issued or
sold, any shares of Common Stock or other equity securities of the Corporation
or any Options (as defined below) or Convertible Securities (as defined below)
for a price per share less than the applicable Conversion Price for the Series
A Preferred immediately prior to the time of such issue or sale (except for (A)
shares issued in connection with the conversion of Series A Preferred or (B)
the issuance of options, warrants or other common stock equivalents or shares
issued upon the exercise of options, warrants or other common stock equivalents
to directors, officers or employees of the Corporation which are approved by
the Compensation Committee of the Corporation's Board of Directors) (a
"Dilutive Financing"), the Conversion Price shall be reduced by multiplying the
Conversion Price in effect immediately before the issuance or sale by a
fraction, the numerator of which is the number of shares of Common Stock that
are Outstanding on an As-Converted Basis (as defined below) immediately before
the Dilutive Financing plus the number of shares of Common Stock that could be
purchased at the Conversion Price immediately before the time of the Dilutive
Financing for the aggregate consideration paid or payable upon the sale or
issuance of Common Stock or other securities in the Dilutive Financing, and the
denominator of which is the number of shares of Common Stock that are
Outstanding on an As-Converted Basis immediately before the Dilutive Financing
plus the number of shares that are acquired or to be acquired upon the sale or
issuance of the Common Stock and other securities in the Dilutive Financing.
For purposes of this SECTION 5.5, "Outstanding on an As-Converted Basis"
immediately before the Dilutive Financing means the sum of (i) all Common Stock
issued and outstanding immediately before the Dilutive Financing plus (ii) all
Common Stock that would be issued if all Series A Preferred, Options and other
Convertible Securities were converted or exercised, as applicable, hereunder
immediately before the Dilutive Financing.
For purposes of this SECTION 5.5., the following subparagraphs (a) to
(g) shall also be applicable:
(a) Issuance of Rights or Options. In case at any time
the Corporation shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or exchangeable
stock or securities being called "Convertible Securities") whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the
<PAGE> 10
price per share for which Common Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of all such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the applicable
Conversion Price for the Series A Preferred immediately prior to the time of
the granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding.
(b) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or
sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the applicable Conversion Price for the Series A
Preferred immediately prior to the time of such issue of sale, then the total
maximum number of shares of Common Stock issuable upon conversion or exchange
of all such Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that
except as otherwise provided in subparagraph (c), no adjustment of any
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of any
Conversion Price have been or are to be made pursuant to other provisions of
this SECTION 5.5., no further adjustment of such Conversion Price shall be made
by reason of such issue or sale.
<PAGE> 11
(c) Change in Option Price or Conversion Rate;
Expiration of Options or Convertible Securities. Upon the happening of any of
the following events, namely, if the purchase price provided for in any Option
referred to in subparagraph (a), the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities referred to in
subparagraph (a) or (b), or the rate at which Convertible Securities referred
to in subparagraph (a) or (b) are convertible into or exchangeable for Common
Stock shall change at any time (including, but not limited to, changes under or
by reason of provisions designed to protect against dilution), the applicable
Conversion Price for the Series A Preferred at the time of such event shall
forthwith be readjusted to the Conversion Price which would have been in effect
at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued or
sold, but only if as a result of such adjustment the Conversion Price then in
effect hereunder is thereby reduced; and on the expiration or termination of
such Option or Convertible Securities, the Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which would have
been in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided, that any consideration
which was actually received by the Corporation in connection with the issuance
or sale of such Options or Convertible Securities shall be included in the
readjustment computation even though such Options or Convertible Securities
shall have expired or terminated.
(d) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for dividends or distributions upon
the Common Stock), Options or Convertible Securities (except for dividends or
distributions on the Series A Preferred), the Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold at
consideration equal to $.01 per share.
(e) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
amounts paid or receivable for accrued interest or accrued dividends and any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Corporation shall be deemed to be the fair value of such
consideration as determined in good faith by the Board of Directors of the
Corporation, without deduction of any amounts paid or receivable for accrued
interest or accrued dividends and any expenses incurred or any
<PAGE> 12
underwriting commissions or concessions paid or allowed by the Corporation in
connection therewith. In case any Options shall be issued in connection with
the issue and sale of other securities of the Corporation, together comprising
one integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have been
issued for such consideration as determined in good faith by the Board of
Directors of the Corporation.
(f) Record Date. In case the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them (i)
to receive a dividend or other distribution payable in Common Stock, Options or
Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(g) Treasury Shares. The disposition of any shares of
Common Stock owned or held by or for the account of the Corporation shall be
considered an issue or sale of Common Stock for the purpose of this SECTION
5.5., but while held as Treasury Shares shall not be included in the number of
shares of Common Stock outstanding.
5.6. Notices.
(a) Immediately upon any adjustment of the Conversion
Price, the Corporation shall give written notice thereof to all holders of
Series A Preferred, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(b) The Corporation shall give written notice to all
holders of Series A Preferred at least 20 days prior to the date on which the
Corporation closes its books or fixes a record date (i) with respect to any
dividend or distribution upon Common Stock, (ii) with respect to any pro rata
subscription offer to holders of Common Stock or (iii) for determining rights
to vote with respect to any Liquidation or Reorganization Event.
5.7 Certain Events.
If any event occurs of the type contemplated by the provisions of this
Section 5 but not expressly provided for by such provisions, upon approval by a
Disinterested Majority (as defined below), then the Corporation's board of
directors will make an appropriate adjustment in the Conversion Price so as to
protect the rights of the holders of the Series A Preferred; provided, however,
that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 5 or decrease the number of shares of
Common Stock issuable upon
<PAGE> 13
conversion of each share of Series A Preferred. For purposes hereof,
"Disinterested Majority" shall mean a majority of the Board of Directors,
whether or not a quorum, excluding those directors who have a direct or
indirect interest in the transaction and those directors who shall have been
elected or designated by the holders of the Series A Preferred.
SECTION 6. MANDATORY CONVERSION. Each share of Series A Preferred
shall automatically be converted into shares of Common Stock at the then
effective Conversion Price (i) immediately prior to the closing of an
underwritten initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation to the public resulting
in the gross proceeds to the Corporation of not less than $30 million and at a
price per share at least equal to the "Threshold Price" (as defined below) (a
"Qualified IPO") or (ii) following a non-Qualified IPO once the average of the
closing sale price of the Common Stock for sixty (60) consecutive trading days
as reported on the national securities exchange or automated quotation system
on which the Corporation's Common Stock is then listed exceeds the "Threshold
Price" (as defined below). For purposes hereof, "Threshold Price" means either
(a) $6.54 per share if the initial public offering takes place prior to
December 2, 2002 or (b) $8.72 per share if the initial public offering takes
place on or after December 2, 2002. Each share of Series A-1 Preferred shall be
converted as set forth in SECTION 5.1(B) upon the satisfaction of either of the
above conditions.
SECTION 7. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a register for the
registration of issuance and transfers of Series A Preferred. Upon the
surrender of any certificate representing Series A Preferred at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares of Series A Preferred represented by the surrendered certificate. Each
such new certificate shall be registered in such name and shall represent such
number of shares of Series A Preferred as is requested by the holder of the
surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Series A Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such Series A Preferred represented by the surrendered
certificate. The new certificate shall contain a legend referencing the
applicable Stated Value Per Share as provided in Section 1.3.
SECTION 8. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss,
<PAGE> 14
theft, destruction or mutilation of any certificate evidencing shares of Series
A Preferred, and in the case of any such loss, theft or destruction, upon
receipt of indemnity reasonably satisfactory to the Corporation (provided that
if the holder is a financial institution or other institutional investor, its
own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of Series A Preferred represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on
the Series A Preferred represented by such new certificate from the date to
which dividends have been fully paid on the shares of Series A Preferred
represented by such lost, stolen, destroyed or mutilated certificate.
SECTION 9. NOTICES.
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when
so mailed or sent (a) to the Corporation, at its principal executive offices
and (b) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
SECTION 10. AMENDMENT AND WAIVER.
No amendment, modification or waiver shall be binding or effective
with respect to any provision hereof without the prior affirmative vote or
written consent of the holders of a majority of the shares of Series A
Preferred outstanding at the time such action is taken."
4.
The amendment was duly adopted by unanimous written consent of the
Board of Directors dated as of March 14, 2000 and was duly approved by the
Corporation's shareholders in accordance with the applicable provisions of the
Georgia Business Corporations Code.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed by its duly authorized officer, this 14th day of
March, 2000.
INTERLAND, INC.
By: /s/ Kenneth Gavranovic
-------------------------------------------
Kenneth Gavranovic, Chief Executive Officer
<PAGE> 1
EXHIBIT 3.2(b)
AMENDMENT TO THE BYLAWS
OF
INTERLAND, INC.
THE BYLAWS OF INTERLAND, INC. SHALL HEREBY BE AMENDED AS FOLLOWS:
(1) Section 2 of Article III shall be deleted in its entirety and replaced
with the following Section 2:
"Section 2. Powers, Number, Election, and Term. Except as
otherwise provided by any legal agreement among shareholders, the
property, affairs and business of the corporation shall be managed by
its Board of Directors. The number of directors which shall constitute
the whole board shall be not less than five (5) nor more than fifteen
(15), the number thereof to be determined from time to time by
resolution of the board of directors or the shareholders; provided,
however, that no decrease in the number of directors shall have the
effect of shortening the term of an incumbent director. The directors
shall be classified with respect to the time during which they shall
severally hold office by dividing them into three classes, as nearly
equal in number as possible. Initially, Class 1 shall consist of two
directors with a term of one year; Class 2 shall consist of two
directors with a term of two years; and Class 3 shall consist of three
directors with a term of three years. At each annual meeting of the
shareholders held thereafter, the successors to the class of directors
whose terms shall expire that year shall be elected to hold office for
a term of three years, so that the term of office of one class of
directors shall expire in each year. Any increase in the number of
directors following the establishment of the staggered board of
directors shall be apportioned among the classes so as to make all
classes as nearly equal in number as possible. Directors shall be
natural persons who have obtained the age of 21 years, but need not be
residents of the State of Georgia or shareholders of the corporation.
A majority of the members of the Board of Directors acting at
a meeting duly assembled, shall constitute a quorum for the transaction
of business, but if at any meeting of the Board of Directors there
shall be less than a quorum present, a majority of those present may
adjourn the meeting, without further notice, from time to time until a
quorum shall have been obtained.
Except as otherwise provided by any legal agreement among
shareholders, in case one or more vacancies shall occur in the Board of
Directors by reason of death, resignation or otherwise, the remaining
directors, although less than a
<PAGE> 2
quorum, may, by a majority vote, elect a successor or successors for
the unexpired term or terms.
(2) Section 9 of Article III shall be deleted in its entirety and replaced
with the following Section 9:
"Section 9. Removal of Directors. At any shareholders' meeting
with respect to which notice of such purpose has been given, any
director may be removed from office, only for cause, by the vote of
shareholders representing a majority of the issued and outstanding
capital stock entitled to vote for the election of directors, provided
that a director elected by a Voting Group may only be removed for cause
by the vote of shareholders representing a majority of the issued and
outstanding capital stock of the Voting Group that elected the
particular director, and his successor may be elected at the same or
any subsequent meeting of shareholders; provided that to the extent any
vacancy created by such removal is not filled by such an election
within 60 days after such removal, the remaining directors shall, by
majority vote, fill any such vacancy.
<PAGE> 1
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
AMONG
INTERLAND, INC.
CREST COMMUNICATIONS PARTNERS L.P.,
CREST ENTREPRENEURS FUND L.P.,
BOULDER VENTURES III, L.P.
AND
THE OTHER INVESTORS SET FORTH ON EXHIBIT C HERETO
DATED DECEMBER 2, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS............................................................
2. SALE AND PURCHASE OF SHARES............................................
2.1. Sale and Purchase of Shares...................................
2.2 Closing.......................................................
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................
3.1. Organization and Standing.....................................
3.2. Subsidiaries..................................................
3.3. Certificate or Articles of Incorporation and Bylaws...........
3.4. Capital Structure of the Company..............................
3.5. Directors, Officers and Employees.............................
3.6. Financial Statements..........................................
3.7. No Liabilities................................................
3.8. Accounts Receivable; Accounts Payable.........................
3.9. Taxes.........................................................
3.10. Conduct of Business; Absence of Material Adverse Change.......
3.11. Title to Property and Assets..................................
3.12. Insurance.....................................................
3.13. Intellectual Property.........................................
3.14. Year 2000 Compliance..........................................
3.15. Debt Instruments..............................................
3.16. Leases........................................................
3.17. Other Agreements..............................................
3.18. Books and Records.............................................
3.19. Litigation; Disputes..........................................
3.20. Labor Relations...............................................
3.21. Pension and Benefit Plans.....................................
3.21.1. Disclosure Schedule..................................
3.21.2. Copies of Documents..................................
3.21.3. Multiemployer Plans..................................
3.21.4. ESOPs................................................
3.21.5. Funding..............................................
3.21.6. Contributions and Other Obligations..................
3.21.7. Qualified Plans......................................
3.21.8. Compliance with Law..................................
3.21.9. Non-deductible Payments..............................
3.21.10. Reportable Events....................................
3.21.11. Foreign Plan.........................................
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.21.12. Tax Form 5330......................................
3.21.13. Welfare Plans......................................
3.21.14. Post-Retirement Plans..............................
3.21.15. Health Care Continuation Coverage Requirements.....
3.21.16. Filed Returns and Reports..........................
3.22. Environmental.................................................
3.23. Transactions with Related Parties.............................
3.24. Restrictions and Consents.....................................
3.25. Authority; Authorization; No Conflict.........................
3.26. Absence of Violation..........................................
3.27. Compliance with Law; Approvals................................
3.28. Copies of Documents...........................................
3.29. Binding Obligation............................................
3.30. Disclosure....................................................
3.31. Use of Proceeds...............................................
3.32. Systems.......................................................
3.33. Customers.....................................................
3.34. Company's Names, Business and Location of Company Assets......
3.35. Small Business Concern........................................
3.36. Real Property Holding Corporation.............................
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS........................
4.1. Organization and Standing.....................................
4.2. Authorization.................................................
4.3. Binding Obligation............................................
4.4. No Registration Under the Securities Act......................
4.5. Acquisition for Investment....................................
4.6. Evaluation of Merits and Risks of Investment..................
4.7. Additional Information........................................
4.8. Stock Certificate Legend......................................
5. CLOSING DELIVERABLES...................................................
5.1. Opinion of Counsel............................................
5.2. Stockholders' Agreement.......................................
5.3. Registration Rights Agreement.................................
5.4. Corporate Documents...........................................
5.5. Documents at Closing..........................................
5.6. Consents......................................................
5.7. Composition of the Board of Directors.........................
5.8. Investor Representatives Letter...............................
5.9. Gavranovic Employment Agreement...............................
5.10 Fernandez Agreement...........................................
6. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION REMEDIES..................
6.1. Survival of Representations...................................
6.2. Agreement of the Company and the Investors to Indemnify.......
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
6.3. Conditions of Indemnification.................................
6.4. Specific Performance..........................................
6.5. Remedies Cumulative...........................................
6.6. Limits for Recovery of Losses.................................
7. MISCELLANEOUS..........................................................
7.1. Additional Actions and Documents..............................
7.2. No Brokers....................................................
7.3. Jury Waiver...................................................
7.4. Publicity.....................................................
7.5. Expenses......................................................
7.6. Assignment....................................................
7.7. Entire Agreement; Amendment...................................
7.8. Waiver........................................................
7.9. Severability..................................................
7.10. Governing Law.................................................
7.11. Notices.......................................................
7.12. Headings......................................................
7.13. Execution in Counterparts.....................................
7.14. Limitation on Benefits........................................
7.15. Binding Effect................................................
7.16. Additional Covenants of the Company...........................
7.17. Key Man Life Insurance........................................
7.18. Proprietary Information Agreement.............................
7.19. SBIC Covenants of the Company.................................
7.20. Regulatory Compliance Cooperation.............................
7.21. Real Property Holding Corporation Covenant....................
</TABLE>
EXHIBIT A DEFINITIONS
EXHIBIT B TERMS OF SERIES A PREFERRED STOCK
EXHIBIT C INVESTORS
EXHIBIT D FORM OF KILPATRICK STOCKTON LLP LEGAL OPINION
EXHIBIT E STOCKHOLDERS' AGREEMENT
EXHIBIT F REGISTRATION RIGHTS AGREEMENT
EXHIBIT G INVESTOR REPRESENTATIVES' LETTER
EXHIBIT H FORM OF KEN GAVRANOVIC EMPLOYMENT AGREEMENT
EXHIBIT I FORM OF FERNANDEZ AGREEMENT
<PAGE> 5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Purchase Agreement") is
entered into as of December 2, 1999 by and among Interland, Inc., a Georgia
corporation (the "Company"), Crest Communications Partners L.P., a Delaware
limited partnership, and Crest Entrepreneurs Fund L.P., a Delaware limited
partnership (collectively, "Crest"), Boulder Ventures III, L.P., a Delaware
limited partnership ("Boulder"), and the other investors set forth on Exhibit C
hereto ("Other Investors" and, together with Crest and Boulder, the
"Investors").
WHEREAS, the Company desires to issue and sell to the
Investors, and the Investors desire to subscribe for and acquire from the
Company, a substantial equity interest in the Company, upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
1 DEFINITIONS
For all purposes of this Purchase Agreement, certain capitalized terms
specified in Exhibit A shall have the meanings set forth in that Exhibit A,
except as otherwise expressly provided.
1 SALE AND PURCHASE OF SHARES
2.1. SALE AND PURCHASE OF SHARES
On the basis of the representations, warranties and
agreements contained herein, and subject to the terms and conditions hereof,
the Company agrees to issue and sell to the Investors, and the Investors,
severally and not jointly, agree to purchase from the Company, an aggregate of
9,174,313 shares of Series A Convertible Participating Preferred Stock, no par
value per share ("Series A Stock"), having the rights, preferences and other
terms set forth on Exhibit B hereto, at a price per share of Series A Stock of
$2.18 for an aggregate purchase price of $20.0 million. The number of shares of
Series A Stock to be purchased by each Investor and the purchase price to be
paid by each Investor is as set forth on Exhibit C hereto.
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<PAGE> 6
2.2 CLOSING
The closing of the sale and purchase of the shares of Series A Stock shall take
place at the offices of Hogan & Hartson L.L.P., 111 South Calvert Street, Suite
1600, Baltimore, Maryland 21202, at 10:00 a.m., Baltimore time, on the date
hereof or at such other location, date and time as may be agreed upon between
the Investors and the Company (the "Closing"). At the Closing, the Company
shall issue and deliver to each Investor a stock certificate or certificates in
definitive form, registered in the name of such Investor, representing the
Series A Stock. As payment in full for the shares of Series A Stock being
purchased by it at the Closing, and against delivery of the stock certificate
or certificates therefor as aforesaid, on the Closing Date each Investor shall
deliver to the Company by wire transfer of immediately available funds the
amount set forth opposite the name of such Investor under the heading "Purchase
Price for Shares at Closing" on Exhibit C.
1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the Disclosure Schedule,
the Company represents and warrants (which representation and warranty shall be
deemed to include the disclosure with respect thereto so specified in the
Disclosure Schedule) to the Investors as set forth below in this SECTION 3. The
disclosures made in the Disclosure Schedule with respect to a Section of this
Purchase Agreement shall also be deemed disclosures with respect to all other
applicable Sections of this Agreement. For purposes of this SECTION, the term
"Company" shall include any predecessor entity and any and all Subsidiaries,
unless the context requires otherwise.
3.1. ORGANIZATION AND STANDING
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia and has all
requisite corporate power and corporate authority to own, operate and lease its
Assets, to carry on its business as currently conducted and to carry out the
transactions contemplated hereby. The Company has made available to the
Investor Representatives complete and correct copies of the certificate or
articles of incorporation and by-laws of the Company, with all amendments
thereto, as in effect on the date of this Purchase Agreement. The Company is
not qualified to conduct business in any other jurisdiction which is not listed
on the Disclosure Schedule, and neither the nature of the business conducted
by, nor the character of the Assets owned, leased or
-3-
<PAGE> 7
otherwise held by, the Company makes such qualification necessary except where
the failure to be so qualified would not have a Material Adverse Effect.
3.2. SUBSIDIARIES
Except as set forth on the Disclosure Schedule, the Company
has no Subsidiaries and no equity investment or other interest in, nor has the
Company made advances or loans to, any corporation, association, partnership,
joint venture or other entity, other than credit extended in the Ordinary
Course of Business, except as set forth in the Disclosure Schedule. The
Disclosure Schedule sets forth (a) the authorized capital stock of each direct
and indirect Subsidiary of the Company and the percentage of the outstanding
capital stock of each Subsidiary directly or indirectly owned by the Company,
and (b) the nature and amount of any such equity investment, other interest or
advance. All of such shares of capital stock of Subsidiaries directly or
indirectly held by the Company have been duly authorized and validly issued and
are outstanding, fully paid and nonassessable. The Company directly, or
indirectly through wholly owned Subsidiaries, owns all such shares of capital
stock of the direct or indirect Subsidiaries free and clear of all
Encumbrances. Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its state or jurisdiction of
incorporation (as listed in the Disclosure Schedule), and has all requisite
corporate power and authority to own, operate and lease its Assets and to carry
on its business as currently conducted. Each Subsidiary is qualified to conduct
business and is in good standing in the states, countries and territories
listed in the Disclosure Schedule. The Subsidiaries are not qualified to
conduct business in any other jurisdictions, and neither the nature of their
businesses nor the character of the Assets owned, leased or otherwise held by
them makes any such qualification necessary. There is no state, country or
territory wherein the absence of licensing or qualification as a foreign
corporation would have a Material Adverse Effect.
3.3. CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS
The Company has Furnished to the Investor Representatives a
true and complete copy of the certificate or articles of incorporation of the
Company and of each Subsidiary, as currently in effect, certified as of a
recent date by the Secretary of State (or comparable governmental authority) of
the respective jurisdictions of incorporation, and a true and complete copy of
the bylaws of the Company and of each Subsidiary, as currently in effect,
certified by their respective corporate secretaries. Such certified copies are
attached as exhibits to, and part of, the Disclosure Schedule.
3.4. CAPITAL STRUCTURE OF THE COMPANY
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<PAGE> 8
The Disclosure Schedule sets forth the authorized capital
stock of the Company. Upon consummation of the purchase by the Investors of the
shares of Series A Stock contemplated hereby, the authorized capital stock of
the Company will consist solely of (i) 100,000,000 shares of Common Stock, of
which (a) 21,742,975 shares are currently issued and outstanding, (b) 9,174,313
shares are reserved for issuance upon conversion of the Series A Stock, (c)
4,500,000 shares are reserved for issuance pursuant to the Company's Option
Plan, (d) 1,300,000 shares are reserved for issuance pursuant to options issued
to consultants and advisors to the Company and (d) 63,282,712 shares are
authorized but unissued and unreserved and (ii) 10,000,000 shares of Preferred
Stock, of which (a) 9,174,313 shares of Series A Stock are to be issued to the
Investors pursuant to the terms of this Purchase Agreement and (b) 825,687
shares of Series A-1 Convertible Participating Preferred Stock, no par value
per share, are authorized but unissued. All issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable and free of any preemptive rights. Except as
set forth on the Disclosure Schedule or in this SECTION 3.4, no shares of
capital stock of the Company or any Subsidiary have been reserved for any
purpose. Except as set forth on the Disclosure Schedule, there are no
outstanding securities convertible into or exchangeable or exercisable for the
capital stock of the Company or any Subsidiary, or warrants or options to
purchase or to subscribe for any shares of such stock or other securities of
the Company or the Subsidiary. There are no outstanding Agreements affecting or
relating to the voting, issuance, purchase, redemption, repurchase, transfer or
registration for sale under the Securities Act of any securities of the Company
or any Subsidiary, except as contemplated hereunder or described in the
Disclosure Schedule.
3.5. DIRECTORS, OFFICERS AND EMPLOYEES
The Disclosure Schedule lists all current directors and
officers of the Company and all managers and consultants of the Company who,
individually, receive or are entitled to receive annual compensation from the
Company in excess of $50,000, showing each such person's name, position, and
annual remuneration, bonuses and fringe benefits for the current fiscal year.
To the Knowledge of the Company, during the past ten years no director or
officer of the Company has: (i) been arrested or convicted for any crime
material to an evaluation of such person's ability or integrity, including,
without limitation, any violation of any federal or state law which currently
or has previously regulated the types of business in which the Company is
currently or has previously been engaged; (ii) filed a petition under federal
bankruptcy or any state insolvency laws; (iii) been a director or officer of a
business entity which has filed a petition under federal bankruptcy or any
state insolvency laws, or had a receiver or similar officer appointed by a
court to administer the business or property of such entity; (iv) lost a civil
suit in which the
-5-
<PAGE> 9
judgment was in excess of $100,000 or (v) had the Internal Revenue Service file
a lien against his or her property.
3.6. FINANCIAL STATEMENTS
(a) The Company has prepared and Furnished to the
Investors and there are included as exhibits that are part of the Disclosure
Schedule, the audited consolidated balance sheets of the Company as of the end
of the fiscal year ending December 31, 1998, and the audited consolidated
statements of income, stockholders' equity and cash flow for such period (the
"Audited Financial Statements"). The Company has Furnished to the Investors the
unaudited balance sheet of the Company for the nine months ended September 30,
1999, and the unaudited statements of income, stockholders' equity and cash
flow for such period. (The September 30, 1999 unaudited financial statements
and the Audited Financial Statements are herein referred to collectively as the
"Financial Statements"). All of the Financial Statements, including, without
limitation, the notes thereto, referred to in this SECTION or Furnished to the
Investors after the date hereof pursuant to this Purchase Agreement: (i) are in
accordance with the books and records of the Company, (ii) present fairly in
all material respects the consolidated financial position of the Company as of
the respective dates and the results of operations and cash flow for the
respective periods indicated, and (iii) have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior accounting periods except for the absence of footnotes and customary
year-end adjustments in the case of the September 30, 1999 unaudited financial
statements (which will not deviate Materially from the other Financial
Statements). The Financial Statements set forth all changes in accounting
methods (for financial accounting purposes) at any time made, agreed to, or
required with respect to the Company.
(b) The financial forecasts of the Company for the
fiscal years 1999-2003 Furnished to the Investors and attached to this Purchase
Agreement as part of the Disclosure Schedule were prepared by the Company in
good faith on the basis of the assumptions stated therein, and the Company has
no reason to believe that the assumptions or the financial forecasts themselves
are not reasonable; provided, however, that the Company makes no representation
or warranty that the results projected in the financial forecasts will actually
be achieved.
3.7. NO LIABILITIES
Except as reflected in the Financial Statements, as of
September 30, 1999, there existed no liabilities (whether contingent or
absolute, matured or unmatured, known or unknown) of the Company other than (i)
incurred in the Ordinary Course of Business and in amounts that are not
individually Material, and (ii) for taxes, assessments and other governmental
charges, if such taxes, assessments and other charges (x) are not yet due and
payable, or (y) are due and
-6-
<PAGE> 10
payable but can be paid hereafter without penalty or interest and for which
a proper accrual relating thereto is reflected in the Financial Statements and
which will be paid before penalty or interest begins to accrue thereon. Except
as described in the Disclosure Schedule, since September 30, 1999, the Company
has not incurred any liabilities (whether contingent or absolute, matured or
unmatured, known or unknown) other than in the Ordinary Course of Business and
in amounts that are not individually or in the aggregate Material.
3.8. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE
(a) The accounts receivable of the Company shown on the
Financial Statements Furnished to the Investors, or thereafter acquired by the
Company, have been collected or, to the Company's Knowledge, represent valid
rights to receive payment for bona fide services rendered or goods sold, and
except as set forth on the Disclosure Schedule, are not subject to discounts,
rebates or to offsets of any kind.
(b) Except as set forth on the Disclosure Schedule, the
Company is current on all accounts payable.
3.9. TAXES
(a) Except as set forth on the Disclosure Schedule, the
Company has (or, in the case of returns becoming due after the date hereof and
on or before the Closing Date, will have prior to the Closing Date) duly filed
(or obtained extensions with respect to) all Tax Returns required to be filed
on or before the Closing Date with respect to all applicable Taxes. No
penalties or other charges are or will become due with respect to any such Tax
Returns as the result of the late filing thereof. All of the Tax Returns are
(or, in the case of returns becoming due after the date hereof and on or before
the Closing Date, will be) true and complete in all Material respects. The
Company: (i) has paid all Taxes due or claimed to be due by any taxing
authority in connection with any such Tax Returns; or (ii) has established (or,
in the case of amounts becoming due after the date hereof, prior to the Closing
Date will have paid or established) in the Financial Statements provided to the
Investors adequate reserves (in conformity with generally accepted accounting
principles consistently applied) for the payment of such Taxes. The amounts set
up as reserves for Taxes on the Financial Statements are sufficient for the
payment of all unpaid Taxes as of the dates thereof, whether or not such Taxes
are disputed or are yet due and payable, for or with respect to the period, and
for which the Company may be liable in its own right or as a transferee of the
Assets of, or successor to, any corporation, person, association, partnership,
joint venture or other entity.
-7-
<PAGE> 11
(b) The Company, either individually or in its own right
or as a transferee, does not have and on the Closing Date will not have any
liability for Taxes payable for or with respect to any periods prior to and
including the Closing Date in excess of the amounts actually paid prior to the
Closing Date or reserved for in the Financial Statements (other than Taxes
accruing after September 30, 1999 in the Ordinary Course of Business which are
not payable on or prior to the Closing Date).
(c) Except as set forth in the Disclosure Schedule,
there is no action, suit, proceeding, audit, investigation or claim pending or,
to the Knowledge of the Company, threatened in respect of any Taxes for which
the Company is or may become liable, nor has any deficiency or claim for any
such Taxes been proposed, asserted or, to the Knowledge of the Company,
threatened. The Company has not consented to any waivers or extensions of any
statute of limitations with respect to the collection or assessment of any
Taxes against the Company. There is no Agreement, waiver or consent providing
for an extension of time with respect to the assessment or collection of any
Taxes against the Company and no power of attorney granted by the Company with
respect to any tax matters is currently in force.
(d) The Company has Furnished or otherwise made
available to the Investor Representatives true and complete copies of all Tax
Returns and all written communications relating to any such Tax Returns or to
any deficiency or claim proposed and/or asserted, irrespective of the outcome
of such matter, but only to the extent such items relate to tax years (i) which
are subject to an audit, investigation, examination or other proceeding, or
(ii) with respect to which the statute of limitations has not expired.
(e) The Disclosure Schedule sets forth (i) all federal
tax elections that currently are in effect with respect to the Company, and
(ii) all elections for purposes of foreign, state or local Taxes and all
consents or Agreements for purposes of federal, foreign, state or local Taxes
in each case that reasonably could be expected to affect or be binding upon the
Company or its Assets or operations after Closing. The Disclosure Schedule sets
forth all Material changes in accounting methods for Tax purposes at any time
made, agreed to, or required with respect to the Company.
(f) Except as set forth on the Disclosure Schedule, the
Company has not: (i) been a partner in a partnership or an owner of an interest
in an entity treated as a partnership for federal income tax purposes; (ii)
executed or filed with the Internal Revenue Service any consent to have the
provisions of Section 341(f) of the Code apply to it; (iii) been subject to
Section 999 of the Code; (iv) been a passive foreign investment company as
defined in Section 1296(a) of the Code; or (v) been a party to any Agreement
relating to the sharing, allocation or payment of, or indemnity for, Taxes.
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<PAGE> 12
3.10. CONDUCT OF BUSINESS; ABSENCE OF MATERIAL ADVERSE CHANGE
Except as otherwise contemplated by the terms of this
Purchase Agreement or as set forth in the Disclosure Schedule, since September
30, 1999 there has been no material adverse change in the business, operations,
prospects, condition (financial or otherwise), Assets or liabilities of the
Company. Except as set forth in the Disclosure Schedule or as contemplated
hereunder, since September 30, 1999, the Company has conducted business
substantially in the manner heretofore conducted and only in the Ordinary
Course of Business, and the Company has not:
(a) incurred any loss Materially and adversely affecting
any of its Assets as the result of any fire, explosion, flood, windstorm,
earthquake, labor trouble, riot, accident, act of God or public enemy or armed
forces, or other casualty;
(b) issued any capital stock or member interests, bonds
or other corporate securities or debt instruments, granted any options,
warrants or other rights calling for the issuance thereof, or borrowed any
funds (other than borrowings in the Ordinary Course of Business in amounts,
individually or in the aggregate, that do not exceed $50,000);
(c) incurred, or become subject to, any obligation or
liability (absolute or contingent, matured or unmatured, known or unknown),
except current liabilities incurred in the Ordinary Course of Business and
liens for current taxes, assessments or governmental charges or levies on
property not yet due and delinquent;
(d) discharged or satisfied any Encumbrance or paid any
obligation or liability (absolute or contingent, matured or unmatured, known or
unknown) other than current liabilities shown in the Financial Statements and
current liabilities incurred since September 30, 1999 in the Ordinary Course of
Business;
(e) declared or made payment of, or set aside for
payment, any dividends or distributions of any Assets, or purchased, redeemed
or otherwise acquired any of its capital stock, any securities convertible into
capital stock, or any other securities;
(f) mortgaged, pledged or subjected to any Encumbrance
any Material Assets, except for (i) Encumbrances reflected in the Financial
Statements of the Company or on the Disclosure Schedule, (ii) Encumbrances
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or irregularities in
title thereto which do not Materially detract from the value of, or impair the
use of, such property by the Company in the operation of its business, and
(iii) liens for current taxes,
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<PAGE> 13
assessments or governmental charges or levies on property not yet due and
delinquent;
(g) sold, exchanged, transferred or otherwise disposed
of any Material Assets, or canceled any Material debts or claims, except in
each case in the Ordinary Course of Business;
(h) written down the value of any Material Assets or
written off as uncollectible any Material notes or accounts receivable, except
write-downs and write-offs in the Ordinary Course of Business, none of which,
individually or in the aggregate, are Material;
(i) entered into any transactions other than in the
Ordinary Course of Business;
(j) increased by more than five percent (5%) the rate of
compensation payable, or to become payable, by the Company to any of its
officers, employees, agents or independent contractors over the rate being paid
to them on September 30, 1999;
(k) made or permitted any amendment or termination of
any Material Agreement to which it is a party or which it owns;
(l) through negotiation or otherwise made any commitment
or incurred any liability to any labor organization;
(m) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind to any director, officer or
employee other than in the Ordinary Course of Business;
(n) directly or indirectly paid any severance or
termination pay to any officer or employee in excess of three months' salary;
(o) made capital expenditures, or entered into
commitments therefor, aggregating more than $50,000;
(p) made any change in any method of accounting or
accounting practice;
(q) entered into any transaction of the type described
in SECTION 3.23 or
(r) made an Agreement to do any of the foregoing.
3.11. TITLE TO PROPERTY AND ASSETS
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The Company has good, valid and marketable title to all
Material Assets owned by it, free and clear of all Encumbrances other than
those referred to in the Financial Statements (or the notes thereto) and liens
for taxes not yet due and payable. The Company does not own any real estate,
and the Company is not a United States Real Property Holding Company as defined
under Section 897 of the Code. All personal property of the Company is in good
operating condition and repair in all Material respects (ordinary wear and tear
and routinely scheduled maintenance excepted) and is suitable and adequate for
the uses for which it is intended or is being used.
3.12. INSURANCE
(a) Set forth on the Disclosure Schedule is the
following information with respect to each insurance policy (including policies
providing property, casualty, liability and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past
three (3) years: (i) the name, address and telephone number of the agent, (ii)
the name of the insurer, (iii) the name of the policyholder, (iv) the name of
each covered insured, (v) the policy number and the period of coverage, (vi)
the scope and amount (including a description of how deductibles and ceilings
are calculated and operate) of coverage, and (vii) a description of any
material retroactive premium adjustments or other loss sharing arrangements.
(b) Other than as set forth in the Disclosure Schedule,
the Company has insurance coverage under policies that (a) are with insurance
companies reasonably believed by the Company to be financially sound and
reputable; (b) are in amounts customary for companies in similar businesses
similarly situated; (c) are legal, valid, binding, enforceable and in full
force and effect; (d) will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms immediately following the
Closing Date; (e) are sufficient for compliance by the Company with all
requirements of Law and of all Agreements to which the Company is a party; (f)
to the Company's Knowledge are valid and outstanding policies enforceable
against the insurer; and (g) in the Company's reasonable belief, provide
adequate insurance coverage for the Assets and business of the Company.
(c) The Company is not in breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default or permit termination, modification or acceleration under any
policy.
(d) The Company has not and to the Knowledge of the
Company, no other party to the policy has repudiated any provision of any such
policy.
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(e) The Company currently has no and has never had any
self-insurance arrangements.
3.13. INTELLECTUAL PROPERTY
(a) The Company owns, or is licensed or otherwise
possesses all necessary rights to use all patents, trademarks, trade names,
service marks, trade dress, logos, domain names, copyrights and any
applications or registrations therefor, maskworks, schematics, technology,
know-how, trade secrets, formulas, compositions, technical data, designs,
drawings, specifications, inventory, inventions, ideas, algorithms, processes,
computer software programs and applications (in both source code and object
code form), and tangible or intangible proprietary information or material and
all reissues, extensions and renewals thereof ("Intellectual Property") that
are used in the business or products of the Company as the business is now
conducted and as proposed to be conducted. The Intellectual Property owned or
used by the Company is free and clear of all Encumbrances.
(b) The Disclosure Schedule lists all (i) patents,
patent applications, registered and unregistered trademarks, trade names and
service marks, registered and unregistered copyrights, and maskworks included
in the Intellectual Property that are owned by the Company, including the
jurisdictions, both domestic and foreign, in which each such item of
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) licenses,
sublicenses and other agreements as to which the Company is a party and
pursuant to which any person is authorized to use any Intellectual Property
owned by the Company, and (iii) licenses, sublicenses and other agreements to
which the Company is a party and pursuant to which the Company is authorized to
use any third party patents, trademarks or copyrights, including software
("Third Party Intellectual Property Rights").
(c) Except as disclosed on the Disclosure Schedule, the
Company has taken (or, with respect to Third Party Intellectual Property Rights
that are Material to the Company's business or products, has ensured that the
owner thereof has taken) all necessary action in all appropriate jurisdictions,
both domestic and foreign, to register and maintain the registration of all
Intellectual Property that is Material to the Company's business or products
that may be registered.
(d) To the Knowledge of the Company, there is no actual
or suspected unauthorized use, disclosure, infringement or misappropriation of
any Intellectual Property rights of the Company, or any Third Party
Intellectual Property Rights, that are Material to the Company's business or
properties, to the extent licensed by or through the Company, by any third
party, including any employee or former employee of the Company. The Company
has not notified any third party that it believes such third party is
interfering with, infringing or
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<PAGE> 16
misappropriating any of the Company's Intellectual Property or engaging in any
act of unfair competition. The Company has the right to bring an action for the
infringement of all of its Intellectual Property. The Company has taken all
reasonably necessary measures to protect and maintain its rights in the
Intellectual Property. Except as set forth on the Disclosure Schedule, there
are no royalties, fees or other payments or compensation payable by the Company
to any person by reason of the ownership, use, sale or disposition of
Intellectual Property.
(e) The Company is not, nor will it be as a result of
the execution and delivery of this Purchase Agreement, the Series A Stock or
the Agreements contemplated hereby, or the performance of its obligations
thereunder, in breach of any license, sublicense or other agreement relating to
the Intellectual Property, including Third Party Intellectual Property Rights.
(f) The Company has no Knowledge that the conduct of the
business of the Company infringes any patent, trademark, service mark,
copyright, trade secret or other proprietary right of any third party. There
are no pending or, to the Company's Knowledge, threatened claims against the
Company alleging that the conduct of its business infringes any Intellectual
Property rights of others. The Intellectual Property of the Company is not
subject to any outstanding injunction, judgment, order, decree, ruling or
charge. To the Company's Knowledge, the Company has not engaged in unfair
competition against any third party.
(g) All present or former officers, directors, employees
and consultants of the Company have executed and delivered to the Company an
agreement regarding assignment to the Company of any Intellectual Property
arising from services performed for the Company by such persons. Except as
disclosed on the Disclosure Schedule, there is no Intellectual Property
developed by a present or former stockholder, director, officer, consultant or
employee of the Company that is used in the business of the Company that has
not been transferred to, or is not owned free and clear of any liens or
encumbrances by, the Company.
(h) The Company has entered into written confidentiality
agreements with all third parties having access to Company-owned Intellectual
Property in connection with the disclosure to, or use or appropriation by,
those third parties, of Intellectual Property owned by the Company that is not
otherwise protected by a patent, a patent application, copyright, trademark, or
other registration or legal scheme.
3.14. YEAR 2000 COMPLIANCE
(a) Each system owned or used by the Company comprised of software,
hardware or databases, the operational failure of which would be reasonably
likely to result in
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a Material Adverse Effect (collectively, a "System") will be able to accurately
process date data, including, but not limited to, calculating, comparing and
sequencing from, into and between the twentieth century (through year 1999),
the year 2000 and the twenty-first century, including leap year calculations
(having such ability being referred to herein as "Year 2000 Compliant"). The
Company has no reason to believe that it or any of its Subsidiaries will incur
material expenses arising from or relating to the failure of any of their
Systems to be Year 2000 Compliant.
(b) All vendors of products to the Company or any of its Subsidiaries, the
operational failure of which due to a failure to be Year 2000 Compliant would
be reasonably likely to result in a Material Adverse Effect, and such
respective products, to the Knowledge of the Company, are (or prior to December
31, 1999, will be) Year 2000 Compliant. To the knowledge of the Company, each
such vendor will continue to furnish its products to the Company or its
Subsidiaries, as applicable, without interruption or material delay, on and
after January 1, 2000.
3.15. DEBT INSTRUMENTS
The Disclosure Schedule lists all mortgages, indentures,
notes, guarantees and other Agreements for or relating to borrowed money
(including, without limitation, conditional sales agreements and capital
leases) involving payments by the Company aggregating in excess of $25,000 per
year to which the Company is a party or which have been assumed by the Company
or to which any Material Assets are subject. The Company has performed all the
Material obligations under such Agreements listed on the Disclosure Schedule
required to be performed by it to date and are not in default in any Material
respect under any of the foregoing, and, to the Knowledge of the Company, there
has not occurred any event which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute such a
default.
3.16. LEASES
The Disclosure Schedule lists all leases and other Agreements
under which the Company is a lessee or lessor of any Material Asset (including
Real Property), or holds, manages or operates any Material Asset owned by any
third party, or under which any Material Asset owned by the Company is held,
operated or managed by a third party. Except as described in the Disclosure
Schedule, the Company is the owner and holder of all the leasehold estates
purported to be granted by the leases or other Agreements listed in the
Disclosure Schedule. Each such lease and other Agreement is in full force and
effect and constitutes a legal, valid and binding obligation of, and is legally
enforceable against, the Company, and, to the Company's Knowledge, the other
parties thereto (except as enforceability may be limited or affected by
bankruptcy, insolvency, reorganization,
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<PAGE> 18
moratorium, fraudulent conveyance and other similar laws and equitable
principles now or hereafter in effect and affecting the rights and remedies of
creditors generally), and grants the leasehold estate it purports to grant free
and clear of all Encumbrances. All necessary governmental approvals with
respect thereto have been obtained and all necessary filings or registrations
therefor have been made, in each case to the extent that the Company is
responsible therefor, other than where the failure to obtain any such approvals
would not have a Material Adverse Effect, and there are no outstanding disputes
thereunder and, to the Knowledge of the Company, there have been no threatened
cancellations thereof. The Company has in all respects performed all material
obligations thereunder required to be performed by it to date. Neither the
Company nor, to the Knowledge of the Company, any other party is in default in
any Material respect under any of the foregoing, and, to the Knowledge of the
Company, there has not occurred any event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute such a default.
3.17. OTHER AGREEMENTS
(a) The Disclosure Schedule lists all Material
Agreements to which the Company is a party or by which the Company is bound at
the date hereof. Each such Material Agreement is in full force and effect and
constitutes a legal, valid and binding obligation of, and is legally
enforceable against the Company and to the Company's Knowledge, the other
parties thereto (except as enforceability may be limited or affected by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws and equitable principles now or hereafter in effect and
affecting the rights and remedies of creditors generally). All necessary
governmental approvals with respect thereto have been obtained and all
necessary filings or registrations therefor have been made, in each case to the
extent that the Company is responsible therefor, other than where the failure
to obtain any such approvals would not have a Material Adverse Effect, and
there are no outstanding disputes thereunder and, to the Knowledge of the
Company, there have been no threatened cancellations thereof. The Company has
performed all the material obligations thereunder required to be performed to
date. Neither the Company nor, to the Knowledge of the Company, any other party
is in default in any Material respect under any of the Agreements listed in the
Disclosure Schedule, and, to the Knowledge of the Company, there has not
occurred any event which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a default.
(b) Except as listed in the Disclosure Schedule (and
without limiting the foregoing), the Company is not a party to any oral or
written:
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(i) Agreement for the employment of any officer,
employee, consultant or independent contractor;
(ii) license agreement or distributor, dealer,
manufacturer's representative, sales agency, advertising, property management
or brokerage agreement;
(iii) Agreement with any labor organization or other
collective bargaining unit;
(iv) Agreement for the future purchase of materials,
supplies, services, merchandise or equipment involving payments of more than
$50,000 over its remaining term (including, without limitation, periods covered
by any option to renew by either party);
(v) Agreement for the purchase, sale or lease of any
real estate or other Assets involving payments of more than $50,000 over its
remaining term (including, without limitation, periods covered by any option to
renew by either party);
(vi) profit-sharing, bonus, incentive compensation,
deferred compensation, stock option, severance pay, stock purchase, employee
benefit, insurance, hospitalization, pension, retirement or other similar plan
or Agreement;
(vii) Agreement for the sale of any of its Material Assets
or the grant of any preferential rights to purchase any of its Material Assets
or rights, other than in the Ordinary Course of Business;
(viii) Agreement which contains any provisions requiring
the Company to indemnify any other party thereto;
(ix) joint venture agreement or other Agreement involving
the sharing of profits;
(x) outstanding loan to any person or entity or
receivable due from any stockholder of the Company or persons or entities
controlling, controlled by or under common control with the Company;
(xi) Agreement (including, without limitation, Agreements
not to compete and exclusivity Agreements) that reasonably could be interpreted
to impose any restriction on any business operations of the Company; or
(xii) other Material Agreement which by its terms does not
terminate or is not terminable by the Company within 30 days or upon 30 days'
(or less) notice.
3.18. BOOKS AND RECORDS
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The books of account, stock records, minute books and other
records of the Company are true and accurate in all Material respects and have
been maintained in accordance with good business practices and the matters
contained therein are appropriately and accurately reflected in the Financial
Statements.
3.19. LITIGATION; DISPUTES
(a) Except as described in the Disclosure Schedule,
there are no actions, suits, claims, arbitrations, proceedings or known
investigations pending or, to the Knowledge of the Company, threatened or
reasonably anticipated against, affecting or involving the Company, or its
business or Assets, or the transactions contemplated by this Purchase Agreement
before or by any court, arbitrator or governmental authority, domestic or
foreign. The Company is not operating under, subject to or in default with
respect to any order, award, writ, injunction, decree or judgment of any court,
arbitrator or governmental authority. The Company has Furnished to the Investor
Representatives copies of all pleadings filed with respect to any Material
litigation in which the Company is engaged.
(b) Except as set forth on the Disclosure Schedule, the
Company is not currently involved in nor, to the Knowledge of the Company,
reasonably anticipates any material dispute with any of its current or former
employees, agents, brokers, distributors, vendors, customers, business
consultants, franchisees, franchisers, representatives or independent
contractors (or any current or former employees of any of the foregoing persons
or entities) which would reasonably be expected to have a Material Adverse
Effect.
3.20. LABOR RELATIONS
There are no strikes, work stoppages, grievance proceedings,
union organization efforts or other controversies pending or, to the Knowledge
of the Company, threatened or reasonably anticipated between the Company and
(a) any current or former employees of the Company, or (b) any union or other
collective bargaining unit representing the employees. Except as set forth in
the Disclosure Schedule, the Company is in compliance in all Material respects
with all Laws relating to employment or the workplace, including, without
limitation, provisions relating to wages, hours, collective bargaining, safety
and health, work authorization, equal employment opportunity, immigration,
withholding, unemployment compensation, worker's compensation, employee privacy
and right to know. Except as set forth on the Disclosure Schedule, there are no
collective bargaining agreements, employment agreements between the Company and
any of its employees, or professional service agreements not terminable at will
without penalty relating to the businesses and Assets of the Company. The
consummation of the transactions contemplated hereby will not cause the Company
or the
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Investors to incur or suffer any liability relating to, or obligation to pay,
severance, termination or other payments to any person or entity.
3.21. PENSION AND BENEFIT PLANS
3.21.1. DISCLOSURE SCHEDULE
Except as set forth in the Disclosure Schedule, the Company
(a) does not maintain and has never has maintained any Plan or Other
Arrangement, (b) is not nor ever has been a party to any Plan or Other
Arrangement and (c) has no obligations under any Plan or Other Arrangement.
3.21.2. COPIES OF DOCUMENTS
The Company has Furnished to the Investor Representatives
true and complete copies of each of the following Documents: (a) the Documents
setting forth the terms of each Plan; (b) all related trust agreements or
annuity agreements (and any other funding Document) for each Plan; (c) for the
three most recent plan years, all annual reports (Form 5500 series) on each
Plan that have been filed with any governmental agency; (d) the current summary
plan description and subsequent summaries of material modifications for each
Title I Plan; (e) all DOL opinions on any Plan and all correspondence relating
to the request for and receipt of each opinion; (f) all correspondence with the
PBGC on any Plan; (g) all IRS rulings, opinions or technical advice relating to
any Plan and all correspondence relating to the request for and receipt of each
ruling, opinion or technical advice; and (h) all Agreements with service
providers or fiduciaries for providing services on behalf of any Plan. For each
Other Arrangement, the Company has Furnished to the Investor Representatives
true and complete copies of each policy, Agreement or other Document setting
forth or explaining the terms of the Other Arrangement, all related trust
agreements or other funding Documents (including, without limitation, insurance
contracts, certificates of deposit, money market accounts, etc.), all material
employee communications, all material correspondence or other submissions with
any governmental agency, and all Agreements with service providers or
fiduciaries for providing services on behalf of any Other Arrangement.
3.21.3. MULTIEMPLOYER PLANS
No Plan is a Multiemployer Plan.
3.21.4. ESOPS
No Plan is an ESOP.
3.21.5. FUNDING
No Plan is a Defined Benefit Plan.
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3.21.6. CONTRIBUTIONS AND OTHER OBLIGATIONS
To the Knowledge of the Company, the Company has made all
contributions and other payments required by and due under the terms of each
Plan and Other Arrangement and has taken no action (including, without
limitation, actions required by Law) relating to any Plan or Other Arrangement
that will Materially increase the Company's obligations under any Plan or Other
Arrangement.
3.21.7. QUALIFIED PLANS
The Disclosure Schedule sets forth a list of all Qualified
Plans. All Qualified Plans and any related trust agreements or annuity
agreements (or any other funding Document) comply and have complied, in all
material respects, with ERISA, the Code (including, without limitation, the
requirements for Tax qualification described in Section 401 thereof), and all
other Laws. To the Knowledge of the Company, the trusts established under the
Plans are exempt from federal income taxes under Section 501(a) of the Code.
The Company has received determination letters issued by the IRS with respect
to each Qualified Plan, and the Company has Furnished to the Investor
Representatives true and complete copies of all such determination letters and
all correspondence relating to applications therefor. All statements made by or
on behalf of the Company to the IRS in connection with applications for
determination with respect to each Qualified Plan were true and complete when
made and continue to be true and complete and nothing has occurred since the
date of the most recent applicable determination letter that would adversely
affect the tax-qualified status of any Qualified Plan.
3.21.8. COMPLIANCE WITH LAW
The Company has complied in all Material respects with all
applicable provisions of the Code, ERISA, the National Labor Relations Act,
Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, the Fair Labor Standards Act, the Securities Act, the Securities Exchange
Act of 1934, and all other Laws pertaining to the Plans, Other Arrangements and
other employee or employment related benefits, and all premiums and assessments
relating to all Plans or Other Arrangements. To the Knowledge of the Company,
the Company does not have any liability for any delinquent contributions within
the meaning of Section 515 of ERISA (including, without limitation, related
attorneys' fees, costs, liquidated damages and interest) or for any arrearages
of wages. The Company does not have any pending unfair labor practice charges,
contract grievances under any collective bargaining agreement, other
administrative charges, claims, grievances or lawsuits before any court,
governmental agency, regulatory body, or arbiter arising under any Law
governing any Plan, and to the Knowledge of the Company, there exist no facts
that could give rise to such a claim.
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3.21.9. NON-DEDUCTIBLE PAYMENTS
No Plan or Other Arrangement, individually or collectively,
provides for any payment by the Company to any employee or independent
contractor that is not deductible under Section 162(a)(1) or 404 of the Code or
that is an "excess parachute payment" pursuant to Section 280G of the Code.
3.21.10. REPORTABLE EVENTS
To the Knowledge of the Company, no Plan has experienced a
"reportable event" (as the term is defined in Section 4043(b) of ERISA) that is
not subject to an administrative or statutory waiver from the reporting
requirement.
3.21.11. FOREIGN PLAN
No Plan is a "qualified foreign plan" (as the term is defined
in Section 404A(e) of the Code), and no Plan is subject to the Laws of any
jurisdiction other than the United States of America or one of its political
subdivisions.
3.21.12. TAX FORM 5330
To the Knowledge of the Company, the Company has timely filed
and the Company has Furnished to the Investor true and complete copies of each
Form 5330 (Return of Excise Taxes Related to Employee Benefit Plans) that the
Company has filed on any Plan. To the Knowledge of the Company, the Company has
no liability for Taxes required to be reported on Form 5330.
3.21.13. WELFARE PLANS
No Plan is a funded Welfare Plan.
3.21.14. POST-RETIREMENT PLANS
No Plan promises or provides post-retirement medical, life
insurance or other benefits due now or in the future to current, former or
retired employees of the Company (including any predecessor entities).
3.21.15. HEALTH CARE CONTINUATION COVERAGE REQUIREMENTS
To the Knowledge of the Company, all Welfare Plans and the
related trusts that are subject to Section 4980B(f) of the Code and Sections 601
through 607 of ERISA comply with and have been administered in compliance with
the health care continuation-coverage requirements of Section 4980B(f) of the
Code, Sections 601 through 607 of ERISA, and all proposed or final Treasury
regulations under Section 162 of the Code explaining those requirements.
3.21.16. FILED RETURNS AND REPORTS
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To the Knowledge of the Company, the Company has (i) filed or
caused to be filed all returns and reports on the Plans that they are required
to file, except where the failure to file would not have a Material Adverse
Effect and (ii) paid or made adequate provision for all Material fees,
interest, penalties, assessments or deficiencies that have become due pursuant
to those returns or reports or pursuant to any assessment or adjustment that
has been made relating to those returns or reports. To the Knowledge of the
Company, all other fees, interest, penalties and assessments that are payable
by or for the Company with respect to any Plan have been timely reported, fully
paid and discharged except for failures that would not have a Material Adverse
Effect. To the Knowledge of the Company, there are no unpaid fees, penalties,
interest or assessments relating to any Plan due from the Company or from any
other person that are or could become a lien on any Asset or could otherwise
have a Material Adverse Effect. To the Knowledge of the Company, the Company
has collected or withheld all amounts that are required to be collected or
withheld by them to discharge their obligations with respect to any Plan, and
all of those amounts have been paid to the appropriate governmental agencies or
set aside in appropriate accounts for future payment when due.
3.22. ENVIRONMENTAL
(a) The Company has complied and is in compliance with,
and the facilities occupied by the Company and all improvements thereon are in
compliance with, all Environmental Laws relating to or affecting the Company,
except where the failure to comply would not have a Material Adverse Effect.
(b) The Company has no liability under any Environmental
Law that would have a Material Adverse Effect and it is not responsible for any
liability of any other person under any Environmental Law. There are no pending
or, to the Knowledge of the Company, threatened actions, suits, orders, claims,
legal proceedings or other proceedings based on, nor has the Company or any
officer or director, directly or indirectly received any formal or informal
notice of any complaint, order, directive, citation, notice of responsibility,
notice of potential responsibility, or information request from any
governmental authority or any other person or entity or knows or suspects any
fact(s) which might reasonably form the basis for any such actions or notices
arising out of or attributable to: (i) the current or past presence, Release,
or threatened Release of Hazardous Materials at or from any part of the Real
Property; (ii) the off-site disposal or treatment of Hazardous Materials
originating on or from the Real Property or the business or Assets of the
Company; or (iii) any violation of Environmental Laws at any part of the Real
Property or arising from the Company's activities (or the activities of such
Person's predecessors in title) involving Hazardous Materials.
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(c) The Company has been duly issued, and currently has
and will maintain through the Closing Date, all permits, licenses, certificates
and approvals required under any Environmental Law with respect to its Assets
and business that the failure to have and maintain would cause a Material
Adverse Effect. A true and complete list of such permits, licenses,
certificates and approvals, all of which are valid and in full force and
effect, is set out in the Disclosure Schedule. Except in accordance with such
permits, licenses, certificates and approvals, to the Knowledge of the Company,
there has been no Release of Hazardous Materials at, or, under, or from the
Real Property occupied by the Company. There are no permits, licenses,
certificates or approvals required under any Environmental Law that are
non-transferable or which require consent, notification or other action to
remain in full force and effect following consummation of the transactions
contemplated by this Purchase Agreement.
(d) No Real Property owned or previously owned by the
Company and, to the Knowledge of the Company, no Real Property currently leased
by the Company from third parties, either (i) contains any underground
improvements, including but not limited to treatment or storage tanks, or
underground piping associated with such tanks, used currently or in the past
for the management of Hazardous Materials, or (ii) is or has been used as a
dump or landfill or consists of filled in land or wetlands.
(e) The Company has Furnished to the Investor
Representatives all of the information in its possession pertaining to the
environmental history of the Real Property currently and formerly occupied by
the Company and the operations of the Company (or any predecessor entity or
predecessor entitled to the Assets).
(f) To the Knowledge of the Company, neither PCBs nor
asbestos-containing materials are present on or in the Real Property occupied
by the Company.
(g) To the Knowledge of the Company, no Encumbrance in
favor of any person relating to or in connection with any Claim under any
Environmental Law has been filed or attached to Real Property currently leased
by the Company from a third party.
3.23. TRANSACTIONS WITH RELATED PARTIES
Except as set forth on the Disclosure Schedule, neither any
present or former officer, director or stockholder of the Company, nor any
Affiliates of the officers, directors or stockholders, are currently a party to
any transaction with the Company, including, without limitation, any Agreement
providing for the employment of, furnishing of services by, rental of Assets
from or to, or otherwise requiring payments to, any of the officers, directors,
stockholders or Affiliates.
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3.24. RESTRICTIONS AND CONSENTS
Except as set forth on the Disclosure Schedule, there are no
Agreements, Laws or other restrictions of any kind to which the Company is a
party or to which the Company's Assets are subject that would prevent or
restrict the execution, delivery or performance of this Purchase Agreement or
prohibit or limit the continued operation of the business of the Company after
the date hereof on substantially the same basis as heretofore operated, as a
result of the execution, delivery or performance of this Purchase Agreement.
The Disclosure Schedule lists all Agreements and Laws that require the consent
or acquiescence of any person or entity not party to this Purchase Agreement
with respect to any aspect of the execution, delivery or performance of this
Purchase Agreement by the Company.
3.25. AUTHORITY; AUTHORIZATION; NO CONFLICT
(a) The Company has all requisite corporate power and
authority to enter into this Purchase Agreement and the other Documents
contemplated hereby and to carry out its obligations hereunder and thereunder.
The execution, delivery and performance of this Purchase Agreement and the
other Documents contemplated hereby by the Company have been duly authorized by
all necessary corporate action. The issuance of the shares of Series A Stock to
be purchased by the Investors hereunder has been duly authorized by all
requisite corporate action of the Company and, upon delivery to the Investors
of certificates therefor against payment in accordance with the terms of this
Purchase Agreement, the shares of Series A Stock will (i) be validly issued,
fully paid and nonassessable, (ii) have the rights, preferences and privileges
described in Exhibit B hereto, (iii) be free and clear of preemptive rights,
(iv) subject to the Investors' representations and warranties contained herein,
be issued in compliance with the Securities Act and any applicable state
securities laws and the rules and regulations promulgated thereunder, and (v)
be free and clear of Encumbrances, other than Encumbrances that might have been
created by the Investors and the Encumbrances imposed under this Purchase
Agreement and the Documents contemplated hereby. The issuance of the Common
Stock issuable upon conversion of the Series A Stock has been duly authorized
by all requisite corporate action and such Common Stock has been reserved for
issuance upon conversion of the Series A Stock and, when issued upon conversion
of the Series A Stock in accordance with the terms of Exhibit B hereto, will be
(i) validly issued, fully paid and nonassessable, (ii) free and clear of
preemptive rights, (iii) issued in compliance with the Securities Act and any
applicable state securities laws and the rules and regulations promulgated
thereunder and (iv) free and clear of Encumbrances, other than Encumbrances
that might have been created by the Investors and the Encumbrances imposed
under this Purchase Agreement and the Documents contemplated hereby.
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(b) The execution, delivery and performance by the
Company of this Purchase Agreement and all other Documents contemplated hereby,
the fulfillment of and compliance with the respective terms and provisions
hereof and thereof, and the consummation by the Company of the transactions
contemplated hereby and thereby, do not and will not: (a) conflict with, or
violate any provision of, any Law having applicability to the Company or any of
its Assets, or any provision of the certificate or articles of incorporation or
bylaws of the Company; (b) conflict with, or result in any breach of, or
constitute a default under any Material Agreement to which the Company is a
party or by which the Company or any of its Assets may be bound; or (c) result
in or require the creation or imposition of or result in the acceleration of
any indebtedness, or of any Encumbrance of any nature upon, or with respect to
any of the Material Assets of the Company.
3.26. ABSENCE OF VIOLATION
The Company is not in violation of or default under, nor has
the Company breached, any term or provision of its certificate or articles of
incorporation or bylaws or any Material Agreement or restriction to which the
Company is a party or by which the Company is bound or any of its Material
Assets are bound or affected. Neither the Company nor any of its officers,
directors, employees or agents (or, to the Company's Knowledge, stockholders,
distributors, representatives or other persons acting on the express, implied
or apparent authority of such entity) have paid, given or received or have
offered or promised to pay, give or receive, any bribe or other unlawful,
questionable payment of money or other thing of value, any extraordinary
discount, or any other unlawful or unusual inducement, to or from any person,
business association or governmental official or entity in the United States or
elsewhere in connection with or in furtherance of the business of the Company
(including, without limitation, any offer, payment or promise to pay money or
other thing of value (a) to any foreign official or political party (or
official thereof) for the purposes of influencing any act, decision or omission
in order to assist the Company in obtaining business for or with, or directing
business to, any person, or (b) to any person, while knowing that all or a
portion of such money or other thing of value will be offered, given or
promised to any such official or party for such purposes. The business of the
Company is not in any manner dependent upon the making or receipt of such
payments, discounts or other inducements.
3.27. COMPLIANCE WITH LAW; APPROVALS
Except as set forth in the Disclosure Schedule:
(a) The operations of the Company have been conducted,
in all Material respects, in compliance with all Laws and regulations
applicable to the Company's business.
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(b) The Company has not received notice of any violation
(or of any investigation, inspection, audit, or other proceeding by any
governmental authority involving allegations of any violation) of any Law, nor
is it in material default with respect to any Law, and to the Knowledge of the
Company, no investigation, inspection, audit, or other proceeding by any
governmental authority involving allegations of violation of any Law is
threatened or contemplated;
(c) The Company has all licenses, franchises, permits,
authorizations or approvals from all governmental authorities ("Approvals")
required for the conduct of the business of the Company and the occupancy and
operation, for its present uses, of the real and personal property which the
Company owns or leases, except where the failure to have such Approvals would
not, individually or in the aggregate, have a Material Adverse Effect, and the
Company is not in violation of any such Approvals or any terms or conditions
thereof.
(d) All such Approvals are in full force and effect,
have been issued to and fully paid for by the holder thereof and, to the
Knowledge of the Company, no suspension or cancellation thereof has been
threatened; and
(e) No such Approvals will in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this Purchase
Agreement or any of the other agreements contemplated hereunder or executed
herewith.
3.28. COPIES OF DOCUMENTS
True and complete copies of all Documents listed in the
Disclosure Schedule have been Furnished to the Investor Representatives.
3.29. BINDING OBLIGATION
This Purchase Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms, is in full
force and effect and constitutes a legal, valid and binding obligation of, and
is legally enforceable against, the Company, and, to the Company's Knowledge,
the other parties thereto (except as enforceability may be limited or affected
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws and equitable principles now or hereafter in effect and
affecting the rights and remedies of creditors generally); and each Document to
be executed by the Company pursuant hereto, when executed and delivered in
accordance with the provisions thereof, shall be a valid and binding obligation
of the Company, enforceable in accordance with its terms.
3.30. DISCLOSURE
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No representation or warranty by the Company in this Purchase
Agreement, and no Document Furnished or to be Furnished to the Investors
pursuant to this Purchase Agreement, contains or will contain any untrue or
misleading statement of a Material fact or omits or will omit any Material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which made, not misleading.
3.31. USE OF PROCEEDS
The Company shall use the proceeds from the sale of the
shares of Series A Stock solely to fund any acquisitions or capital expenditures
as approved by the Company's Board of Directors or for working capital or other
general corporate purposes.
3.32. SYSTEMS
Except as set forth in the Disclosure Schedule and with such
other exceptions as will not, individually or in the aggregate, have a Material
Adverse Effect, (i) all of the Systems services' and platform servers are
running, or peaking, at no higher than 60% of capacity, (ii) all of the Systems'
services are replicated in a redundant manner across available platform servers,
(iii) all remote physical points of presence ("POPs") are secure, conform to
equipment manufacturers' recommended environmental parameters, and contain an
uninterrupted power supply with a battery backup of at least 30 minutes, (iv)
the existing power plant at the Company's main location is equipped with an
uninterrupted power supply with a battery backup of at least 60 minutes, (v) all
deployed dial-in modem, modem shelf and corresponding technology conform to
applicable industry standards necessary to support traffic at a rate of 44.5
Mgbps or above, and (vi) all Systems owned, leased by or licensed to or by the
Company are Year 2000 Compliant.
3.33. CUSTOMERS
The Disclosure Schedule sets forth (a) the number of customers
served by the Company by type of business (i.e., segregated by the following
categories, if applicable to the Company: (i) shared hosting, (ii) dedicated
hosting, (iii) co-located hosting and (iv) application hosting) as of September
30, 1999 and the Company's standard rates for such customers for each type of
business; (b) for the period commencing January 1, 1998, the Company's monthly
churn rate (consisting of (i) cancellations of month-to-month service and/or
long-term subscription or service contracts prior to expiration, (ii)
termination of any such contracts, and (iii) non-renewal of any such contracts
upon expiration) by business type during each full calendar month prior to the
date hereof for the period commencing January 1, 1998; and (c) as of September
30, 1999, detail as to the amount of prepaid subscription or service contracts
and the amount of unearned revenue for all customer contracts
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with a remaining term of (i) less than or equal to 90 days, (ii) greater than
90 days and less than or equal to one year, (iii) greater than one year and
less than or equal to two years, (iv) greater than two years and less than or
equal to three years and (v) greater than three years.
3.34. COMPANY'S NAMES, BUSINESS AND LOCATION OF COMPANY ASSETS
The Company has conducted business under the names "Interland,
Inc." and "Cumberland Title and Closing Corporation" and no other names. The
Company is in the business of providing web hosting services. Other than
engaging in business as a real estate title company under the name "Cumberland
Title and Closing Corporation," the Company has not engaged in and does not
currently engage in any other business. The Company has not engaged in business
as a real estate title company at any time within the past ten (10) years. The
Company's chief executive office and principal place of business is located at
101 Marietta Street, Atlanta, Georgia 30303. Substantially all of the Company's
physical Assets are located at the same address as its chief executive office
and the Company does not currently have any places of business other than at
such address or as disclosed in the Disclosure Schedule. Set forth in the
Disclosure Schedule is a complete and accurate listing of all locations at which
the Company has conducted business over the last ten (10) years.
3.35. SMALL BUSINESS CONCERN
The Company together with its "affiliates" (as that term is
defined in Section 121.103 of Title 13 of the Code of Federal Regulations) meets
the size standard requirements set forth in Title 13, C.F.R. ss. 121.301(c) as a
"small business concern" within the meaning of the Small Business Act of 1958,
as amended ("SBIA"). . The information pertaining to the Company set forth in
Small Business Administration Forms 480, 652 and 1031 delivered to each Investor
that is a Small Business Investment Company ("SBIC") licensed by the United
States Small Business Administration (each an "SBIC Purchaser") is accurate and
complete. Neither the Company nor any subsidiary of the Company presently
engages in, or shall hereafter engage in, any activities, nor shall the Company
or any subsidiary of the Company use the proceeds of the sale of the Series A
Stock directly or indirectly for any purpose for which an SBIC is prohibited
from providing funds by the regulations under the SBIA (the "SBIC Regulations")
(including, without limitation, 13 C.F.R. ss. 107.720). To the best knowledge of
the Company, each SBIC that owns any securities issued by the Company, together
with a description of the kinds and amounts of securities held, are listed on
the Disclosure Schedule.
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3.36. REAL PROPERTY HOLDING CORPORATION
The Company is not a United States Real Property Holding Corporation within the
meaning of Section 897(c) of the Code.
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants, severally and
not jointly, to the Company as follows:
4.1. ORGANIZATION AND STANDING
The Investor is duly organized, validly existing and in good
standing under the laws of the state or jurisdiction of its formation and each
has the full and unrestricted power and authority to enter into this Purchase
Agreement and to carry out the transactions contemplated hereby.
4.2. AUTHORIZATION
The execution, delivery and performance by that Investor of
this Purchase Agreement and all other Documents contemplated hereby, the
fulfillment of and the compliance with the respective terms and provisions
hereof and thereof, and the consummation by the Investor of the transactions
contemplated hereby and thereby have been duly authorized, and will not: (a)
conflict with, or violate any term or provision of the Investor's certificate
or agreement of limited partnership or other governing documents or (b)
conflict with, or result in any breach of, or constitute a default under, any
Agreement to which the Investor is a party or by which such Investor is bound.
No other action is necessary for the Investor to enter into this Purchase
Agreement and all other Documents contemplated hereby and to consummate the
transactions contemplated hereby and thereby.
4.3. BINDING OBLIGATION
This Purchase Agreement constitutes a valid and binding
obligation of the Investor, enforceable in accordance with its terms, is in
full force and effect and constitutes a legal, valid and binding obligation of,
and is legally enforceable against, the Company, and, to the Company's
Knowledge, the other parties thereto (except as enforceability may be limited
or affected by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws and equitable principles now or hereafter in
effect and affecting the rights and remedies of creditors generally). Each
Document to be executed by the Investor pursuant hereto, when executed and
delivered in accordance with the provisions hereof, shall be a valid and
binding obligation of the Investor, enforceable in accordance with its terms,
shall be in full force and effect and shall constitute a legal, valid and
binding
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obligation of, and shall be legally enforceable against, the Investor, and, to
the Investor's Knowledge, the other parties thereto (except as enforceability
may be limited or affected by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws and equitable
principles now or hereafter in effect and affecting the rights and remedies of
creditors generally).
4.4. NO REGISTRATION UNDER THE SECURITIES ACT
The Investor understands that the Series A Stock to be
purchased by it at Closing pursuant to the terms of this Purchase Agreement,
and the Common Stock of the Company into which the Series A Stock is
convertible, have not and will not be registered under the Securities Act or
any state securities laws and will be issued in reliance upon exemptions
contained in the Securities Act or interpretations thereof and in the
applicable state securities laws, and cannot be offered for sale, sold or
otherwise transferred unless the Series A Stock being acquired hereunder or the
Common Stock of the Company into which the Series A Stock is convertible
subsequently are so registered or qualify for exemption from registration under
the Securities Act.
4.5. ACQUISITION FOR INVESTMENT
The Series A Stock and the Common Stock issuable upon
conversion thereof, respectively, are being acquired under this Purchase
Agreement by the Investor in good faith solely for its own account, for
investment and not with a view toward distribution within the meaning of the
Securities Act. The Series A Stock will not be offered for sale, sold or
otherwise transferred by the Investor without either registration or exemption
from registration under the Securities Act and any applicable state securities
laws (and the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, as reasonably requested by the
Company).
4.6. EVALUATION OF MERITS AND RISKS OF INVESTMENT
The Investor has knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
its investment in the Series A Stock being acquired hereunder. The Investor is
an "accredited investor" within the meaning of Rule 501(a) under the Securities
Act. The Investor understands and is able to bear any economic risks associated
with such investment (including, without limitation, the necessity of holding
the Series A Stock for an indefinite period of time, inasmuch as the Series A
Stock have not been registered under the Securities Act or any state securities
laws).
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4.7. ADDITIONAL INFORMATION
The Investor acknowledges that it has been afforded the
opportunity to ask questions and receive answers concerning the Company and to
obtain additional information that it has requested to verify the accuracy of
the information contained herein. Notwithstanding the foregoing, nothing
contained herein shall operate to modify or limit in any respect the
representations and warranties of the Company or to relieve it from any
obligations to the Investors for breach thereof or the making of misleading
statements of material fact or the omission of material facts in connection
with the transactions contemplated herein.
4.8. STOCK CERTIFICATE LEGEND
Each Investor acknowledges and agrees that each certificate
representing the Series A Stock and the Common Stock issuable upon conversion
thereof shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
CLOSING DELIVERABLES
Contemporaneously with the execution of this Agreement, the
Company shall deliver to the Investors the following:
5.1. OPINION OF COUNSEL
The Purchasers shall have received an opinion of Kilpatrick
Stockton LLP, counsel to the Company, dated as of the Closing Date, to the
effect and in the form attached hereto as Exhibit D.
5.2. STOCKHOLDERS' AGREEMENT
Prior to or concurrently with Closing, the Company, certain
of the Company's securityholders and the Investors shall execute and deliver a
Stockholders' Agreement in the form attached hereto as Exhibit E.
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5.3. REGISTRATION RIGHTS AGREEMENT
Prior to or concurrently with Closing, the Company and the
Investors shall execute and deliver a Registration Rights Agreement in the form
attached hereto as Exhibit F.
5.4. CORPORATE DOCUMENTS
Concurrently with Closing, the Company shall have provided to
the Investors an incumbency certificate for the officers of the Company
executing this Purchase Agreement and any other documents pursuant hereto and a
copy of each of the following: (a) the certificate or articles of incorporation
of the Company and any other filings required to authorize the issuance of, and
designate the terms of, the Series A Stock, as certified by the Secretary of
State of the State of Georgia and by the secretary of the Company as being true
and complete as of the Closing Date; (b) certificates certifying that the
Company is in good standing (or its equivalent) in its state of incorporation
and in any jurisdiction where it is qualified to do business and in which the
Company maintains an office, in each case dated not more than ten days prior to
the Closing Date; (c) the Company's By-laws certified by the secretary of the
Company as being true and complete as of the Closing Date; and (d) a copy of
the resolutions of the Company's Board of Directors and, if necessary, the
Stockholders certified by the secretary of the Company as of the Closing Date
authorizing the execution, delivery and performance of this Purchase Agreement
and the issuance of the Series A Stock to the Investors pursuant hereto.
5.5. DOCUMENTS AT CLOSING
All documents required to be furnished by the Company to the
Investors prior to or at Closing shall have been so furnished.
5.6. CONSENTS
(a) The Investors shall have received all consents,
authorizations and approvals of governmental and private parties which are
required to be obtained in order to consummate the transactions contemplated
hereby, and such consents, authorizations and approvals shall be in full force
and effect on the Closing Date.
(b) The Company shall have received all consents,
authorizations and approvals of governmental and private parties which are
required to be obtained in order to consummate the transactions contemplated
hereby, and such consents, authorizations and approvals be in full force and
effect on the Closing Date.
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5.7. COMPOSITION OF THE BOARD OF DIRECTORS
The following individuals shall constitute the entire Board
of Directors of the Company (effective as of the Closing): Ken Gavranovic,
Maryjane Stevens, Rahim Shah, Andrew E. Jones, and Gregg A. Mockenhaupt.
5.8. INVESTOR REPRESENTATIVES LETTER
Prior to or concurrently with Closing, the Company shall have
delivered to the Investor Representatives a certificate substantially in the
form of Exhibit G.
5.9. GAVRANOVIC EMPLOYMENT AGREEMENT
Prior to or concurrently with Closing, the Company shall have
delivered to the Investor Representatives an executed employment agreement
between the Company and Ken Gavranovic in the form of Exhibit H.
5.10 FERNANDEZ AGREEMENT
Prior to or concurrently with the Closing, the Company shall
have delivered to the Investor Representatives an executed agreement between
the Company and Waldemar Fernandez in the form of Exhibit I.
All such documents shall be satisfactory in form and substance to the Investors
and their counsel.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION REMEDIES
6.1. SURVIVAL OF REPRESENTATIONS
All representations, warranties, covenants, and other
Agreements made by any party to this Purchase Agreement herein or pursuant
hereto shall also be deemed made on and as of the Closing Date as though such
representations, warranties, covenants, indemnities and other Agreements were
made on and as of such date, and all the representations, warranties,
covenants, indemnities and other Agreements shall survive the Closing Date for
a period of two years, except for the Company's indemnification of the Investor
Indemnified Persons pursuant to Section 6.2(a), (i) relating to the Company's
prior activities as a real estate title company, (ii) for any unlawful or
fraudulent actions taken by Waldemar Fernandez prior to the date of this
Purchase Agreement, (iii) for any Claims which may be brought by Waldemar
Fernandez against the Company or the Investors for any actions taken prior to
the date of this Purchase Agreement, and (iv) for any Claims
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arising out of the information contained in that certain side letter delivered
to the Investors by the Company on the date hereof, each of which shall survive
indefinitely without limitation.
6.2. AGREEMENT OF THE COMPANY AND THE INVESTORS TO INDEMNIFY
(a) Subject to the conditions and provisions of this
SECTION, the Company hereby agrees to indemnify, defend and hold harmless the
Investor Indemnified Persons from and against and in any respect of all Claims
asserted against, resulting to, imposed upon or incurred by the Investor
Indemnified Persons (whether such Claims are by, against or relate to the
Company or any other party, including a governmental entity), directly or
indirectly, by reason of or resulting from (i) any misrepresentation or breach
of any representation or warranty, or noncompliance with any covenants or other
Agreements, given or made by the Company in this Purchase Agreement or in the
Disclosure Schedule or Exhibits attached hereto or in any Document Furnished by
or on behalf of the Company pursuant to this Purchase Agreement, (ii) the
Company's prior activities as a real estate title company, (iii) any unlawful
or fraudulent actions taken by Waldemar Fernandez prior to the date of this
Purchase Agreement, (iv) any Claims which may be brought by Waldemar Fernandez
against the Company or the Investors for any actions taken prior to the date of
this Purchase Agreement and (v) any Claims arising out of the information
contained in that certain side letter delivered to the Investors by the Company
on the date hereof.
(b) Subject to the conditions and provisions of this
Section 6, each Investor hereby, severally but not jointly, agrees to
indemnify, defend and hold harmless the Company Indemnified Persons from and
against and in any respect of all Claims asserted against, resulting to,
imposed upon or incurred by the Company Indemnified Persons, directly or
indirectly, by reason of or resulting from any misrepresentation or breach of
any representation or warranty, or noncompliance with any covenants or other
Agreements, given or made by the Investor in this Purchase Agreement or in any
Document Furnished by or behalf of the Investor pursuant to this Purchase
Agreement.
(b) Except as set forth below, it shall be a condition
to the right of any Indemnified Person to indemnification pursuant to this
SECTION that such Indemnified Person shall assert a Claim for indemnification
within two years following the Closing Date. Notwithstanding the foregoing, (x)
any Claim made pursuant to this SECTION relating to a breach of SECTION 3.9 may
be made throughout the period ending one year following the latter of (i) the
expiration of all applicable statutes of limitation (including extensions), and
(ii) the final determination of (and the expiration of time to appeal) any
audit, examination, investigation or other proceeding relating to Taxes covered
by, or any Claim under,
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SECTION 3.9 hereof and (y) any Claim made pursuant to this SECTION 6 relating
to the items set forth in SECTION 6.2(A)(II) through (V) may be made at any
time.
6.3. CONDITIONS OF INDEMNIFICATION
The obligations and liabilities of the Company and each
Investor hereunder with respect to their respective indemnities pursuant to
this SECTION , resulting from any Claim shall be subject to the following
additional terms and conditions:
(a) The indemnified party shall give prompt written
notice to the indemnifying party of any Claim which is asserted against,
resulting to, imposed upon or incurred by such indemnified party and which may
give rise to liability of the indemnifying party pursuant to this SECTION ,
stating (to the extent known or reasonably anticipated) the nature and basis of
such Claim and the amount thereof. The omission of the indemnified party so to
notify the indemnifying party of any Claim shall not relieve the indemnifying
party from any liability it may have hereunder except to the extent that (i)
the liability was caused or increased by such omission, or (ii) the ability of
the indemnifying party to reduce or defend against the liability was materially
adversely affected by the omission.
(b) The indemnifying party may engage counsel with
respect to any such Claim, the representation (including the compromise or
settlement of any Claim) to be undertaken on behalf of the indemnified party,
and the indemnified party shall have right to approve counsel (which approval
shall not be unreasonably withheld). The indemnified party shall have the prior
right to approve any compromise or settlement of any Claim by counsel engaged
by the indemnifying party (which approval shall not be unreasonably withheld),
unless such compromise or settlement contains a full release of the indemnified
party of any and all liability and does not impose any restrictions on the
indemnified party or its business or affairs. In the event the indemnifying
party elects not to undertake the defense of the Claim by its own counsel, or
in the event that the indemnified party reasonably believes that representation
by counsel designated by the indemnifying party would be inappropriate due to
actual or potential conflicts of interest, the indemnified party will undertake
the defense thereof by one counsel or other representatives designated by it,
at the cost and expense of the indemnifying party. In any event, the
indemnifying parties will advance all expenses of the indemnified parties as
incurred.
6.4. SPECIFIC PERFORMANCE
In addition to any other remedies which the Investors may
have at law or in equity, the Company hereby acknowledges that the Series A
Stock and the Company are unique, and that the harm to the Investors resulting
from breaches by the Company of its obligations cannot be adequately
compensated by damages.
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Accordingly, the Company agrees that the Investors shall have the right to have
all obligations, undertakings, Agreements, covenants and other provisions of
this Purchase Agreement specifically performed by the Company and that the
Investors shall have the right to seek an order or decree of such specific
performance in any of the courts of the United States of America or of any
state or other political subdivision thereof.
6.5. REMEDIES CUMULATIVE
The remedies provided herein shall be cumulative and shall
not preclude the assertion by the Company or the Investors of any other rights
or the seeking of any other remedies against the other, or their respective
successors or assigns.
6.6. LIMITS FOR RECOVERY OF LOSSES
The Company shall not be liable as the indemnifying party for
any Claims under this Section 6 unless and until the aggregate amount of all
Claims hereunder by the Investors or other indemnified parties equals or
exceeds $250,000, in which case the Company shall be liable for all Claims in
the aggregate in excess of $250,000. The limitations set forth in the prior
sentence shall not apply to Claims against the Company relating to the items
set forth in SECTION 6.2(A)(II) through (V) and the Investor Indemnified
Persons shall be entitled to indemnification from the Company for any Claims
relating to the items set forth in SECTION 6.2(A)(II) through (V) without any
limitation. In all cases, and notwithstanding anything herein to the contrary,
the Company shall be subject to a maximum aggregate limit of all Claims against
it equal to the aggregate purchase price paid by the Investors for the Series A
Stock purchased hereunder.
MISCELLANEOUS
7.1. ADDITIONAL ACTIONS AND DOCUMENTS
After Closing, each of the parties hereto hereby agrees to
take or cause to be taken such further actions, to execute, deliver and file or
cause to be executed, delivered and filed such further Documents, and will
obtain such consents, as may be necessary or as may be reasonably requested in
order to fully effectuate the purposes, terms and conditions of this Purchase
Agreement.
7.2. NO BROKERS
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Each of the parties hereto represents and warrants to the
other parties (and to each of them) that, other than fees payable to Chase
Securities Inc., for which the Company shall be solely responsible, such party
has not engaged any broker, finder or agent in connection with the transactions
contemplated by this Purchase Agreement and has not incurred (and will not
incur) any unpaid liability to any broker, finder or agent for any brokerage
fees, finders' fees or commissions, with respect to the transactions
contemplated by this Purchase Agreement. Each party agrees to indemnify, defend
and hold harmless each of the other parties from and against any and all claims
asserted against such parties for any such fees or commissions by any persons
purporting to act or to have acted for or on behalf of the indemnifying party.
7.3. JURY WAIVER
THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN AN ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS PURCHASE AGREEMENT OR ANY OF THE
TRANSACTIONS OR AGREEMENTS CONTEMPLATED HEREBY.
7.4. PUBLICITY
Neither the Investors nor the Company shall issue any press release or make any
public disclosure regarding the transaction contemplated hereby unless such
press release or public disclosure is approved by those parties expressly
mentioned by name in the press release in advance. Notwithstanding the
foregoing, each of the parties hereto may, in documents required to be filed by
it with the SEC or other regulatory bodies, make such statements with respect
to the transactions contemplated hereby as each may be advised by counsel as
legally necessary or advisable and may make such disclosure as it is advised by
its counsel as required by law.
7.5. EXPENSES
Subject to the provisions of this SECTION 7.5, each party
hereto shall pay its own expenses incident to this Purchase Agreement and the
transactions contemplated hereunder, including all legal and accounting fees
and disbursements, except that the Company agrees to pay all reasonable out-of
pocket expenses of the Investors, including the legal fees and expenses of
Hogan & Hartson L.L.P., not to exceed an aggregate of $50,000 without the prior
approval of the Company.
7.6. ASSIGNMENT
Each Investor shall have the right to assign its rights and
obligations under this Purchase Agreement, in whole or in part, to any
Affiliate of an Investor
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or to designate any of its Affiliates (to the extent permitted by Law) to
receive directly the shares of Series A Stock to be purchased hereunder or to
exercise any of the rights of such Investor, or to perform its obligations,
provided that such assignee shall have been deemed to have made the
representations and warranties contained in Article 4 hereof. The Company shall
not assign its rights and obligations under this Purchase Agreement, in whole
or in part, whether by operation of law or otherwise, without the prior written
consent of the Investor Representatives, and any such assignment contrary to
the terms hereof shall be null and void and of no force and effect. In no event
shall the assignment by the Company or any Investor of its rights or
obligations under this Purchase Agreement, whether before or after the Closing,
release the Company or the Investor from their respective liabilities and
obligations hereunder.
7.7. ENTIRE AGREEMENT; AMENDMENT
This Purchase Agreement, including the Disclosure Schedule,
the Exhibits and other Documents referred to herein or Furnished pursuant
hereto, constitutes the entire Agreement among the parties hereto with respect
to the transactions contemplated herein, and it supersedes all prior oral or
written Agreements, commitments or understandings with respect to the matters
provided for herein. No amendment or modification of this Purchase Agreement
shall be valid or binding unless set forth in writing and duly executed and
delivered by the Company and the Investor Representatives.
7.8. WAIVER
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Purchase Agreement or under
any other Documents Furnished in connection with or pursuant to this Purchase
Agreement shall impair any such right, power or privilege or be construed as a
waiver of any default or any acquiescence therein. No single or partial
exercise of any such right, power or privilege shall preclude the further
exercise of such right, power or privilege, or the exercise of any other right,
power or privilege. No waiver shall be valid against any party hereto unless
made in writing and signed by the party against whom enforcement of such waiver
is sought and then only to the extent expressly specified therein.
7.9. SEVERABILITY
If any part of any provision of this Purchase Agreement or
any other Agreement or document given pursuant to or in connection with this
Purchase Agreement shall be invalid or unenforceable in any respect, such part
shall be
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<PAGE> 41
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Purchase Agreement.
7.10. GOVERNING LAW
This Purchase Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of the State of Delaware (excluding the choice of law
rules thereof).
7.11. NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Purchase Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
telecopy addressed as follows:
(i) If to Crest:
Crest Communications Holdings LLC
2852 Jackson Street
San Francisco, CA 94115
Telecopy No.: (415) 928-1247
Attention: Gregg Mockenhaupt
If to Boulder:
Boulder Ventures Ltd.
4750 Owings Mills Blvd.
Owings Mills, MD 21117
Telecopy No.: (410) 356-5492
Attention: Andrew E. Jones
If to the other Investors, then to the names and
addresses set forth on the books and records of the
Company
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<PAGE> 42
in each case with a copy (which shall not constitute notice)
to:
Hogan & Hartson L.L.P.
111 South Calvert Street, Suite 1600
Baltimore, Maryland 21202
Telecopy No: (410) 539-6981
Attention: Lawrence R. Seidman
(ii) If to the Company:
Interland, Inc.
101 Marietta Street, Suite 200
Atlanta, GA 30303
Telecopy No.: (404) 720-3707
Attention: Ken Gavranovic
with a copy (which shall not constitute notice) to:
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309-4530
Telecopy No.: (404) 815-6555
Attention: David A. Stockton
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request, or communication which shall be hand
delivered, sent, mailed or telecopied in the manner described above, shall be
deemed sufficiently given, served, sent, received or delivered for all purposes
at such time as it is delivered to the addressee (with the return receipt, the
delivery receipt, or (with respect to a telecopy) the answerback or
confirmation being deemed conclusive, but not exclusive, evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
7.12. HEADINGS
Section headings contained in this Purchase Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Purchase Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
7.13. EXECUTION IN COUNTERPARTS
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<PAGE> 43
To facilitate execution, this Purchase Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signatures of, or on behalf of, each party, or that the signatures of
all persons required to bind any party, appear on each counterpart; but it
shall be sufficient that the signature of, or on behalf of, each party, or that
the signatures of the persons required to bind any party, appear on one or more
of the counterparts. All counterparts shall collectively constitute a single
Agreement. It shall not be necessary in making proof of this Purchase Agreement
to produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
7.14. LIMITATION ON BENEFITS
The covenants, undertakings and agreements set forth in this
Purchase Agreement shall be solely for the benefit of, and shall be enforceable
only by, the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns (including
specifically, without limitation, any third party transferees acquiring shares
of Series A Stock purchased by the Investors pursuant hereto).
7.15. BINDING EFFECT
Subject to any provisions hereof restricting assignment, this
Purchase Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
7.16. ADDITIONAL COVENANTS OF THE COMPANY
(a) The Company covenants and agrees that, no later than
January 31, 2000, it will have initiated and kept open for thirty days a
rescission offer to those holders of its Common Stock who (i) reside in the
states of Delaware, Florida, Georgia, Idaho, New Jersey, New York and Virginia
and (ii) purchased the Common Stock between November 1, 1998 and November 1,
1999, which rescission offer satisfies the requirements of those states in
which the rescission offer was made.
(b) The Company covenants and agrees to obtain, within a
reasonable period of time following the Closing, directors' and officers'
liability insurance covering the Company's officers and the members of its board
of directors with such coverage, with such insurer and with such terms and
conditions as may be reasonably acceptable to the Board of Directors of the
Company.
7.17. KEY MAN LIFE INSURANCE
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<PAGE> 44
The Company covenants and agrees, that within a reasonable period of time
following the Closing, it will obtain key man life insurance on the life of Ken
Gavranovic in the amount of $5 million, with all proceeds payable to the
Company.
7.18. PROPRIETARY INFORMATION AGREEMENT
The Company covenants and agrees that (i) all future officers, directors,
employees and consultants of the Company will execute and deliver to the
Company an agreement regarding assignment to the Company of any Intellectual
Property arising for services performed for the Company by such persons, and
(ii) it will enter into written agreements with all third parties having access
to the Company-owned Intellectual Property in connection with the disclosure
to, or use or appropriation by, those third parties, of Intellectual Property
owned by the Company that is not otherwise protected by a patent, a patent
application, copyrights, trademark or legal scheme.
7.19. SBIC COVENANTS OF THE COMPANY
(a) Without the consent of each SBIC Purchaser, the Company will not issue
securities to any SBIC in the future if such issuance would cause such SBIC
Purchaser to be deemed to be a member of an "Investor Group" in "Control" of the
Company (as such terms are defined in 13 C.F.R. ss. 107.865).
(b) The Company shall permit representatives of each SBIC Purchaser access
to the Company's records. Upon the request of an SBIC Purchaser or any of its
affiliates, the Company will furnish to such person all information reasonably
requested by it in order for it to comply with its recordkeeping, reporting and
other obligations under the SBIA or any SBIC Regulation. Each SBIC Purchaser
agrees to keep such information confidential, except as required to be
disclosed under the SBIA or any SBIC Regulation.
(c) For a period of one year following the date hereof, neither the
Company nor any of its subsidiaries (if any) will change its business activity
if such change would render the Company ineligible to receive financial
assistance from an SBIC under the SBIA and the regulations thereunder (within
the meanings of 13 C.F.R. ss.ss. 107.720 and 107.760(b)).
(d) The Company will at all times comply with the non-discrimination
requirements of 13 C.F.R., Parts 112, 113 and 117.
7.20. REGULATORY COMPLIANCE COOPERATION
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<PAGE> 45
(a) In the event that an SBIC Purchaser determines that it has a
Regulatory Problem (as defined below), such SBIC Purchaser shall have the right
to transfer its Shares without regard to any restriction on transfer, provided,
however, that no such transfer will be made to any of the Company's competitors
and that each SBIC Purchaser will ensure that such transfers are made in
compliance with the federal securities laws, and the Company shall (i) take all
such actions as are reasonably requested by such SBIC Purchaser in order to
effectuate and facilitate any transfer by such SBIC Purchaser of any securities
of the Company then held by such SBIC Purchaser to any person designated by
such SBIC Purchaser or (ii) use its best efforts to take all actions reasonably
necessary to address and cure such Regulatory Problem.
(b) For purposes of this Agreement, a "Regulatory Problem" means any set
of facts or circumstances wherein it has been asserted by any governmental
regulatory agency (or an SBIC Purchaser reasonably believes that there is a
substantial risk of such assertion) that such SBIC Purchaser is not entitled to
hold, or exercise any significant right with respect to, the underlying common
stock of the Company.
7.21. REAL PROPERTY HOLDING CORPORATION COVENANT
The Company will use best efforts to avoid being a United States Real Property
Holding Company within the meaning of Section 897(c) of the Code.
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<PAGE> 46
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have
caused this Stock Purchase Agreement to be duly executed on their behalf, as of
the day and year first hereinabove set forth.
THE COMPANY:
INTERLAND, INC.
By: /s/ Ken Gavranovic
--------------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive
Officer
THE INVESTORS
CREST COMMUNICATIONS
PARTNERS L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
--------------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
CREST ENTREPRENEURS FUND
L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
--------------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
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<PAGE> 47
BOULDER VENTURES III, L.P.
By: /s/ Andrew E. Jones
--------------------------------------------
Name: Andrew E. Jones
Title: Partner
BANCBOSTON VENTURES INC.
By: /s/ M. Scott McCormack
--------------------------------------------
Name: M. Scott McCormack
Title: Vice President
PRIVATE EQUITY CO-INVEST LTD.
By: VBTC Management, Ltd.
Its: Sole Director
By: /s/ John Arnold
--------------------------------------------
Name: John Arnold
Title: Chairman
BOULDER VENTURES III (ANNEX), L.P.
By: /s/ Andrew E. Jones
--------------------------------------------
Name: Andrew E. Jones
Title: Partner
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<PAGE> 48
EXHIBIT A
TO STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 2, 1999
DEFINITIONS
"AFFILIATE" means: (a) with respect to a person, any member
of such person's family; (b) with respect to an entity, any officer, director,
stockholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a person or entity, any person or
entity which directly or indirectly, through one or more intermediaries,
Controls, is Controlled by, or is under common Control with such person or
entity.
"AGREEMENT" means any concurrence of understanding and
intention between two or more persons (or entities) with respect to their
relative rights and/or obligations or with respect to a thing done or to be
done (whether or not conditional, executory, express, implied, in writing or
meeting the requirements of contract), including, without limitation,
contracts, leases, promissory notes, covenants, easements, rights of way,
covenants, commitments, arrangements and understandings.
"ASSETS" means assets of every kind and everything that is or
may be available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"BOULDER" means Boulder Ventures III, L.P., a Delaware
limited partnership.
"CLAIMS" means all demands, claims, actions or causes of
action, assessments, losses, damages (including, without limitation, diminution
in value), liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and disbursements.
"CLOSING" means the Closing of the sale of shares of Series A
Stock to the Investors under this Purchase Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended,
and all Laws promulgated pursuant thereto or in connection therewith.
"COMMON STOCK" means the Company's Common Stock, no par value
per share.
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<PAGE> 49
"COMPANY" means Interland, Inc., a Georgia corporation.
"COMPANY INDEMNIFIED PERSON" means the Company and its
Affiliates, employees, representatives, agents, officers, directors and each
other person who "controls" the Company within the meaning of the Securities
Act.
"CONTROL" means possession, directly or indirectly, of power
to direct or cause the direction of management or policies (whether through
ownership of voting securities, by Agreement or otherwise).
"CREST" means Crest Communications Partners L.P., a Delaware
limited partnership and Crest Entrepreneurs Fund L.P., a Delaware limited
partnership.
"DEFINED BENEFIT PLAN" means a Plan that is or was a "defined
benefit plan" as such term is defined in Section 3(35) of ERISA.
"DISCLOSURE SCHEDULE" means the disclosure schedule
identified as the Disclosure Schedule to the Purchase Agreement.
"DOCUMENTS" means any paper or other material (including,
without limitation, computer storage media) on which is recorded (by letters,
numbers or other marks) information that may be evidentially used, including,
without limitation, legal opinions, mortgages, indentures, notes, instruments,
leases, Agreements, insurance policies, reports, studies, Financial Statements
(including, without limitation, the notes thereto), other written financial
information, schedules, certificates, charts, maps, plans, photographs,
letters, memoranda and all similar materials.
"DOL" means the Department of Labor or its successors.
"ENCUMBRANCE" means, with respect to any Asset, any mortgage,
lien, pledge, encumbrance, security interest, deed of trust, option,
encroachment, reservation, order, decree, judgment, condition, restriction,
charge, Agreement, claim or equity of any kind.
"ENVIRONMENTAL LAWS" means any Laws (including, without
limitation, the Clean Air Act, the Clean Water Act, the Resource Conservation
and Recovery Act, the Comprehensive Environmental Response, Compensation, and
Liability Act, the Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act and the Hazardous Materials Transportation Act),
now or hereafter in effect relating to the generation, production,
installation, use, storage, treatment, transportation, release, threatened
release, or disposal of Hazardous Materials, noise control, or the protection
of human health, safety, natural resources, animal health or welfare, or the
environment.
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<PAGE> 50
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all Laws promulgated pursuant thereto or in connection
therewith.
"ESOP" means an "employee stock ownership plan" as such term
is defined in Section 407(d)(6) of ERISA or Section 4975(e)(7) of the Code.
"EXHIBIT" means an exhibit attached to the Agreement.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION
3.6.
"FURNISHED" means supplied, delivered or provided in any way,
including through attorneys, employees or officers.
"HAZARDOUS MATERIALS" means any wastes, substances,
radiation, or materials (whether solids, liquids or gases) (i) which are
hazardous, toxic, infectious, explosive, radioactive, carcinogenic, or
mutagenic; (ii) which are or become defined as a "pollutants" "contaminants",
"hazardous materials," "hazardous wastes," "hazardous substances," "toxic
substances," "radioactive materials," "solid wastes," or other similar
designations in, or otherwise subject to regulation under, any Environmental
Laws; (iii) without limitation, which contain polychlorinated biphenyls (PCBs),
asbestos, lead-based paints, urea-formaldehyde foam insulation, and petroleum
or petroleum products (including, without limitation, crude oil or any fraction
thereof) or (iv) which pose a hazard to human health, safety, natural
resources, industrial hygiene, or the environment, or an impediment to working
conditions.
"INDEMNIFIED PERSON" means an Investor Indemnified Person or
a Company Indemnified Person, as applicable.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade
names, service marks, trade dress, logos, domain names, copyrights and any
applications or registrations therefore, maskworks, schematics, technology,
know-how, trade secrets, formulas, compositions, technical data, designs,
drawings, specifications, inventory, inventions, ideas, algorithms, processes,
computer software programs and applications (in both source code and object
code form), and tangible or intangible proprietary information or material and
all reissues, extensions or renewals thereof.
"INVESTOR INDEMNIFIED PERSONS" means each Investor and its
Affiliates, employees, representatives, agents, representatives, officers,
partners, members and directors, and each other person who "controls" an
Investor within the meaning of the Securities Act.
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<PAGE> 51
"INVESTOR REPRESENTATIVES" means Crest and Boulder.
"KNOWLEDGE" means to the actual knowledge of the party making
the representation, and, in the case of the Company, "Knowledge" shall mean the
actual Knowledge of the officers and directors of the Company.
"LAWS" means all foreign, federal, state and local statutes,
laws, ordinances, regulations, rules, resolutions, orders, determinations,
writs, injunctions, awards (including, without limitation, awards of any
arbitrator), judgments and decrees applicable to the specified persons or
entities and to the businesses and Assets thereof (including, without
limitation, Laws relating to securities registration and regulation; the sale,
leasing, ownership or management of real property; employment practices, terms
and conditions, and wages and hours; building standards, land use and zoning;
safety, health and fire prevention; and environmental protection, including
Environmental Laws).
"MATERIAL" means material to the Company and its
Subsidiaries, taken as a whole.
"MATERIAL ADVERSE EFFECT" means any material adverse effect
on the Assets, properties, business, operations, prospects, condition
(financial or otherwise) or liabilities of the Company and its Subsidiaries,
taken as a whole.
"MATERIAL ASSET" means an Asset having a value equal to or in
excess of $25,000, or Assets having an aggregate value in excess of $50,000.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as such
term is defined in Section 3(37) of ERISA.
"ORDINARY COURSE OF BUSINESS" means ordinary course of the
Company's business consistent with past practices and business operations.
"OTHER ARRANGEMENT" means a benefit program or practice
providing for bonuses, incentive compensation, vacation pay, severance pay,
insurance, reimbursement or any other perquisite or benefit (including, without
limitation, any fringe benefit under Section 132 of the Code) to employees,
officers or independent contractors that is not a Plan.
"PBGC" means the Pension Benefit Guaranty Corporation or its
successor.
"PENSION PLAN" means an "employee pension benefit plan" as
such term is defined in Section 3(2) of ERISA.
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<PAGE> 52
"PERSON" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or entity, government or
department or agency of a government.
"PLAN" means any plan, program or arrangement, whether or not
written, that is or was an "employee benefit plan" as such term is defined in
Section 3(3) of ERISA and (a) which was or is established or maintained by the
Company or any Subsidiary (or any predecessor entity); (b) to which the Company
or any Subsidiary (or any predecessor entity) contributed or was obligated to
contribute or to fund or provide benefits; or (c) which provides or promises
benefits to any person who performs or who has performed services for the
Company or any Subsidiary and because of those services is or has been (i) a
participant therein or (ii) entitled to benefits thereunder.
"QUALIFIED PLAN" means a Pension Plan that satisfies, or is
intended by the Company to satisfy, the requirements for tax qualification
described in Section 401 of the Code.
"REAL PROPERTY" means any real property owned, operated or
used by the Company as of the date hereof or previously.
"RELEASE" means any emission, spill, seepage, leak, escape,
leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal,
or release of Hazardous Materials from any source (including without limitation
the Real Property) into or upon the environment, including the air, soil,
improvements, surface water, groundwater, the sewer, septic system, or waste
treatment, storage, or disposal systems at, on, above, or under the Real
Property.
"SECTION" means a Section (or a subsection) of this Purchase
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"SERIES A STOCK" means the Company's Series A Convertible
Participating Preferred Stock, no par value per share.
"SHARES" means the Series A Stock being purchased by the
Investors pursuant to the terms of this Purchase Agreement.
"SUBSIDIARY" means a corporation or other entity of which at
least 50% of the outstanding securities or other interests having rights to
vote or otherwise exercise Control are held, directly or indirectly, by the
Company.
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<PAGE> 53
"SYSTEMS" means the infrastructure used to provide web
hosting services, including network components, communications facilities,
servers, services and service platforms, power plants, data processing
platforms, MIS systems, office automation systems and internal LAN network
management systems.
"TAXES" means all federal, state, local and foreign taxes
(including, without limitation, income, profit, franchise, sales, use, real
property, personal property, ad valorem, excise, employment, social security
and wage withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or description
imposed by any governmental or quasi-governmental authorities, and any
interest, penalties or additions to tax imposed thereon or in connection
therewith.
"TAX RETURNS" means all federal, state, local, foreign and
other applicable tax returns, declarations of estimated tax reports required to
be filed by the Company or any Subsidiary (without regard to extensions of time
permitted by law or otherwise).
"TITLE I PLAN" means an Employee Plan that is subject to
Title I of ERISA.
"WELFARE PLAN" means an "employee welfare benefit plan" as
such term is defined in Section 3(1) of ERISA.
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<PAGE> 54
EXHIBIT B
TO STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 2, 1999
TERMS OF SERIES A PREFERRED STOCK
<PAGE> 55
EXHIBIT C
TO STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 2, 1999
INVESTORS
<PAGE> 56
EXHIBIT D
TO STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 2, 1999
FORM OF KILPATRICK STOCKTON LLP LEGAL OPINION
<PAGE> 57
EXHIBIT E
TO STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 2, 1999
STOCKHOLDERS' AGREEMENT
<PAGE> 58
EXHIBIT F
TO STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 2, 1999
REGISTRATION RIGHTS AGREEMENT
<PAGE> 59
EXHIBIT G
TO STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 2, 1999
INVESTOR REPRESENTATIVES' LETTER
<PAGE> 60
EXHIBIT H
TO STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 2, 1999
FORM OF KEN GAVRANOVIC EMPLOYMENT AGREEMENT
<PAGE> 61
EXHIBIT I
TO STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 2, 1999
FORM OF FERNANDEZ AGREEMENT
<PAGE> 1
EXHIBIT 10.3
SUBSCRIPTION AGREEMENT
BETWEEN
INTERLAND, INC.
AND
NETWORK SOLUTIONS, INC.
DATED MARCH 15, 2000
<PAGE> 2
SUBSCRIPTION AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of March 15, 2000
by and between Interland, Inc., a Georgia corporation (the "Company") and
Network Solutions, Inc., a Delaware corporation ("Investor").
WHEREAS, the Company desires to issue and sell to the
Investor, and the Investor desires to subscribe for and acquire from the
Company, a substantial equity interest in the Company, upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
1. DEFINITIONS
For all purposes of this Agreement, certain capitalized terms specified
in Exhibit A shall have the meanings set forth in that Exhibit A, except as
otherwise expressly provided.
2. SALE AND PURCHASE OF SHARES
2.1. SALE AND PURCHASE OF SHARES
On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions hereof, the Company
agrees to issue and sell to the Investor, and the Investor is subscribing for
and agrees to purchase from the Company, an aggregate of 689,655 shares of
Series A Convertible Participating Preferred Stock, no par value per share
("Series A Stock"), having the rights, preferences and other terms set forth on
Exhibit B hereto, at a price per share of Series A Stock of $5.80 for an
aggregate purchase price of $4,000,000. In addition, the Company hereby agrees
to issue to Investor a warrant to purchase 344,827 shares of Common Stock (the
"Warrant"), in form and substance of Exhibit C hereto, with an exercise price of
$5.80 per share.
2.2 CLOSING
The closing of the sale and purchase of the shares of Series A
Stock and the issuance of the Warrant shall take place simultaneously with the
Company's receipt by wire transfer of immediately available funds in the amount
of $4,000,000 from the Investor, as payment in full for the share of Series A
Stock subscribed for and being purchase by the Investor hereunder (the
"Closing"). At the Closing, the Company shall issue and deliver to the Investor
(i) a stock certificate or certificates in definitive form, registered in the
Investor's name, representing the Series A Stock, and (ii) the Warrant
registered in the Investor's name.
<PAGE> 3
2.3. SALE AND PURCHASE OF ADDITIONAL SHARES
At the Second Closing (as defined below), and on the terms and
subject to the conditions set forth in this Agreement, the Company shall issue,
sell and deliver to the Investor, and the Investor hereby subscribes for and
shall purchase and accept from the Company, the number of shares (the
"Additional Shares") of Common Stock of the Company equal to the number obtained
by dividing (A) $6,000,000 by (B) a number equal to the lesser of (i) the
midpoint of the expected range of offering prices reflected on the Company's
first filing with the Securities and Exchange Commission of a registration
statement covering the sale of its Common Stock and (ii) the actual price to the
public in such offering, and rounding the number obtained thereby to the nearest
whole number. In addition, the Company shall issue an additional warrant to the
Investor (the "Additional Warrant") at the Second Closing, in form and substance
of Exhibit C hereto, to purchase up to that number of shares of Common Stock
equal to 75% of the number of Additional Shares purchased by the Investor at the
Second Closing with an exercise price per share equal to the purchase price per
share paid by the Investor at the Second Closing to purchase the Additional
Shares.
2.4. PURCHASE PRICE AND PAYMENT FOR ADDITIONAL SHARES.
In consideration of the sale of the Additional Shares to the
Investor, the Investor shall pay to the Company at the Second Closing the
aggregate purchase price of $6,000,000.00 (the "Purchase Price"). The Purchase
Price shall be paid in cash by wire transfer of immediately available federal
funds to an account designated in writing by the Company.
2.5. SECOND CLOSING.
The closing of the transactions contemplated in Section 2.3
and Section 2.4 hereof (the "Second Closing") shall take place at the offices of
Kilpatrick Stockton LLP, 1100 Peachtree Street NE, Suite 2800, Atlanta, Georgia,
at 10:00 a.m., Atlanta time, on the day after the Company's registration
statement is declared
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<PAGE> 4
effective and the offering made pursuant thereto is priced. The date on which
the Second Closing takes place is herein referred to as the "Second Closing
Date". At the Second Closing (i) the Company shall deliver to the Investor the
executed stock certificate representing the Additional Shares duly issued in the
name of the Investor and the Additional Warrant, and (ii) the Investor shall
deliver the Purchase Price to Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the Disclosure Schedule to the
Stock Purchase Agreement (as hereinafter defined) dated December 2, 1999 (the
"Disclosure Schedule"), the Company represents and warrants as of December 2,
1999 (which representation and warranty shall be deemed to include the
disclosure with respect thereto so specified in the Disclosure Schedule) to the
Investor each of the representations and warranties as set forth in SECTION 3 of
that certain Stock Purchase Agreement entered into as of December 2, 1999 by and
among the Company, Crest Communications Partners L.P., Crest Entrepreneurs Fund
L.P., Boulder Ventures III, L.P., and the other investors set forth on Exhibit C
thereto (the "Stock Purchase Agreement"), and each such representation and
warranty shall be incorporated by reference and made a part hereof; provided,
however, for purposes of this Agreement, each reference to the (i) "Purchase
Agreement" made therein shall mean this Agreement, and (ii) "Investors" made
therein shall refer to the Investor except those contained in SECTION 3.4 of the
Stock Purchase Agreement. The disclosures made in the Disclosure Schedule with
respect to a Section of this Purchase Agreement shall also be deemed disclosures
with respect to all other applicable Sections of this Agreement as of December
2, 1999. Investor hereby acknowledges and agrees that each of the
representations and warranties made by the Company herein and any and all
disclosures made by the Company in the Disclosure Memorandum shall be effective
as of December 2, 1999 and the Company shall be under no obligation to
supplement or otherwise update such information subsequent to December 2, 1999.
For purposes of this section, the term "Company" shall include any predecessor
entity and any and all Subsidiaries, unless the context requires otherwise.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to the Company as follows:
4.1. ORGANIZATION AND STANDING
The Investor is duly organized, validly existing and in good
standing under the laws of the state or jurisdiction of its formation and has
the full and
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unrestricted power and authority to enter into this Agreement and to carry out
the transactions contemplated hereby.
4.2. AUTHORIZATION
The execution, delivery and performance by the Investor of
this Agreement and all other Documents contemplated hereby, the fulfillment of
and the compliance with the respective terms and provisions hereof and thereof,
and the consummation by the Investor of the transactions contemplated hereby and
thereby have been duly authorized, and will not: (a) conflict with, or violate
any term or provision of the Investor's certificate or articles of
incorporation, its bylaws or other governing documents or (b) conflict with, or
result in any breach of, or constitute a default under, any Agreement to which
the Investor is a party or by which such Investor is bound. No other action is
necessary for the Investor to enter into this Agreement and all other Documents
contemplated hereby and to consummate the transactions contemplated hereby and
thereby.
4.3. BINDING OBLIGATION
Each Document to be executed by the Investor pursuant hereto,
when executed and delivered in accordance with the provisions hereof, shall be a
valid and binding obligation of the Investor, enforceable in accordance with its
terms, shall be in full force and effect and shall constitute a legal, valid and
binding obligation of, and shall be legally enforceable against, the Investor,
and, to the Investor's Knowledge, the other parties thereto (except as
enforceability may be limited or affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws and
equitable principles now or hereafter in effect and affecting the rights and
remedies of creditors generally).
4.4. NO REGISTRATION UNDER THE SECURITIES ACT
The Investor understands that the Series A Stock, the Warrant,
the Additional Shares, and the Additional Warrant to be purchased by it at the
Closing or the Second Closing pursuant to the terms of this Agreement, and the
Common Stock of the Company into which the Series A Stock, the Warrant and the
Additional Warrant are convertible, have not and will not be registered under
the Securities Act or any state securities laws and will be issued in reliance
upon exemptions contained in the Securities Act or interpretations thereof and
in the applicable state securities laws, and cannot be offered for sale, sold or
otherwise transferred unless the Series A Stock being acquired hereunder or the
Common Stock of the Company into which the Series A Stock, the Warrant and the
Additional Warrant are convertible subsequently are so registered or qualify for
exemption from registration under the Securities Act.
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4.5. ACQUISITION FOR INVESTMENT
The Series A Stock, the Warrant, the Additional Shares and the
Additional Warrant, and the Common Stock issuable upon conversion of the Series
A Stock, the Warrant and the Additional Warrant, respectively, are being
acquired under this Agreement by the Investor in good faith solely for its own
account, for investment and not with a view toward distribution within the
meaning of the Securities Act. The Series A Stock, the Warrant, the Additional
Shares and the Additional Warrant will not be offered for sale, sold or
otherwise transferred by the Investor without either registration or exemption
from registration under the Securities Act and any applicable state securities
laws (and the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, as reasonably requested by the Company).
4.6. EVALUATION OF MERITS AND RISKS OF INVESTMENT
The Investor has knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
its investment in the Series A Stock, the Warrant, the Additional Shares and the
Additional Warrant being acquired hereunder. The Investor is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act. The
Investor understands and is able to bear any economic risks associated with such
investment (including, without limitation, the necessity of holding the Series A
Stock, the Warrant, the Additional Shares, and the Additional Warrant for an
indefinite period of time, inasmuch as the Series A Stock, the Warrant, the
Additional Shares, and the Additional Warrant have not been registered under the
Securities Act or any state securities laws).
4.7. ADDITIONAL INFORMATION
The Investor acknowledges that it has been afforded the
opportunity to ask questions and receive answers concerning the Company and to
obtain additional information that it has requested to verify the accuracy of
the information contained herein. Notwithstanding the foregoing, nothing
contained herein shall operate to modify or limit in any respect the
representations and warranties of the Company or to relieve it from any
obligations to the Investor for breach thereof or the making of misleading
statements of material fact or the omission of material facts in connection with
the transactions contemplated herein.
4.8. STOCK CERTIFICATE LEGEND
Each Investor acknowledges and agrees that each certificate
representing the Series A Stock, the Warrant, the Additional Shares and the
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<PAGE> 7
Additional Warrant and the Common Stock issuable upon conversion thereof shall
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
Each Investor acknowledges and agrees that each certificate
representing the Series A Stock shall bear the following legend in addition to
the legend described above:
THE SHARES OF SERIES A CONVERTIBLE PARTICIPATING PREFERRED
STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN DESIGNATED
WITH A STATED VALUE PER SHARE OF $5.80 AND AN INITIAL
CONVERSION PRICE OF $5.80. CERTAIN SHARES OF SERIES A
CONVERTIBLE PARTICIPATING PREFERRED STOCK THAT HAVE BEEN
ISSUED PRIOR TO THE DATE OF THIS CERTIFICATE HAVE BEEN
DESIGNATED WITH A STATED VALUE PER SHARE OF $2.18 AND AN
INITIAL CONVERSION PRICE OF $2.18.
5. SURVIVAL OF REPRESENTATIONS
5.1. SURVIVAL OF REPRESENTATIONS
All representations, warranties, covenants, and other
Agreements made by the Investor herein or pursuant hereto shall also be deemed
made on and as of the Closing Date as though such representations, warranties,
covenants, indemnities and other Agreements were made on and as of such date,
and all such representations, warranties, covenants, indemnities and other
Agreements shall survive the Closing Date for a period of two years. All
representations, warranties, covenants, and other Agreements made by the Company
herein are made as of the date hereof and any representations and warranties
incorporated by reference from the Stock Purchase Agreement shall be deemed to
be made on and as of December 2, 1999, and all such representations, warranties,
covenants, indemnities and other Agreements shall survive the Closing Date for a
period of two years.
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<PAGE> 8
6. MISCELLANEOUS
6.1. ADDITIONAL ACTIONS AND DOCUMENTS
After Closing, each of the parties hereto hereby agrees to
take or cause to be taken such further actions, to execute, deliver and file or
cause to be executed, delivered and filed such further Documents, and will
obtain such consents, as may be necessary or as may be reasonably requested in
order to fully effectuate the purposes, terms and conditions of this Agreement.
6.2. NO BROKERS
Each of the parties hereto represents and warrants to the
other parties (and to each of them) that such party has not engaged any broker,
finder or agent in connection with the transactions contemplated by this
Agreement and has not incurred (and will not incur) any unpaid liability to any
broker, finder or agent for any brokerage fees, finders' fees or commissions,
with respect to the transactions contemplated by this Agreement. Each party
agrees to indemnify, defend and hold harmless each of the other parties from and
against any and all claims asserted against such parties for any such fees or
commissions by any persons purporting to act or to have acted for or on behalf
of the indemnifying party.
6.3. JURY WAIVER
THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN AN
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY
OF THE TRANSACTIONS OR AGREEMENTS CONTEMPLATED HEREBY.
6.4. PUBLICITY
Neither the Investor nor the Company shall issue any press
release or make any public disclosure regarding the transaction contemplated
hereby unless such press release or public disclosure is approved by those
parties expressly mentioned by name in the press release in advance.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the SEC or other regulatory bodies, make such
statements with respect to the transactions contemplated hereby as each may be
advised by counsel as legally necessary or advisable and may make such
disclosure as it is advised by its counsel as required by law.
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<PAGE> 9
6.5. EXPENSES
Subject to the provisions of this SECTION 6.5, each party
hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated hereunder, including all legal and accounting fees and
disbursements.
6.6. ASSIGNMENT
The Investor shall have the right to assign its rights and
obligations under this Agreement, in whole or in part, to any Affiliate of
Investor or to designate any of its Affiliates (to the extent permitted by Law)
to receive directly the shares of Series A Stock to be purchased hereunder or to
exercise any of the rights of the Investor, or to perform its obligations,
provided that such assignee shall have been deemed to have made the
representations and warranties contained in Article 3 hereof. The Company shall
not assign its rights and obligations under this Agreement, in whole or in part,
whether by operation of law or otherwise, without the prior written consent of
the Investor, and any such assignment contrary to the terms hereof shall be null
and void and of no force and effect. In no event shall the assignment by the
Company or the Investor of its rights or obligations under this Agreement,
whether before or after the Closing, release the Company or the Investor from
their respective liabilities and obligations hereunder.
6.7. ENTIRE AGREEMENT; AMENDMENT
This Agreement, including the other Documents referred to
herein or Furnished pursuant hereto, constitutes the entire Agreement among the
parties hereto with respect to the transactions contemplated herein, and it
supersedes all prior oral or written Agreements, commitments or understandings
with respect to the matters provided for herein. No amendment or modification of
this Agreement shall be valid or binding unless set forth in writing and duly
executed and delivered by the Company and the Investor.
6.8. WAIVER
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any other
Documents Furnished in connection with or pursuant to this Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and signed
by the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
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<PAGE> 10
6.9. SEVERABILITY
If any part of any provision of this Agreement or any other
agreement or document given pursuant to or in connection with this Agreement
shall be invalid or unenforceable in any respect, such part shall be ineffective
to the extent of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provision or the remaining provisions of
this Agreement.
6.10. GOVERNING LAW
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of Georgia (excluding the
choice of law rules thereof).
6.11. NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
telecopy addressed as follows:
(i) If to Investor:
Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, VA 20170
Telecopy No.: (703) 742-7461
Attention: General Counsel
(ii) If to the Company:
Interland, Inc.
101 Marietta Street, Suite 200
Atlanta, GA 30303
Telecopy No.: (404) 720-3707
Attention: Ken Gavranovic
with a copy (which shall not constitute notice) to:
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309-4530
Telecopy No.: (404) 815-6555
Attention: David A. Stockton
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<PAGE> 11
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed or telecopied in the manner described above, shall be deemed
sufficiently given, served, sent, received or delivered for all purposes at such
time as it is delivered to the addressee (with the return receipt, the delivery
receipt, or (with respect to a telecopy) the answerback or confirmation being
deemed conclusive, but not exclusive, evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
6.12. HEADINGS
Section headings contained in this Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
6.13. EXECUTION IN COUNTERPARTS
To facilitate execution, this Agreement may be executed in as
many counterparts as may be required. It shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
6.14. LIMITATION ON BENEFITS
The covenants, undertakings and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns (including
specifically, without limitation, any third party transferees acquiring shares
of Series A Stock purchased by the Investor pursuant hereto).
6.15. BINDING EFFECT
Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, heirs, executors, administrators, legal
representatives and assigns.
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<PAGE> 12
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have
caused this Agreement to be duly executed on their behalf, as of the day and
year first hereinabove set forth.
COMPANY:
INTERLAND, INC.
By: /s/ Ken Gavranovic
------------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive Officer
INVESTOR:
NETWORK SOLUTIONS, INC.
By: /s/ James P. Rutt
-----------------------------------------
Name: James P. Rutt
----------------------------------------
Its: Chief Executive Officer
----------------------------------------
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<PAGE> 13
EXHIBIT A
TO SUBSCRIPTION AGREEMENT
DATED AS OF MARCH 15, 2000
DEFINITIONS
"ADDITIONAL SHARES" means the shares of Common Stock acquired
by the Investor at the Second Closing.
"ADDITIONAL WARRANT" means the warrant issued to the Investor
at the Second Closing.
"AFFILIATE" means: (a) with respect to a person, any member
of such person's family; (b) with respect to an entity, any officer, director,
stockholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a person or entity, any person or entity
which directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such person or entity.
"AGREEMENT" means any concurrence of understanding and
intention between two or more persons (or entities) with respect to their
relative rights and/or obligations or with respect to a thing done or to be done
(whether or not conditional, executory, express, implied, in writing or meeting
the requirements of contract), including, without limitation, contracts, leases,
promissory notes, covenants, easements, rights of way, covenants, commitments,
arrangements and understandings.
"CLAIMS" means all demands, claims, actions or causes of
action, assessments, losses, damages (including, without limitation, diminution
in value), liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and disbursements.
"CLOSING" means the Closing of the sale of shares of Series A
Stock and the Warrant to the Investor under this Agreement.
"COMMON STOCK" means the Company's Common Stock, no par value
per share.
"COMPANY" means Interland, Inc., a Georgia corporation.
"CONTROL" means possession, directly or indirectly, of power
to direct or cause the direction of management or policies (whether through
ownership of voting securities, by Agreement or otherwise).
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<PAGE> 14
"DOCUMENTS" means any paper or other material (including,
without limitation, computer storage media) on which is recorded (by letters,
numbers or other marks) information that may be evidentially used, including,
without limitation, legal opinions, mortgages, indentures, notes, instruments,
leases, Agreements, insurance policies, reports, studies, Financial Statements
(including, without limitation, the notes thereto), other written financial
information, schedules, certificates, charts, maps, plans, photographs, letters,
memoranda and all similar materials.
"EXHIBIT" means an exhibit attached to the Agreement.
"FURNISHED" means supplied, delivered or provided in any way,
including through attorneys, employees or officers.
"INVESTOR" means Network Solutions, Inc., a Delaware
corporation.
"KNOWLEDGE" means to the actual knowledge of the party making
the representation, and, in the case of the Company, "Knowledge" shall mean the
actual Knowledge of the officers and directors of the Company.
"LAWS" means all foreign, federal, state and local statutes,
laws, ordinances, regulations, rules, resolutions, orders, determinations,
writs, injunctions, awards (including, without limitation, awards of any
arbitrator), judgments and decrees applicable to the specified persons or
entities and to the businesses and Assets thereof (including, without
limitation, Laws relating to securities registration and regulation; the sale,
leasing, ownership or management of real property; employment practices, terms
and conditions, and wages and hours; building standards, land use and zoning;
safety, health and fire prevention; and environmental protection, including
Environmental Laws).
"PERSON" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or entity, government or
department or agency of a government.
"SECOND CLOSING" means the closing of the sale of the
Additional Shares and the Additional Warrant to the Investor under this
Agreement
"SECTION" means a Section (or a subsection) of this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and all Laws promulgated pursuant thereto or in connection therewith.
"SERIES A STOCK" means the Company's Series A Convertible
Participating Preferred Stock, no par value per share.
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<PAGE> 15
"SHARES" means the Series A Stock being purchased by the
Investor pursuant to the terms of this Agreement.
"SUBSIDIARY" means a corporation or other entity of which at
least 50% of the outstanding securities or other interests having rights to vote
or otherwise exercise Control are held, directly or indirectly, by the Company.
"WARRANT" means the warrant to purchase shares of Common Stock
issued to the Investor at the Closing.
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EXHIBIT B
TO SUBSCRIPTION AGREEMENT
DATED AS OF MARCH 15, 2000
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INTERLAND, INC.
1.
The name of the corporation is Interland, Inc. (hereinafter
referred to as the "Corporation").
2.
The powers, rights and preferences, and the qualifications,
limitations and restrictions thereof, of Series A Convertible Participating
Preferred Stock and Series A-1 Convertible Participating Preferred Stock, as set
forth at the end of Article IV of the Amended and Restated Articles of
Incorporation of the Corporation, are hereby deleted and restated in their
entirety as follows:
"SERIES A AND SERIES A-1 CONVERTIBLE PARTICIPATING PREFERRED STOCK
The following sections set forth the powers, rights and
preferences, and the qualifications, limitations and restrictions thereof, of
the Corporation's Series A Convertible Participating Preferred Stock and the
Series A-1 Convertible Participating Preferred Stock.
SECTION 1. DESIGNATION AND AMOUNT.
1.1. Number of Shares. The designation of one of the
series of Preferred Stock, no par value per share, provided for herein shall be
"Series A Convertible Participating Preferred Stock" (hereinafter referred to as
the "Series A Preferred"), and the number of authorized shares constituting
Series A Preferred is 15,000,000. The designation of the other series of
Preferred Stock, no par value per share, provided for herein shall be "Series
A-1 Convertible Participating Preferred
<PAGE> 17
Stock" (hereinafter referred to as the "Series A-1 Preferred"), and the number
of authorized shares constituting Series A-1 Preferred is 2,100,000. The shares
of Series A-1 Preferred shall only be issued as dividends on the Series A
Preferred pursuant to Section 2.2 hereof. The Series A-1 Preferred shall have
all of the same powers, preferences, rights, qualifications, limitations and
restrictions as the Series A Preferred and shall otherwise be identical and pari
passu to the Series A Preferred except as specifically provided in Section
5.1(b) hereof. Unless expressly provided otherwise herein, the term "Series A
Preferred" shall refer to both the Series A Preferred and the Series A-1
Preferred.
1.2. Restrictions on Reissuance. All shares of Series A
Preferred redeemed, purchased or otherwise acquired by the Corporation shall be
retired and canceled and shall be restored to the status of authorized, but
unissued shares of Preferred Stock, without designation as to series, and may
thereafter be issued, but not as shares of Series A Preferred.
1.3. Stated Value Per Share. The Stated Value Per Share of
the Series A Preferred issued prior to March __, 2000 shall be $2.18. The Stated
Value Per Share of the Series A Preferred issued on or after March __, 2000
shall be $5.80. Share certificates issued on or after March___,2000 shall
reference the applicable Stated Value Per Share.
1.4. Rank. The Series A Preferred shall, with respect to
rights upon liquidation, winding up or dissolution, and redemption rights, rank
(a) junior to any other series of Preferred Stock duly established by the Board
of Directors of the Corporation, the terms of which shall specifically provide
that such series shall rank prior to the Series A Preferred, whether now
existing or hereafter created (the "Senior Preferred Stock") and (b) prior to
any other class or series of Preferred Stock the terms of which shall
specifically provide that such series shall rank junior to the Series A
Preferred and prior to any other series of capital stock of the Corporation,
including all classes of the Common Stock, no par value per share, of the
Corporation, whether now existing or hereafter created (the "Common Stock"; all
of such classes or series of capital stock of the Corporation to which the
Series A Preferred ranks prior, including without limitation the Common Stock,
and including, without limitation, junior securities convertible into or
exchangeable for other junior securities or phantom stock representing junior
securities, are collectively referred to herein as "Junior Securities").
SECTION 2. DIVIDENDS.
2.1. General Obligation.
Subject to any prior preferences and other rights of any
Senior Preferred Stock and to the provisions of this SECTION 2.1, the record
holders of the Series A Preferred shall be entitled to receive when, as and if
declared by the Corporation's Board of Directors and to the extent permitted
under the Georgia
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<PAGE> 18
Business Corporation Code, as amended (the "Act"), cumulative preferential
dividends on the shares of the Series A Preferred outstanding, at a compounded
annual rate per share of nine percent (9%) of the Stated Value Per Share of the
Series A Preferred. Dividends on the Series A Preferred shall accrue on a
semi-annual basis with the dividend periods ending on the last day of each of
May and November, with the first dividend period ending on May 31, 2000.
Dividends on the Series A Preferred shall be cumulative from the first date on
which shares of Series A Preferred are issued (the "Original Issue Date"),
whether or not declared and whether or not in any dividend period there shall
have been net profits or net assets of the Corporation legally available for the
payment of those dividends. After the holders of the Series A Preferred have
received their dividend preference as set forth above, the holders of the Series
A Preferred shall be entitled to receive, out of funds legally available
therefor, dividends at the same rate as dividends (other than dividends payable
in additional shares of Common Stock) are paid with respect to the Common Stock
(treating each share of Series A Preferred as being equal to the number of
shares of Common Stock (including fractions of a share) into which each share of
Series A Preferred is then convertible).
2.2. Payment of Dividends.
Any dividend on the Series A Preferred accrued and payable as
provided in this SECTION 2 shall be paid at, the option of the Corporation, (i)
in cash, (ii) by issuing a number of shares (or partial shares) of the Series
A-1 Preferred for each such share (or partial share) of Series A Preferred then
outstanding equal to the dividend then payable on each such share (or partial
share) of Series A Preferred for the dividend period then ended (or such shorter
period for which dividends are so being paid) (expressed as a dollar amount)
divided by the Stated Value Per Share, or (iii) a combination thereof. To the
extent declared by the Board of Directors of the Corporation, dividends accrued
for each semi-annual period ending on the last day of the next preceding May and
November, respectively, shall be paid on the fifth day of June or December,
respectively (or if any such day is not a business day, the next business day
following such day) in each year (each such date being referred to as a
"Dividend Payment Date")). Dividends shall be paid to the holders of record of
Series A Preferred as of the last day of the month immediately preceding the
Dividend Payment Date. Any dividends not paid on a Dividend Payment Date
thereafter shall accumulate and shall be considered "accrued but unpaid" for all
purposes hereunder until paid. The amount of dividends accruing for any period
shorter or longer than a full semi-annual dividend period shall be determined on
the basis of twelve 30-day months and a 360-day year, and the actual number of
days elapsed in the period for which a dividend is payable. Dividends paid on
the shares of Series A Preferred in an amount less than the total amount of such
dividends at the time accrued on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. Dividends
for any past semi-annual dividend period that are accrued but unpaid may be
declared and paid at any time,
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<PAGE> 19
without reference to any regular Dividend Payment Date, to the holders of record
on the record date for such dividend payment.
2.3. Dividends or Distributions on Junior Securities.
The Corporation shall not declare and pay any dividends on
Junior Securities unless all accrued and unpaid dividends on the Series A
Preferred have been paid in full. The Corporation shall not repurchase, redeem
or make any distribution with respect to any Junior Securities unless all
accrued and unpaid dividends on the Series A Preferred have been paid in full.
SECTION 3. LIQUIDATION.
In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation"), the holders of
shares of Series A Preferred shall be entitled to receive for each share of
Series A Preferred the greater of (a) the Stated Value Per Share plus any
accrued but unpaid dividends on the Series A Preferred out of the assets of the
Corporation legally available for distribution to stockholders (whether
representing capital or surplus), before any payment or distribution shall be
made on the Common Stock or any other Junior Securities, but after distribution
of such assets among, or payment thereof over to, creditors of the Corporation
and to holders of the Senior Preferred Stock (the "Series A Preferred
Liquidation Distribution") or (b) the amount that each holder of Series A
Preferred would receive out of the remaining assets of the Corporation available
for distribution to stockholders (treating each share of Series A Preferred as
being equal to the number of shares of Common Stock (including fractions of a
share) into which each share of Series A Preferred is then convertible) and
Junior Securities in accordance with the respective rights of such holders. If
the assets distributable to holders of the Series A Preferred upon such
dissolution, liquidation or winding up shall be insufficient to pay cash in an
amount equal to the amount of the Series A Preferred Liquidation Distribution to
the holders of shares of Series A Preferred then such assets or the proceeds
thereof shall be distributed among the holders of the Series A Preferred ratably
in proportion to the respective amounts to which they otherwise would be
entitled. Upon the election of a majority of the shares of the Series A
Preferred (including fractional shares) then outstanding, in the aggregate and
given in writing or by vote at a meeting, and consenting or voting separately as
a single class, (i) the sale, conveyance, exchange or transfer of all or
substantially all of the property or assets of the Corporation, (ii) the
consolidation or merger of the Corporation with any other corporation in which
the Corporation's stockholders prior to the consolidation or merger own less
than a majority of the voting securities of the surviving corporation or (iii)
any capital reorganization or reclassification (any such event a "Reorganization
Event") will be deemed to be a Liquidation, provided that (x) the holders of
Series A Preferred, consenting or voting separately as a class, have not
previously approved the Reorganization Event, (y) the holders of Series A
Preferred, voting separately as a
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<PAGE> 20
class, do not have the right to approve the Reorganization Event pursuant to
Section 4(a) below or (z) the Corporation has not exercised its right, pursuant
to Section 4, to convert all of the Series A Preferred into Common Stock in
connection with such a Reorganization Event.
SECTION 4. VOTING RIGHTS; PROTECTIVE PROVISIONS.
The holders of the Series A Preferred shall be entitled to notice of
all stockholder meetings in accordance with the Corporation's bylaws, and except
as otherwise required by law or these Articles, the holders of the Series A
Preferred shall vote on all matters submitted to the stockholders for a vote
together with the holders of the Common Stock as a single voting group, and each
share of Series A Preferred (including fractional shares) shall be entitled to
the number of votes equal to the number of votes which could be cast in such
vote by the number of shares of Common Stock that would be issuable upon
conversion of such share of Series A Preferred on the record date for
determining eligibility to participate in the action being taken. In addition to
any other rights provided by law, the consent of a majority of the shares of the
Series A Preferred (including fractional shares), which consent will not in any
event be unreasonably withheld, on an as if converted basis then outstanding, in
the aggregate and given in writing or by vote at a meeting, and consenting or
voting separately as a single class on an as-if-converted basis, shall be
required for the Corporation to:
(a) authorize or effect a Reorganization Event or
Liquidation, except for a Reorganization Event or Liquidation in which the
consideration per share of Series A Preferred (including shares Outstanding on
an As-Converted Basis (as defined below) if appropriate) is equal to or greater
than (i) $6.54 per share if the transaction takes place before December 2, 2002
or (ii) $8.72 per share if the transaction takes place on or after December 2,
2002 provided that the consideration consists of (i) cash, (ii) securities
listed on an established national securities exchange or automated quotation
system and registered under the Act or (iii) a combination thereof;
(b) authorize the issuance of unsecured debt in an amount
greater than $20 million;
(c) authorize the issuance of any equity securities that
are senior to or pari passu with the Series A Preferred;
(d) materially alter the rights, preferences or
privileges of the Series A Preferred; or
(e) increase or decrease the number of authorized shares
of Series A Preferred.
In the event that the holders of the Series A Preferred do not
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<PAGE> 21
approve any of the matters set forth above, the Corporation shall have the right
to convert all of the outstanding shares of Series A Preferred into Common Stock
at a conversion ratio (which represents the number of shares of Common Stock
into which each share of Series A Preferred is convertible) determined by
dividing (A) the greater of (i) $6.54 per Share or (ii) the current market value
of a share of Common Stock as determined by a third-party unaffiliated
investment bank of national repute selected jointly by the Corporation and the
holders of a majority of the Series A Preferred by (B) the Conversion Price then
in effect. The Corporation must exercise its right to cause a conversion
pursuant to this SECTION 4 within sixty (60) days of the date upon which the
Corporation receives final written notification that the holders of Series A
Preferred have not consented to any of the matters set forth above and the
conversion of the Series A Preferred pursuant to this SECTION 4 shall be
effected within thirty (30) days of such election by the Corporation.
SECTION 5. OPTIONAL CONVERSION.
5.1. General.
(a) Series A Preferred. At any time and from time to time
after the issuance thereof, any holder of Series A Preferred may convert any
share of Series A Preferred held by such holder into a number of shares of
Common Stock determined by dividing the Stated Value Per Share of the Series A
Preferred by the Conversion Price then in effect. The initial Conversion Price
for the Series A Preferred issued prior to March __, 2000 shall be $2.18. The
initial Conversion Price for the Series A Preferred issued on or after March __,
2000 shall be $5.80. The Conversion Price from time to time in effect is subject
to adjustment as hereinafter provided.
(b) Series A-1 Preferred. Each share of Series A-1
Preferred shall convert into the same number of shares of Common Stock as each
share of Series A Preferred pursuant to which it was issued and the provisions
of this Section 5 shall apply to the Series A-1 Preferred, except as
specifically provided in this Section 5.1(b). In the event that the Corporation
has completed a "Qualified Equity Infusion" (as defined below) after the
issuance of the shares of Series A Preferred, any holder of Series A-1 Preferred
may convert any shares of Series A-1 Preferred held by such holder into a number
of shares of Common Stock determined by dividing the Stated Value Per Share by
the price per share of Common Stock paid (or the value accorded each share of
Common Stock if the security purchased is other than Common Stock) in the
Corporation's most recent "Qualified Equity Infusion" (as defined below) which
occurred after the issuance by the Corporation of the shares of Series A
Preferred held by such holder. For purposes of this SECTION 5.1(B), Qualified
Equity Infusion shall mean the most recent (i) equity investment of $5 million
or more made by a "Strategic Investor" (as defined below) or (ii) equity
investment of $10 million or more by a non-Strategic Investor. For purposes of
this
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<PAGE> 22
SECTION 5.1(B), "Strategic Investor" shall mean an investor in the Corporation's
securities which (i) is engaged in the same or a related business as the
Corporation, (ii) in the opinion of a majority of the Board of Directors, is
making the investment primarily for strategic business reasons rather than as a
passive investment and (iii) has a public market capitalization (based on the
fair market value of its outstanding publicly-traded securities) of at least $2
billion. For purposes of this SECTION 5.1(B), an "equity investment" shall
include an investment in any shares of capital stock of the Corporation or any
security which is convertible into, exchangeable for, or exercisable for any
shares of capital stock of the Corporation.
5.2. Conversion Procedure
(a) Any holder of shares of Series A Preferred desiring
to convert any portion thereof into Common Stock shall surrender each
certificate representing one or more shares of the Series A Preferred to be
converted, duly endorsed in favor of the Corporation or in blank and accompanied
by proper instruments of transfer, at the principal business office of the
Corporation (or such other place as may be designated by the Corporation), and
shall give written notice to the Corporation at that office of its election to
convert the same, setting forth therein the name or names (with the address or
addresses) in which the shares of Common Stock are to be issued. Conversion
shall be effective upon receipt by the Corporation of the notice and the share
certificate or certificates contemplated by the preceding sentence. In case of
any Liquidation of the Corporation, such right of conversion shall cease and
terminate at the close of business on the business day fixed for payment of the
amount distributable to the holders of the Series A Preferred pursuant to
SECTION 3.
(b) As soon as possible after a conversion has been
effected (but in any event within five business days), the Corporation shall
deliver to the converting holder:
(i) a certificate or certificates representing
the number of shares of Common Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the converting
holder has specified; and
(ii) a certificate representing any shares of
Series A Preferred which were represented by the certificate or certificates
delivered to the Corporation in connection with such conversion but which were
not converted.
(c) The issuance of certificates for shares of Common
Stock upon conversion of Series A Preferred shall be made without charge to the
holders of such Series A Preferred for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Common Stock.
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<PAGE> 23
(d) The Corporation shall not close its books against the
transfer of Series A Preferred or of Common Stock issued or issuable upon
conversion of Series A Preferred in any manner which interferes with the timely
conversion of Series A Preferred. The Corporation shall assist and cooperate
(but the Corporation shall not be required to expend substantial efforts or
funds in excess of $5,000 in the aggregate) with any holder of Series A
Preferred required to make any governmental filings or obtain any governmental
approval prior to or in connection with any conversion of shares of Series A
Preferred hereunder (including, without limitation, making any filings required
to be made by the Corporation).
(e) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of issuance upon the conversion of the Series A Preferred, not less
than the number of shares of Common Stock issuable upon the conversion of all
outstanding Series A Preferred that may then be exercised. All shares of Common
Stock which are so issuable shall, when issued, be duly authorized and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges.
The Corporation shall take all such actions as may be necessary to ensure that
all such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed (except for
official notice of issuance which shall be immediately delivered by the
Corporation upon each such issuance).
5.3. Subdivision or Combination of Common Stock. If the Corporation
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the outstanding shares of one or more classes of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately decreased to account for such
subdivision, and if the Corporation at any time combines (by reverse stock split
or otherwise) the outstanding shares of one or more classes of Common Stock into
a smaller number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased.
5.4. Reorganization, Reclassification, Consolidation, Merger or
Sale. In connection with any Reorganization Event, the holders of Series A
Preferred shall thereafter have the right to acquire and receive, in lieu of (or
in addition to, as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Series A Preferred, such shares of stock, securities, cash or other assets (or,
if not practicably attainable, the reasonable equivalent thereof) as such holder
would have received in connection with such Reorganization Event if such holder
had converted its Series A Preferred immediately prior to such Reorganization
Event. The Corporation shall make appropriate provisions to ensure that the
requirements of the previous sentence are effected. The Corporation will not
effect any such Reorganization Event unless
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<PAGE> 24
prior to the consummation thereof, the successor corporation (if other than the
Corporation) resulting from such Reorganization Event assumes, by written
instrument, the obligation to deliver each such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.
5.5. Adjustment of Price Upon Issuance of Common Stock.
If and whenever the Corporation shall issue or sell, or is, in
accordance with subparagraphs 5.5(a) through 5.5(g), deemed to have issued or
sold, any shares of Common Stock or other equity securities of the Corporation
or any Options (as defined below) or Convertible Securities (as defined below)
for a price per share less than the applicable Conversion Price for the Series A
Preferred immediately prior to the time of such issue or sale (except for (A)
shares issued in connection with the conversion of Series A Preferred or (B) the
issuance of options, warrants or other common stock equivalents or shares issued
upon the exercise of options, warrants or other common stock equivalents to
directors, officers or employees of the Corporation which are approved by the
Compensation Committee of the Corporation's Board of Directors) (a "Dilutive
Financing"), the Conversion Price shall be reduced by multiplying the Conversion
Price in effect immediately before the issuance or sale by a fraction, the
numerator of which is the number of shares of Common Stock that are Outstanding
on an As-Converted Basis (as defined below) immediately before the Dilutive
Financing plus the number of shares of Common Stock that could be purchased at
the Conversion Price immediately before the time of the Dilutive Financing for
the aggregate consideration paid or payable upon the sale or issuance of Common
Stock or other securities in the Dilutive Financing, and the denominator of
which is the number of shares of Common Stock that are Outstanding on an
As-Converted Basis immediately before the Dilutive Financing plus the number of
shares that are acquired or to be acquired upon the sale or issuance of the
Common Stock and other securities in the Dilutive Financing. For purposes of
this SECTION 5.5, "Outstanding on an As-Converted Basis" immediately before the
Dilutive Financing means the sum of (i) all Common Stock issued and outstanding
immediately before the Dilutive Financing plus (ii) all Common Stock that would
be issued if all Series A Preferred, Options and other Convertible Securities
were converted or exercised, as applicable, hereunder immediately before the
Dilutive Financing.
For purposes of this SECTION 5.5., the following subparagraphs (a) to
(g) shall also be applicable:
(a) Issuance of Rights or Options. In case at any time
the Corporation shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being
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<PAGE> 25
called "Options" and such convertible or exchangeable stock or securities being
called "Convertible Securities") whether or not such Options or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon the exercise of
such Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of all such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the applicable
Conversion Price for the Series A Preferred immediately prior to the time of the
granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding.
(b) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the applicable Conversion Price for the Series A Preferred
immediately prior to the time of such issue of sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that except as otherwise
provided in subparagraph (c), no adjustment of any Conversion Price shall be
made upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options to purchase any such Convertible
Securities for which adjustments of any Conversion Price have been or are to be
made pursuant to
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<PAGE> 26
other provisions of this SECTION 5.5., no further adjustment of such Conversion
Price shall be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate; Expiration
of Options or Convertible Securities. Upon the happening of any of the following
events, namely, if the purchase price provided for in any Option referred to in
subparagraph (a), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in subparagraph
(a) or (b), or the rate at which Convertible Securities referred to in
subparagraph (a) or (b) are convertible into or exchangeable for Common Stock
shall change at any time (including, but not limited to, changes under or by
reason of provisions designed to protect against dilution), the applicable
Conversion Price for the Series A Preferred at the time of such event shall
forthwith be readjusted to the Conversion Price which would have been in effect
at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold, but
only if as a result of such adjustment the Conversion Price then in effect
hereunder is thereby reduced; and on the expiration or termination of such
Option or Convertible Securities, the Conversion Price then in effect hereunder
shall forthwith be increased to the Conversion Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided, that any consideration
which was actually received by the Corporation in connection with the issuance
or sale of such Options or Convertible Securities shall be included in the
readjustment computation even though such Options or Convertible Securities
shall have expired or terminated.
(d) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for dividends or distributions upon
the Common Stock), Options or Convertible Securities (except for dividends or
distributions on the Series A Preferred), the Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to have been issued or sold at consideration
equal to $.01 per share.
(e) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any amounts paid or
receivable for accrued interest or accrued dividends and any expenses incurred
or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case any shares of Common Stock, Options
or Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be
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<PAGE> 27
the fair value of such consideration as determined in good faith by the Board of
Directors of the Corporation, without deduction of any amounts paid or
receivable for accrued interest or accrued dividends and any expenses incurred
or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case any Options shall be issued in
connection with the issue and sale of other securities of the Corporation,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
(f) Record Date. In case the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them (i)
to receive a dividend or other distribution payable in Common Stock, Options or
Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(g) Treasury Shares. The disposition of any shares of
Common Stock owned or held by or for the account of the Corporation shall be
considered an issue or sale of Common Stock for the purpose of this SECTION
5.5., but while held as Treasury Shares shall not be included in the number of
shares of Common Stock outstanding.
5.6. Notices.
(a) Immediately upon any adjustment of the Conversion
Price, the Corporation shall give written notice thereof to all holders of
Series A Preferred, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(b) The Corporation shall give written notice to all
holders of Series A Preferred at least 20 days prior to the date on which the
Corporation closes its books or fixes a record date (i) with respect to any
dividend or distribution upon Common Stock, (ii) with respect to any pro rata
subscription offer to holders of Common Stock or (iii) for determining rights to
vote with respect to any Liquidation or Reorganization Event.
5.7 Certain Events.
If any event occurs of the type contemplated by the provisions
of this Section 5 but not expressly provided for by such provisions, upon
approval by a Disinterested Majority (as defined below), then the Corporation's
board of directors will make an appropriate adjustment in the Conversion Price
so as to protect the
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<PAGE> 28
rights of the holders of the Series A Preferred; provided, however, that no such
adjustment will increase the Conversion Price as otherwise determined pursuant
to this Section 5 or decrease the number of shares of Common Stock issuable upon
conversion of each share of Series A Preferred. For purposes hereof,
"Disinterested Majority" shall mean a majority of the Board of Directors,
whether or not a quorum, excluding those directors who have a direct or indirect
interest in the transaction and those directors who shall have been elected or
designated by the holders of the Series A Preferred.
SECTION 6. MANDATORY CONVERSION. Each share of Series A Preferred shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price (i) immediately prior to the closing of an underwritten initial
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation to the public resulting in the gross proceeds
to the Corporation of not less than $30 million and at a price per share at
least equal to the "Threshold Price" (as defined below) (a "Qualified IPO") or
(ii) following a non-Qualified IPO once the average of the closing sale price of
the Common Stock for sixty (60) consecutive trading days as reported on the
national securities exchange or automated quotation system on which the
Corporation's Common Stock is then listed exceeds the "Threshold Price" (as
defined below). For purposes hereof, "Threshold Price" means either (a) $6.54
per share if the initial public offering takes place prior to December 2, 2002
or (b) $8.72 per share if the initial public offering takes place on or after
December 2, 2002. Each share of Series A-1 Preferred shall be converted as set
forth in SECTION 5.1(B) upon the satisfaction of either of the above conditions.
SECTION 7. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a register for the
registration of issuance and transfers of Series A Preferred. Upon the surrender
of any certificate representing Series A Preferred at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares of Series A Preferred represented by the surrendered certificate. Each
such new certificate shall be registered in such name and shall represent such
number of shares of Series A Preferred as is requested by the holder of the
surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Series A Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such Series A Preferred represented by the surrendered
certificate. The new certificate shall contain a legend referencing the
applicable Stated Value Per Share as provided in Section 1.3.
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<PAGE> 29
SECTION 8. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series A Preferred, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Corporation (provided
that if the holder is a financial institution or other institutional investor,
its own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of Series A Preferred represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on
the Series A Preferred represented by such new certificate from the date to
which dividends have been fully paid on the shares of Series A Preferred
represented by such lost, stolen, destroyed or mutilated certificate.
SECTION 9. NOTICES.
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (a) to the Corporation, at its principal executive offices and
(b) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
SECTION 10. AMENDMENT AND WAIVER.
No amendment, modification or waiver shall be binding or effective with
respect to any provision hereof without the prior affirmative vote or written
consent of the holders of a majority of the shares of Series A Preferred
outstanding at the time such action is taken."
4.
The amendment was duly adopted by unanimous written consent of the
Board of Directors dated as of March ____, 2000 and was duly approved by the
Corporation's shareholders in accordance with the applicable provisions of the
Georgia Business Corporations Code.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed by its duly authorized officer, this ____ day of
_______, 2000.
INTERLAND, INC.
By
-----------------------------------------
Kenneth Gavranovic, Chief Executive Officer
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EXHIBIT C
TO SUBSCRIPTION AGREEMENT
DATED AS OF MARCH 15, 2000
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
COMMON STOCK WARRANT
OF
INTERLAND, INC.
NO. A-1
_______ __, 2000
Void after the Fifth Anniversary
of the Above-Referenced Date
THIS CERTIFIES THAT, for value received, Network Solutions,
Inc. (together with any permitted assigns, the "Warrantholder") is entitled to
purchase from Interland, Inc., a Georgia corporation (the "Company"), 344,827
shares of Common Stock, no par value per share, of the Company ("Common Stock").
The exercise price per share applicable to this Warrant (the "Exercise Price")
shall be $5.80 per share of Common Stock. The Exercise Price and such number of
shares shall be subject to adjustment upon the occurrence of the contingencies
set forth in this Warrant.
Upon delivery of this Warrant, together with payment of the
Exercise Price multiplied by the total number of shares of Common Stock thereby
purchased (the "Aggregate Exercise Price"), at the principal office of the
Company or at such other office or agency as the Company may designate by notice
in writing to the holder hereof, the holder of this Warrant shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased. The date at which the Company receives (i) this Warrant and (ii)
payment for the shares of Common Stock, either by payment in cash, or by check,
or wire transfer, shall be referred to herein as the "Exercise Date". All shares
of Common Stock which may be issued upon the exercise of this Warrant ("Warrant
Shares") shall, upon issuance, be fully paid, validly issued and non-assessable,
free from all taxes, liens and charges.
This Warrant is subject to the following terms and conditions:
<PAGE> 31
1. Exercise of Warrant.
1.1 Time of Exercise.
(a) This Warrant may be exercised in whole or in
part commencing on the date hereof until the fifth anniversary date of the
issuance of this Warrant, and if such day is not a business day, then on the
next business day thereafter.
(b) The issuance of certificates for shares upon
exercise of this Warrant shall be made without charge to the holder thereof for
any issuance tax in respect thereof or other cost incurred by the Company in
connection with such exercise and the related issuance of the shares.
(c) The Company shall not close its books
against the transfer of this Warrant or of any shares issued or issuable upon
the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant.
(d) The Company shall at all times reserve and
keep available out of its authorized but unissued Common Stock solely for the
purpose of issuance upon the exercise of this Warrant, the maximum number of
shares issuable upon the exercise of this Warrant.
1.2 Method of Exercise. While this Warrant remains
outstanding and exercisable in accordance with Section 1.1, the Warrantholder
may exercise, in whole or in part, the purchase rights evidenced hereby. Such
exercise shall be effected by:
(a) the surrender of the Warrant at the
principal office of the Company; and
(b) subject to Section 1.3, the payment to the
Company by wire transfer or check of the Aggregate Exercise Price for all shares
of Common Stock purchased.
1.3 Net Exercise. In lieu of exercising this Warrant, the
Warrantholder may elect to receive shares of Common Stock equal to the value of
this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to the holder hereof a number
of shares of Common Stock computed using the following formula:
S = P x (F-E)
-------
F
Where
S = The number of shares of Common Stock to be issued to the
Warrantholder.
P = The number of shares of Common Stock purchasable under
this Warrant.
F = The Fair Market Value (as defined below) of 1 share of
Common Stock.
E = The Exercise Price (as adjusted to the date of such
calculations).
For purposes of this Section 1.3, the "Fair Market Value" of
the Common Stock shall be determined in good faith by the Board of Directors of
the Company; provided, that if the Common Stock is then trading on a national
securities exchange or in the over-the-counter market, such determination shall
be made with reference to the average closing price of the Common Stock in such
trading over the 20 trading days immediately preceding the exercise of the
Warrant.
1.4 Certificates for Shares. The Company shall, within 30
days after the Exercise Date, prepare a certificate for the shares of Common
Stock purchased in the name of the holder of this Warrant, or as such holder may
direct (subject to the restrictions upon transfer contained herein and upon
payment by such holder hereof of any applicable transfer taxes). In case the
Warrantholder shall exercise this Warrant with respect to less than all of the
shares of Common Stock that may be purchased under this Warrant, the Company
shall execute a new warrant in the form of this Warrant for the balance of such
shares and deliver such new warrant to the Warrantholder.
1.5 Warrant Register. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Warrantholder as the
absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
2. Certain Adjustments.
2.1 Exercise Price; Adjustment of Number of Shares. The
Exercise Price set forth in Section 1 hereof and the number of shares
purchasable hereunder shall be subject to adjustment from time to time as
hereinafter provided.
2.2 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
entity, or the sale of all or substantially all of the Company's assets to
another person or entity (collectively referred to as a "Transaction") shall be
effected in such a way that holders of Common Stock shall be entitled to receive
stock,
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<PAGE> 32
securities, cash or assets with respect to or in exchange for Common Stock,
then, as a condition of such Transaction, reasonable, lawful and adequate
provisions shall be made whereby the holder of this Warrant shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant, upon exercise of this Warrant and in lieu
of the Warrant Shares immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby, such number, amount and like kind
of shares of stock, securities, cash or assets as may be issued or payable
pursuant to the terms of the Transaction with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby as if such shares
were outstanding immediately prior to the Transaction, and in any such case
appropriate provision shall be made with respect to the rights and interest of
the holders to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the number
of Warrant Shares purchasable and receivable upon the exercise of this Warrant)
shall thereafter be applicable, as nearly as may be practicable, in relation to
any shares of stock or securities thereafter deliverable upon the exercise
hereof.
2.3 Stock Splits, Stock Dividends and Reverse Stock
Splits. In case at any time the Company shall subdivide its outstanding shares
of Common Stock into a greater number of shares, or shall declare and pay any
stock dividend with respect to its outstanding stock that has the effect of
increasing the number of outstanding shares of Common Stock, the Exercise Price
in effect immediately prior to such subdivision or stock dividend shall be
proportionately reduced and the number of Warrant Shares purchasable pursuant to
this Warrant immediately prior to such subdivision or stock dividend shall be
proportionately increased, and conversely, in case at any time the Company shall
combine its outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of Warrant Shares purchasable upon the
exercise of this Warrant immediately prior to such combination shall be
proportionately reduced.
2.4 Issuance of Additional Shares of Common Stock. If at
any time after the first anniversary of the date of the Warrant and prior to the
Expiration Date the Company shall issue any Additional Shares of Common Stock
for a consideration per share (the "Subsequent Issue Price") less than the
Exercise Price as in effect immediately prior to such issuance, the Exercise
Price shall be reduced to the price calculated by dividing (i) an amount equal
to the sum of (x) the number of shares of Common Stock outstanding immediately
prior to such issuance multiplied by the Exercise Price then in effect plus (y)
the aggregate consideration, if any, received by the Company in connection with
such issuance, by (ii) the total number of shares of Common Stock outstanding
immediately after such issuance.
For purposes of this Section 2.4, "Additional Shares of Common
Stock" shall mean all shares of Common Stock issued or issuable by the Company
after the Original Issue Date, other than (i) shares of Common Stock issuable
under the Company's employee stock option plan as approved by the Company's
Board of Directors (the "Employee Stock") and (ii) shares issued by the Company
in an underwritten public offering. For purposes of this Section 2.4, in the
case of convertible securities, there shall be determined the price per share
for which Additional Shares of Common Stock are issuable upon the conversion or
exchange thereof, such
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<PAGE> 33
determination to be made by dividing (i) the total amount received or receivable
by the Company as consideration for the issue or sale of such convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon conversion or exchange thereof by (ii) the
maximum aggregate number of additional Shares of Common Stock issuable upon
conversion or exchange of all such convertible securities for such minimum
aggregate amount of additional consideration; and such issue or sale shall be
deemed to be an issue or sale for cash (as of the date of issue or sale of such
convertible securities, whether or not then exercisable or convertible) of such
maximum number of Additional Shares of common stock at the price per share so
determined.
If any rights of conversion or exchange evidenced by
convertible securities the issuance of which resulted in an adjustment to the
Exercise Price and the number of Warrant Shares issuable hereunder pursuant to
this Section 2.4 shall expire without having been exercised, or if any such
convertible securities are exercised for a consideration greater than or for a
number of Additional Shares of Common Stock less than those used for purposed of
determining the adjustment to the Exercise Price provided in this Section 2.4,
the adjusted Exercise Price shall forthwith be readjusted to such Exercise Price
as would have been in effect had an adjustment with respect to such Convertible
Securities been made on the basis that the only Additional Shares of Common
Stock issued or sold were those issued upon the conversion or exchange of such
convertible securities, and that they were issued or sold for the consideration
actually received by the Company upon such exercise, plus the consideration, if
any, actually received by the Company for the granting of such Convertible
Securities.
Notwithstanding anything to the contrary in this Section 2.4,
in no event shall (i) the Exercise Price be increased or (ii) the number of
Warrant Shares purchasable hereunder be decreased pursuant to the provisions of
this Section 2.4.
2.5 Company to Prevent Dilution. In case at any time or
from time to time conditions arise by reason of action taken by the Company
which are not adequately covered by this Section 2, and which might materially
and adversely affect the exercise rights of the holder hereof, unless the
adjustment necessary shall be agreed by the Company and the holder hereof, the
Board of Directors of the Company shall appoint a firm of independent certified
public accountants of national standing, reasonably acceptable to the holder,
who at the Company's expense shall give their opinion upon the adjustment
necessary with respect to the Exercise Price and the number of Warrant Shares
purchasable upon exercise of this Warrant, if any, so as to preserve, without
dilution, the exercise rights of the holder hereof. In the event that the holder
disputes such adjustment, the holder shall be entitled to select an additional
firm of independent certified public accountants of national standing and paid
for by the holder to calculate such adjustment and the Company and the holder
shall use their good faith best efforts to agree on such adjustment based on the
reports of the two accounting firms. In the event that the Company and the
holder are still unable to reach agreement as to such adjustment, the Company
and the holder agree to submit such determination to binding arbitration. Upon
determination of such adjustment, the Board of Directors shall forthwith make
the adjustments described therein.
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<PAGE> 34
2.6 Dissolution, Liquidation or Wind-Up. In case the
Company shall, at any time prior to the exercise of this Warrant, dissolve,
liquidate or wind up its affairs, the holder hereof shall be entitled, upon the
exercise of this Warrant, to receive, in lieu of the Warrant Shares which the
holder would have been entitled to receive, the same kind and amount of assets
as would have been issued, distributed or paid to such holder upon any such
dissolution, liquidation or winding up with respect to such Warrant Shares, had
such holder hereof been the holder of record of the Warrant Shares receivable
upon the exercise of this Warrant on the record date for the determination of
those persons entitled to receive any such liquidating distribution.
2.7 Accountant's Certificate. In each case of an
adjustment in the Exercise Price, number of Warrant Shares or other stock,
securities or property receivable upon the exercise of this Warrant, the Company
shall compute, and upon the holder's request shall at the Company's expense
cause independent public accountants of recognized standing selected by the
Company and reasonably acceptable to the holder to certify such computation,
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of (i) the number of
shares of Common Stock of each class outstanding or deemed to be outstanding,
(ii) the adjusted Exercise Price and (iii) the number of Warrant Shares issuable
upon exercise of this Warrant. The Company will forthwith mail a copy of each
such certificate to the holder hereof. In the event that the holder disputes
such adjustment, the holder shall be entitled to select an additional firm of
independent certified public accountants of national standing and paid for by
the holder to certify such adjustment and the Company and the holder shall use
their good faith best efforts to agree on such adjustment based on the reports
of the two accounting firms. In the event that the Company and the holder are
still unable to reach agreement as to such adjustment, the Company and the
holder agree to submit such determination to binding arbitration. Upon
determination of such adjustment, the Board of Directors shall forthwith make
the adjustments described therein.
3. Representations and Warranties of Warrantholder.
Warrantholder hereby represents and warrants that:
3.1 Purchase Entirely for Own Account. This Warrant and
the Common Stock issuable upon exercise hereof (collectively, the "Securities")
will be acquired for investment for Warrantholder's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and Warrantholder has no present intention of selling, granting any
participation in, or otherwise distributing the same. Warrantholder does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to any person with respect to any of the
Securities. Warrantholder represents that it has full power and authority to
enter into this Warrant.
3.2 Investment Experience. Warrantholder acknowledges
that it is able to protect its own economic interests, can bear the economic
risk of its investment and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the investment in this Warrant. Warrantholder also represents it
has not been organized for the purpose of acquiring this Warrant.
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<PAGE> 35
3.3 Accredited Investor. Warrantholder is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act of 1933 (the "Act").
3.4 Restricted Securities. Warrantholder understands that
the Securities are characterized as "restricted securities" under the Act
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering, and that under the Act such securities may be
resold without registration under the Act only in certain limited circumstances.
In this connection, Warrantholder represents that it is familiar with Rule 144
promulgated under the Act and understands the resale limitations imposed thereby
and by the Act. Warrantholder further acknowledges that it will not be able to
avail itself of Rule 144 unless and until the Company effects a public offering
of its Common Stock.
3.5 Further Limitations on Disposition. Without in any
way limiting the representations set forth above, Warrantholder further agrees
not to make any disposition of all or any portion of the Securities unless and
until:
(a) there is then in effect a Registration
Statement under the Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement; or
(b)(i) such Warrantholder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (ii) if reasonably requested by the Company, such Warrantholder shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such shares
under the Act.
4. Miscellaneous.
4.1 Successors and Assigns. The terms of this Warrant
shall be binding upon and shall inure to the benefit of any successors or
assigns of the Company and of the holder hereof and of the Common Stock issued
upon the exercise hereof.
4.2 No Rights as Shareholder. No Warrantholder, as such,
shall be entitled to vote or receive dividends or be deemed to be a shareholder
of the Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder of this Warrant, as such, any rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
corporate action, receive notice of meetings, receive dividends or subscription
rights, or otherwise.
4.3 No Fractional Shares. No fractional share shall be
issued upon exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay Warrantholder a sum in cash equal to the fair market value
of such fraction on the date of exercise.
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<PAGE> 36
4.4 Lock-Up. Warrantholder hereby agrees that it shall
not, without the consent of the managing underwriter, sell, transfer, pledge,
hypothecate or otherwise transfer or dispose of any Common Stock or other shares
of stock of the Company then owned by Warrantholder for up to 180 days following
the effective date of a registration statement (other than a registration
statements relating to any employee benefit plan, or with respect to a corporate
reorganization or other transaction under Rule 145 promulgated under the
Securities Act )of the Company for an initial public offering filed under the
Securities Act; provided, however, that all officers and directors of the
Company and all holders of Common Stock (or options or other rights to acquire
Common Stock) equal to at least 1% of the Company's voting securities (on a
fully-diluted basis) enter into similar agreements. In order to enforce the
foregoing covenant, the Company shall have the right to place restrictive
legends on the certificates representing the shares subject to this Section and
to impose stop transfer instructions with respect to the Common Stock and such
other shares of stock of Warrantholder.
4.5 Replacement. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will execute and deliver, in lieu
thereof, a new Warrant of like data and tenor.
4.6 Business Days. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or Sunday or shall be a legal holiday, then such action may
be taken or such right may be exercised on the next succeeding day not a legal
holiday.
4.7 Governing Law. This Warrant shall be governed by the
internal laws of the State of Georgia, as applied to contracts between residents
of Georgia and to be performed entirely within Georgia, without regard to the
application of conflict of law rules.
4.8 Agreement by Warrantholder. Receipt of this Warrant
by the holder hereof shall constitute acceptance of and agreement to the
foregoing terms and conditions.
5. Amendment. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively) with the
written consent of the Company and the holder hereof.
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<PAGE> 37
IN WITNESS WHEREOF, Interland, Inc. has caused this Warrant to be
signed by its duly authorized officer.
INTERLAND, INC.
By:
---------------------------------------
Ken Gavranovic, Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.4(a)
STOCKHOLDERS' AGREEMENT
AMONG
INTERLAND, INC.
CREST COMMUNICATIONS PARTNERS L.P.,
CREST ENTREPRENEURS FUND L.P.
BOULDER VENTURES III, L.P.
AND
THE OTHER INVESTORS SET FORTH ON THE SIGNATURE PAGE HERETO
DATED DECEMBER 2, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS............................................................2
2. DIRECTORS OF THE COMPANY...............................................2
2.1. Board of Directors............................................2
2.2. Board Meetings................................................3
2.3. Board Committees..............................................3
3. TRANSFER OF EQUITY SECURITIES; PREEMPTIVE RIGHTS.......................4
3.1. Restrictions on Transfer of Shares by the Stockholders........4
3.2. Investor Stockholders Ownership...............................4
3.3. Rights of First Refusal and Tag-Along Rights..................4
3.3.1. First OfferRights.....................................4
3.3.2. Offer.................................................5
3.3.3. Company Rights........................................5
3.3.4. Stockholder Rights....................................5
3.3.5. Sale by Transferor....................................6
3.3.6. Closing...............................................7
3.3.7. Tag-Along Rights......................................7
3.4. Obligation to Sell............................................8
3.5. Preemptive Rights.............................................9
3.6. Put Rights...................................................10
4. ADDITIONAL COVENANTS OF THE COMPANY...................................10
4.1. Books and Records............................................10
4.2. Access and Examination Rights................................11
4.3. Financial and Business Information...........................11
4.4. Defaults; Litigation.........................................12
4.5. Additional Information.......................................12
5. ADDITIONAL COVENANTS AND REPRESENTATIONS OF THE
EXISTING STOCKHOLDERS.................................................12
5.1. Action by Written Consent....................................12
5.2. Special Meetings.............................................13
5.3. Stock Ownership..............................................13
5.4. Holdback Agreement...........................................13
6. MISCELLANEOUS.........................................................13
6.1. Legend.......................................................13
6.2. Specific Performance.........................................14
6.3. Termination..................................................14
6.4. Assignment...................................................14
6.5. Entire Agreement; Amendment..................................15
6.6. Waiver.......................................................15
6.7. No Third Party Beneficiaries.................................15
6.8. Binding Effect...............................................15
6.9. Governing Law................................................16
6.10. Notices......................................................16
6.11. Execution in Counterparts....................................17
</TABLE>
<PAGE> 3
STOCKHOLDERS AGREEMENT
INTERLAND, INC.
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is entered
into as of December 2, 1999 by and among Interland, Inc., a Georgia corporation
(the "Company"), Crest Communications Partners L.P., a Delaware limited
partnership and Crest Entrepreneurs Fund L.P., a Delaware limited partnership
(collectively, "Crest"), Boulder Ventures III, L.P., a Delaware limited
partnership ("Boulder") and the other investors set forth on the signature page
hereto (the "Other Investors," and together with Crest and Boulder, the
"Investor Stockholders"), and Waldemar Fernandez and Ken Gavranovic (the
"Existing Stockholders"). The Investor Stockholders and the Existing
Stockholders, together with other stockholders of the Company who may become
parties hereto, are referred to herein collectively as the "Stockholders" and
individually as a "Stockholder."
WHEREAS, the Existing Stockholders own 16,671,340 shares of
the issued and outstanding shares of the Company's common stock, no par value
per share (the "Common Stock"), representing 76.7% of the total issued and
outstanding equity securities of the Company immediately prior to the execution
hereof and the issuance to the Investor Stockholders of the Company's Series A
Convertible Participating Preferred Stock, no par value per share (the "Series
A Preferred Stock");
WHEREAS, immediately prior to the execution hereof, the
Company has issued to the Investor Stockholders an aggregate of 9,174,313
shares of Series A Preferred Stock pursuant to a Stock Purchase Agreement
between the Company and the Investor Stockholders dated as of the date hereof
(the "Purchase Agreement");
WHEREAS, the Company and the Stockholders desire to enter
into this Agreement in order to provide, among other things, for certain
restrictions relating to the transfer of the Equity Securities and other rights
and responsibilities as set forth herein; and
NOW, THEREFORE, for and in consideration of the foregoing and
of the mutual covenants and agreements hereinafter set forth, the parties
hereto agree as follows:
<PAGE> 4
1. DEFINITIONS
For all purposes of this Agreement, certain capitalized terms
specified in Exhibit A shall have the meanings set forth in Exhibit A, except
as otherwise expressly provided.
2. DIRECTORS OF THE COMPANY
As provided in the Articles of Incorporation, as amended, of
the Company (the "Articles") and the Bylaws, as amended, of the Company (the
"Bylaws"), all directors of the Company shall be elected by the holders of the
Common Stock and the Series A Preferred Stock voting together as a single class
(with each share of Series A Preferred Stock entitled to the number of votes
equal to the number of votes which could be cast in such vote by the number of
shares of Common Stock that would be issuable upon conversion of such share of
Series A Preferred Stock on the record date for determining eligibility to
participate in the action being taken).
2.1. BOARD OF DIRECTORS
The Company and each Stockholder (for so long as such
Stockholder owns any capital stock of the Company) shall take or cause to be
taken all such action within their respective power and authority (including
without limitation the voting of shares of Equity Securities held by such
Stockholder or the taking of action by consent with respect to such shares) as
may be required; provided, however, that the Investor Stockholders' rights
provided in this SECTION 2.1 shall terminate once the Investor Stockholders'
aggregate ownership of the Equity Securities is less than ten percent (10%) of
the aggregate voting power of the Equity Securities (the "10% Requirement"):
(1) to establish and maintain the authorized
size of the Board of Directors of the Company at eight (8) directors; to
maintain the quorum requirements for actions of the Board of Directors at a
majority of the entire number of directors, including the directors designated
by the Investor Stockholders as provided below; and to maintain the voting
requirements for actions of the Board of Directors at a majority of directors
present at a meeting at which there is a quorum, except in respect of such
matters as this Agreement, the Articles or the Bylaws of the Company may impose
a greater voting requirement;
(2) to cause to be elected to the Board of
Directors of the Company (A) two directors designated jointly by Crest and
Boulder or their assignees, on behalf of the Investor Stockholders, who shall
initially be Andrew E. Jones and Gregg A. Mockenhaupt, (B) four directors
designated by the Company, three of whom shall initially be Ken Gavranovic,
Maryjane Stevens and Rahim Shah, and (C) two directors who are not employees of
the Company, designated by
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<PAGE> 5
the Company;
(3) to remove forthwith from the Board of
Directors any director when removal is requested for any reason by the
Stockholder group designating the election of such director pursuant to SECTION
2.1(2) above (each a "Designating Group"), with or without cause;
(4) in the case of death, resignation or other
removal as herein provided of such director, to elect another person designated
by the respective Designating Group to fill the vacancy created thereby; and
(5) to use its best efforts to prevent any
action from being taken by the Board of Directors of the Company during the
pendency of any vacancy due to death, resignation or removal of a director,
unless the Designating Group shall have failed for a period of ten days after
written notice of such vacancy to designate a replacement.
The Investor Stockholders, for so long as they own shares of
Series A Preferred Stock, shall be permitted to send no more than four
representatives in the aggregate (the "Representatives"), with one
Representative designated by each of Crest, Boulder, BancBoston Ventures Inc.
and Private Equity Co-Invest Ltd., to attend, as nonvoting observers, all
meetings of the Company's Board of Directors or committees thereof and, in this
respect, the Company shall provide the Representatives copies of all notices,
minutes, consents, and other material that it provides to its Directors;
provided, however, that the Company reserves the right to exclude the
Representatives from access to any material or meeting or portion thereof if
the Company in good faith believes upon advice of counsel that such exclusion
is reasonably necessary to preserve the attorney-client privilege or to protect
highly confidential proprietary information. The Representatives may
participate in discussions of matters brought to the Board of Directors or the
committees thereof.
2.2. BOARD MEETINGS
The Company and each Stockholder agree to take, or cause the
Board of Directors to take, all such actions necessary to hold meetings of the
Board of Directors at least once each month in accordance with the Bylaws of
the Company.
2.3. BOARD COMMITTEES
The Company and each Stockholder further agree to take, or to
cause the Board of Directors to take, all such actions necessary to cause the
directors designated by the Investor Stockholders to be nominated to each
committee of the Board of Directors whether now in existence or created after
the date hereof;
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<PAGE> 6
provided, however, the rights granted to the Investor Stockholders in this
SECTION 2.3 shall terminate if the Investor Stockholders fail to maintain the
10% Requirement.
3. TRANSFER OF EQUITY SECURITIES; PREEMPTIVE RIGHTS
Until the termination of this Agreement, the following
restrictions shall apply to the Transfer of Equity Securities:
3.1. RESTRICTIONS ON TRANSFER OF SHARES BY THE STOCKHOLDERS
Subject to the rights of the Investor Stockholders and the
Existing Stockholders set forth in this SECTION 3, Stockholders may only
Transfer Equity Securities in accordance with this SECTION 3. No Transfer of
Equity Securities in violation of this Agreement shall be made or recorded on
the books of the Company, and any such Transfer shall be void and of no effect.
3.2. INVESTOR STOCKHOLDERS OWNERSHIP
With the exception of increases in percentage ownership as a
result of anti-dilution and other conversion ratio adjustments set forth in the
Articles, the Investor Stockholders will not acquire additional Equity
Securities if doing so would have the effect of increasing the Investor
Stockholders' aggregate percentage ownership of the Company above that in
effect on the Effective Date without first obtaining the approval of the Board
of Directors. The Investor Stockholders hereby covenant that they will not seek
to exercise control over the management and operations of the Company other
than through their ability to designate two members of the Company's Board of
Directors. Notwithstanding the foregoing, the Investor Stockholders may acquire
additional Equity Securities and thereby increase their percentage ownership of
the Company without obtaining approval of the Board of Directors if such
acquisition occurs as a result of the exercise of rights provided for in this
SECTION 3. The Investor Stockholders may not Transfer any Equity Securities to
a Third Party unless such Transfer is approved by the Board of Directors, which
approval shall not be unreasonably withheld.
3.3. RIGHTS OF FIRST REFUSAL AND TAG-ALONG RIGHTS
3.3.1. FIRST OFFER RIGHTS
In the event that a Stockholder (a "Transferor"), desires to
Transfer for value (a "Sale of Shares") Equity Securities now or hereafter held
or acquired by such Transferor, before the Transferor may effect a Sale of
Shares, the Transferor first must make the offer(s) required by this SECTION
3.3 and such offer(s) must not have been accepted as provided in this SECTION
3.3.
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<PAGE> 7
3.3.2. OFFER
Prior to effecting a Sale of Shares, the Transferor shall
first deliver a written notice (the "Transfer Notice") to the Company and to
each other Stockholder specifying (i) the name and address of the individual or
entity to whom the Transferor wishes to Transfer any Equity Securities, (ii)
the number and class or series of Equity Securities which the Transferor wishes
to Transfer (the "Offered Shares"), (iii) the cash or other purchase price
offered for the Equity Securities (the "Offer Price"), and (iv) any other terms
and conditions of the Transfer. The Transfer Notice shall constitute an
irrevocable offer by the Transferor to sell to the Company and to each other
Stockholder the Offered Shares at the price under the same terms and conditions
contained in the Transfer Notice and pursuant to the terms of this Section 3.3.
3.3.3. COMPANY RIGHTS
Within ten (10) Business Days following its receipt of the
Transfer Notice, the Company shall notify the Transferor and each other
Stockholder as to the number of the Offered Shares, if any, that it is electing
to purchase (the "Company Acceptance"). The election to purchase Offered Shares
shall be made on behalf of the Company and approved by those members of the
Board of Directors of the Company who are not and have not been designated by,
or are not Affiliates of, the Transferor. The Company Acceptance shall be
deemed to be an irrevocable commitment to purchase from the Transferor that
number of the Offered Shares which the Company has elected to purchase pursuant
to the Company Acceptance.
3.3.4. STOCKHOLDER RIGHTS
If the Company does not elect to purchase all of the Offered
Shares, then the Stockholders shall have the right to purchase any remaining
Offered Shares that the Company has not agreed to purchase (the "Remaining
Offered Shares"). Within five (5) Business Days following its receipt of the
Company Acceptance, each other Stockholder shall notify the Company and the
Transferor as to the number of the Remaining Offered Shares, if any, that each
such Stockholder is electing to purchase (each such notice being a "Stockholder
Acceptance"). If the number of Remaining Offered Shares is less than the total
number included in all Stockholder Acceptances (as verified by the Company),
then the number of Remaining Offered Shares shall be allocated as nearly as
practicable among the Stockholders pro-rata in proportion to the number of
shares of Common Stock (assuming conversion of the Series A Preferred Stock)
held by each such Stockholder. Each of the Stockholders shall have the right of
over-subscription such that if any of the Stockholders fails to exercise the
right to purchase its pro rata portion of the Remaining Offered Shares, the
Company shall promptly notify each of the other Stockholders and each of the
other Stockholders may purchase the non-purchasing Stockholder's portion,
within five (5) Business Days of the date of this
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<PAGE> 8
subsequent notice from the Company, allocated as nearly as practicable among
the Stockholders pro-rata in proportion to the number of shares of Common Stock
(assuming conversion of the Series A Preferred Stock) held by each Stockholder.
Each Stockholder Acceptance shall be deemed to be an irrevocable commitment to
purchase from the Transferor that number of the Remaining Offered Shares which
the Stockholders have elected to purchase pursuant to their Stockholder
Acceptances.
3.3.5. SALE BY TRANSFEROR
If the Company and Stockholders do not deliver to the
Transferor a Company Acceptance and the Stockholder Acceptances to purchase all
of the Offered Shares or exercise Tag-Along Rights within the time frames set
forth in SECTIONS 3.3.3 AND 3.3.4 above, the Transferor (a) shall be under no
obligation to sell any of the Offered Shares to the Company and the
Stockholders, unless the Transferor so elects, and (b) may, within a period of
90 days from the date of the Transfer Notice, sell all, but not less than all,
of the Offered Shares to one or more Third Parties (each a "Third Party
Transferee"), for cash or other consideration substantially on the terms
specified in the Transfer Notice; provided that if there is more than one Third
Party Transferee, the Transferor in good faith must obtain binding and
definitive commitments to purchase all the Offered Shares within the 90-day
period before any sale to a Third Party Transferee of the Offered Shares may
take place. Upon any such sale, the Third Party Transferee of the Offered
Shares shall execute an agreement in form and substance satisfactory to the
Company and the Stockholders pursuant to which the Third Party Transferee
agrees that the Equity Securities it acquired from the Transferor are subject
to the provisions of this SECTION 3 and otherwise agrees to become a party to
this Agreement as a Stockholder. Any Third Party Transferee to whom Offered
Shares are Transferred pursuant to and in compliance with this SECTION 3.3
shall, upon consummation of such Transfer, be deemed a Stockholder. If the
Transferor does not complete the sale of the Offered Shares within the 90-day
period, the provisions of this SECTION 3 shall again apply, and no Transfer of
Shares held by the Transferor shall be made otherwise than in accordance with
the terms of this Agreement.
3.3.6. CLOSING
The closing of purchases of Offered Shares by the Company and
the Stockholders (or their designees) pursuant to this SECTION 3.3. shall take
place within 90 days after the date of the Transfer Notice at 11:00 A.M. local
time at the principal offices of the Company, or at such other date, time or
place as the parties to the sale may agree. At least five (5) Business Days
prior to the closing, the Company shall notify the Transferor in writing of the
name and number of purchasers and the portion of the Offered Shares to be
purchased by the Company and the Stockholders. At the closing, the Transferor
shall sell, transfer and deliver to the Company and each of the Stockholders
participating in the purchase, full
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<PAGE> 9
right, title and interest in and to the Offered Shares so purchased, free and
clear of all liens, security interests or adverse claims of any kind and nature
(except as otherwise set forth in the Articles and this Agreement and
applicable securities laws) and shall deliver to the Company and all
participating Stockholders a certificate or certificates representing the
Offered Shares sold, in each case duly endorsed for transfer or accompanied by
appropriate stock transfer powers duly endorsed with signatures guaranteed by a
commercial bank, trust company or registered broker dealer. Simultaneously with
delivery of the certificates, the Company and each of the participating
Stockholders shall deliver to the Transferor, in full payment of the purchase
price of the Offered Shares purchased, (a) any cash consideration for the
shares by wire transfer of immediately available funds to the bank and the
account designated by the Transferor and/or (b) any non-cash consideration for
the shares in person to the Transferor at Closing.
3.3.7. TAG-ALONG RIGHTS
To the extent any rights of first refusal are not exercised
under this SECTION 3.3 as to all the Offered Shares or the consideration in any
proposed sale is other than cash or promissory notes, the Transferor proposing
to effect a Sale of Shares shall afford the Investor Stockholders the
opportunity to participate in the sale with the Transferor (the "Tag-Along
Right") with each such Stockholder (including the Transferor) participating in
the sale pro-rata in proportion to the ownership of the Equity Securities by
each of the Stockholders (on an as-converted basis, with respect to all
then-outstanding convertible securities), and for the same consideration and
otherwise on the same terms as specified in the Transfer Notice. In the event
that any Stockholder shall propose a Sale of Shares, the Transferor shall
provide written notice to the Company and the Investor Stockholders in
accordance with SECTION 3.3, and if the Investor Stockholders intend to
participate in the proposed sale, they shall state their intention to
participate in the Stockholder Acceptance, as the case may be, delivered to the
Transferor in accordance with SECTION 3.3.
3.4. OBLIGATION TO SELL
(1) If the Board of Directors recommends a transaction
in which all of the Equity Securities would be sold or exchanged (in a business
combination or otherwise) in a bona fide arms length transaction to a Third
Party (other than a public offering under the Act) (the "Recommended
Transaction"), the Investor Stockholders of the Company and the Existing
Stockholders shall be obligated to, and shall, (a) Transfer to such Third
Party, all Equity Securities (on an as-converted basis, with respect to the
Series A Preferred Stock) owned by such Stockholder and (b) if stockholder
approval of the transaction is required, vote its Equity Securities in favor
thereof. The requirements of this SECTION 3.4 shall apply only in the event
that (a) the per share consideration to be received in the Recommended
Transaction is in excess of the applicable Threshold Price and (b) the
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<PAGE> 10
consideration offered in the Recommended Transaction consists of (i) cash, (ii)
securities listed on an established national securities exchange or automated
quotation system and registered under the Act or (iii) a combination thereof.
(2) The obligations of the Stockholders pursuant to this
SECTION 3.4 are subject to the satisfaction of the following conditions:
(a) if any Stockholders of a class or series are given
an option as to the form and amount of consideration to be received, all
holders of such class or series will be given the same option;
(b) no Stockholder shall be obligated to make any
out-of-pocket expenditure prior to the consummation of the Recommended
Transaction and no Stockholder shall be obligated to pay more than his pro rata
share (based upon the amount of consideration received) of reasonable expenses
incurred in connection with a consummated Recommended Transaction to the extent
such costs are incurred for the benefit of all Stockholders and are not
otherwise paid by the Company or the acquiring party (costs incurred by or on
behalf of a Stockholder for his sole benefit will not be considered costs of
the transaction hereunder), provided that a Stockholder's liability for such
expenses shall be capped at the total purchase price received by such
Stockholder for his shares of the capital stock of the Company; and
(c) in the event that the Stockholders are required to
provide any representations in connection with the Recommended Transaction, the
Stockholders shall provide representations only concerning each Stockholder's
valid ownership of his capital stock in the Company, free of all liens and
encumbrances (other than those arising under applicable securities laws), and
each Stockholder's authority, power, and right to enter into and consummate
such purchase or merger agreement without violating any other agreement.
3.5. PREEMPTIVE RIGHTS
(1) The Company hereby grants to each Investor
Stockholder the right (but not the obligation) to purchase the Investor
Stockholder's pro rata share of all (or any part) of New Securities (as
hereinafter defined) that the Company may, from time to time, propose to sell
and issue. A pro rata share, for purposes of this preemptive right, is the
portion of the New Securities obtained by multiplying the total New Securities
by a fraction, the numerator of which is the sum of the number of shares of
Common Stock then held by an Investor Stockholder and the number of shares of
Common Stock into which shares of Series A Preferred Stock or other convertible
securities then held by an Investor Stockholder may then be converted, and the
denominator of which is the total number of shares of Common Stock plus the
total number of shares of Common Stock issuable upon conversion of all
then-outstanding convertible securities. For purposes of this SECTION 3.5, "New
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<PAGE> 11
Securities" shall mean any common stock or preferred stock of the Company,
whether now authorized or not, and rights, options or warrants to purchase such
common stock or preferred stock, and securities of any type whatsoever that
are, or may become, convertible into or exchangeable for common stock or
preferred stock of the Company, but shall not include: (a) shares of Common
Stock to be issued upon conversion of the Series A Preferred Stock; (b) shares
of Common Stock issued to officers, directors, consultants or employees of the
Company upon the exercise of options issued to such persons, under any stock
option, other equity incentive plan, or pursuant to agreements entered into
prior to the date of this Agreement, in all cases, approved by the Board of
Directors or a committee thereof; (c) securities offered in an underwritten
public offering; or (d) securities issued in consideration of the acquisition
of one or more businesses by the Company.
In the event the Company issues New Securities, it shall give
the Investor Stockholders written notice of such issuance within sixty (60)
days thereof, describing the type of New Securities, the price and the general
terms upon which the Company issued the same. The Investor Stockholders shall
have ten (10) Business Days from the date of receipt of any such notice to
purchase all or a portion of its pro rata share of the New Securities for the
price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(2) In the case of an issuance and sale of New
Securities to a Strategic Investor, the rights granted under this SECTION 3.5
shall be exercisable only in the following circumstances:
(a) if the issuance or series of related
issuances of New Securities to a Strategic Investor takes place within sixty
(60) days of the date of this Agreement and (i) the aggregate purchase price of
the New Securities is equal to or greater than $5 million and (ii) the price
per share for such New Securities is less than the per share purchase price
paid for the Series A Preferred Stock under the Purchase Agreement; or
(b) if the issuance or series of related
issuances of New Securities to a Strategic Investor takes place more than sixty
(60) days from the date of this Agreement, and (i) the aggregate purchase price
of the New Securities is equal to or greater than $20 million and (ii) the
price per share for such New Securities is less than one and one-half times the
per share purchase price paid for the Series A Preferred Stock under the
Purchase Agreement.
The right to purchase New Securities set forth in this
SECTION 3.5(2) shall be offered to the Investor Stockholders within sixty (60)
days following the issuance of the New Securities.
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3.6. PUT RIGHTS
In the event that the Company has not initiated and kept open
for thirty days a rescission offer to those holders of its Common Stock who (i)
reside in the states of Delaware, Florida, Georgia, Idaho, New Jersey, New York
and Virginia and (ii) purchased the Common Stock between November 1, 1998 and
November 1, 1999 by January 31, 2000, which rescission offer satisfies the
requirements of those states in which the rescission offer was made, the
Investor Stockholders shall have the right to require that the Company
repurchase their shares of Series A Preferred and any Common Stock into which
the Series A Preferred shall have been converted. The Investor Stockholders
shall have until March 31, 2000 to exercise the rights granted pursuant to this
SECTION 3.6 and may exercise these rights with regard to all or a part of the
Series A Preferred or Common Stock by sending written notice to the Company
requesting that the Company repurchase their shares. The purchase price per
share of Series A Preferred or Common Stock shall be the Stated Value Per
Share, as defined in the Company's Articles of Incorporation, plus any accrued
but unpaid dividends thereon.
4. ADDITIONAL COVENANTS OF THE COMPANY
The Company hereby covenants with each Stockholder as follows:
4.1. BOOKS AND RECORDS
The Company shall keep and maintain adequate and proper books
and records of account, in which complete entries are made in accordance with
generally accepted accounting principles consistently applied and in accordance
with all applicable laws, rules, and regulations, reflecting all financial and
other transactions of the Company normally or customarily included in books and
records of account of companies engaged in the same or similar businesses and
activities as the Company.
4.2. ACCESS AND EXAMINATION RIGHTS
The Company shall permit each Investor Stockholder and any
agents or representatives thereof to visit and inspect the properties of the
Company, to examine and make abstracts from any of the Company's books and
records (including agreements, licenses, and similar documents) at any
reasonable time and as often as such Investor Stockholder or such agents or
representatives may reasonably request, and to discuss the business,
operations, prospects, assets, properties, and condition (financial or
otherwise) of the Company with any of the officers, directors, employees,
agents, or representatives of the Company; provided, however, that such rights
of access and examination shall be subject to such security or safety rules and
regulations as the Company may have in effect from time to time
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<PAGE> 13
that are applicable to all visitors to its facilities and to applicable laws
and regulations, including those applying to classified material and
facilities.
4.3. FINANCIAL AND BUSINESS INFORMATION
The Company shall furnish to the Investor Stockholders:
(1) as soon as available and in any event within 90 days
after the end of each fiscal year of the Company, a copy of the audited balance
sheet of the Company as of the end of such fiscal year and the related audited
statements of income and cash flows for the fiscal year, all prepared in
reasonable detail, and certified by independent certified public accountants of
recognized national standing as presenting fairly the financial position of the
Company and approved by the Board of Directors of the Company, including
footnotes and setting forth in comparative form the corresponding figures for
the corresponding period of the preceding fiscal year. The Company shall also
provide the figures for such period set forth in the operating plan and budget
delivered by the Company pursuant to subsection (4) hereof;
(2) as soon as available and in any event within 45 days
after the end of each fiscal quarter of the Company (other than the last
quarter of each fiscal year) in the case of quarterly statements and within 30
days after the close of each month of each fiscal year in the case of monthly
statements, a copy of the unaudited balance sheet of the Company as of the end
of the quarter or month and the related unaudited statements of income and cash
flows of the Company for the periods commencing at the end of the previous
quarter or month and ending at the end of the quarter or month and commencing
at the beginning of the fiscal year and ending at the end of the quarter or
month, in each case (a) setting forth in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year and the
figures for the period set forth in the operating plan and budget delivered by
the Company pursuant to subsection (4) hereof and (b) in the case of quarterly
financial statements, accompanied by a report from the Company's Chief
Financial Officer (or other member of management acting in such capacity)
summarizing the Company's financial condition and results of operations during
such period and in comparison to the periods set forth in (a) immediately
preceding;
(3) promptly after the sending or filing thereof, copies
of all financial statements and reports that the Company sends to its
stockholders and copies of all regular, periodic, and special reports which the
Company files with any governmental authority, including, without limitation
the United States Securities and Exchange Commission; and
(4) as soon as available and in any event no later than
30 days prior
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to the first day of each fiscal year of the Company beginning after the date
hereof, an annual operating plan and budget (including cash flow data) for the
Company for the upcoming fiscal year, each prepared in reasonable detail, as
each operating plan and budget has been approved by the Board of Directors of
the Company.
4.4. DEFAULTS; LITIGATION
The Company shall furnish to the Investor Stockholders
notifications of any material defaults under any of its contracts or agreements
and copies of any litigation brought against the Company, including in each
case, a detailed description thereof.
4.5. ADDITIONAL INFORMATION
The Company shall furnish to the Investor Stockholders such
additional information as the Investor Stockholders may reasonably request.
5. ADDITIONAL COVENANTS AND REPRESENTATIONS OF THE
EXISTING STOCKHOLDERS
5.1. ACTION BY WRITTEN CONSENT
The Existing Stockholders agree that they will not take any
action by written consent, which may otherwise be permitted by the Company's
Articles of Incorporation or Bylaws, without first obtaining the consent to
such action by the holders of a majority of the Series A Preferred.
5.2. SPECIAL MEETINGS
The Existing Stockholders agree that, upon a request by the
Investor Stockholders that a special meeting of the Company's stockholders be
called, the Existing Stockholders will request the Company to call such a
special meeting.
5.3. STOCK OWNERSHIP
Each Existing Stockholder hereby represents that as of the
date of this Agreement, he owns (free and clear of any liens) 8,335,670 shares
of the Company's Common Stock.
5.4. HOLDBACK AGREEMENT
In the event that the Company effects a registration of any
securities under the Act, in an underwritten public offering, each Existing
Stockholder agrees
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<PAGE> 15
not to effect any sale, transfer, disposition or distribution, including any
sale pursuant to Rule 144 under the Act, of any Equity Securities (except as
part of such offering) during (i) the 180-day period commencing with the
effective date of the registration statement for the IPO and, (ii) for so long
as each Existing Stockholder owns 5% or more of the Company's outstanding
voting securities, the 90-day period commencing with the effective date of the
registration statement for any subsequent public offering, provided, in the
case of both (i) and (ii) above, that all officers, directors and holders of 5%
or more of the Company's outstanding voting securities enter into agreements
providing for similar restrictions on sales.
6. MISCELLANEOUS
6.1. LEGEND
The certificates or other evidence representing the Equity
Securities held by the Stockholders shall bear a legend (the "Legend") in
substantially the following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") or
state securities laws and cannot be offered, sold or
otherwise transferred in the absence of registration or the
availability of an exemption from registration under the Act
and regulations promulgated thereunder and applicable state
securities laws. The voting rights with respect to, and sale
or other disposition of, the securities represented by this
certificate are restricted by and subject to the provisions
of a Stockholders' Agreement dated as of December 2, 1999, a
copy of which is available for inspection at the offices of
the Company.
6.2. SPECIFIC PERFORMANCE
With respect to the terms of this Agreement, in addition to
any other remedies which the Stockholders and the Company may have at law or in
equity, the Company and the Stockholders hereby acknowledge that the harm which
might result to the Stockholders or the Company from breaches by the Company or
Stockholders, as appropriate, of their respective obligations to take all
necessary actions with respect to the rights and obligations set forth in this
Agreement cannot be adequately compensated by damages. Accordingly, the Company
and the Stockholders agree that the parties to this Agreement shall have the
right to have all obligations and undertakings set forth in this Agreement
specifically performed by each other party to this Agreement and that any
Stockholder or the Company, as appropriate, shall have the right to obtain an
order or decree of such specific performance in any of the courts of the United
States of America or of any state or
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other political subdivision thereof.
6.3. TERMINATION
This Agreement shall terminate, and all agreements, covenants
and obligations of the parties hereunder shall become wholly void and of no
effect, upon the closing date of a Qualified Public Offering.
6.4. ASSIGNMENT
Except for assignments by the Investor Stockholder of the
rights existing under this Agreement to any transferee of any shares held by an
Investor Stockholder, neither the Company nor any other Stockholder shall
assign this Agreement, in whole or in part, whether by operation of law or
otherwise, unless (a) such person shall have obtained the prior written consent
of all the other parties, or (b) such assignment is in connection with a
Transfer of Equity Securities pursuant to SECTION 3 hereof. Any purported
assignment of this Agreement contrary to the terms hereof shall be null and
void and of no force and effect.
6.5. ENTIRE AGREEMENT; AMENDMENT
This Agreement, including the Exhibits hereto, constitutes
the entire agreement among the parties hereto with respect to the matters
provided for herein, and it supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein.
This Agreement may only be amended with the written consent of the Company and
the holders of at least a majority of the Series A Preferred Stock, provided,
however, that no such amendment may be effected which has the effect of
altering the restrictions or obligations of the Existing Stockholders without
the consent of both Existing Stockholders.
6.6. WAIVER
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any
other instruments given in connection with or pursuant to this Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and
signed by the party against whom enforcement of such waiver is sought and then
only to the extent expressly specified therein.
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<PAGE> 17
6.7. NO THIRD PARTY BENEFICIARIES
It is the explicit intention of the parties hereto that no
person or entity other than the parties hereto is or shall be entitled to bring
any action to enforce any provision of this Agreement against any of the
parties hereto, and the covenants, undertakings and agreements set forth in
this Agreement shall be solely for the benefit of, and shall be enforceable
only by, the parties hereto or their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
6.8. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs,
executors, administrators, legal representatives and permitted assigns.
6.9. GOVERNING LAW
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of Georgia (excluding the choice of law
rules thereof).
6.10. NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be
hand-delivered or mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or transmitted by telecopy as follows:
(i) If to the Company:
Interland, Inc.
101 Marietta Street, Suite 200
Atlanta, Georgia 30303
Telecopy No.: (404) 720-3707
Attention: Ken Gavranovic
with a copy (which shall not constitute notice) to:
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309-4530
Telecopy No.: (404) 815-6555
Attention: David A. Stockton
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<PAGE> 18
(ii) If to Crest:
Crest Communications Holdings LLC
2852 Jackson Street
San Francisco, California 94115
Telecopy No.:
Attention: Gregg A. Mockenhaupt
If to Boulder:
Boulder Ventures Ltd.
4750 Owings Mills Boulevard
Owings Mills, Maryland 21117
Telecopy No.: (410) 356-5492
Attention: Andrew E. Jones
If to any other Investor Stockholder, then to the
names and address set forth on the books and records
of the Company.
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
111 South Calvert Street
Suite 1600
Baltimore, Maryland 21202
Telecopy No.: (410) 539-6981
Attention: Lawrence R. Seidman
(iii) If to any other Stockholder:
To such Stockholder's address shown on the signature
pages hereof.
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request, or communication which shall be
hand-delivered, mailed, transmitted or telecopied in the manner described
above, shall be deemed sufficiently given, served, sent, received or delivered
for all purposes at such time as it is delivered to the addressee (with the
return receipt, the delivery receipt, or the answerback being deemed
conclusive, but not exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
6.11. EXECUTION IN COUNTERPARTS
To facilitate execution, this Agreement may be executed in as
many
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<PAGE> 19
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
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<PAGE> 20
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement, or have caused this Stockholders Agreement to be duly executed on
their behalf, as of the day and year first hereinabove set forth.
INTERLAND, INC.
By: /s/ Ken Gavranovic
---------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive
Officer
INVESTOR STOCKHOLDERS
CREST COMMUNICATIONS
PARTNERS L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
---------------------------------------
Name: Gregg A. Mockenhaupt
Title:Managing Director
CREST ENTREPRENEURS FUND
L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
---------------------------------------
Name: Gregg A. Mockenhaupt
Title:Managing Director
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BOULDER VENTURES III, L.P.
By: /s/ Andrew E. Jones
---------------------------------------
Name: Andrew E. Jones
Title: Partner
BANCBOSTON VENTURES INC.
By: /s/ M. Scott McCormack
---------------------------------------
Name: M. Scott McCormack
Title: Vice President
PRIVATE EQUITY CO-INVEST LTD.
By: VBTC Management, Ltd.
Its:Sole Director
By /s/ John Arnold
---------------------------------------
Name: John Arnold
Title: Chairman
BOULDER VENTURES III (ANNEX),
L.P.
By: /s/ Andrew E. Jones
---------------------------------------
Name: Andrew E. Jones
Title: Partner
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<PAGE> 22
EXISTING STOCKHOLDERS:
/s/ Waldemar Fernandez
---------------------------------------
Waldemar Fernandez
/s/ Ken Gavranovic
---------------------------------------
Ken Gavranovic
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<PAGE> 23
EXHIBIT A
TO STOCKHOLDERS' AGREEMENT
DATED AS OF DECEMBER 2, 1999
DEFINITIONS
"Act" shall mean the Securities Act of 1933, as amended.
"Agreement" shall mean this Stockholders' Agreement.
"Business Day" shall mean Monday through Friday and shall
exclude any federal or banking holidays observed in New York City.
"Common Stock" shall mean any class of common stock of the
Company.
"Company" shall mean Interland, Inc., a Georgia corporation,
or any successor thereto.
"Effective Date" shall mean the date on which the Agreement
is effective.
"Equity Securities" shall mean the Common Stock, the Series A
Preferred Stock and any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock, any stock or
security convertible into or exchangeable for Common Stock or any other stock,
security or interest in the Company whether or not convertible into or
exchangeable for Common Stock.
"Qualified Public Offering" shall mean the public sale of any
equity securities of the Company under the Act through a nationally recognized
underwriter in which the Company's aggregate net proceeds realized from the
offering are at least $30 million, at an offering price per share equal to or
greater than (i) three times the Stated Value Per Share if the offering takes
place prior to December 2, 2002 or (ii) four times the Stated Value Per Share
if the offering takes place on or after December 2, 2002.
"Stated Value Per Share" shall have the meaning in the
Company's Articles of Incorporation defining the rights, terms and preferences
of the Series A Preferred.
"Stockholder" shall mean an Existing Stockholder or an
Investor Stockholder.
"Strategic Investor" shall mean an investor in the Company's
securities which (i) is engaged in the same or a related business as the
Company, (ii) in the
<PAGE> 24
opinion of a majority of the Board of Directors, is making the investment
primarily for strategic business reasons rather than as a passive investment
and (iii) has a public market capitalization (based on the fair market value of
its outstanding publicly-traded securities) of at least $2 billion.
"Third Party" shall mean any person or entity excluding each
of the following: (a) the Company and any affiliate or associate of the
Company; (b) each of the Investor Stockholders and any of their respective
successors, officers, directors, affiliates or associates, and partners
(limited and general); or (c) each of the Existing Stockholders that are a
party to this Agreement as of December 2, 1999.
"Threshold Price" shall mean (i) three times the Stated Value
Per Share if the Recommended Transaction is recommended before December 2, 2002
or (ii) four times the Stated Value Per Share if the Recommended Transaction is
recommended on or after December 2, 2002.
"Transfer" means the sale, gift, mortgage, pledge, exchange,
assignment or other disposition or transfer, including a disposition under
judicial order, legal process, execution, attachment or enforcement of an
encumbrance, but shall not include: (a) a transfer by any Stockholder pursuant
to the terms of a merger or acquisition agreement to which the Company is a
party and which involves all of the Company's Equity Securities; (b) a transfer
by a Stockholder to such Stockholder's parents, spouse, children or
grandchildren, or to trustees or custodians for their benefit or any entity
controlled by any of such persons solely for estate planning purposes, provided
that the transferees shall hold the Equity Securities subject to the terms of
this Agreement and, as a condition precedent to such transfers, shall be
required to execute and deliver this Agreement; (c) a transfer by a Stockholder
in a public offering registered under the Act; (d) a transfer by an Investor
Stockholder to any director, officer, employee, partner, holder of a limited
liability company interest, stockholder or affiliate of the Investor
Stockholder; (e) a transfer by an Investor Stockholder of amounts not greater
than 2% of the then-outstanding Equity Securities (calculated on a
fully-diluted basis); or (f) any transfer for consideration other than cash or
promissory notes.
<PAGE> 1
EXHIBIT 10.4(b)
AMENDMENT TO STOCKHOLDERS' AGREEMENT
THIS AMENDMENT TO STOCKHOLDERS' AGREEMENT (this "Amendment") is made
and entered into as of the 23rd day of December, 1999, by and among INTERLAND,
INC., a Georgia corporation (the "Company"), CREST COMMUNICATIONS PARTNERS,
L.P., a Delaware limited partnership, CREST ENTREPRENEURS FUND, L.P., a Delaware
limited partnership (collectively "Crest"), BOULDER VENTURES III, L.P., a
Delaware limited partnership ("Boulder"), MICROSOFT CORPORATION ("Microsoft")
and the other investors set forth on the signature page hereto (the "Other
Investors"), to amend the terms of that certain Stockholders' Agreement by and
among the Company, Crest, Boulder and the Other Investors dated as of December
2, 1999 (the "Agreement").
WHEREAS, the Agreement was entered into in connection with Crest's and
Boulder's acquisition of an aggregate of 9,174,313 shares of the Company's
Series A Convertible Participating Preferred Stock, no par value per share (the
"Series A Stock");
WHEREAS, in connection with Microsoft's acquisition of 2,300,000 shares
of the Series A Stock, Microsoft desires to be entitled and subject to all of
the rights and obligations of the Agreement pari passu with each of Boulder and
Crest;
WHEREAS, the Company, Crest, Boulder and the Other Investors have
determined and agreed that it would be in the strategic best interest of the
Company to amend the Agreement to include Microsoft as a party to the Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, agree as follows:
1. The Agreement is hereby amended to include Microsoft as a
party thereto as one of the Investor Stockholders for all purposes thereunder,
except that Microsoft's acquisition of the Series A Stock is in addition to the
purchase of 9,174,313 shares of Series A Stock described in the recitals section
of the Agreement. As such, Microsoft shall have all of the rights and
obligations under and pursuant to the Agreement in exactly the same manner and
to the same extent as such rights and obligations are granted to each of the
Investor Stockholders.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned individuals and the
respective duly authorized officer or partner, as the case may be, of each of
the parties hereto have executed this Amendment as of the day and year first
hereinabove set forth.
INTERLAND, INC.
By: /s/ Ken Kavranovic
-------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive
Officer
THE INVESTOR STOCKHOLDERS
CREST COMMUNICATIONS PARTNERS L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
-------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
CREST ENTREPRENEURS FUND L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
-------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
2
<PAGE> 3
BOULDER VENTURES III, L.P.
By: /s/ Andrew E. Jones
-------------------------------------
Name: Andrew E. Jones
Title: Partner
BANCBOSTON VENTURES INC.
By: /s/ M. Scott McCormack
-------------------------------------
Name: M. Scott McCormack
Title: Vice President
PRIVATE EQUITY CO-INVEST LTD.
By: VBTC Management, Ltd.
Its: Sole Director
By: /s/ John Arnold
-------------------------------------
Name: John Arnold
Title: Chairman
BOULDER VENTURES III (ANNEX), L.P.
By: /s/ Andrew E. Jones
-------------------------------------
Name: Andrew E. Jones
Title: Partner
MICROSOFT CORPORATION
By: /s/ Bruce Jaffe
-------------------------------------
Name: Bruce Jaffe
Its: Director - Corporate Development
/s/ Waldemar Fernandez
-------------------------------------------
Waldemar Fernandez
/s/ Ken Gavranovic
-------------------------------------------
Ken Gavranovic
3
<PAGE> 1
EXHIBIT 10.4(c)
AMENDMENT TO STOCKHOLDERS' AGREEMENT
THIS AMENDMENT TO STOCKHOLDERS' AGREEMENT (this "Amendment") is made
and entered into as of the 15th day of March, 2000, by and among INTERLAND,
INC., a Georgia corporation (the "Company"), CREST COMMUNICATIONS PARTNERS,
L.P., a Delaware limited partnership, CREST ENTREPRENEURS FUND, L.P., a Delaware
limited partnership (collectively "Crest"), BOULDER VENTURES III, L.P., a
Delaware limited partnership ("Boulder"), MICROSOFT CORPORATION, a Washington
corporation ("Microsoft"), NETWORK SOLUTIONS, INC., a Delaware corporation
("NetSol"), and the other investors set forth on the signature page hereto (the
"Other Investors"), to amend the terms of that certain Stockholders' Agreement
by and among the Company, Crest, Boulder and the Other Investors dated as of
December 2, 1999 (the "Agreement").
WHEREAS, the Agreement was entered into in connection with Crest's and
Boulder's acquisition of an aggregate of 9,174,313 shares of the Company's
Series A Convertible Participating Preferred Stock, no par value per share (the
"Series A Stock") and amended on December 23, 1999 to include Microsoft as a
party to the Agreement (the "Microsoft Amendment") in connection with its
purchase of 2,300,000 shares of Series A Stock;
WHEREAS, in connection with NetSol's acquisition of 689,655 shares of
the Series A Stock, NetSol desires to be entitled and subject to all of the
rights and obligations of the Agreement pari passu with each of Boulder, Crest
and Microsoft;
WHEREAS, the Company, Crest, Boulder and Microsoft and the Other
Investors have determined and agreed that it would be in the strategic best
interest of the Company to amend the Agreement to include NetSol as a party to
the Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, agree as follows:
1. The Agreement is hereby amended to include NetSol as a party
thereto as one of the Investor Stockholders for all purposes thereunder, except
that NetSol's acquisition of the Series A Stock is in addition to the purchase
of 9,174,313 shares of Series A Stock described in the recitals section of the
Agreement and the 2,300,000 shares of Series A Stock described in the Microsoft
Amendment. As such, NetSol shall have all of the rights and obligations under
and pursuant to the Agreement in exactly the same manner and to the same extent
as such rights and obligations are granted to each of the Investor Stockholders.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned individuals and the
respective duly authorized officer or partner, as the case may be, of each of
the parties hereto have executed this Amendment as of the day and year first
hereinabove set forth.
INTERLAND, INC.
By: /s/ Ken Gavranovic
------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive
Officer
THE INVESTOR STOCKHOLDERS
CREST COMMUNICATIONS PARTNERS L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: Gregg A. Mockenhaupt
------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
CREST ENTREPRENEURS FUND L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: Gregg A. Mockenhaupt
------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
-2-
<PAGE> 3
BOULDER VENTURES III, L.P.
By: /s/ Andrew E. Jones
------------------------------------
Name: Andrew E. Jones
Title: Partner
BANCBOSTON VENTURES INC.
By: /s/ M. Scott McCormack
------------------------------------
Name: M. Scott McCormack
Title: Vice President
PRIVATE EQUITY CO-INVEST LTD.
By: VBTC Management, Ltd.
Its: Sole Director
By: /s/ Clive Munyard
------------------------------------
Name: Clive Munyard
Title: Executive Director
BOULDER VENTURES III (ANNEX), L.P.
By: /s/ Andrew E. Jones
------------------------------------
Name: Andrew E. Jones
Title: Partner
MICROSOFT CORPORATION
By: /s/ Amar Nehru
-------------------------------------
Name: Amar Nehru
Its: GM-Corporate Development
NETWORK SOLUTIONS, INC.
By: /s/ James P. Rutt
------------------------------------
Name: James P. Rutt
Its: Chief Executive Officer
-3-
<PAGE> 4
/s/ Waldemar Fernandez
-------------------------------------
Waldemar Fernandez
/s/ Ken Gavranovic
------------------------------------
Ken Gavranovic
-4-
<PAGE> 1
EXHIBIT 10.4(d)
AMENDMENT TO STOCKHOLDERS' AGREEMENT
THIS AMENDMENT TO STOCKHOLDERS' AGREEMENT (this "Amendment") is made
and entered into as of the 8th day of May, 2000, by and among INTERLAND,
INC., a Georgia corporation (the "Company"), CREST COMMUNICATIONS PARTNERS,
L.P., a Delaware limited partnership, CREST ENTREPRENEURS FUND, L.P., a
Delaware limited partnership (collectively "Crest"), BOULDER VENTURES III,
L.P., a Delaware limited partnership ("Boulder"), MICROSOFT CORPORATION, a
Washington corporation ("Microsoft"), NETWORK SOLUTIONS, INC., a Delaware
corporation ("NetSol"), BELL ATLANTIC INVESTMENTS, INC., a Delaware corporation
("BAI") and the other investors set forth on the signature page hereto (the
"Other Investors"), to amend the terms of that certain Stockholders' Agreement
by and among the Company, Crest, Boulder and the Other Investors dated as of
December 2, 1999, and amended on December 23, 1999 and March 15, 2000 (the
"Agreement").
WHEREAS, the Agreement was entered into in connection with Crest's and
Boulder's acquisition of an aggregate of 9,174,313 shares of the Company's
Series A Convertible Participating Preferred Stock, no par value per share (the
"Series A Stock") and amended on December 23, 1999 to include Microsoft as a
party to the Agreement (the "Microsoft Amendment") in connection with its
purchase of 2,300,000 shares of Series A Stock and amended on March 15, 2000 to
schedule NetSol as a party to the Agreement (the "NetSol Amendment") in
connection with its purchase of 689,655 shares of Series A Stock;
WHEREAS, in connection with BAI's acquisition of 1,111,111 shares of
the Series A Stock, BAI desires to be entitled and subject to all of the rights
and obligations of the Agreement pari passu with each of Boulder, Crest,
Microsoft and NetSol;
WHEREAS, the Company, Crest, Boulder, Microsoft, NetSol and the Other
Investors have determined and agreed that it would be in the strategic best
interest of the Company to amend the Agreement to include BAI as a party to the
Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, agree as follows:
1. The Agreement is hereby amended to include BAI as a party
thereto as one of the Investor Stockholders for all purposes thereunder, except
that BAI's acquisition of the Series A Stock is in addition to the purchase of
9,174,313 shares of Series A Stock described in the recitals section of the
Agreement, the 2,300,000 shares of Series A Stock
<PAGE> 2
described in the Microsoft Amendment and the 689,655 shares of Series A Stock
described in the NetSol Amendment. As such, BAI shall have all of the rights
and obligations under and pursuant to the Agreement in exactly the same manner
and to the same extent as such rights and obligations are granted to each of
the Investor Stockholders.
IN WITNESS WHEREOF, the undersigned individuals and the
respective duly authorized officer or partner, as the case may be, of each of
the parties hereto have executed this Amendment as of the day and year first
hereinabove set forth.
INTERLAND, INC.
By: /s/ Ken Gavranovic
----------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive
Officer
THE INVESTOR STOCKHOLDERS
CREST COMMUNICATIONS PARTNERS L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
----------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
CREST ENTREPRENEURS FUND L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
----------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
2
<PAGE> 3
BOULDER VENTURES III, L.P.
By: /s/ Andrew E. Jones
----------------------------------------
Name: Andrew E. Jones
Title: Partner
BANCBOSTON VENTURES INC.
By: /s/ M. Scott McCormack
----------------------------------------
Name: M. Scott McCormack
Title: Vice President
PRIVATE EQUITY CO-INVEST LTD.
By: VBTC Management, Ltd.
Its: Sole Director
By: /s/ Chiva Munyard
----------------------------------------
Name: Chiva Munyard
Title: Executive Director
BOULDER VENTURES III (ANNEX), L.P.
By: /s/ Andrew E. Jones
----------------------------------------
Name: Andrew E. Jones
Title: Partner
MICROSOFT CORPORATION
By:
----------------------------------------
Name:
----------------------------------------
Its:
----------------------------------------
NETWORK SOLUTIONS, INC.
By: /s/ James P. Rutt
----------------------------------------
Name: James P. Rutt
----------------------------------------
Its: Chief Executive Officer
----------------------------------------
3
<PAGE> 4
BELL ATLANTIC INVESTMENTS, INC.
By: /s/ Janet Garrity
-----------------------------------------
Name: Janet Garrity
Its: President and Treasurer
-------------------------------------------------
Waldemar Fernandez
/s/ Ken Gavranovic
-------------------------------------------------
Ken Gavranovic
4
<PAGE> 1
EXHIBIT 10.5(a)
REGISTRATION RIGHTS AGREEMENT
AMONG
INTERLAND, INC.
CREST COMMUNICATIONS PARTNERS L.P.
CREST ENTREPRENEURS FUND L.P.
BOULDER VENTURES III, L.P.
AND
THE OTHER INVESTORS SET FORTH
ON THE SIGNATURE PAGE HERETO
DECEMBER 2, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. REGISTRATION RIGHTS............................................................................1
1.1. Demand Registration Rights of Initiating Holders......................................1
1.1.1. Request........................................................................1
1.1.2. Demand Procedures..............................................................2
1.1.3. Delay by Company...............................................................3
1.1.4. Reduction......................................................................3
1.1.5. Withdrawal.....................................................................4
1.2. Piggyback Registration Rights.........................................................4
1.2.1. Request........................................................................4
1.2.2. Reduction......................................................................5
1.3. Registration on Form S-3..............................................................5
1.4. Registration Procedures...............................................................6
1.5. Holdback Agreement....................................................................8
1.6. Registration Expenses.................................................................9
1.6.1. Holder Expenses...............................................................9
1.6.2. Company Expenses..............................................................9
1.6.3. Indemnity and Contribution....................................................10
1.7. Grant and Transfer of Registration Rights.............................................12
1.8. Information from Holder...............................................................13
1.9. Changes in Common Stock or Series A Preferred.........................................13
1.10 Rule 144 Reporting....................................................................13
2. DEFINITIONS....................................................................................14
3. MISCELLANEOUS..................................................................................15
3.1. Entire Agreement; Amendment...........................................................15
3.2. Waiver................................................................................15
3.3. No Third Party Beneficiaries..........................................................15
3.4. Binding Effect........................................................................16
3.5. Governing Law.........................................................................16
3.6. Notices...............................................................................16
3.7. Execution in Counterparts.............................................................17
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
entered into as of December 2, 1999 by and between Interland, Inc., a Georgia
corporation (the "Company"), Crest Communications Partners L.P., a Delaware
limited partnership, Crest Entrepreneurs Fund L.P., a Delaware limited
partnership (collectively "Crest"), Boulder Ventures III, L.P., a Delaware
limited partnership ("Boulder"), and the other investors set forth on the
signature page hereto (the "Other Investors," and together with Crest and
Boulder, the initial "Holders").
WHEREAS, on the date hereof, the Holders have acquired an
aggregate of 9,174,313 shares of Series A Convertible Participating Preferred
Stock, no par value (the "Series A Preferred"), from the Company pursuant to a
Stock Purchase Agreement among the Company, Crest, Boulder and the Other
Investors (the "Purchase Agreement");
WHEREAS, it is a condition to the obligations of the Holders
under the Purchase Agreement that the Company enter into this Agreement; and
WHEREAS, the Company and the Holders desire to enter into
this Agreement in order to provide the Holders with certain rights with respect
to the registration of the Common Stock of the Company issuable upon conversion
of the Series A Preferred; and
WHEREAS capitalized terms used in this Agreement shall have
the meanings ascribed to them in SECTION 2 hereof.
NOW, THEREFORE, for and in consideration of the foregoing and
of the mutual covenants and agreements hereinafter set forth, the parties
hereto agree as follows:
1. REGISTRATION RIGHTS
1.1. DEMAND REGISTRATION RIGHTS OF INITIATING HOLDERS
1.1.1. REQUEST
At any time after the earlier of (i) December 2, 2002 (provided
that the requesting Holders have agreed to convert their shares of Series A
Preferred into Common Stock upon the effective date of any registration
statement filed by the Company pursuant to this SECTION 1.1.1) or (ii) the
closing of the Company's IPO,
<PAGE> 4
the Initiating Holders may request registration for sale under the Act of all
or part of the Registrable Securities then held by them, provided that such
requested registration relates to a number of shares of Registrable Securities
which represents at least 25% of the total number of shares of Registrable
Securities (or a lesser percentage if the anticipated aggregate offering price
would exceed $5 million), and upon such request the Company will promptly take
the actions specified in SECTION 1.1.2.
1.1.2. DEMAND PROCEDURES
Within ten (10) Business Days after receipt by the Company of
a registration request under SECTION 1.1.1 (which request shall specify the
number of shares proposed to be registered and sold and the manner in which
such sale is proposed to be effected), the Company shall promptly give written
notice to all other Holders of the proposed demand registration, and such other
Holders shall have the right to join in the proposed registration and sale,
upon written request to the Company (which request shall specify the number of
shares proposed to be registered and sold) within five (5) Business Days after
receipt of such notice from the Company. The Company shall thereafter, as
expeditiously as practicable (i) file with the SEC under the Act a registration
statement on the appropriate form concerning all Registrable Securities
specified in the demand request and all Registrable Securities with respect to
which the Company has received the written request from the other Holders and
(ii) use its reasonable efforts to cause the registration statement to be
declared effective. At the request of the Initiating Holders requesting
registration, the Company shall use its reasonable efforts to cause each
offering pursuant to SECTION 1.1.1 to be managed, on a firm commitment basis,
by a recognized regional or national underwriter selected by the Initiating
Holders and approved by the Company, such approval not to be unreasonably
withheld. All holders proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in customary form. The
Company shall not be obligated to effect more than two registrations requested
by Initiating Holders under SECTION 1.1.1, provided, however, that each such
request shall be deemed satisfied only when a registration statement covering
all Registrable Securities specified in notices received as aforesaid, for sale
in accordance with the method of disposition specified by the Initiating
Holders, has become effective and, if the method of disposition is a firm
commitment underwritten public offering, at least 75% of the Registrable
Securities covered thereby shall have been sold pursuant thereto. Except for
registration statements on Form S-4, S-8 or another form not available for
registering securities for sale to the public, or any successor thereto, the
Company will not, without the consent of the Holders selling a majority of the
Registrable Securities in such offering pursuant to this SECTION 1.1, file with
the SEC any other registration statement with respect to its Common Stock,
whether for its own account or that of other
-2-
<PAGE> 5
stockholders, from the date of receipt of a notice from requesting Holders
pursuant to this SECTION 1.1 until the completion of the period of distribution
of the securities contemplated thereby as provided in SECTION 1.4; provided,
however, that the Company may include securities offered by the Company for its
own account and/or other securities of the Company that are held by
Stockholders other than the Holders in such offering pursuant to this Section
1.1, subject to reduction as provided in Section 1.1.4 of this Agreement.
1.1.3. DELAY BY COMPANY
The Company shall not be required to proceed to effect a
demand registration under the Act pursuant to SECTION 1.1.1 above if (i) the
Company receives a request for registration under SECTION 1.1.1 less than 90
days preceding the anticipated effective date of a proposed underwritten public
offering of securities of the Company approved by the Company's Board of
Directors prior to the Company's receipt of the request; (ii) within 180 days
prior to any such request for registration, a registration of securities of the
Company has been effected in which the Initiating Holders had the right to
participate pursuant to this SECTION 1.1 or SECTION 1.2 hereof; or (iii) the
Board of Directors of the Company reasonably determines in good faith that
effecting such a demand registration at such time would have a material adverse
effect upon a proposed sale of all (or substantially all) of the assets of the
Company, or a merger, share exchange, reorganization, recapitalization, or any
other form of business combination or transaction materially affecting the
capital structure, or equity ownership of the Company, or would otherwise be
seriously detrimental to the Company because the Company was then in the
process of raising capital in the public or private markets; provided, however,
that the Company may only delay a demand registration pursuant to this SECTION
1.1.3 for a period not exceeding 90 days (or until such earlier time as such
transaction is consummated or no longer proposed) and may only defer any such
filing pursuant to this SECTION 1.1.3 once per calendar year. The Company shall
promptly notify in writing the Holders requesting registration of any decision
not to effect any such request for registration pursuant to this SECTION 1.1.3,
which notice shall set forth in reasonable detail the reason for such decision
and shall include an undertaking by the Company promptly to notify such Holders
as soon as a demand registration may be effected.
1.1.4. REDUCTION
If a demand registration is an underwritten registration and
the managing underwriters advise the Company and the Holders participating in
the demand registration in writing that in their opinion the number of shares
of Common Stock requested to be included in such registration exceeds the
number which can be sold in such offering, then the amount of such shares that
may be
-3-
<PAGE> 6
included in such registration shall first be allocated pro rata among all of
the Holders joining in the registration under this SECTION 1.1 in proportion to
the number of shares of Registrable Securities owned by them and then to the
Company or any other party seeking to participate in the offering.
1.1.5. WITHDRAWAL
Holders participating in any demand registration pursuant to
this SECTION 1.1 may withdraw at any time before a registration statement is
declared effective, and the Company may withdraw such registration statement if
no Registrable Securities are then proposed to be included (and if withdrawn by
the Company the Holders shall not be deemed to have requested a demand
registration for purposes of SECTION 1.1.1 hereof). If the Company withdraws a
registration statement under this SECTION 1.1.5 in respect of a registration
for which the Company would otherwise be required to pay expenses under SECTION
1.6.2 hereof, the Holders that shall have withdrawn shall reimburse the Company
for all expenses of such registration in proportion to the number of shares
each such withdrawing Holder shall have requested to be registered.
Notwithstanding the foregoing, however, if at the time of the withdrawal, the
Holders have learned of a material adverse change in the condition, business or
prospects of the Company from that known to the Holders at the time of their
request, then the Holders shall not be required to pay any of said registration
expenses and the Company shall be deemed not to have effected a registration
pursuant to SECTION 1.1.2 of this Agreement.
1.2. PIGGYBACK REGISTRATION RIGHTS
1.2.1. REQUEST
If at any time or times after the date of this Agreement the
Company proposes to make a registered public offering of any of its securities
under the Act (whether to be sold by it or by one or more selling
stockholders), other than an offering pursuant to a demand registration under
SECTION 1.1.1 or SECTION 1.3 hereof or an offering registered on Form S-8 or
Form S-4, or successor forms relating to employee stock plans and business
combinations, the Company shall, not less than 20 days prior to the proposed
filing date of the registration form, give written notice of the proposed
registration to all Holders specifying in reasonable detail the proposed
transaction to be covered by the registration statement, and at the written
request of any Holder delivered to the Company within 20 days after giving such
notice, shall include in such registration and offering, and in any
underwriting of such offering, all Registrable Securities as may have been
designated in the Holder's request. The Company shall have no obligation to
include shares of Common Stock owned by any Holder in a registration statement
-4-
<PAGE> 7
pursuant to this SECTION 1.2, unless and until such Holder (a) in connection
with any underwritten offering, agrees to enter into an underwriting agreement,
a custody agreement and power of attorney and any other customary documents
required in an underwritten offering all in customary form and containing
customary provisions (but not requiring any Holder to provide indemnification
or contribution more extensive than is set forth in SECTION 1.6.3 hereof) and
(b) shall have furnished the Company with all information and statements about
or pertaining to such Holder in such reasonable detail and on such timely basis
as is reasonably deemed by the Company to be legally required with respect to
the preparation of the registration statement.
1.2.2. REDUCTION
If a registration in which any Holder has the right to
participate pursuant to this SECTION 1.2 is an underwritten registration, and
the managing underwriters advise the Company in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering, the Company shall include in
such registration (i) first, the securities of the Company proposed to be sold
by the Company, (ii) second, the shares proposed to be sold by Holders
exercising rights under SECTION 1.2.1, allocated pro rata among such Holders in
proportion to the number of Registrable Securities owned by them and (iii)
third, by any other stockholders proposing to sell shares of Common Stock
pursuant to such registration.
1.3. REGISTRATION ON FORM S-3
Subject to the limitations set forth in SECTION 1.1.3, if at
any time the Company is eligible to use Form S-3 (or any successor form) for
secondary sales any Holder may request (by written notice to the Company
stating the number of Registrable Securities proposed to be sold and the
intended method of disposition) that the Company file a registration statement
on Form S-3 (or any successor form) for a public sale of all or any portion of
the Registrable Securities beneficially owned by it (which may include a
"shelf" registration under Rule 415 under the Act, or any successor rule),
provided that the reasonably anticipated aggregate price to the public of such
Registrable Securities shall be at least $2.5 million. Upon receiving such
request, the Company shall use its reasonable best efforts to promptly file a
registration statement on Form S-3 (or any successor form) to register under
the Act for public sale in accordance with the method of disposition specified
in such request, the number of shares of Registrable Securities specified in
such request and shall otherwise carry out the actions specified in SECTION
1.1.2 and 1.4. The Company shall not be obligated to file more than two
registration statements on Form S-3 (or any successor form) pursuant to this
SECTION 1.3 within any eighteen month period.
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1.4. REGISTRATION PROCEDURES
(a) Whenever any Holder has requested that any shares of
Common Stock be registered pursuant to SECTIONS 1.1, 1.2 or 1.3 hereof, the
Company shall, as expeditiously as reasonably possible:
(1) prepare and file with the SEC a registration
statement with respect to such shares and use its reasonable best efforts to
cause such registration statement to become effective as soon as reasonably
practicable thereafter (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall furnish
counsel for such Holder with copies of all such documents proposed to be filed)
and to cause such registration statement to comply as to form and content in
all material respects with the SEC's forms, rules and regulations;
(2) prepare and file with the SEC such amendments and
supplements to such registration statement and prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than 120 days (2 years in the case of a registration
pursuant to SECTION 1.3 hereof) or until such Holder has completed the
distribution described in such registration statement, whichever occurs first;
(3) furnish to such Holder such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), and such other documents as such Holder may reasonably request;
(4) use its reasonable efforts to register or qualify
such shares under such other securities or blue sky laws of such jurisdictions
as such Holder requests (and to maintain such registrations and qualifications
effective for a period of 120 days (2 years in the case of a registration
pursuant to SECTION 1.3 hereof) or until such Holder has completed the
distribution of such shares, whichever occurs first), and to do any and all
other acts and things which may be necessary or advisable to enable such Holder
to consummate the disposition in such jurisdictions of such shares (provided
that the Company will not be required to (i) qualify generally to do business
in any jurisdiction where it would not be required but for this subsection (4),
(ii) subject itself to taxation in any such jurisdiction, or (iii) file any
general consent to service of process in any such jurisdiction); provided that,
notwithstanding anything to the contrary in this Agreement with respect to the
bearing of expenses, if any such jurisdiction shall require that expenses
incurred in connection with the qualification of such shares in that
jurisdiction be borne in part
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or full by such Holder, then such Holder shall pay such expenses to the extent
required by such jurisdiction;
(5) notify such Holder, at any time when a prospectus
relating thereto is required to be delivered under the Act within the period
that the Company is required to keep the registration statement effective, of
the happening of any event as a result of which the prospectus included in any
such registration statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading, and
promptly prepare, file and furnish to the Holder a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
shares, such prospectus will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or, in light of
the circumstances then existing, necessary to make the statements therein not
misleading;
(6) cause all such shares to be listed on securities
exchanges, if any, on which similar securities issued by the Company are then
listed;
(7) provide a transfer agent and registrar for all such
shares not later than the effective date of such registration statement;
(8) enter into such customary agreements and take all
such other actions as such Holder reasonably requests (and subject to its
reasonable approval) in order to expedite or facilitate the disposition of such
shares;
(9) make available for inspection by such Holder, by any
underwriter participating in any distribution pursuant to such registration
statement, and by any attorney, accountant or other agent retained by such
Holder or by any such underwriter, all financial and other records, pertinent
corporate documents, and properties (other than confidential intellectual
property) of the Company;
(10) if the offering is underwritten and at the request
of any seller of Registrable Securities, use its best efforts to furnish on the
date that Registrable Securities are delivered to the underwriters for sale
pursuant to such registration: (i) an opinion dated such date of counsel
representing the Company for the purposes of such registration, addressed to
the underwriters and to such seller, stating that such registration statement
has become effective under the Act and that (A) to the best knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Act, (B) the registration statement, the related
prospectus and each amendment or supplement thereof comply as to form in all
material respects with the requirements of the Act (except that such counsel
need
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not express any opinion as to financial statements or other financial or
statistical data contained therein), (C) to such other customary matters as
reasonably may be requested by counsel for the underwriters or by such seller
or its counsel and (D) (not an opinion but as a negative assurance) that to the
best knowledge of such counsel, such registration statement does not contain a
material misrepresentation or omission to state a material fact necessary to
make the statements therein not misleading; and (ii) a letter dated such date
from the independent public accountants retained by the Company, addressed to
the underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Act and that, in the opinion of such
accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Act, and such letter shall additionally cover
such other financial matters (including information as to the period ending no
more than five business days prior to the date of such letter) with respect to
such registration as such underwriters reasonably may request; and
(11) in connection with an underwritten offering pursuant
to a registration statement filed pursuant to SECTION 1.1 hereof, enter into an
underwriting agreement in customary form and containing customary provisions,
including provisions for indemnification of underwriters and contribution, if
so requested by any underwriter.
(b) In an underwritten offering pursuant to SECTIONS
1.1, 1.2 or 1.3, the Holders shall be entitled to sell the Series A Preferred
to the underwriters for conversion and sale of the shares of Common Stock
issued upon conversion thereof.
1.5. HOLDBACK AGREEMENT
(a) Notwithstanding anything in this Agreement to the
contrary, if after any registration statement to which the rights hereunder
apply becomes effective (and prior to completion of any sales thereunder), the
Board of Directors determines in good faith that the failure of the Company to
(i) suspend sales of stock under the registration statement or (ii) amend or
supplement the registration statement, would have a material adverse effect on
the Company, the Company shall so notify each Holder participating in such
registration and each Holder shall suspend any further sales under such
registration statement until the Company advises the Holder that the
registration statement has been amended or that conditions no longer exist
which would require such suspension, provided that the Company may impose any
such suspension for no more than 30 days and no more than 2 times during any
twelve month period.
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<PAGE> 11
(b) In the event that the Company effects a registration
of any securities under the Act in an underwritten public offering, each Holder
agrees not to effect any sale, transfer, disposition or distribution, including
any sale pursuant to Rule 144 under the Act, of any Equity Securities (except
as part of such offering) during the 180-day period commencing with the
effective date of the registration statement for the IPO and, for so long as
each Holder owns 5% or more of the Company's outstanding voting securities, the
90-day period commencing with the effective date of the registration statement
for any subsequent public offering, provided that all officers, directors and
holders of 5% or more of the Company's outstanding voting securities enter into
agreements providing for similar restrictions on sales.
1.6. REGISTRATION EXPENSES
1.6.1. HOLDER EXPENSES
If, pursuant to SECTIONS 1.1, 1.2 or 1.3 hereof, Registrable
Securities are included in a registration statement, then the Holder thereof
shall pay all transfer taxes, if any, relating to the sale of its shares, and
any underwriting discounts or commissions or the equivalent thereof applicable
to the sale of its shares.
1.6.2. COMPANY EXPENSES
Except for the fees and expenses specified in SECTION 1.6.1
hereof and except as provided below in this SECTION 1.6.2, the Company shall
pay all expenses incident to the registration of shares by the Company and any
Holders pursuant to SECTIONS 1.1, 1.2 or 1.3 hereof, and to the Company's
performance of or compliance with this Agreement, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, underwriting discounts, fees and expenses
(other than any Holder's portion of any underwriting discounts or commissions
or the equivalent thereof), printing expenses, messenger and delivery expenses,
and fees and expenses of counsel for the Company and a single counsel for all
Holders selling shares (the fees of such counsel not to exceed $20,000 and not
to exceed $5,000 in connection with a shelf registration pursuant to Section
1.3 hereof; provided that in the case of registrations of shares pursuant to
Section 1.2 hereof, the Company shall not be responsible for counsel fees of
more than $50,000 in the aggregate for all such registrations pursuant to
Section 1.2 hereof) and all independent certified public accountants and other
persons retained by the Company.
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1.6.3. INDEMNITY AND CONTRIBUTION
(a) In the event that any shares owned by a Holder are
proposed to be offered by means of a registration statement pursuant to
SECTIONS 1.1, 1.2 or 1.3 hereof, to the extent permitted by law, the Company
agrees to indemnify and hold harmless such Holder, any underwriter
participating in such offering, each officer, partner, manager and director of
such person, each person, if any, who controls or may control such Holder or
underwriter within the meaning of the Act and each representative of any Holder
serving on the Board of Directors of the Company (such Holder or underwriter,
its officers, partners, managers, directors and representatives, and any such
other persons being hereinafter referred to individually as an "Investor
Indemnified Person" and collectively as "Investor Indemnified Persons") from
and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs, and expenses, including, without
limitation, interest, penalties, and attorneys' fees and disbursements,
asserted against, resulting to, imposed upon or incurred by such Investor
Indemnified Person, directly or indirectly (hereinafter referred to in this
SECTION 1.6.3 in the singular as a "claim" and in the plural as "claims"),
based upon, arising out of or resulting from any breach of representation or
warranty made by the Company in any underwriting agreement or any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement or any omission or alleged omission to state therein a
material fact necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading, except insofar as
such claim is based upon, arises out of or results from information furnished
to the Company in writing by such Investor Indemnified Person for use in
connection with the registration statement.
(b) In the event that any shares owned by a Holder are
proposed to be offered by means of a registration statement pursuant to
SECTIONS 1.1, 1.2 OR 1.3 hereof, to the extent permitted by law, each such
Holder agrees, severally and not jointly, to indemnify and hold harmless the
Company, each officer of the Company who signs the Registration Statement, each
director of the Company, any underwriter participating in such offering, and
each person, if any, who controls or may control the Company or such
underwriter within the meaning of the Act (the Company, such officers and
directors of the Company, such underwriter, and any such other persons also
being hereinafter referred to individually as a "Company Indemnified Person"
and collectively as "Company Indemnified Persons") from and against all claims
based upon, arising out of or resulting from any untrue statement or alleged
untrue statement of a material fact contained in the registration statement or
any omission or alleged omission to state therein a material fact necessary in
order to make the statement made therein, in the light of the circumstances
under which they were made, not misleading, but only to the extent that such
claim is based upon, arises out of or results from information furnished to
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<PAGE> 13
the Company in writing by such Holder explicitly for use in connection with the
registration statement; provided, however, that a Holder shall be under no
obligation to indemnify or hold harmless any Company Indemnified Persons with
respect to any amount in excess of the net cash proceeds paid to such Holder in
connection with any sales of securities effected under such registration
statement.
(c) The indemnification provisions set forth herein
shall be in addition to any liability the Company or any Holder may otherwise
have to the Investor Indemnified Persons or Company Indemnified Persons. The
Company Indemnified Persons and the Investor Indemnified Persons are
hereinafter referred to as Indemnified Persons. Promptly after receiving notice
of any claim in respect of which an Indemnified Person may seek indemnification
under this SECTION 1.6.3, such Indemnified Person shall submit written notice
thereof to either the Company or the Holders, as the case may be (sometimes
being hereinafter referred to as an "Indemnifying Person"). The omission of the
Indemnified Person so to notify the Indemnifying Person of any such claim shall
not relieve the Indemnifying Person from any liability it may have hereunder
except to the extent that (a) such liability was caused or increased by such
omission, or (b) the ability of the Indemnifying Person to reduce such
liability was materially adversely affected by such omission. In addition, the
omission of the Indemnified Person so to notify the Indemnifying Person of any
such claim shall not relieve the Indemnifying Person from any liability it may
have otherwise than hereunder. The Indemnifying Person shall have the right to
undertake, by counsel or representatives of its own choosing, the defense,
compromise or settlement (without admitting liability of the Indemnified
Person) of any such claim asserted, such defense, compromise or settlement to
be undertaken at the expense and risk of the Indemnifying Person, and the
Indemnified Person shall have the right to engage separate counsel, at its own
expense, whom counsel for the Indemnifying Person shall keep informed and
consult with in a reasonable manner; provided, however, if the defendants in
any such action include both the Indemnified Person and the Indemnifying Person
and the Indemnified Person shall have reasonably concluded that there may be a
conflict between the positions of the Indemnifying Person and the Indemnified
Person in conducting the defense of any such action or that there may be legal
defenses available to it and/or other Indemnified Persons which are different
from or additional to those available to the Indemnifying Person, the
Indemnified Person shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such action
on behalf of the Indemnified Person at the expense of the Indemnifying Person.
In the event the Indemnifying Person shall elect not to undertake such defense
by its own representatives, the Indemnifying Person shall give prompt written
notice of such election to the Indemnified Person, and the Indemnified Person
shall undertake the defense, compromise or settlement (without admitting
liability of the Indemnified Person) thereof on behalf of and for the account
and risk of the Indemnifying Person by
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<PAGE> 14
counsel or other representatives designated by the Indemnified Person.
Notwithstanding the foregoing, no Indemnifying Person shall be obligated
hereunder with respect to amounts paid in settlement of any claim if such
settlement is effected without the consent of such Indemnifying Person (such
consent not to be unreasonably withheld).
(d) If the indemnification provided for in this SECTION
1.6 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Person, then the Indemnifying Person, in lieu of indemnifying such
Indemnified Person hereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of any losses or claims in such proportion
as is appropriate to reflect the relative fault of the Indemnified Person on
the one hand and the Indemnifying Person on the other in connection with the
statements or omissions that resulted in such losses or claims as well as any
other relevant equitable considerations. The relative fault of the Indemnified
Person and the Indemnifying Person shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Person or by the Indemnified Person
and the parties' relative intent, knowledge and access to information and
opportunity to correct or prevent such statement or omission. In no event will
the liability of any Holder for contribution exceed the net proceeds received
by such Holder in any sale of securities to which such liability relates.
1.7. GRANT AND TRANSFER OF REGISTRATION RIGHTS
Except for registration rights granted by the Company after
the date hereof (a) in connection with business acquisitions and which relate
solely to registrations on Form S-3 or (b) which are subordinate to the rights
of the Holders hereunder, the Company shall not grant any registration rights
to any other person or entity without the prior written consent of the
Initiating Holders, which consent shall not be unreasonably withheld or
delayed. Holders shall have the right to transfer or assign the rights
contained in this Agreement (i) to any limited partner or affiliate of a Holder
in connection with the transfer of any Registrable Securities or (ii) to any
third party transferee acquiring at least 20% of the Registrable Securities
issued to the Holder as of the date hereof or the shares of Common Stock issued
upon conversion of such Registrable Securities; provided: (a) the Company is,
within thirty (30) days after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement; and (c) such assignment shall be
effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the Act.
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1.8. INFORMATION FROM HOLDER
It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this SECTION 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
1.9. CHANGES IN COMMON STOCK OR SERIES A PREFERRED
If there is any change in the Common Stock or the Series A
Preferred by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made
in the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock or the Series A Preferred as so
changed.
1.10. RULE 144 REPORTING
With a view to making available to the Holders the benefits
of certain rules and regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or analogous
rule promulgated under the Act, at all times after the effective date of the
first registration under the Act filed by the Company for an offering of its
securities to the general public;
(b) File with the SEC, in a timely manner, all reports
and other documents required of the Company under the Act and the Exchange Act;
and
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
of the Act, and of the Exchange Act (at any time after it has become subject to
such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Holder may
reasonably request in
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<PAGE> 16
availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.
2. DEFINITIONS
The capitalized terms contained in this Agreement shall have
the following meanings unless otherwise specifically defined:
"Act" shall mean the Securities Act of 1933, as amended.
"Agreement" shall mean this Registration Rights Agreement.
"Business Day" shall mean Monday through Friday and shall
exclude any federal or bank holidays observed in New York City.
"Company" shall mean Interland, Inc., a Georgia corporation,
or any successor thereto.
"Common Stock" shall mean the common stock of the Company, no
par value per share.
"Equity Securities" shall mean the Common Stock, the Series A
Preferred and any warrants or other rights to subscribe for or to purchase, or
any options for the purchase of, Common Stock, any stock or security
convertible into or exchangeable for Common Stock or any other stock, security
or interest in the Company whether or not convertible into or exchangeable for
Common Stock.
"Holders" shall mean Crest, Boulder, the Other Investors and
any other person or entity that is a valid transferee of the rights granted
hereunder pursuant to SECTION 1.7 hereof.
"Indemnified Person" shall have the meaning ascribed to that
term in SECTION 1.6.3.
"Indemnifying Person" shall have the meaning ascribed to that
term in SECTION 1.6.3.
"Initiating Holders" shall mean Holders who in the aggregate
beneficially own not less than 50% of the Registrable Securities.
"IPO" shall mean the initial public offering of the Company's
Equity Securities registered under the Act.
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<PAGE> 17
"Registrable Securities" shall mean (i) shares of Common
Stock issued or issuable upon conversion of the Series A Preferred and (ii) any
equity securities issued as a distribution with respect to or in exchange for
or in replacement for any of the shares referred to in clause (i); provided,
however, that Registrable Securities shall not include any securities that have
been previously sold pursuant to a registration statement filed under the Act
or under Rule 144 promulgated under the Act, or which have otherwise been
transferred in a transaction in which the transferor's rights under this
Agreement are not assigned or are not subject to transfer restrictions under
the Act or applicable state securities laws.
"SEC" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Act.
3. MISCELLANEOUS
3.1. ENTIRE AGREEMENT; AMENDMENT
This Agreement constitutes the entire agreement among the
parties hereto with respect to the matters provided for herein, and it
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein. This Agreement may not be
amended without the written consent of the Company and the Initiating Holders.
3.2. WAIVER
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any
other instruments given in connection with or pursuant to this Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and
signed by the party against whom enforcement of such waiver is sought and then
only to the extent expressly specified therein.
3.3. NO THIRD PARTY BENEFICIARIES
Except to the extent that the rights hereunder are assigned
in accordance with SECTION 1.7, it is the explicit intention of the parties
hereto that no person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision of this Agreement against
any of the parties hereto, and the covenants, undertakings and agreements set
forth in this Agreement shall
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<PAGE> 18
be solely for the benefit of, and shall be enforceable only by, the parties
hereto or their respective successors, heirs, executors, administrators, legal
representatives and permitted assigns.
3.4. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs,
executors, administrators, legal representatives and permitted assigns.
3.5. GOVERNING LAW
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of Delaware (excluding the choice of law
rules thereof).
3.6. NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be
hand-delivered, sent by overnight courier service or mailed by first-class,
registered or certified mail, return receipt requested, postage prepaid, or
transmitted by telecopy, addressed as follows:
(i) If to the Company:
Interland, Inc.
101 Marietta Street, Suite 200
Atlanta, GA 30303
Telecopy No.: (404) 720-3707
Attention: Ken Gavranovic
in each case with a copy (which shall not constitute
notice) to:
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309-4530
Telecopy No.: (404) 815-6555
Attention: David A. Stockton
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<PAGE> 19
(ii) If to Crest:
Crest Communications Holdings LLC
2852 Jackson Street
San Francisco, California 94115
Telecopy No.: (415) 928-1247
Attention: Gregg Mockenhaupt
If to Boulder:
Boulder Ventures Ltd.
4750 Owings Mills Blvd.
Owings Mills, MD 21117
Telecopy No: (410) 356-5492
Attention: Andrew E. Jones
If to the Other Investors, then to the names and
addresses set forth on the books and records of the
Company
in each case with a copy (which shall not constitute
notice) to:
Hogan & Hartson L.L.P.
111 South Calvert Street, Suite 1600
Baltimore, Maryland 21202
Telecopy No.: (410) 539-6981
Attention: Lawrence R. Seidman
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request, or communication which shall be
hand-delivered, mailed, transmitted or telecopied in the manner described
above, shall be deemed sufficiently given, served, sent, received or delivered
for all purposes at such time as it is delivered to the addressee (with the
return receipt, the delivery receipt, or the answerback being deemed
conclusive, but not exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
3.7. EXECUTION IN COUNTERPARTS
To facilitate execution, this Agreement may be executed in as
many counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall
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collectively constitute a single agreement. It shall not be necessary in making
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement, or have caused this Registration Rights Agreement to be duly
executed on their behalf, as of the day and year first hereinabove set forth.
INTERLAND, INC.
By: /s/ Ken Gavranovic
-----------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive
Officer
THE HOLDERS
CREST COMMUNICATIONS
PARTNERS L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
-----------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
CREST ENTREPRENEURS FUND
L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
-----------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
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<PAGE> 22
BOULDER VENTURES III, L.P.
By: /s/ Andrew E. Jones
-----------------------------------------
Name: Andrew E. Jones
Title: Partner
BANCBOSTON VENTURES INC.
By: /s/ M. Scott McCormack
-----------------------------------------
Name: M. Scott McCormack
Title: Vice President
PRIVATE EQUITY CO-INVEST LTD.
By: VBTC Management, Ltd.
Its: Sole Director
By: /s/ John Arnold
-----------------------------------------
Name: John Arnold
Title: Chairman
BOULDER VENTURES III (ANNEX),
L.P.
By: /s/ Andrew E. Jones
-----------------------------------------
Name: Andrew E. Jones
Title: Partner
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<PAGE> 1
EXHIBIT 10.5(b)
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") is
made and entered into as of the 24th day of December, 1999, by and among
INTERLAND, INC., a Georgia corporation (the "Company"), CREST COMMUNICATIONS
PARTNERS, L.P., a Delaware limited partnership, CREST ENTREPRENEURS FUND, L.P.,
a Delaware limited partnership (collectively "Crest"), BOULDER VENTURES III,
L.P., a Delaware limited partnership ("Boulder"), MICROSOFT CORPORATION
("Microsoft") and the other investors set forth on the signature page hereto
(the "Other Investors"), to amend the terms of that certain Registration Rights
Agreement by and among the Company, Crest, Boulder and the Other Investors
dated as of December 2, 1999 (the "Agreement").
WHEREAS, the Agreement was entered into in connection with Crest's and
Boulder's acquisition of an aggregate of 9,174,313 shares of the Company's
Series A Convertible Participating Preferred Stock, no par value per share (the
"Series A Stock");
WHEREAS, in connection with Microsoft's acquisition of 2,300,000
shares of the Series A Stock, it desires to be entitled and subject to all of
the rights and obligations of the Agreement pari passu with each of Boulder and
Crest;
WHEREAS, the Company, Crest and Boulder have determined and agreed
that it would be in the strategic best interest of the Company to amend the
Agreement to include Microsoft as a party to the Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, agree as follows:
1. The Agreement is hereby amended to include Microsoft as a
party thereto as one of the Holders (as defined therein) for all purposes
thereunder. As such, Microsoft shall have all of the rights and obligations
under and pursuant to the Agreement in exactly the same manner and to the same
extent as such rights and obligations are granted to each of Holders.
2. The definition of Holders contained in Section 2 of the
Agreement shall be deleted and restated in its entirety as follows:
""Holders" shall mean Crest, Boulder, Microsoft, the Other
Investors and any other person or entity that is a valid transferee of the
rights granted hereunder pursuant to SECTION 1.7 hereof."
<PAGE> 2
IN WITNESS WHEREOF, the undersigned individuals and the
respective duly authorized officer or partner, as the case may be, of each of
the parties hereto have executed this Amendment as of the day and year first
hereinabove set forth.
INTERLAND, INC.
By: /s/ Ken Gavranovic
----------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive
Officer
THE HOLDERS
CREST COMMUNICATIONS
PARTNERS L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
----------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
CREST ENTREPRENEURS FUND L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
----------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
BOULDER VENTURES III, L.P.
By: /s/ Andrew E. Jones
----------------------------------------
Name: Andrew E. Jones
Title: Partner
<PAGE> 3
BANCBOSTON VENTURES INC.
By: /s/ M. Scott McCormack
----------------------------------------
Name: M. Scott McCormack
Title: Vice President
PRIVATE EQUITY CO-INVEST LTD.
By: VBTC Management, Ltd.
Its: Sole Director
By: /s/ John Arnold
----------------------------------------
Name: John Arnold
Title: Chairman
BOULDER VENTURES III (ANNEX),
L.P.
By: /s/ Andrew E. Jones
----------------------------------------
Name: Andrew E. Jones
Title: Partner
MICROSOFT CORPORATION
By: /s/ Bruce Jaffe
----------------------------------------
Name: Bruce Jaffe
Its: Director - Corporate Development
<PAGE> 1
EXHIBIT 10.5(c)
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") is
made and entered into as of the 15th day of March, 2000, by and among
INTERLAND, INC., a Georgia corporation (the "Company"), CREST COMMUNICATIONS
PARTNERS, L.P., a Delaware limited partnership, CREST ENTREPRENEURS FUND, L.P.,
a Delaware limited partnership (collectively "Crest"), BOULDER VENTURES III,
L.P., a Delaware limited partnership ("Boulder"), MICROSOFT CORPORATION, a
Washington corporation ("Microsoft"), NETWORK SOLUTIONS, INC., a Delaware
corporation ("NetSol") and the other investors set forth on the signature page
hereto (the "Other Investors"), to amend the terms of that certain Registration
Rights Agreement by and among the Company, Crest, Boulder and the Other
Investors dated as of December 2, 1999 as amended on December 23, 1999 (the
"Agreement").
WHEREAS, the Agreement was entered into in connection with Crest's and
Boulder's acquisition of an aggregate of 9,174,313 shares of the Company's
Series A Convertible Participating Preferred Stock, no par value per share (the
"Series A Stock") and amended on December 23, 1999 to include Microsoft as a
party to the Agreement;
WHEREAS, in connection with NetSol's acquisition of 689,655 shares of
the Series A Stock, it desires to be entitled and subject to all of the rights
and obligations of the Agreement pari passu with each of Boulder, Crest and
Microsoft;
WHEREAS, the Company, Crest and Boulder have determined and agreed
that it would be in the strategic best interest of the Company to amend the
Agreement to include NetSol as a party to the Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, agree as follows:
1. The Agreement is hereby amended to include NetSol as a party
thereto as one of the Holders (as defined therein) for all purposes thereunder.
As such, NetSol shall have all of the rights and obligations under and pursuant
to the Agreement in exactly the same manner and to the same extent as such
rights and obligations are granted to each of Holders.
2. The definition of Holders contained in Section 2 of the
Agreement shall be deleted and restated in its entirety as follows:
""Holders" shall mean Crest, Boulder, Microsoft Corporation,
Network Solutions, Inc., the Other Investors and any other person or entity
that is a valid transferee of the rights granted hereunder pursuant to SECTION
1.7 hereof."
<PAGE> 2
IN WITNESS WHEREOF, the undersigned individuals and the
respective duly authorized officer or partner, as the case may be, of each of
the parties hereto have executed this Amendment as of the day and year first
hereinabove set forth.
INTERLAND, INC.
By: /s/ Ken Gavranovic
----------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive
Officer
THE HOLDERS
CREST COMMUNICATIONS PARTNERS
L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
----------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
CREST ENTREPRENEURS FUND L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
----------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
BOULDER VENTURES III, L.P.
By: /s/ Andrew E. Jones
----------------------------------------
Name: Andrew E. Jones
Title: Partner
BANCBOSTON VENTURES INC.
<PAGE> 3
By: /s/ M. Scott McCormack
----------------------------------------
Name: M. Scott McCormack
Title: Vice President
PRIVATE EQUITY CO-INVEST LTD.
By: VBTC Management, Ltd.
Its: Sole Director
By: /s/ Clive Munyard
----------------------------------------
Name: Clive Munyard
Title: Executive Director
BOULDER VENTURES III (ANNEX), L.P.
By: /s/ Andrew E. Jones
----------------------------------------
Name: Andrew E. Jones
Title: Partner
MICROSOFT CORPORATION
By: /s/ Amar Nehru
----------------------------------------
Name: Amar Nehru
Its: GM - Corporate Development
NETWORK SOLUTIONS, INC.
By: /s/ James P. Rutt
----------------------------------------
Name: James P. Rutt
Its: Chief Executive Officer
<PAGE> 1
EXHIBIT 10.5 (d)
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") is
made and entered into as of the 8th day of May, 2000, by and among INTERLAND,
INC., a Georgia corporation (the "Company"), CREST COMMUNICATIONS PARTNERS,
L.P., a Delaware limited partnership, CREST ENTREPRENEURS FUND, L.P., a
Delaware limited partnership (collectively "Crest"), BOULDER VENTURES III,
L.P., a Delaware limited partnership ("Boulder"), MICROSOFT CORPORATION, a
Washington corporation ("Microsoft"), NETWORK SOLUTIONS, INC., a Delaware
corporation ("NetSol"), BELL ATLANTIC INVESTMENTS, INC., a Delaware corporation
("BAI"), and the other investors set forth on the signature page hereto (the
"Other Investors"), to amend the terms of that certain Registration Rights
Agreement by and among the Company, Crest, Boulder and the Other Investors
dated as of December 2, 1999, as amended on December 23, 1999 and on March 15,
2000 (the "Agreement").
WHEREAS, the Agreement was entered into in connection with Crest's and
Boulder's acquisition of an aggregate of 9,174,313 shares of the Company's
Series A Convertible Participating Preferred Stock, no par value per share (the
"Series A Stock") and amended on December 23, 1999 to include Microsoft and on
March 15, 2000 to include NetSol as a party to the Agreement;
WHEREAS, in connection with BAI's acquisition of 1,111,111 shares of
the Series A Stock, it desires to be entitled and subject to all of the rights
and obligations of the Agreement pari passu with each of Boulder, Crest,
Microsoft and NetSol;
WHEREAS, the Company, Crest, Boulder and NetSol have determined and
agreed that it would be in the strategic best interest of the Company to amend
the Agreement to include BAI as a party to the Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, agree as follows:
1. The Agreement is hereby amended to include BAI as a party
thereto as one of the Holders (as defined therein) for all purposes thereunder.
As such, BAI shall have all of the rights and obligations under and pursuant to
the Agreement in exactly the same manner and to the same extent as such rights
and obligations are granted to each of Holders.
2. The definition of Holders contained in Section 2 of the
Agreement shall be deleted and restated in its entirety as follows:
<PAGE> 2
""Holders" shall mean Crest, Boulder, Microsoft Corporation,
Network Solutions, Inc., Bell Atlantic, Inc., the Other Investors and any other
person or entity that is a valid transferee of the rights granted hereunder
pursuant to SECTION 1.7 hereof."
IN WITNESS WHEREOF, the undersigned individuals and the
respective duly authorized officer or partner, as the case may be, of each of
the parties hereto have executed this Amendment as of the day and year first
hereinabove set forth.
INTERLAND, INC.
By: /s/ Ken Gavranovic
-------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive
Officer
THE HOLDERS
CREST COMMUNICATIONS
PARTNERS L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
-------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
CREST ENTREPRENEURS FUND L.P.
By: Crest Communications Holdings LLC
Its: Authorized Representative
By: /s/ Gregg A. Mockenhaupt
-------------------------------------
Name: Gregg A. Mockenhaupt
Title: Managing Director
2
<PAGE> 3
BOULDER VENTURES III, L.P.
By: /s/ Andrew E. Jones
-------------------------------------
Name: Andrew E. Jones
Title: Partner
BANCBOSTON VENTURES INC.
By: /s/ M. Scott McCormack
-------------------------------------
Name: M. Scott McCormack
Title: Vice President
PRIVATE EQUITY CO-INVEST LTD.
By: VBTC Management, Ltd.
Its: Sole Director
By: /s/ Clive Munyard
-------------------------------------
Name: Clive Munyard
Title: Executive Director
BOULDER VENTURES III (ANNEX), L.P.
By: /s/ Andrew E. Jones
-------------------------------------
Name: Andrew E. Jones
Title: Partner
MICROSOFT CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
3
<PAGE> 4
NETWORK SOLUTIONS, INC.
By: /s/ James P. Rutt
-------------------------------------
Name: James P. Rutt
-----------------------------------
Its: Chief Executive Officer
------------------------------------
BELL ATLANTIC
INVESTMENTS, INC.
By: /s/ Janet Garrity
-------------------------------------
Name: Janet Garrity
Its: President and Treasurer
<PAGE> 1
EXHIBIT 10.14
SEPARATION AGREEMENT AND GENERAL RELEASE
This Separation Agreement and General Release (hereinafter, the
"Agreement") is made and entered into this 19th day of November, 1999, by and
between Waldemar Fernandez (hereinafter, "Mr. Fernandez") and Interland, Inc.,
a Georgia corporation headquartered in Atlanta, Georgia (hereinafter,
"Interland") (hereinafter, together, "the parties").
WHEREAS, the parties desire to enter into a written agreement
embodying their mutual understanding and promises reflecting their desire to
resolve any and all disputes, claims, and differences between the parties that
either of them may have arising from Mr. Fernandez's employment with Interland
and the termination thereof or for any other reason.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, Mr. Fernandez and Interland agree as follows:
1. Upon the expiration of the revocation period described in
paragraph 18 below Interland shall pay to Mr. Fernandez (or his designee) the
sum of $330,000 and upon each of the first two anniversaries of the execution
of this Agreement, Interland shall pay to Mr. Fernandez (or his designee or
estate) the sum of $165,000. Mr. Fernandez agrees that no representations have
been made to him regarding the tax treatment of these payments, that he has
relied on his own tax advisor regarding this subject, and that if the Internal
Revenue Service or a State taxing authority determines that any taxes are due
or outstanding on these payments, he shall indemnify and hold harmless
Interland from any claim for taxes, interest or penalties.
2. Mr. Fernandez agrees that as of the execution of this
Agreement, he resigns as both Chairman of the Board of Directors and as a
member of the Board of Directors of Interland and effectively ends any
employment, consulting, or other agency relationship of any kind whatsoever
with Interland. Mr. Fernandez acknowledges and agrees that as of the time he
executes this Agreement he will have no authority to act for or on behalf of
Interland in any capacity.
3. Except as may otherwise be limited in writing in an agreement
executed by Mr. Fernandez in connection with Interland's offering of Series A
Convertible Participating Preferred Stock, Mr. Fernandez has the right, at
will, to transfer any or all of his shares of Interland at anytime and
Interland, at its expense, will cause the issuance of such legal opinions and
transfer agent services to effect such transfer, provided that such transfer(s)
requested by Mr. Fernandez are in compliance with all applicable state and
federal securities laws.
4. (a) Mr. Fernandez, on his behalf and on behalf of his
heirs, successors, agents, executors, administrators, attorneys and assigns,
hereby releases and forever discharges Interland and any and all of its current
or former affiliated entities, benefit plans, departments, stockholders,
officers, directors, employees, representatives, agents, attorneys, affiliates,
successors and assigns (hereinafter referred to as the "Released Parties"), to
the fullest extent provided by law, from any and all charges, complaints,
claims, liabilities, obligations, promises, agreements, controversies, damages,
actions, causes of action, suits, rights, demands, costs, losses, debts and
expenses (including attorneys' fees and costs actually incurred), of any nature
whatsoever, known or unknown, suspected or unsuspected, which he now has, owns,
or holds, or claims to have, own, or hold, which he at any time heretofore had,
owned, or held, or claimed to have had, owned, or held, and which he at any
time in the future may have, own, or hold, against any one or more of them, for
any reason or cause whatsoever arising on or prior to the date hereof, whether
in law or in equity, under federal, state or other local law, including without
limitation any and all claims arising from or relating to Mr. Fernandez's
employment with Interland or the Released Parties or the termination thereof,
any claims relating to or arising under any employment contract, any employment
statute or regulation,
<PAGE> 2
any employment discrimination law, including but not limited to the Age
Discrimination in Employment Act, as amended, 29 U.S.C. ss. 621 et seq., Title
VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1963, and
any other federal, state, or local civil rights, pension or labor law, contract
law, tort law, or common law. Mr. Fernandez warrants that this is a general
release and that he has not assigned or transferred any claims covered hereby.
Provided, however, that notwithstanding anything to the contrary herein, this
Release shall not release any rights under this Agreement, under any rights to
indemnification arising as a result of service as a director, officer or
employee of Interland, rights arising solely as a result of Mr. Fernandez's
status as a shareholder of Interland or rights arising as an option holder
pursuant an agreement existing on the date hereof.
(b) Interland, on its behalf and on behalf of its agents,
executors, administrators, attorneys and assigns, hereby releases and forever
discharges Mr. Fernandez to the fullest extent provided by law, from any and
all charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including attorneys' fees and costs
actually incurred), of any nature whatsoever, known or unknown, suspected or
unsuspected, which it now has, owns, or holds, or claims to have, own, or hold,
which it at any time heretofore had, owned, or held, or claimed to have had,
owned, or held, and which it at any time in the future may have, own, or hold,
against him, for any reason or cause whatsoever arising on or prior to the date
hereof, whether in law or in equity, under federal, state or other local law,
including without limitation any and all claims arising from or relating to Mr.
Fernandez's employment by or association with Interland or the termination
thereof, any claims relating to or arising under any employment contract, any
employment statute or regulation, any employment discrimination law, including
but not limited to the Age Discrimination in Employment Act, as amended, 29
U.S.C. ss. 621 et seq., Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1963, and any other federal, state, or local civil rights,
pension or labor law, contract law, tort law, or common law. Interland warrants
that this is a general release and that it has not assigned or transferred any
claims covered hereby.
5. (a) Without limiting the generality of the general
release in Paragraph 4(a), Mr. Fernandez, on his behalf and on behalf of his
heirs, legal representatives and assigns, further agrees not to sue or
otherwise institute or cause to be instituted, or solicit, encourage, or cause
any other individual or entity to sue or otherwise institute or cause to be
instituted, except as required by order of a court or of any agency of the
federal, state, or local government, the prosecution of any claim, complaint,
or charge against any entity released herein in any federal, state, local or
other court, administrative agency, commission, or other forum seeking damages
concerning any claims released herein, and Mr. Fernandez irrevocably and
unconditionally waives any and all rights to recover any relief and damages
concerning claims released herein. Mr. Fernandez specifically represents that
no complaints, charges, or other proceedings are pending in any court,
administrative agency, or other forum relating directly or indirectly to any
claims released herein.
(b) Without limiting the generality of the general
release in Paragraph 4(b), Interland, on its behalf and on behalf of its agents
and assigns, further agrees not to sue or otherwise institute or cause to be
instituted, or solicit, encourage, or cause any other individual or entity to
sue or otherwise institute or cause to be instituted, except as required by
order of a court or of any agency of the federal, state, or local government,
the prosecution of any claim, complaint, or charge against any person or entity
released herein in any federal, state, local or other court, administrative
agency, commission, or other forum seeking damages concerning any claims
released herein, and Interland irrevocably and unconditionally waives any and
all rights to recover any relief and damages concerning claims released herein.
Interland specifically represents that no complaints, charges, or other
proceedings are pending in any court, administrative agency, or other forum
relating directly or indirectly to any claims released herein.
2
<PAGE> 3
6. Mr. Fernandez agrees that he will strictly maintain the
confidentiality of the existence and terms of this Agreement, except that he
may disclose the terms of this Agreement if required by order of a court of
competent jurisdiction, or as agreed to in writing by the parties. In addition,
Mr. Fernandez may disclose the existence and terms of this Agreement to his
tax, accounting and legal advisors, provided that he instructs them that the
settlement of this matter is confidential and that any disclosure by them to a
third person would be improper and could constitute a breach of this Agreement.
7. Mr. Fernandez shall be entitled to advancement of expenses as
contemplated by ss.14-2-853 of the Official Code of Georgia Annotated, or any
successor provision thereto, provided that the written affirmations and written
undertakings enumerated therein are provided to Interland.
8. Mr. Fernandez shall maintain Confidential Information (as
defined below) as secret and confidential unless he is required to disclose
Confidential Information pursuant to the terms of a valid and effective order
issued by a court of competent jurisdiction or a governmental authority. All
physical items, including electronic media, containing Confidential
Information, including, without limitation, any business plan, know-how,
collection methods and procedures, advertising techniques, marketing plans and
methods, sales techniques, documentation, contracts, reports, letters, notes,
any computer media, client lists, and all other information and materials of
Interland's business and operations, shall remain the exclusive and
confidential property of Interland and shall be returned, along with any copies
or notes Mr. Fernandez made thereof or therefrom, to Interland promptly upon
execution of this Agreement. For the purposes of this Agreement, "Confidential
Information" shall mean information, without regard to form, related to
Interland's business. Such information shall include, but shall not be limited
to: (1) any financial, business, planning, operations, services, potential
services, products, potential products, technical information, intellectual
property, trade secrets, know-how, and/or formulas, as well as production,
purchasing, marketing, sales, personnel, customer, supplier, or other
information of Interland; (2) any papers, data, records, processes, methods,
techniques, systems, models, samples, devices, equipment, compilations,
invoices, customer lists, or documents of Interland; (3) any confidential
information or trade secrets of any third party provided to Interland in
confidence or subject to other use or disclosure, restrictions, or limitations;
and (4) any other information, written, oral or electronic, which pertains to
Interland's affairs or interests or with whom or how Interland does business,
whether existing now or at some time in the future, whether pertaining to
current or future developments, and whether accessed during, prior to, or after
Fernandez's tenure or association with Interland. Interland acknowledges and
agrees that Confidential Information shall not include information in the
public domain or information that was or becomes available from a source that
Mr. Fernandez reasonably believes was not and is not legally bound to Interland
to maintain the confidentiality of the information.
9. (a) Interland agrees to provide Mr. Fernandez any and
all written information and reports that it provides to the holders of
Interland's Series A Convertible Participating Preferred Stock or if the
issuance of such Preferred Stock does not occur, then Mr. Fernandez shall be
entitled to such information and reports as he reasonably may request.
(b) Mr. Fernandez shall be permitted to participate on
an equal basis with Mr. Gavranovic in the allocation of any "friends and
family" shares in connection with the initial public offering of Interland's
common stock.
(c) Mr. Fernandez shall be entitled to all stock
registration rights that are granted by Interland to Mr. Gavranovic, on an
equal basis with Mr. Gavranovic in proportion to their relative ownership of
Interland's equity securities. Mr. Fernandez will be entitled to piggyback
registration rights after Interland's initial public offering on terms and
conditions that are customary in comparable situations, which rights will be
memorialized in a separate agreement.
3
<PAGE> 4
(d) Interland hereby agrees to take any and all actions
as are necessary or required to amend Mr. Fernandez's current options to
acquire Interland's common stock so that such options will not expire as a
result of Fernandez's termination pursuant hereto and will become fully
exercisable upon the earlier to occur of July 1, 2001 or the completion of
Interland's initial public offering and may be exercised by Mr. Fernandez(or
his personal representative or executor in the event of his death or
disability) until the earlier of the third anniversary of the IPO or July 1,
2004.
(e) Interland agrees that Mr. Fernandez's loan from
Interland in the principal amount of $200,000, which is the entire amount owed
by Mr. Fernandez to the Company) shall be accorded equal treatment as is given
to the similar existing loan extended by Interland to Mr. Gavranovic; and
provided further that notwithstanding any provision in the loan documentation
to the contrary, that the loan will not be due until the earlier to occur of a
six month period after Interland's initial public offering or 5 years from the
date of this agreement.
10. Mr. Fernandez shall not at any time make false, misleading or
disparaging statements, or statements that could be interpreted as such, about
Interland, including its products, services, management, employees and
customers. Interland shall not make any false, misleading or disparaging
statements or statements that could be interpreted as such concerning Mr.
Fernandez.
11. Mr. Fernandez hereby covenants and agrees that for a period
of one year immediately following the date hereof he shall not act in any way,
directly or indirectly, with the purpose or effect of soliciting, diverting or
taking away any strategic partner, business, customer, client or supplier of
Interland that he contacted, directly or indirectly, or that anyone directly or
indirectly supervised by him contacted, directly or indirectly, during his
employment by the Interland.
12. Mr. Fernandez hereby covenants and agrees that for a period
of one year immediately following the date hereof he shall not act in any way
with the purpose or effect of soliciting, recruiting, or encouraging, directly
or indirectly, any Person who is or was at any time during the one year period
prior to the termination of his employment with Interland to leave the employ
of Interland, its divisions or its subsidiaries.
13. Mr. Fernandez hereby covenants and agrees that for a period
of six months immediately following the date hereof he shall not within the
United States and Europe (i) develop, own, manage, operate, or otherwise engage
in, participate in, represent, or in any way be connected with, as officer,
director, partner, owner, employee, agent, independent contractor, consultant,
proprietor, stockholder (except for the ownership of a less than 5% stock
interest in a publicly traded company), or otherwise, any business or activity
that competes with Interland or its affiliates; or (ii) otherwise compete with
Interland in the sale, marketing, provision, or licensing, directly or
indirectly, as officer, director, partner, owner, employee, agent, independent
contractor, consultant, proprietor, stockholder (except for the ownership of a
less than 5% stock interest in a publicly traded company), or otherwise, of any
products competitive with the products, or services competitive with the
services, developed or marketed by Interland within the United States or
Europe. Mr. Fernandez acknowledges that (i) this covenant has unique,
substantial, and immeasurable value to Interland, (ii) this covenant is
reasonably limited in scope and geography to protect Interland's legitimate
business interests, including its property, confidential information and
relationships, good will, economic advantage, and customer relationships; (iii)
the agreements, covenants and undertakings of Mr. Fernandez set forth in this
Agreement will not preclude him from becoming gainfully employed following
termination of the engagement with Interland; and (iv) the services Mr.
Fernandez intends and is expected to provide are special and unique.
14. Because any breach or threatened breach of this Agreement by
Mr. Fernandez would result in continuing material and irreparable harm to
Interland, and because it would be difficult or impossible to establish the
full monetary value of such damage, Interland shall be entitled to
4
<PAGE> 5
injunctive relief in the event of Mr. Fernandez's breach or threatened breach
of this Agreement. Injunctive relief is in addition to any other remedy that
may be available to Interland. In the event of any breach or threatened breach
by Mr. Fernandez, Mr. Fernandez shall reimburse Interland for its reasonable
attorneys' fees and other expenses Interland incurs.
15. The rights and restrictions in this Agreement may be
exercised and are applicable only to the extent that they do not violate
applicable laws, and are intended to be limited to the extent necessary so that
they will not render this Agreement illegal, invalid or unenforceable. If any
term shall be held illegal, invalid or unenforceable by a court of competent
jurisdiction, the remaining terms shall remain in full force and effect.
16. This Agreement may be amended, modified, or supplemented only
by a written instrument executed by the parties affected thereby, and shall be
binding upon their respective heirs, beneficiaries, and successors and assigns.
This Agreement is entered into in the State of Georgia and shall be governed by
and construed under Georgia law, exclusive of any choice of law rules.
17. This Agreement sets forth the entire agreement and
understanding between the parties on the subject matter hereof and merges all
prior discussions and negotiations between them. The parties each represent
that they are not relying on any promises or oral or written statements or
representations other than those in this Agreement.
18. Mr. Fernandez acknowledges that he has read and understands
this Agreement and executes it knowingly, voluntarily and without coercion. Mr.
Fernandez further acknowledges that he is being advised herein in writing to
consult with an attorney prior to executing this Agreement, and that he has
been given a period of at least twenty-one (21) days within which to consider
and execute this Agreement, unless he voluntarily chooses to execute this
Agreement before the end of the twenty-one (21) day period by executing the
attached Election to Execute Prior to Expiration of
5
<PAGE> 6
Twenty-One Day Consideration Period. Mr. Fernandez understands that he has
seven (7) days following his execution of this Agreement to revoke it. For such
revocation to be effective, written notice of revocation must be delivered to
David Stockton, Kilpatrick Stockton LLP, 1100 Peachtree Street, Suite 2800,
Atlanta, Georgia 30309, no later than 5:00 p.m. on the seventh calendar day
after Mr. Fernandez signs this Agreement. If Mr. Fernandez revokes this
Agreement, it shall not be effective or enforceable and he shall not receive
the benefits described herein.
IN WITNESS THEREOF, Mr. Fernandez and Interland, after carefully
reading the provisions of this Release herein declare that they understand such
provisions and willingly accept and agree thereto by executing this Agreement
this 19th day of November, 1999.
INTERLAND, INC.
/s/ Waldemar Fernandez By: /s/ Bart Hahn
- ---------------------------------- ------------------------------------
Waldemar Fernandez
Title: Managing Director
---------------------------------
Date: November 19, 1999 Date: November 19, 1999
----------------------------- ----------------------------------
6
<PAGE> 7
ELECTION TO EXECUTE PRIOR TO EXPIRATION
OF TWENTY-ONE DAY CONSIDERATION PERIOD
I, Waldemar Fernandez, understand that I have at least twenty-one (21)
days within which to consider and execute the foregoing Separation Agreement
and General Release. However, after having an opportunity to consult counsel I
have freely and voluntarily elected to execute the Separation Agreement and
General Release before the twenty-one (21) day period has expired.
/s/ Waldemar Fernandez
----------------------------------------
Waldemar Fernandez
Date: November 19, 1999
-----------------------------------
7
<PAGE> 1
EXHIBIT 10.15
PROMISSORY NOTE
December 10, 1998 $25,000
FOR VALUE RECEIVED, KEN GAVRANOVIC, ("BORROWER"), promises to pay to
the order of INTERLAND, INC., a Georgia corporation ("LENDER") at Lender's
office located at 34 Peachtree Street, Atlanta, Georgia 30303, or at such other
place as the holder hereof may designate, the principal sum of TWENTY-FIVE
THOUSAND DOLLARS ($25,000), together with interest on so much of the principal
balance of this Note as may be outstanding and unpaid from time to time,
calculated on the basis of a 360-day year and actual days elapsed, at the rate
per annum indicated below.
1. PAYMENT OF PRINCIPAL AND INTEREST. The principal balance of this
Note and accrued interest thereon shall be payable in full on demand by Lender.
Unless demand for payment is earlier made, accrued interest shall be payable
quarterly on the 1st day of the calendar month following the quarter in which it
accrues commencing on the 1st day of January, 1999, and continuing to be due on
the same day of each succeeding quarter thereafter until principal and interest
are paid in full. The provision of this interest payment schedule is not
intended, and shall not be construed, to affect or impair the demand nature of
this Note.
2. INTEREST RATE. The unpaid principal balance of this Note shall bear
interest at a rate per annum of ten percent (10%).
In no event shall the amount or rate of interest due and payable under
this Note exceed the maximum amount or rate of interest allowed by applicable
law (including, without limitation, O.C.G.A. ss. 7-4-18) and, in the event any
such excess payment is made by Borrower or received by Lender, such excess sum
shall be credited as a payment of principal (or if no principal shall remain
outstanding, shall be refunded to Borrower). It is the express intent hereof
that Borrower not pay and Lender not receive, directly or indirectly or in any
manner, interest in excess of that which may be lawfully paid under applicable
law. All interest (including all charges, fees or other amounts deemed to be
interest) which is paid or charged under this Note shall, to the maximum extent
permitted by applicable law, be amortized, allocated and spread on a pro rata
basis throughout the actual term of this Note and any extension or renewal
hereof.
3. EVENT OF DEFAULT. During the existence of any Event of Default (as
defined herein), the unpaid principal balance of this Note shall bear interest
on each day until paid at the interest rate otherwise in effect under this Note
plus, in Lender's discretion, up to an additional five percentage points (5%).
All payments or prepayments on this Note shall first be applied to interest
accrued on this Note through the date of such payment or prepayment and then to
principal (with partial principal prepayments applied to installments in the
order of their maturity).
The occurrence of any one or more of the following events will
constitute a default by Borrower hereunder (an "Event of Default"): (i) Borrower
fails to pay when due any amount payable under this Note; or (ii) if any
proceeding is instituted by or against Borrower alleging that Borrower is
insolvent, unable to pay Borrower's debts as they mature, or not generally
paying Borrower's debts as such debts become due, or if any proceeding is
instituted by or against Borrower under the Federal Bankruptcy Code or any
successor statute, or if any proceeding is
<PAGE> 2
instituted seeking the appointment of a receiver or trustee for all or any
portion of Borrower's property, or if any proceeding affecting the rights or
creditors generally is instituted by or against Borrower.
Upon the occurrence of an Event of Default, Lender, at its option,
without demand or notice of any kind, may declare this Note immediately due and
payable, whereupon all outstanding principal and accrued interest shall become
immediately due and payable; provided, however, that upon the occurrence of any
Event of Default described in clause (ii) above, this Note, without demand,
notice or declaration by Lender of any kind, shall automatically and immediately
become due and payable.
4. PREPAYMENTS. Borrower may prepay the principal balance of this Note
in whole or in part without premium or penalty. All payments or prepayments on
this Note shall be applied, first, to interest accrued on this Note through the
date of such payment or prepayment and then to principal.
5. ATTORNEY'S FEES. If this Note is collected by or through an
attorney-at-law, all costs of such collection incurred by the Lender, including
reasonable attorney's fees, shall be paid by Borrower.
6. TIME IS OF THE ESSENCE; WAIVERS OF RIGHTS. Time is of the essence of
this Note. Lender shall not be deemed to waive any of its rights under this Note
unless such waiver be in writing and signed by Lender. No delay or omission by
Lender in exercising any of its rights under this Note shall operate as a waiver
of such rights, and a waiver in writing on one occasion shall not be construed
as a consent to or a waiver of any right or remedy on any future occasion.
7. GEORGIA LAW GOVERNS. This Note shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia (without giving
effect to its conflicts of law rules). Whenever possible, each provision of this
Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Note.
8. WORDS. Words importing the singular number hereunder shall include
the plural number and vice versa. The word "Lender" as used herein shall include
transferees, successors and assigns of Lender, and all rights of Lender
hereunder shall inure to the benefit of its transferees, successors and assigns.
All obligations of Borrower hereunder shall bind Borrower's successors and
assigns.
EXECUTED by the undersigned Borrower as of the day and year first above
set forth.
/s/ Ken Gavranovic
----------------------------------------------
KEN GAVRANOVIC
Address:
--------------------------------------
--------------------------------------
--------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.16
PROMISSORY NOTE
December 15, 1998 $25,000
FOR VALUE RECEIVED, WALDEMAR FERNANDEZ, ("BORROWER"), promises to pay
to the order of INTERLAND, INC., a Georgia corporation ("LENDER") at Lender's
office located at 34 Peachtree Street, Atlanta, Georgia 30303, or at such other
place as the holder hereof may designate, the principal sum of TWENTY-FIVE
THOUSAND DOLLARS ($25,000), together with interest on so much of the principal
balance of this Note as may be outstanding and unpaid from time to time,
calculated on the basis of a 360-day year and actual days elapsed, at the rate
per annum indicated below.
1. PAYMENT OF PRINCIPAL AND INTEREST. The principal balance of this
Note and accrued interest thereon shall be payable in full on demand by Lender.
Unless demand for payment is earlier made, accrued interest shall be payable
quarterly on the 1st day of the calendar month following the quarter in which it
accrues commencing on the 1st day of January, 1999, and continuing to be due on
the same day of each succeeding quarter thereafter until principal and interest
are paid in full. The provision of this interest payment schedule is not
intended, and shall not be construed, to affect or impair the demand nature of
this Note.
2. INTEREST RATE. The unpaid principal balance of this Note shall bear
interest at a rate per annum of ten percent (10%).
In no event shall the amount or rate of interest due and payable under
this Note exceed the maximum amount or rate of interest allowed by applicable
law (including, without limitation, O.C.G.A. ss. 7-4-18) and, in the event any
such excess payment is made by Borrower or received by Lender, such excess sum
shall be credited as a payment of principal (or if no principal shall remain
outstanding, shall be refunded to Borrower). It is the express intent hereof
that Borrower not pay and Lender not receive, directly or indirectly or in any
manner, interest in excess of that which may be lawfully paid under applicable
law. All interest (including all charges, fees or other amounts deemed to be
interest) which is paid or charged under this Note shall, to the maximum extent
permitted by applicable law, be amortized, allocated and spread on a pro rata
basis throughout the actual term of this Note and any extension or renewal
hereof.
3. EVENT OF DEFAULT. During the existence of any Event of Default (as
defined herein), the unpaid principal balance of this Note shall bear interest
on each day until paid at the interest rate otherwise in effect under this Note
plus, in Lender's discretion, up to an additional five percentage points (5%).
All payments or prepayments on this Note shall first be applied to interest
accrued on this Note through the date of such payment or prepayment and then to
principal (with partial principal prepayments applied to installments in the
order of their maturity).
The occurrence of any one or more of the following events will
constitute a default by Borrower hereunder (an "Event of Default"): (i) Borrower
fails to pay when due any amount payable under this Note; or (ii) if any
proceeding is instituted by or against Borrower alleging that Borrower is
insolvent, unable to pay Borrower's debts as they mature, or not generally
paying Borrower's debts as such debts become due, or if any proceeding is
instituted by or against Borrower under the Federal Bankruptcy Code or any
successor statute, or if any proceeding is
<PAGE> 2
instituted seeking the appointment of
a receiver or trustee for all or any portion of Borrower's property, or if any
proceeding affecting the rights or creditors generally is instituted by or
against Borrower.
Upon the occurrence of an Event of Default, Lender, at its option,
without demand or notice of any kind, may declare this Note immediately due and
payable, whereupon all outstanding principal and accrued interest shall become
immediately due and payable; provided, however, that upon the occurrence of any
Event of Default described in clause (ii) above, this Note, without demand,
notice or declaration by Lender of any kind, shall automatically and immediately
become due and payable.
4. PREPAYMENTS. Borrower may prepay the principal balance of this Note
in whole or in part without premium or penalty. All payments or prepayments on
this Note shall be applied, first, to interest accrued on this Note through the
date of such payment or prepayment and then to principal.
5. ATTORNEY'S FEES. If this Note is collected by or through an
attorney-at-law, all costs of such collection incurred by the Lender, including
reasonable attorney's fees, shall be paid by Borrower.
6. TIME IS OF THE ESSENCE; WAIVERS OF RIGHTS. Time is of the essence of
this Note. Lender shall not be deemed to waive any of its rights under this Note
unless such waiver be in writing and signed by Lender. No delay or omission by
Lender in exercising any of its rights under this Note shall operate as a waiver
of such rights, and a waiver in writing on one occasion shall not be construed
as a consent to or a waiver of any right or remedy on any future occasion.
7. GEORGIA LAW GOVERNS. This Note shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia (without giving
effect to its conflicts of law rules). Whenever possible, each provision of this
Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Note.
8. WORDS. Words importing the singular number hereunder shall include
the plural number and vice versa. The word "Lender" as used herein shall include
transferees, successors and assigns of Lender, and all rights of Lender
hereunder shall inure to the benefit of its transferees, successors and assigns.
All obligations of Borrower hereunder shall bind Borrower's successors and
assigns.
EXECUTED by the undersigned Borrower as of the day and year first above
set forth.
/s/ Waldemar Fernandez
----------------------------------------------
WALDEMAR FERNANDEZ
Address:
--------------------------------------
--------------------------------------
--------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.17
PROMISSORY NOTE
May 14, 1999 $200,000
FOR VALUE RECEIVED, KEN GAVRANOVIC, ("BORROWER"), promises to pay to
the order of INTERLAND, INC., a Georgia corporation ("LENDER") at Lender's
office located at 34 Peachtree Street, Atlanta, Georgia 30303, or at such other
place as the holder hereof may designate, the principal sum of TWO HUNDRED
THOUSAND DOLLARS ($200,000), together with interest on so much of the principal
balance of this Note as may be outstanding and unpaid from time to time,
calculated on the basis of a 360-day year and actual days elapsed, at the rate
per annum indicated below.
1. PAYMENT OF PRINCIPAL AND INTEREST. The principal balance of this
Note and accrued interest thereon shall be payable in full on demand by Lender.
Unless demand for payment is earlier made, accrued interest shall be payable
quarterly on the 1st day of the calendar month following the quarter in which it
accrues commencing on the 1st day of July, 1999, and continuing to be due on the
same day of each succeeding quarter thereafter until principal and interest are
paid in full. The provision of this interest payment schedule is not intended,
and shall not be construed, to affect or impair the demand nature of this Note.
2. INTEREST RATE. The unpaid principal balance of this Note shall bear
interest at a rate per annum of ten percent (10%).
In no event shall the amount or rate of interest due and payable under
this Note exceed the maximum amount or rate of interest allowed by applicable
law (including, without limitation, O.C.G.A. ss. 7-4-18) and, in the event any
such excess payment is made by Borrower or received by Lender, such excess sum
shall be credited as a payment of principal (or if no principal shall remain
outstanding, shall be refunded to Borrower). It is the express intent hereof
that Borrower not pay and Lender not receive, directly or indirectly or in any
manner, interest in excess of that which may be lawfully paid under applicable
law. All interest (including all charges, fees or other amounts deemed to be
interest) which is paid or charged under this Note shall, to the maximum extent
permitted by applicable law, be amortized, allocated and spread on a pro rata
basis throughout the actual term of this Note and any extension or renewal
hereof.
3. EVENT OF DEFAULT. During the existence of any Event of Default (as
defined herein), the unpaid principal balance of this Note shall bear interest
on each day until paid at the interest rate otherwise in effect under this Note
plus, in Lender's discretion, up to an additional five percentage points (5%).
All payments or prepayments on this Note shall first be applied to interest
accrued on this Note through the date of such payment or prepayment and then to
principal (with partial principal prepayments applied to installments in the
order of their maturity).
The occurrence of any one or more of the following events will
constitute a default by Borrower hereunder (an "Event of Default"): (i) Borrower
fails to pay when due any amount payable under this Note; or (ii) if any
proceeding is instituted by or against Borrower alleging that Borrower is
insolvent, unable to pay Borrower's debts as they mature, or not generally
paying Borrower's debts as such debts become due, or if any proceeding is
instituted by or against Borrower under the Federal Bankruptcy Code or any
successor statute, or if any proceeding is
<PAGE> 2
instituted seeking the appointment of a receiver or trustee for all or any
portion of Borrower's property, or if any proceeding affecting the rights or
creditors generally is instituted by or against Borrower.
Upon the occurrence of an Event of Default, Lender, at its option,
without demand or notice of any kind, may declare this Note immediately due and
payable, whereupon all outstanding principal and accrued interest shall become
immediately due and payable; provided, however, that upon the occurrence of any
Event of Default described in clause (ii) above, this Note, without demand,
notice or declaration by Lender of any kind, shall automatically and immediately
become due and payable.
4. PREPAYMENTS. Borrower may prepay the principal balance of this Note
in whole or in part without premium or penalty. All payments or prepayments on
this Note shall be applied, first, to interest accrued on this Note through the
date of such payment or prepayment and then to principal.
5. ATTORNEY'S FEES. If this Note is collected by or through an
attorney-at-law, all costs of such collection incurred by the Lender, including
reasonable attorney's fees, shall be paid by Borrower.
6. TIME IS OF THE ESSENCE; WAIVERS OF RIGHTS. Time is of the essence of
this Note. Lender shall not be deemed to waive any of its rights under this Note
unless such waiver be in writing and signed by Lender. No delay or omission by
Lender in exercising any of its rights under this Note shall operate as a waiver
of such rights, and a waiver in writing on one occasion shall not be construed
as a consent to or a waiver of any right or remedy on any future occasion.
7. GEORGIA LAW GOVERNS. This Note shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia (without giving
effect to its conflicts of law rules). Whenever possible, each provision of this
Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Note.
8. WORDS. Words importing the singular number hereunder shall include
the plural number and vice versa. The word "Lender" as used herein shall include
transferees, successors and assigns of Lender, and all rights of Lender
hereunder shall inure to the benefit of its transferees, successors and assigns.
All obligations of Borrower hereunder shall bind Borrower's successors and
assigns.
EXECUTED by the undersigned Borrower as of the day and year first above
set forth.
/s/ Ken Gavranovic
----------------------------------------------
KEN GAVRANOVIC
Address:
--------------------------------------
--------------------------------------
--------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.18
PROMISSORY NOTE
May 19, 1999 $200,000
FOR VALUE RECEIVED, WALDEMAR FERNANDEZ, ("BORROWER"), promises to pay
to the order of INTERLAND, INC., a Georgia corporation ("LENDER") at Lender's
office located at 34 Peachtree Street, Atlanta, Georgia 30303, or at such other
place as the holder hereof may designate, the principal sum of TWO HUNDRED
THOUSAND DOLLARS ($200,000), together with interest on so much of the principal
balance of this Note as may be outstanding and unpaid from time to time,
calculated on the basis of a 360-day year and actual days elapsed, at the rate
per annum indicated below.
1. PAYMENT OF PRINCIPAL AND INTEREST. The principal balance of this
Note and accrued interest thereon shall be payable in full on demand by Lender.
Unless demand for payment is earlier made, accrued interest shall be payable
quarterly on the 1st day of the calendar month following the quarter in which
it accrues commencing on the 1st day of July, 1999, and continuing to be due on
the same day of each succeeding quarter thereafter until principal and interest
are paid in full. The provision of this interest payment schedule is not
intended, and shall not be construed, to affect or impair the demand nature of
this Note.
2. INTEREST RATE. The unpaid principal balance of this Note shall bear
interest at a rate per annum of ten percent (10%).
In no event shall the amount or rate of interest due and payable under
this Note exceed the maximum amount or rate of interest allowed by applicable
law (including, without limitation, O.C.G.A. ss. 7-4-18) and, in the event any
such excess payment is made by Borrower or received by Lender, such excess sum
shall be credited as a payment of principal (or if no principal shall remain
outstanding, shall be refunded to Borrower). It is the express intent hereof
that Borrower not pay and Lender not receive, directly or indirectly or in any
manner, interest in excess of that which may be lawfully paid under applicable
law. All interest (including all charges, fees or other amounts deemed to be
interest) which is paid or charged under this Note shall, to the maximum extent
permitted by applicable law, be amortized, allocated and spread on a pro rata
basis throughout the actual term of this Note and any extension or renewal
hereof.
3. EVENT OF DEFAULT. During the existence of any Event of Default (as
defined herein), the unpaid principal balance of this Note shall bear interest
on each day until paid at the interest rate otherwise in effect under this Note
plus, in Lender's discretion, up to an additional five percentage points (5%).
All payments or prepayments on this Note shall first be applied to interest
accrued on this Note through the date of such payment or prepayment and then to
principal (with partial principal prepayments applied to installments in the
order of their maturity).
The occurrence of any one or more of the following events will
constitute a default by Borrower hereunder (an "Event of Default"): (i)
Borrower fails to pay when due any amount payable under this Note; or (ii) if
any proceeding is instituted by or against Borrower alleging that Borrower is
insolvent, unable to pay Borrower's debts as they mature, or not generally
paying Borrower's debts as such debts become due, or if any proceeding is
instituted by or against Borrower under the Federal Bankruptcy Code or any
successor statute, or if any proceeding is
<PAGE> 2
instituted seeking the appointment of a receiver or trustee for all or any
portion of Borrower's property, or if any proceeding affecting the rights or
creditors generally is instituted by or against Borrower.
Upon the occurrence of an Event of Default, Lender, at its option,
without demand or notice of any kind, may declare this Note immediately due and
payable, whereupon all outstanding principal and accrued interest shall become
immediately due and payable; provided, however, that upon the occurrence of any
Event of Default described in clause (ii) above, this Note, without demand,
notice or declaration by Lender of any kind, shall automatically and
immediately become due and payable.
4. PREPAYMENTS. Borrower may prepay the principal balance of this Note
in whole or in part without premium or penalty. All payments or prepayments on
this Note shall be applied, first, to interest accrued on this Note through the
date of such payment or prepayment and then to principal.
5. ATTORNEY'S FEES. If this Note is collected by or through an
attorney-at-law, all costs of such collection incurred by the Lender, including
reasonable attorney's fees, shall be paid by Borrower.
6. TIME IS OF THE ESSENCE; WAIVERS OF RIGHTS. Time is of the essence
of this Note. Lender shall not be deemed to waive any of its rights under this
Note unless such waiver be in writing and signed by Lender. No delay or
omission by Lender in exercising any of its rights under this Note shall
operate as a waiver of such rights, and a waiver in writing on one occasion
shall not be construed as a consent to or a waiver of any right or remedy on
any future occasion.
7. GEORGIA LAW GOVERNS. This Note shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia (without
giving effect to its conflicts of law rules). Whenever possible, each provision
of this Note shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Note shall be prohibited by
or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Note.
8. WORDS. Words importing the singular number hereunder shall include
the plural number and vice versa. The word "Lender" as used herein shall
include transferees, successors and assigns of Lender, and all rights of Lender
hereunder shall inure to the benefit of its transferees, successors and
assigns. All obligations of Borrower hereunder shall bind Borrower's successors
and assigns.
EXECUTED by the undersigned Borrower as of the day and year
first above set forth.
/s/ Waldemar Fernandez
----------------------------------
WALDEMAR FERNANDEZ
Address:
--------------------------
--------------------------
--------------------------
-2-
<PAGE> 1
EXHIBIT 10.19
STOCK PLEDGE AGREEMENT
THIS AGREEMENT is entered into as of May 14, 1999 by KEN GAVRANOVIC
("Pledgor"), and INTERLAND, INC., a Georgia corporation ("Pledgee").
WHEREAS, Pledgee has accepted from Pledgor (i) that certain Promissory
Note dated December 10, 1998; and (ii) that certain Promissory Note dated May
14, 1999, executed by Pledgor in favor of Pledgee (said Promissory Notes being
collectively referred to as the "Note");
WHEREAS, as a condition to accepting the Note, and without which
Pledgee would not have accepted the Note, Pledgee has required Pledgor to pledge
to Pledgee the Pledged Securities (as defined below) pursuant to the terms and
conditions contained herein in order to secure all of Pledgor's obligations to
Pledgee under the Note; and
WHEREAS, Pledgor desires to so pledge the Pledged Securities to
Pledgee.
THEREFORE, for and in consideration of the foregoing premises and the
mutual agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is for the benefit of
Pledgee to secure the prompt payment in full when due, whether upon demand or
otherwise, of any and all amounts due to Pledgee from Pledgor under the Note
(collectively, the "Secured Obligations").
2. PLEDGED SECURITIES.
2.1. Pledged Stock. As used herein, the term "Pledged
Stock" means 400,000 shares of the no par value per share common stock of the
Company, presently represented by certificate(s) number(ed) _75, and all
replacements and substitutions therefor.
2.2. Pledgor's Representations and Warranties. Pledgor
hereby represents and warrants that (i) he is the legal, record and beneficial
owner of, and has good and marketable title to, the Pledged Securities, subject
to no lien, claim, charge, encumbrance or security interest whatsoever, however
evidenced or created, other than that created by this Agreement in favor of
Pledgee; (ii) he has full power, authority and legal right to pledge all the
Pledged Securities pursuant to this Agreement; and (iii) the pledge and delivery
of the Pledged Securities pursuant to this Agreement creates a valid and
perfected first priority security interest in the Pledged Securities, and any
and all proceeds thereof, which security interest is not subject to any prior
lien, claim, charge, encumbrance or security interest.
<PAGE> 2
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Secured Obligations and for the
purposes set forth in Section 1, Pledgor hereby pledges to Pledgee the Pledged
Stock, together with (i) any and all certificates or other instruments now or
hereafter representing any or all of the Pledged Stock accompanied by stock
powers duly executed in blank by Pledgor, and (ii) all cash and non-cash
proceeds of the foregoing; and hereby assigns, transfers, hypothecates and sets
over to Pledgee all of Pledgor's right, title and interest in and to the Pledged
Stock (and in and to the certificates or instruments evidencing the items
described in clause (i) above) to be held by Pledgee, upon the terms and
conditions set forth in this Agreement. Pledgor shall deliver to Pledgee all
certificates and instruments evidencing the items described in clause (i) above
promptly upon Pledgor's receipt thereof.
3.2. Definition of Pledged Securities and Collateral. The
Pledged Stock and all items described in clause (i) of Section 3.1 hereof are
hereinafter collectively called the "Pledged Securities," and the Pledged
Securities, together with all other securities and moneys received or to be
received and at the time held by Pledgee hereunder and any cash or non-cash
proceeds of any of the foregoing, are hereinafter collectively called the
"Collateral."
4. VOTING, ETC. Unless and until an Event of Default (as defined
below) occurs and is continuing, Pledgor shall be entitled to vote any and all
Pledged Stock and to give consents, waivers or ratifications in respect thereof.
5. EVENT OF DEFAULT.
5.1. Definition of Event of Default. "Event of Default"
means any default or event of default under the Note.
5.2. Remedies. If an Event of Default occurs and is
continuing, Pledgee shall be entitled to exercise all of the rights, powers and
remedies (whether vested in it by this Agreement or by law and including,
without limitation, all rights and remedies of a secured party of a debtor in
default under the Uniform Commercial Code (the "Code") in effect in the State of
Georgia at that time) for the protection and enforcement of its rights in
respect of the Collateral, and Pledgee shall be entitled, without limitation, to
exercise the following rights and remedies:
(a) to receive all amounts payable in respect of
the Collateral to Pledgor and to enforce the payment of the Pledged
Securities and to exercise all of the rights, powers, and remedies of
Pledgor thereunder;
(b) to transfer all or any part of the
Collateral into Pledgee's name or the name of its nominee(s);
2
<PAGE> 3
(c) to vote all or any part of the Collateral
(whether or not transferred into the name of Pledgee) and give all
consents, waivers and ratifications in respect of the Collateral and
otherwise act with respect thereto as though it were the outright owner
thereof; and
(d) at any time or from time to time to sell,
assign and deliver, or grant options to purchase, all or any part of
the Collateral in one or more parcels, or any interest therein, at any
public or private sale at any exchange, broker's board or at any of
Pledgee's offices or elsewhere, without demand of performance,
advertisement or notice of intention to sell or of the time or place of
sale or adjournment thereof or to redeem or otherwise (all of which are
hereby expressly and irrevocably waived by Pledgor), for cash, on
credit or for other property, for immediate or future delivery without
any assumption of credit risk, and for such price or prices and on such
terms as Pledgee in its sole discretion may determine. Pledgor agrees
that to the extent that notice of sale shall be required by any
applicable law that ten business days notice to Pledgor of the time and
place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification.
6. REMEDIES, ETC. CUMULATIVE. Each right, power and remedy of
Pledgee provided for in this Agreement or any other financing document or now or
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise by Pledgee of any one or more of the
rights, powers or remedies provided for in this Agreement or any other financing
document or now or hereafter existing at law or in equity, or by statute or
otherwise, shall not preclude the simultaneous or later exercise by Pledgee of
all such other rights, powers or remedies, and no failure or delay on the part
of Pledgee to exercise any such right, power or remedy shall operate as a waiver
thereof.
7. APPLICATION OF PROCEEDS. All moneys collected by Pledgee upon
any sale, collection or other disposition of the Collateral, together with all
other moneys received by Pledgee hereunder, shall be applied to the payment of
the Secured Obligations then due, and Pledgee shall be entitled to any surplus
then remaining.
8. COVENANTS OF PLEDGOR. Pledgor covenants and agrees that (i)
Pledgor shall not grant or suffer to exist any other lien, claim, charge,
encumbrance or security interest whatsoever, however evidenced or created, other
than that created by this Agreement in favor of Pledgee whether or not
subordinate to the liens granted hereunder, and (ii) Pledgor will defend
Pledgee's right, title and security interest in and to the Pledged Securities
and the proceeds thereof against the claims and demands of all persons
whomsoever.
9. NOTICES, ETC. All notices and other communications hereunder
shall be effective on the third day after being deposited in the United States
mail, first class postage prepaid, certified or registered, return receipt
requested, to the respective parties at their last known addresses. Each party
may give to the other notice of a change of its address as
3
<PAGE> 4
provided in this Section 9, provided however that no notice of such change of
address shall be effective until actual receipt thereof by the addressee.
10. TERMINATION, RELEASE. Upon the full payment and performance of
all of the Secured Obligations, this Agreement shall terminate, and Pledgee
shall execute and deliver to Pledgor a proper instrument or instruments
acknowledging the satisfaction and termination of this Agreement, and will duly
assign, transfer and deliver to Pledgor (without recourse and without any
representation or warranty) such of the Collateral as is in Pledgee's possession
and as has not theretofore been sold or otherwise applied or released pursuant
to this Agreement, together with any moneys at the time held by Pledgee
hereunder.
11. MISCELLANEOUS. This Agreement shall create a continuing
security interest in the Collateral and shall be binding upon the successors and
assigns of Pledgor, and shall inure to the benefit of and be enforceable by
Pledgee and its successors and assigns. This Agreement may be changed, waived,
discharged or terminated only in a writing signed by the parties or as otherwise
expressly provided herein. Unless otherwise defined herein or in the Note, terms
defined in Article 9 of the Code in the State of Georgia are used herein as
therein defined. The headings in this Agreement are for purposes of reference
only and shall not limit or define the meaning hereof.
12. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be construed in accordance with and be governed
by the law of the State of Georgia (without giving effect to its conflict of
laws principles).
IN WITNESS WHEREOF, Pledgor and Pledgee have each executed this
Agreement as of the date first above written.
/s/ Ken Gavranovic
-----------------------------------
KEN GAVRANOVIC
INTERLAND, INC.
By: /s/ Barbara Wilson
--------------------------------
Name: Barbara Wilson
Title: Vice President
4
<PAGE> 5
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned, KEN GAVRANOVIC ("Assignor"), has
fully and irrevocably granted, assigned and transferred and hereby does fully
and irrevocably grant, assign and transfer to INTERLAND, INC., and the
successors, transferees, assigns and personal representatives thereof
(collectively referred to herein as "Assignee"), the following property:
400,000 shares of the Common Stock of Interland, Inc.,
represented by Certificate(s) No. 75 and standing in
Assignor's name on the books of said corporation.
Assignor hereby irrevocably appoints Assignee to be Assignor's true
and lawful attorney-in-fact, with full power of substitution, and empowers
Assignee, for and in the name and stead of Assignor, to sell, transfer,
hypothecate, liquidate or otherwise dispose of all or any portion of the
above-described securities, from time to time, and, for that purpose, to make,
sign, execute and deliver any documents or perform any other act necessary for
such sale, transfer, hypothecation, liquidation or other disposition. Assignor
acknowledges that this appointment is coupled with an interest and shall not be
revocable by Assignor's death or for any other reason. Assignor hereby ratifies
and approves all acts that Assignee or any substitute therefore shall do by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this document as
of May 14, 1999.
/s/ Ken Gavranovic
-----------------------------------
KEN GAVRANOVIC
5
<PAGE> 1
EXHIBIT 10.20
STOCK PLEDGE AGREEMENT
THIS AGREEMENT is entered into as of May 19, 1999 by WALDEMAR FERNANDEZ
("Pledgor"), and INTERLAND, INC., a Georgia corporation ("Pledgee").
WHEREAS, Pledgee has accepted from Pledgor (i) that certain Promissory
Note dated December 15, 1998; and (ii) that certain Promissory Note dated May
19, 1999, executed by Pledgor in favor of Pledgee (said Promissory Notes being
collectively referred to as the "Note");
WHEREAS, as a condition to accepting the Note, and without which
Pledgee would not have accepted the Note, Pledgee has required Pledgor to pledge
to Pledgee the Pledged Securities (as defined below) pursuant to the terms and
conditions contained herein in order to secure all of Pledgor's obligations to
Pledgee under the Note; and
WHEREAS, Pledgor desires to so pledge the Pledged Securities to
Pledgee.
THEREFORE, for and in consideration of the foregoing premises and the
mutual agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is for the benefit of
Pledgee to secure the prompt payment in full when due, whether upon demand or
otherwise, of any and all amounts due to Pledgee from Pledgor under the Note
(collectively, the "Secured Obligations").
2. PLEDGED SECURITIES.
2.1. Pledged Stock. As used herein, the term "Pledged
Stock" means 400,000 shares of the no par value per share common stock of the
Company, presently represented by certificate(s) number(ed) 77 and all
replacements and substitutions therefor.
2.2. Pledgor's Representations and Warranties. Pledgor
hereby represents and warrants that (i) he is the legal, record and beneficial
owner of, and has good and marketable title to, the Pledged Securities, subject
to no lien, claim, charge, encumbrance or security interest whatsoever, however
evidenced or created, other than that created by this Agreement in favor of
Pledgee; (ii) he has full power, authority and legal right to pledge all the
Pledged Securities pursuant to this Agreement; and (iii) the pledge and delivery
of the Pledged Securities pursuant to this Agreement creates a valid and
perfected first priority security interest in the Pledged Securities, and any
and all proceeds thereof, which security interest is not subject to any prior
lien, claim, charge, encumbrance or security interest.
<PAGE> 2
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Secured Obligations and for the
purposes set forth in Section 1, Pledgor hereby pledges to Pledgee the Pledged
Stock, together with (i) any and all certificates or other instruments now or
hereafter representing any or all of the Pledged Stock accompanied by stock
powers duly executed in blank by Pledgor, and (ii) all cash and non-cash
proceeds of the foregoing; and hereby assigns, transfers, hypothecates and sets
over to Pledgee all of Pledgor's right, title and interest in and to the Pledged
Stock (and in and to the certificates or instruments evidencing the items
described in clause (i) above) to be held by Pledgee, upon the terms and
conditions set forth in this Agreement. Pledgor shall deliver to Pledgee all
certificates and instruments evidencing the items described in clause (i) above
promptly upon Pledgor's receipt thereof.
3.2. Definition of Pledged Securities and Collateral. The
Pledged Stock and all items described in clause (i) of Section 3.1 hereof are
hereinafter collectively called the "Pledged Securities," and the Pledged
Securities, together with all other securities and moneys received or to be
received and at the time held by Pledgee hereunder and any cash or non-cash
proceeds of any of the foregoing, are hereinafter collectively called the
"Collateral."
4. VOTING, ETC. Unless and until an Event of Default (as defined
below) occurs and is continuing, Pledgor shall be entitled to vote any and all
Pledged Stock and to give consents, waivers or ratifications in respect thereof.
5. EVENT OF DEFAULT.
5.1. Definition of Event of Default. "Event of Default"
means any default or event of default under the Note.
5.2. Remedies. If an Event of Default occurs and is
continuing, Pledgee shall be entitled to exercise all of the rights, powers and
remedies (whether vested in it by this Agreement or by law and including,
without limitation, all rights and remedies of a secured party of a debtor in
default under the Uniform Commercial Code (the "Code") in effect in the State of
Georgia at that time) for the protection and enforcement of its rights in
respect of the Collateral, and Pledgee shall be entitled, without limitation, to
exercise the following rights and remedies:
(a) to receive all amounts payable in respect of
the Collateral to Pledgor and to enforce the payment of the Pledged
Securities and to exercise all of the rights, powers, and remedies of
Pledgor thereunder;
(b) to transfer all or any part of the
Collateral into Pledgee's name or the name of its nominee(s);
2
<PAGE> 3
(c) to vote all or any part of the Collateral
(whether or not transferred into the name of Pledgee) and give all
consents, waivers and ratifications in respect of the Collateral and
otherwise act with respect thereto as though it were the outright owner
thereof; and
(d) at any time or from time to time to sell,
assign and deliver, or grant options to purchase, all or any part of
the Collateral in one or more parcels, or any interest therein, at any
public or private sale at any exchange, broker's board or at any of
Pledgee's offices or elsewhere, without demand of performance,
advertisement or notice of intention to sell or of the time or place of
sale or adjournment thereof or to redeem or otherwise (all of which are
hereby expressly and irrevocably waived by Pledgor), for cash, on
credit or for other property, for immediate or future delivery without
any assumption of credit risk, and for such price or prices and on such
terms as Pledgee in its sole discretion may determine. Pledgor agrees
that to the extent that notice of sale shall be required by any
applicable law that ten business days notice to Pledgor of the time and
place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification.
6. REMEDIES, ETC. CUMULATIVE. Each right, power and remedy of
Pledgee provided for in this Agreement or any other financing document or now or
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise by Pledgee of any one or more of the
rights, powers or remedies provided for in this Agreement or any other financing
document or now or hereafter existing at law or in equity, or by statute or
otherwise, shall not preclude the simultaneous or later exercise by Pledgee of
all such other rights, powers or remedies, and no failure or delay on the part
of Pledgee to exercise any such right, power or remedy shall operate as a waiver
thereof.
7. APPLICATION OF PROCEEDS. All moneys collected by Pledgee upon
any sale, collection or other disposition of the Collateral, together with all
other moneys received by Pledgee hereunder, shall be applied to the payment of
the Secured Obligations then due, and Pledgee shall be entitled to any surplus
then remaining.
8. COVENANTS OF PLEDGOR. Pledgor covenants and agrees that (i)
Pledgor shall not grant or suffer to exist any other lien, claim, charge,
encumbrance or security interest whatsoever, however evidenced or created, other
than that created by this Agreement in favor of Pledgee whether or not
subordinate to the liens granted hereunder, and (ii) Pledgor will defend
Pledgee's right, title and security interest in and to the Pledged Securities
and the proceeds thereof against the claims and demands of all persons
whomsoever.
9. NOTICES, ETC. All notices and other communications hereunder
shall be effective on the third day after being deposited in the United States
mail, first class postage prepaid, certified or registered, return receipt
requested, to the respective parties at their last known addresses. Each party
may give to the other notice of a change of its address as
3
<PAGE> 4
provided in this Section 9, provided however that no notice of such change of
address shall be effective until actual receipt thereof by the addressee.
10. TERMINATION, RELEASE. Upon the full payment and performance of
all of the Secured Obligations, this Agreement shall terminate, and Pledgee
shall execute and deliver to Pledgor a proper instrument or instruments
acknowledging the satisfaction and termination of this Agreement, and will duly
assign, transfer and deliver to Pledgor (without recourse and without any
representation or warranty) such of the Collateral as is in Pledgee's possession
and as has not theretofore been sold or otherwise applied or released pursuant
to this Agreement, together with any moneys at the time held by Pledgee
hereunder.
11. MISCELLANEOUS. This Agreement shall create a continuing
security interest in the Collateral and shall be binding upon the successors and
assigns of Pledgor, and shall inure to the benefit of and be enforceable by
Pledgee and its successors and assigns. This Agreement may be changed, waived,
discharged or terminated only in a writing signed by the parties or as otherwise
expressly provided herein. Unless otherwise defined herein or in the Note, terms
defined in Article 9 of the Code in the State of Georgia are used herein as
therein defined. The headings in this Agreement are for purposes of reference
only and shall not limit or define the meaning hereof.
12. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be construed in accordance with and be governed
by the law of the State of Georgia (without giving effect to its conflict of
laws principles).
IN WITNESS WHEREOF, Pledgor and Pledgee have each executed this
Agreement as of the date first above written.
/s/ Waldemar Fernandez
--------------------------------------
WALDEMAR FERNANDEZ
INTERLAND, INC.
By: /s/ Barbara Wilson
--------------------------------------
Name: Barbara Wilson
----------------------
Title: Vice President
----------------------
4
<PAGE> 5
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned, WALDEMAR FERNANDEZ ("Assignor"),
has fully and irrevocably granted, assigned and transferred and hereby does
fully and irrevocably grant, assign and transfer to INTERLAND, INC., and the
successors, transferees, assigns and personal representatives thereof
(collectively referred to herein as "Assignee"), the following property:
400,000 shares of the Common Stock of Interland, Inc.,
represented by Certificate(s) No. 77 and standing in
Assignor's name on the books of said corporation.
Assignor hereby irrevocably appoints Assignee to be Assignor's true
and lawful attorney-in-fact, with full power of substitution, and empowers
Assignee, for and in the name and stead of Assignor, to sell, transfer,
hypothecate, liquidate or otherwise dispose of all or any portion of the
above-described securities, from time to time, and, for that purpose, to make,
sign, execute and deliver any documents or perform any other act necessary for
such sale, transfer, hypothecation, liquidation or other disposition. Assignor
acknowledges that this appointment is coupled with an interest and shall not be
revocable by Assignor's death or for any other reason. Assignor hereby ratifies
and approves all acts that Assignee or any substitute therefore shall do by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this document as
of May 19, 1999.
/s/ Waldemar Fernandez
------------------------------------
WALDEMAR FERNANDEZ
5
<PAGE> 1
EXHIBIT 10.21(a)
AGREEMENT OF LEASE
BETWEEN
34 PEACHTREE ASSOCIATES, L.P., LANDLORD
AND
INTERLAND, INC., TENANT.
PREMISES:
One Park Tower
34 Peachtree Street, N.W.
Suite 1400
Atlanta, Georgia 30303
<PAGE> 2
<TABLE>
<CAPTION>
INDEX
<S> <C>
PREMISES..........................................................................................................1
TERM..............................................................................................................1
FAILURE TO GIVE POSSESSION........................................................................................1
BASE RENT.........................................................................................................1
IMPROVEMENTS BY LANDLORD..........................................................................................2
ELECTRICITY USED WITHIN THE PREMISES..............................................................................2
USE...............................................................................................................2
RELOCATION AND TERMINATION........................................................................................3
REPAIRS TO PREMISES AND REMOVAL OF TENANT'S IMPROVEMENTS AND ALTERATIONS..........................................3
SERVICES-ELEVATOR, HEAT AND AIR-CONDITIONING, WATER AND CLEANING..................................................4
TENANT RISK.......................................................................................................5
DESTRUCTION OR DAMAGE TO PREMISES.................................................................................5
SUBORDINATION AND ATTORNMENT......................................................................................6
RULES AND REGULATIONS.............................................................................................7
FLOOR LOAD........................................................................................................7
BANKRUPTCY........................................................................................................7
DEFAULT...........................................................................................................7
ASSIGNMENT AND SUBLETTING...................................................................................... ..9
RIGHT OF ENTRY...................................................................................................10
EMINENT DOMAIN...................................................................................................11
QUIET ENJOYMENT..................................................................................................11
INDEMNITY AND HOLD HARMLESS......................................................................................11
TENANTS FIRE AND EXTENDED COVERAGE INSURANCE AND WAIVER OF SUBROGATION THEREUNDER................................11
REMEDIES.........................................................................................................12
CUMULATIVE HOLDING OVER..........................................................................................12
NO WAIVER OR CHANGES.............................................................................................13
MARGINAL NOTATIONS...............................................................................................13
NOTICE...........................................................................................................13
CHANGE OF NAME...................................................................................................13
APPLICABLE LAWS AND USUFRUCT.....................................................................................13
HEIRS AND ASSIGNS................................................................................................14
ENTIRE AGREEMENT AND OTHER AGREEMENTS............................................................................14
LEGAL CONSTRUCTION...............................................................................................14
BROKER...........................................................................................................14
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
SECURITY.........................................................................................................15
ATTORNEY'S FEES..................................................................................................15
PARTNERSHIP TENANT...............................................................................................15
SPECIAL STIPULATIONS.............................................................................................16
RULES AND REGULATIONS............................................................................................19
</TABLE>
ii
<PAGE> 4
LEASE
THIS LEASE AGREEMENT made on the 19th day of November, 1997, between
34 PEACHTREE ASSOCIATES, L.P., C/O COMPASS Management and Leasing, Inc., 34
Peachtree Street, N.W., Suite 2355, Atlanta, Georgia 30303 and INTERLAND, INC.
("Tenant"), whose mailing addressing is 34 Peachtree Street, N.W., Suite 1470,
Atlanta, Georgia 30303.
PREMISES
1. Landlord leases to Tenant and Tenant leases and rents from
Landlord the ("Premises") shown and identified on the floor plan
attached hereto as Exhibit "A" and made a part hereof, located on the
14th floor(s) in the One Park Tower Building ("Building") located at 34
Peachtree Street, N.W. in Atlanta (Fulton County), Georgia consisting
of approximately 5,011 rentable square feet. No easement for light and
air is granted.
TERM
2.A. The term ("Term") of this Lease shall begin ("Commencement Date")
on January 1, 1998 and shall end at 12:00 midnight on February 28,
2009, both dates inclusive (subject to Paragraph 2.B.) unless sooner
terminated as provided herein ("Expiration Date").
FAILURE
TO GIVE
POSSESSION
B. If the Premises should not be ready for occupancy by the
specified Commencement Date for any reason (a) this Lease shall be void
or voidable by only Tenant, and Tenant shall be entitled to a full
refund for all amounts paid to Landlord within 30 days of the specified
Commencement Date by Landlord shall not be liable to Tenant for any
loss or damage resulting therefrom, and (b) the Term shall not commence
on the date set forth in Paragraph 2.A but shall instead commence on a
date fixed by Landlord in a notice to Tenant not sooner than five (5)
days next following the date of giving such notice which notice shall
state that Landlord has on or prior to the Commencement Date fixed in
such notice substantially completed Landlord's Initial Construction (as
hereinafter defined). If such delay should occur, rentals hereunder
(except any charge for Tenant Delay under Exhibit "B" hereto) shall not
begin until the actual Commencement Date.
BASE RENT
3.A. Tenant agrees to pay Landlord, at such place as Landlord may
designate, without demand, deduction or setoff:
(a) Rental of Sixty One Thousand One Hundred Thirty Four &
20/100 Dollars ($61,134.20) per year ("Base Rent"), payable in
equal monthly installments of Five Thousand Ninety Four &
52/100 Dollars ($5,094.52), in advance on the first day of
each calendar month during the Term;
(b) Adjustments to Base Rent as provided in Paragraph 38.D;
and
1
<PAGE> 5
(c) Any sales, privilege, or rental tax now or hereafter
required by any governmental body on all Base Rent and
additional Rent amounts (as hereinafter defined) due from
Tenant to Landlord; and
(d) Simultaneously with the execution of this Lease by Tenant,
Tenant shall pay Landlord the first month's rental due under
paragraph 3.A.(a) hereinabove, and the Security Deposit (as
hereinafter defined), if any.
B. Tenant agrees that any adjustments to Base Rent under Paragraph
5, and all other sums due Landlord from Tenant hereunder shall be
considered additional rental ("Additional Rent") from Tenant and shall
entitle Landlord to all remedies provided for herein or at law or
equity because of Tenant's failure to pay rent.
IMPROVEMENTS
BY LANDLORD
4. Landlord agrees to perform work and make installations in
Premises as set forth in Exhibit "B" attached hereto and made a part
hereof. Such work and installations are referred to as Landlord's
Initial Construction". All of the provisions of Exhibit "B" are
incorporated herein by reference and shall be considered a part hereof.
ELECTRICITY
USED WITHIN THE
PREMISES
6. The Base Rent does include electricity for lights and outlets
used by Tenant within Premises, provided, that Landlord may submeter
Tenant's electrical usage and Tenant shall pay as Additional Rental on
a monthly basis any amounts in excess of $.0625 per rentable square
foot of electrical utility charges associated with Tenant's electrical
usage. Such costs shall be billed to Tenant at Landlord's actual per
KWH rate from Landlord's electrical utility provider. Tenant shall not,
without the prior consent of Landlord, use or connect any electrical
equipment or make excessive use of electrical wiring in the Building or
interfere with the electrical use or reasonable electrical requirements
of Landlord and other tenants in the Building. Landlord shall not be
responsible in any way for any interruption, curtailment or failure or
defect in the supply of electricity furnished to Premises by reason of
any requirement, act or omission of any public utility company, or for
any other reason.
USE
7. Premises shall be used for offices and for no other purpose.
Premises shall not be used for retail sales (unless specified to the
contrary) or for any illegal purposes or in violation of any regulation
of any governmental body, or in any manner to create any nuisance or
trespass, or to vitiate any insurance or increase the rate of insurance
on Premises or the building. Tenant agrees to comply with all
governmental rules, regulations, decrees or requirements applicable to
the use and occupancy of Premises. Tenant shall not do or permit
anything to be done in or about Premises which will obstruct or
interfere with the rights of other tenants in the Building. If Tenant
receives notice of any claim of violation of any law, rule or
regulation applicable to Premises, Tenant shall give prompt notice
thereof to Landlord. In case of breach of any of the
2
<PAGE> 6
covenants contained in this Paragraph, Landlord may, in addition to all
other remedies available to the Landlord under the Lease, elect to
terminate this Lease by giving Tenant sixty (60) days written notice to
vacate.
RELOCATION AND *SEE SPECIAL STIPULATION, PARAGRAPH 38.1.
TERMINATION
REPAIRS TO PREMISES
AND REMOVAL OF
TENANT'S IMPROVEMENTS
9.A. Tenant accepts Premises in their present "as is" condition
(subject to completion of the improvements required by Exhibit "B", if
any). Tenant will, at Tenant's sole expense, take good care of Premises
and the fixtures, equipment and appurtenances therein, and will suffer
no active or permissive waster or injury thereof. Tenant agrees, at
Tenant's expense, but under the direction of Landlord, to promptly
repair (making replacements where necessary) any injury or damage to
Premises and to the fixtures, equipment and appurtenances therein, and
any injury or damage to the Building caused by Tenant, Tenant's
employees, or by persons permitted on Premises by Tenant, or by Tenant
moving in or out of Premises; all such repairs and replacements shall
be of a quality equal to original installations. If Tenant fails to
make such repairs or replacements promptly, Landlord may, at its
options, make repairs or replacements, and Tenant shall repay the cost
thereof to Landlord on demand. Landlord shall not be required to make
any improvements to or repairs of any kind or character on the Premises
during the Term, except as expressly provided herein. Landlord shall
repair the Building plumbing, heating, ventilating or air-conditioning
and electrical systems and shall make structural and mechanical repairs
within the Premises arising from ordinary wear and tear or through
causes over which Tenant has no control, except as otherwise provided
in this Lease. Except as provided in Paragraph 12 hereof, there shall
be no allowance, abatement or apportionment of rent payable by Tenant
and no liability on the part of Landlord by reason of inconvenience,
annoyance or injury to business arising from the making of any repairs,
alterations, decorations, additions or improvements in or to any
portion of the Building or Premises, or in or to fixtures,
appurtenances or equipment, and no liability upon Landlord for failure
to make any repairs, alterations, decorations, additions or
improvements in or to any portion of the Building, or the premises, or
in or to fixtures, appurtenances or equipment, or by reason of the act
or neglect of Tenant or any other Tenant or occupant of the Building.
B. Tenant will not, without Landlord's written consent, which
consent will not be unreasonably withheld or delayed, make any
alterations or improvements in or about Premises. Tenant shall be
required to obtain all appropriate governmental permits and approvals
at Tenant's expense prior to beginning any such work in Premises. All
alterations, additions or improvements (including, but not limited to,
carpets, drapes and drapery hardware) made or installed by Tenant or by
the Landlord for Tenant's benefit to the Premises shall become the
property of Landlord at the Expiration Date. Landlord reserves the
right, however, to require, Tenant, at Tenant's expense: (x) to remove
any improvements or additions made to the Premises by Tenant, or
non-standard
3
<PAGE> 7
improvements made by Landlord for Tenant's benefit, at the Expiration
Date: and (y) to repair all injury done by or in connection with
installation or removal of said improvements or additions less ordinary
wear and tear. On notice by Landlord, Tenant further agrees to do so
prior to the Expiration Date, or within thirty (30) days after notice
from Landlord, whichever shall be later, provided that Landlord gives
such notice no later than sixty (60) days after the Expiration Date.
C. No later than the Expiration Date, Tenant will remove all
Tenant's personal property and Tenant shall repair all injury done by
or in connection with the installation or removal of said property and
surrender Premises (together with all keys to Premises) in as good a
condition as they were at the beginning of the Term, reasonable wear
and tear excepted. All property of Tenant remaining on Premises after
the expiration Date shall be deemed conclusively abandoned and may, at
the election of Landlord, either be retained as Landlord's property or
be removed by Landlord, and Tenant shall reimburse Landlord for the
cost of removing the same, subject however, to Landlord's right to
require Tenant to remove any improvements or additions made to premises
by Tenant pursuant to the preceding sub-paragraph.
D. In doing work of any nature in, to or about Premises, Tenant will
use only contractor or workmen approved by Landlord. Tenant shall
remove or appropriately bond any lien for material or labor claimed to
be furnished to Premises on Tenant's or any sub-tenant's behalf within
three (3) business days of its filing.
SERVICES-ELEVATOR,
HEAT AND
AIR-CONDITIONING,
WATER AND CLEANING
10.A. Landlord shall furnish the following services without charge, at
the proper season, during the work day hours specified below on normal
business days, except New Year's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, Christmas Day and Election Date in
presidential elections years:
(a) Automatic elevator service in common with other tenants
shall be provided on Mondays through Fridays from 7:30 A.M. to
6:00 P.M. and on Saturdays, from 7:30 A.M. to 1:00 P.M., and
one elevator shall be available at all other times.
(b) Heat, air conditioning and ventilation when, in the
judgment of Landlord, it may be required for comfortable
occupancy of the Premises shall be furnished during the work
day hours of 8:00 A.M. to 6:00 P.M. on Mondays through
Fridays, and from 8:00 A.M. to 1:00 P.M. on Saturdays;
(c) Water for lavatory purposes;
(d) Common use restrooms;
(e) Nightly cleaning and janitorial service for office areas
in accordance with usual standards for offices, provided same
are kept reasonably in order by Tenant. Services under items
(a) and (b) for periods other than periods prescribed above
will be made available by Landlord for the benefit of Tenant
provided Tenant has given Landlord written notice at least 24
hours in advance. Tenant shall pay on demand as Additional
Rent Landlord's standard charge for such additional
services(s), and for the cost of removal of Tenant's refuse
and rubbish to the extend that the same
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exceeds the refuse and rubbish usually attendant upon the use
of demised premises exclusively as offices. If the premises or
any part thereof are not used exclusively as offices, same
shall be kept clean and in order by Tenant, at Tenant's
expense, and to the satisfaction of Landlord, and by persons
approved by Landlord.
B. Landlord shall in no way be liable for cessation of any of the
services of this Paragraph 10 caused by strike, lock-outs, labor
disputes, labor troubles, inability to procure materials, failure of
power, fuel shortages, restrictive governmental laws or regulations,
riots, insurrection, was, injunction, court order, act of God,
accident, breakdown, or other reason of like nature beyond the
Landlord's control, nor shall Landlord be liable for damages from the
stopping of elevators or elevator service, or any of the fixtures or
equipment in the Building being out of repair, or for injury to person
or property, caused by any defects in the electrical equipment,
heating, ventilating and air conditioning systems, elevators or water
apparatus, or for any damages arising out of failure to furnish the
services enumerated in this Paragraph 10. Cessation of any of the
services of this Paragraph 10 shall not be considered to be an eviction
or disturbance of Tenant's use of Premises, shall not entitle Tenant to
any apportionment, abatement or set-off or rent payable by Tenant, not
shall this Lease or any of the provisions hereof be deemed invalidated
by such cessation.
C. Landlord's obligation to furnish light, heat and power shall be
conditioned upon the availability of adequate energy sources. Landlord
shall have the right to reduce services provided within the Building as
required by any mandatory or voluntary fuel or energy savings,
allocation or similar statute, regulation, order or program.
TENANT RISK
11. Tenant agrees that all personal property brought into the
Premises by Tenant, its employees, licensees and invitees shall be at
the sole risk of Tenant. Landlord shall not be liable for theft thereof
or of any money deposited therein or for any damages thereto; such
theft or damage being the sole responsibility of Tenant.
DESTRUCTION OR
DAMAGE TO PREMISES
12.A. If the Premises shall be partially damaged by fire or other
casualty without fault or neglect of Tenant, and Tenant shall give
prompt notice thereof to Landlord, the damages shall be repaired by and
at the expense of Landlord, and the Base Rent until such repair shall
be made shall be reduced in the proportion which the area of the part
of the Premises which is not usable by Tenant bears to the total area
of the Premises. Landlord shall have no obligation to repair any damage
to, or replace, any fixtures, furniture, furnishings, equipment or
other property or effects of Tenant.
B. Anything in subsection A of this Paragraph 12 to the contrary
notwithstanding, if the Premises are totally damaged or rendered wholly
untenantable, and if Landlord shall decide not to restore the Premises,
or if the Building shall be so damaged by fire or other casualty, that,
in Landlord's opinion, substantial alteration, demolition or
reconstruction of the Building shall be required (whether or not
Premises shall have been damaged or rendered untenantable), then in any
of such events, Landlord, at Landlord's option, may, not later than
ninety (90) days following the damage, give Tenant a notice in writing
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terminating this Lease. If Landlord elects to terminate this Lease, the
Term shall expire upon the tenth (10th) day after such notice is given,
and Tenant shall vacate the Premises and surrender the same to
Landlord. If Tenant shall not be in default under this Lease, then upon
the termination of this Lease under the conditions proved for in the
next preceding sentence, Tenant's liability for rent shall cease as of
the day following such damage.
C. In no event shall rent abate if the damage or destruction of the
Premises, whether total or partial, is the result of the negligence of
Tenant, its agents, or employees.
D. Landlord shall have no liability under any circumstances for any
business losses of Tenant, or for any losses to Tenant's personal
property or fixtures caused by any casualty occurrence as contemplated
in this Paragraph 12. No damages shall accrue to Tenant, nor shall any
termination privilege become operable against Landlord for delays,
including but not limited to, adjustments or any insurance claims by
Landlord.
SUBORDINATION,
ATTORNMENT
AND MODIFICATION
13.A. This Lease is and shall continue to be subject and subordinate to
any ground or underlying lease(s) and to any first lien mortgage or
deed to secure debt which may now or hereafter cover or affect such
lease(s) or the land on which the Building is constructed or the
Building and to all renewals, modifications, consolidations,
replacements and extensions of any such underlying lease(s) mortgages
or deeds to secure debt. This clause shall be self-operative and no
further instrument of subordination shall be required. However, at any
time and from time to time, Tenant shall execute promptly any
certificate in confirmation of such subordination that Landlord may
request.
B. If any such ground or underlying lease(s) or first lien mortgage
or deed to secure debt is terminated or foreclosed, this Lease (at the
option of the lessor under such ground or underlying lease(s) or the
purchaser at such foreclosure sale, as the case may be), shall not
terminate, nor be terminable by Tenant by reason of such termination or
foreclosure, and Tenant shall (if requested) attorn to the lessor under
such ground or underlying lease(s) or the purchaser at such foreclosure
sale.
C. If in connection with obtaining financing for the Building, or of
any ground or underlying lease(s), a recognized institutional lender
shall request reasonable modifications in this Lease as a condition to
such financing, Tenant will not unreasonably withhold, delay or defer
its consent, provided that such modifications do not increase the
obligations of Tenant hereunder or materially adversely affect Tenant's
leasehold interest or Tenant's use and enjoyment of Premises.
D. From time to time, within seven (7) days next following
Landlord's request, Tenant shall deliver to Landlord a written
statement executed and acknowledged by Tenant in form satisfactory to
Landlord, (i) stating that this Lease is in full force and effect and
has not been modified (or if modified, setting forth all
modifications), (ii) setting forth the date to which the Base Rent,
Additional Rent and other charges hereunder have been paid, (iii)
stating whether or not, to the best knowledge of Tenant, Landlord is in
default under this Lease and if Landlord is in default, setting forth
the specified nature of all such defaults, (iv) stating the amount of
Security Deposit deposited by Tenant with Landlord
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as security for Tenant's obligations under this Lease; and (v) as to
any other matters requested by Landlord. Tenant acknowledges that any
statement delivered pursuant to this subsection D may be relied upon by
any purchaser or owner of the Building or the real property, or of
Landlord's interest in the real property or the Building, or by any
mortgagee or holder of a deed to secure debt, or by any assignee of any
mortgagee or holder of a deed to secure debt.
RULES AND
REGULATIONS
14. Tenant will observe and comply with the "Rules and Regulations"
attached hereto as Exhibit "C", and such further reasonable rules and
regulations as Landlord may prescribe on written notice to Tenant as
long as such further rules and regulations are uniformly applied and
enforced to all tenants in the building.
FLOOR LOAD
15. Tenant shall not overload the floors, nor shall Tenant install
any heavy business machines or any safes or heavy equipment of any kind
without prior written consent of Landlord, which, if granted, may be
conditioned upon moving by skilled licensed handlers and installation
and maintenance at Tenant's expense of special reinforcings and
settings adequate to absorb and prevent notice and vibration.
BANKRUPTCY
16. If at any time prior to or during the Term there shall be filed
by or against Tenant in any court pursuant to any State or Federal
statute a petition in bankruptcy or insolvency or for reorganization or
for appointment of a receiver or trustee of all or a portion of
Tenant's property, or if Tenant makes an assignment for the benefit of
creditors, or petitions for or enters into an arrangement, this Lease
may be cancelled and terminated by Landlord and in such event neither
Tenant nor any person claiming through or under Tenant or by virtue of
any statue or of any order of any court shall be entitled to possession
or to remain in possession of the Premises. If the Term has commenced,
Tenant shall forthwith quit and surrender the Premises, and Landlord,
in addition to the other rights and remedies given by Paragraph 17 or
elsewhere in this Lease or by virtue of any statute or rule of law, may
retain as liquidated damages any rent, Security Deposit or monies
received by Landlord from Tenant or others in behalf of Tenant.
DEFAULT
17.A. Upon the occurrence, at any time prior to or during the Term, of
any one or more of the following events ("Events of Default"):
(a) if Tenant shall default in the payment when due of any
installment of Base Rent or in the payment when due or any
Additional Rent after receipt of written notice of default and
Tenant's failure to cure default within four (4) business days
thereafter; or
(b) if Tenant shall default in the observance or performance
of any term, covenant or condition of this Lease on Tenant's
part to be observed or performed (other than the covenants for
the payment of Base Rent and Additional Rent) and Tenant shall
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fail to remedy such default within ten (10) days after notice
by Landlord to Tenant of such default, or if such default is
of such a nature that it cannot be completely remedied within
said ten (10) days and Tenant shall not commence within said
ten (10) days, and shall not thereafter diligently prosecute
to completion, all steps necessary to remedy such default; or
(c) if Tenant shall default in the observance or performance
of any term, covenant or condition on Tenant's part to be
observed or performed under any other lease with Landlord or
Landlord's predecessor in interest of space in the Building
and such default shall continue beyond any grace period set
forth in such other lease for the remedy of such default; or
(d) if the Premises shall become vacant, deserted or abandoned
but not when Tenant continues to pay rent; or
(e) if Tenant's interest in this Lease shall devolve upon or
pass to any person, whether by operation of law or otherwise
except as expressly permitted under Paragraph 18; or
(f) if the Premises are damaged by reason of the negligence or
carelessness of Tenant, its servants, employees, agents,
visitors or licensees, then, upon the occurrence of any such
Events of Default, Landlord, at any time thereafter, at
Landlord's option, may:
(i) Give to Tenant fifteen (15) days notice of
termination of this Lease and, in the event such
notice is given, this Lease and the Term shall come
to an end and expire (whether or not the Term shall
have commenced) upon the expiration of said fifteen
(15) days with the same effect as if the date of
expiration of said fifteen (15) days were the
Expiration Date, but Tenant shall remain liable for
damages a herein provided. Upon such termination by
Landlord, Tenant shall at once surrender possession
of Premises to Landlord and remove all of Tenant's
effects therefrom and Landlord may forthwith re-enter
the Premises and repossess himself thereof, and
remove all persons and effects therefrom, under
process of law.
(ii) Remedy such default for the account and at the
expense of Tenant without thereby waiving such
default.
B. In addition to and not in lieu of Landlord's foregoing rights,
Landlord may, at its option, as Tenant's agent, without termination of
this Lease, enter upon and rent Premises at the best price obtainable
by reasonable effort, with or without advertisement, and by private
negotiations and for any term Landlord deems proper, whereupon Tenant
shall have no right to reenter or occupy Premises. Tenant shall be
liable to Landlord for the deficiency, if any, between all rents
reserved hereunder and the total rental applicable to the term obtained
by Landlord on re-letting after deducting Landlord's expenses in
restoring or altering Premises and all costs incident to such
reletting, including without limitations, reasonable legal fees,
reasonable advertising costs and reasonable brokerage commissions.
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ASSIGNMENT AND
SUBLETTING
18.A. Without the prior written consent of Landlord, tenant shall not
assign this Lease or sub-lease Premises or any part thereof. If Tenant
desires to sublease Premises or any part thereof, Tenant shall give
Landlord written notice of such desire at least fifteen (15) days in
advance of the date of which tenant desires to make such sub-lease.
Said Tenant's notice shall be accompanied by the name of the proposed
sub-tenant, a copy of the proposed sub-lease, and such financial
information relative to the proposed sub-tenant's financial
responsibility as Landlord may reasonably require. Landlord shall have
a period of fifteen (15) days following receipt of such notice and
information to notify Tenant in writing that Landlord elects either
option (i), to cancel and terminate this Lease if the request is to
sub-lease all of Premises; or, option (ii), if the request is to
sub-lease a portion of Premises only (said portion being an entire
floor or floors), to cancel and terminate this Lease with respect to
such portion; or, option (iii), to refuse to consent to Tenant's
sub-leasing such space and continue this Lease in full force and effect
as to the entire Premises; or, option (iv), to consent to the proposed
sublease. Landlord's notice to Tenant, under options (i) and (ii) shall
state an effective date of such cancellation and termination which
shall be not less than sixty (60) days nor more than one hundred-twenty
(120) days from the service of Landlord's notice. In no event should
Landlord consent to any proposed sub-lease if Tenant is then in default
under this Lease. If Landlord should fail to notify Tenant in writing
of the election of options (i) or (ii) within said sixty (60) day
period, Landlord will be considered to have elected option (iv) above
subject to Paragraph 18.C. Any attempted sub-lease by Tenant in
violation of the terms and conditions of this paragraph shall be void.
18.C. Any attempted sub-lease by Tenant in violation of the terms and
conditions of this paragraph shall be void.
B. In the event Landlord shall exercise said option (i) or (ii)
Tenant shall surrender possession of the entire Premises or the portion
which is the subject of the option as the case may be, on the date set
forth in Landlord's notice in accordance with the provisions of this
Lease relating to surrender of Premises on the Expiration Date. If this
Lease shall be cancelled as to a portion of Premises only, the rent
payable by terms under this lease shall be abated proportionately
according to the entire Premises and "Tenant's Proportionate Share"
shall be redefined and Landlord shall issue to Tenant a notice setting
forth the new definition of "Tenant's Proportionate Share." Landlord's
election of option (i) or (ii) shall not affect Tenant's obligation to
pay adjustments to Base Rent for the period prior to the termination
date.
C. In the event that Landlord shall not exercise option (i) or (ii)
within 60 days after the receipt of Tenant's written request, then
Landlord's consent to such request shall not be unreasonably withheld
provided:
(a) the proposed sub-leasing is for purposes not inconsistent
with the manner of use permitted herein and is in keeping with
the then standards of the Building and does not violate any
negative covenants as used in any other lease between Landlord
and other tenants in the Building;
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(b) the proposed sub-tenant is a reputable party of reasonable
financial worth considering the responsibility involved and
Tenant shall provide Landlord with proof thereof satisfactory
to Landlord;
(c) any proposed sub-lease shall contain a provision making
such sub-lease subject to the terms and conditions of this
Lease;
(d) such sub-leasing shall not release Tenant from the due,
prompt, and punctual performance of all the terms, covenants
and conditions contained in this Lease on its part to be
performed or observed and from the payment of the base Rent
and Additional Rent due and to become due under this Lease;
(e) Tenant submits a copy of the proposed sub-lease, executed
by the proposed sub-tenant, to Landlord for its review and
approval prior to execution by Tenant; and
(f) Tenant and the proposed sub-tenant shall execute
Landlord's standard form of consent to said subleasing and
shall pay all of Landlord's processing and reasonable legal
costs incurred in reviewing and approving said proposed
sub-lease.
D. In no event shall any sub-leasing to which Landlord may have
consented release or relieve Tenant from its obligations to fully
perform all of the terms, covenants and conditions of this Lease on its
part to be performed.
E. If Tenant sublets the Premises, Tenant shall deliver to Landlord
an executed duplicate original of the sublease within seven (7) days of
the date of execution and delivery thereof, and shall pay to Landlord a
sum equal to (i) any rent or other consideration paid to Tenant by any
subtenant in excess of the Base Rent then being paid by Tenant to
Landlord pursuant to the terms of this Lease, and (ii) any other profit
or gain realized by tenant from such subletting. The sums payable
hereunder by Tenant shall be paid to Landlord as Additional Rent
immediately upon the receipt thereof by Tenant.
F. Tenant covenants and agrees that in any case where Tenant claims
Landlord is unreasonably withholding its consent, such dispute shall be
determined by arbitration in the City of Atlanta in accordance with the
rules and regulations then in effect of the American Arbitration
Association or its successors. Any such determination shall be final
and binding upon the parties. In no event shall Tenant make any claim
against Landlord for damages resulting from said dispute.
RIGHT
OF
ENTRY
19. Landlord shall have the right to enter into and grant licenses
to enter the Premises at any time for any purpose Landlord may deem
necessary for any installation in or operation of the Building,
including without limitation, the exhibiting or Premises to prospective
purchasers, mortgagees or tenants. In addition, Landlord shall have the
right to take all necessary materials and equipment into Premises and
to store the same within, as necessitated by Landlord's work. Any entry
and activity by the Landlord, as permitted under this Paragraph 19,
shall not entitle Tenant to any rent abatement, shall not constitute an
eviction of Tenant and shall not in any way violate the Lease or any
provision thereof.
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EMINENT
DOMAIN
20. If all or any substantial part of Premises or the land on which
Building stands or any estate therein is taken by virtue of eminent
domain or is conveyed or leased in lieu of such taking, this Lease
shall expire on the date when title shall vest, or the term of such
lease shall commence, and any rent paid for any period beyond said date
shall be repaid to Tenant. Tenant shall not be entitled to any part of
the award or any payment in lieu thereof. Provided, however, that
widening of streets abutting the land on which the Building stands
shall not affect this Lease, provided no part of the Building is so
taken. Tenant shall not be prevented from pursuing any claim for
business damages against the condemning authority, provided Tenant's
claim will not diminish Landlord's award.
QUIET
ENJOYMENT
21. Tenant, on paying the Base Rent and any Additional Rent and
keeping and performing the conditions and covenants herein contained,
shall and may peaceably and quietly enjoy the Premises for the Term
aforesaid, subject, however, to the terms of this Lease and any
underlying leases and mortgages or deed to secure debt, if any.
INDEMNITY AND
HOLD HARMLESS
22. Notwithstanding that joint or concurrent liability may be imposed
upon Landlord by law, Tenant shall indemnify, defend and hold harmless
the Landlord and Premises, at Tenant's expense against: (i) any default
by Tenant or sub-tenant hereunder; (ii) any act of negligence of tenant
or its agents, contractors, employees, invitees or licensees; and (iii)
all claims for damages to persons or property by reason of the use of
occupancy of Premises unless resulting from affirmative acts of
negligence by Landlord or its representatives. Moreover, Landlord shall
not be liable for any damage or injury to Premises, to Tenant's
property, to Tenant, its agents, contractors, employees, invitees or
licensees, arising from any use or condition of Premises, the Building,
or any sidewalk or entranceway serving the Building, or the act of
neglect or other tenants. Any and all claims for any damages referred
to in this Paragraph are hereby waived by Tenant.
TENANTS FIRE AND
EXTENDED COVERAGE
INSURANCE AND WAIVER
OF SUBROGATION
THEREUNDER
23.A. Tenant shall obtain and keep in full force and effect during the
Term a policy of fire and extended coverage insurance insuring Tenant's
trade fixtures, operating equipment, furnishings, improvements and any
other equipment furnished and installed by Tenant in Premises against
loss or damage by fire or other casualty, in an amount equal to not
less than ninety percent (90%) of the full insurable value thereof.
Tenant shall also obtain and keep in full force and effect during the
Term a policy of
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comprehensive general public liability and property damage insurance
with the broad form contractual liability endorsement insuring against
loss of life, bodily injury and/or property damage with respect to the
Premises and the business operated by Tenant in the Premises, in which
the limit of public liability shall be not less than $1,000,000.00 for
combined single limit bodily injury and property damage liability. Each
such policy shall name Tenant as the insured, and Landlord as a
certificate holder, and shall be non-cancelable with respect to
Landlord without thirty (30) days' written notice to Landlord by
certified mail, return receipt requested, which notice shall contain
the policy number and the names of the insured and certificate holder.
A copy of each such policy or a certificate thereof shall be delivered
to Landlord. All insurance required to be carried by Tenant pursuant to
the terms of this Lease shall be effected under valid and enforceable
policies issued by reputable insurers permitted to do business in the
State of Georgia.
B. Landlord hereby waives any and all rights of recovery against Tenant
for or arising out of damage to or destruction of the Premises, or the
Building, from causes then included under standard fire and extended
coverage insurance policies or endorsements, and Landlord covenants and
agrees with Tenant that Landlord will obtain a waiver from the carrier
of Landlord's insurance on the Building releasing such carrier's
subrogation rights against Tenant. Tenant hereby waives any and all
rights or recovery against Landlord for or arising out of damage to or
destruction of any property of Tenant from causes then included under
standard fire and extended coverage insurance policies or endorsements,
and Tenant covenants and agrees with Landlord that Tenant will obtain a
waiver from the carrier of Tenant's insurance on the Premises releasing
such carrier's subrogation rights against Landlord.
REMEDIES
24. The rights given to Landlord herein are in addition to any rights
that may be given to Landlord by any statute or otherwise.
CUMULATIVE
HOLDING OVER
25. If Tenant remains in possession after the Expiration Date,
without Landlord's acquiescence and without any distinct agreement
between the parties, Tenant shall be a tenant at will, and such tenancy
shall be subject to all the provisions hereof, except that the monthly
portion of the base Rent then in effect shall be 150% for the entire
hold-over period and there shall be no renewal of this Lease by
operation of law. Tenant shall also be responsible to Landlord for all
damage which Landlord shall suffer by reason of Tenant remaining in
possession after the Expiration date, and Tenant hereby indemnifies
Landlord against all claims made by any succeeding tenant against
Landlord resulting from delays by Landlord in delivering possession of
Premises to such succeeding tenant. Nothing in this paragraph shall be
construed as a consent by Landlord to the possession of Premises by
Tenant after the Expiration Date.
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NO WAIVER
OR CHANGES
26. The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of
this Lease, or any of the Rules and Regulations herein or hereafter
adopted by Landlord, shall not prevent a subsequent act or omission,
which would have originally constituted a violation, from having all
the force and effect of an original violation. The receipt by Landlord
of rent with knowledge of the breach of any covenant of this Lease
shall not be deemed a waiver of such breach. No provision of this Lease
shall be deemed to have been waived by Landlord, unless such waiver be
in writing signed by Landlord. No act or thing done by Landlord or
Landlord's agent during the Term shall be deemed an acceptance of a
surrender of the Premises and no agreement to accept such surrender
shall be valid unless in writing signed by Landlord.
MARGINAL
NOTATIONS
27. The marginal notations in this Lease are included for convenience
only and shall not be taken into consideration in any construction or
interpretation of this Lease or any of its provisions.
NOTICE
28.A. Any notice by either party to the other shall be valid only if in
writing and shall be deemed to be duly given only if delivered
personally or sent by registered or certified mail, return receipt
requested, addressed (i) if to tenant, at the Premises or Tenant's
mailing address above, and (ii) to Landlord, at Landlord's address set
forth above, with a copy of James R. Borders, 645 Greystone Park, N.E.,
Atlanta, Georgia 30324, or at such other address for either party as
that party may designate by notice to the other; notice shall be deemed
given, if delivered personally, upon delivery thereof, and if mailed,
upon the mailing thereof.
B. Tenant hereby appoints as its agents to receive all dispossessory
or distraint proceedings, the person occupying Premises, and if there
is no person occupying same, then such service may be made by service
upon the registered agent of Tenant: Richard A. Gordon, Suite 520, 40
Interstate North Parkway, Atlanta, Georgia 30339.
CHANGE OF
NAME
29. Landlord shall have the right from time to time to rename the
Building.
APPLICABLE LAWS
AND USUFRUCT
30.A. This Lease shall be construed under the laws of the State of
Georgia.
B. This lease shall create only the relationship of landlord and
tenant between the parties hereto; no estate shall pass out of
Landlord, Tenant has only a usufruct, not subject to levy and sale, and
not assignable by Tenant except with Landlord's consent.
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HEIRS AND ASSIGNS
31. The provisions of this Lease shall inure to the benefit of and be
binding upon Landlord and Tenant, and their respective successors,
heirs, legal representatives and assigns; it being understood that the
term "Landlord", as used in this Lease, means only the owner, or the
lessee for the time being of the land and Building of which Premises
are a part, so that in the event of any sale or sales of said property
or any lease thereof, 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, or the lessee, as the case may
be, has assumed and agreed to carry out any and all covenants and
obligations of Landlord hereunder during the period such party has
possession of the land and Building. Neither the shareholders,
directors or officers of Landlord (collectively, the "Parties") shall
be liable to the performance of Landlord's obligations under this
lease. Tenant shall look solely to Landlord to enforce Landlord's
obligations hereunder and shall not seek any damages against any of the
Parties. The liability of Landlord for Landlord's obligations under
this Lease shall not exceed and shall be limited to the value of
Landlord's assets and Tenant shall not look to the property or assets
of any of the Parties in seeking to enforce Landlord's obligations
under this Lease or to satisfy a judgment for Landlord's failure to
perform such obligations. Should the land and the entire Building be
served as to ownership by sale and/or lease, then the owner of the
entire Building or lessee of the entire building has the right to lease
space in the Building to tenants shall be deemed the "Landlord". Tenant
shall be bound to any succeeding landlord for all the terms, covenants
and conditions hereof and shall execute any attornment, agreement not
in conflict herewith at the request of any succeeding landlord.
ENTIRE AGREEMENT
AND OTHER AGREEMENTS
32.A. This Lease contains the entire agreement of the parties hereto
and no representations, inducements, promises or agreements, oral or
otherwise, between the Landlord and Tenant not embodied herein, shall
be of any force or effect.
B. Any agreement hereafter made between Landlord and Tenant shall be
ineffective to modify, release or otherwise affect this Lease, in whole
or in part, unless such agreement is in writing and signed by both
parties.
LEGAL
CONSTRUCTION
33. If any of the provisions of this Lease shall be held to be
invalid, illegal, or unenforceable for any reason, such circumstance
shall not affect any other provision. This Lease shall be construed as
if such invalid, illegal or unenforceable provision had never been
herein.
BROKER
34. Tenant represents that, except for Eric Lemboris & Associates
("Broker"), Tenant has not dealt with any real estate broker, sales
person, or finder in connection with this Lease, and no other real
estate broker initiated or participated in the negotiation of this
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<PAGE> 18
Lease, or showed the Premises to Tenant. Tenant agrees to indemnify and
hold Landlord harmless from and against any liabilities and claims for
commissions and fees arising out of a breach of the foregoing
representation. Landlord shall be responsible for the payment of all
commissions to Broker, and shall pay said leasing commissions pursuant
to the terms of a separate agreement with Broker.
SECURITY
35. Tenant has deposited with Landlord the sum of $5,094.52 ("Deposit")
as security for the performance of tenant's obligations in this Lease,
which sum shall be returned to Tenant, without interest, within thirty
(30) days after the 61st month of occupancy, provided Tenant has fully
performed hereunder. If Tenant defaults in any of the provisions of
this Lease, Landlord may, but shall not be required to, apply all or
part of the Deposit for the payment of any Base Rent or Additional Rent
or for any sum which Landlord may spend or be required to spend because
of Tenant's default, including any damages or deficiency in reletting
of Premises whether such damages or deficiency accrue before or after
summary proceedings or re-entry by Landlord. Landlord shall have the
right to apply any part of the Deposit to cure any default of Tenant
and if Landlord does so, Tenant shall, upon demand, deposit with
Landlord the amount so applied so that Landlord shall have the full
Deposit on hand at all times during the Term. In the event of a sale of
Building or a lease of the Building, subject to this Lease, Landlord
shall be released from all liability for the return of the Deposit and
Tenant shall look to the new landlord for the return of the Deposit.
This provision shall apply to every transfer or assignment made of the
deposit to a new landlord. The Deposit shall not be assigned or
encumbered by Tenant without the written consent of Landlord and such
assignment or encumbrance without Landlord's consent shall be void.
ATTORNEY'S
FEES
36. In the event Tenant defaults in the performance of any of the
provisions of this Lease and Landlord places the enforcement of this
Lease, or any part hereof, or the collection of any rent due, or to
become due hereunder, or recovery of the possession of Premises in the
hands of an attorney, or files suit upon the same, or in the event
Tenant shall make an unsuccessful claim against Landlord for alleged
breach of any provision of this Lease or for any other cause of action
relating to or arising out of this Lease, and Landlord shall incur
legal fees in defense of said claim, Tenant agrees to pay Landlord's
reasonable attorney's fees.
PARTNERSHIP
TENANT
37. If Tenant is a partnership (or is comprised of two (2) or more
persons, individually and as co-partners of a partnership) or if
Tenant's interest in this Lease shall be assigned to a partnership (or
to two (2) or more persons, individually and as co-partners of a
partnership) pursuant to Paragraph 18 (any such partnership and such
persons are referred to in this Paragraph 37 as "Partnership Tenant"),
the following provisions shall apply: (i) the liability of each of the
parties comprising Partnership Tenant shall be joint and
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<PAGE> 19
several, and (ii) each of the parties comprising Partnership Tenant
hereby consents in advance to, and agrees to be bound by, any written
instrument which may hereafter be executed, changing, modifying or
discharging this Lease, in whole or part, or surrendering all or any
part of the Premises to Landlord, and by any notices, demands, requests
or other communications which may hereafter be given by Partnership
Tenant or by any of the parties comprising Partnership Tenant, and
(iii) any bills, statements, notices, demands, requests or other
communications given or rendered to Partnership Tenant and to all such
parties shall be binding upon Partnership Tenant and all such parties,
and (iv) if Partnership Tenant shall admit new partners, all of such
new partners shall by their admission to Partnership Tenant, be deemed
to have assumed performance of all of the terms, covenants and
conditions of this Lease on tenant's part to be observed and performed,
and (v) Partnership Tenant shall give prompt notice to Landlord of the
admission of any such new partners, and upon demand of Landlord, shall
cause each such new partner to execute and deliver to Landlord an
agreement in form satisfactory to Landlord, wherein each new partners h
all assume performance of all the terms, covenants and conditions of
this Lease on tenant's part to be observed and performed (but neither
Landlord's failure to request any such agreement nor the failure of any
such new partner to execute or deliver any such agreement to Landlord
shall vitiate the provision of subdivision (iv) of this Paragraph 37.
SPECIAL
STIPULATIONS
38. The following "Special Stipulations," if in conflict with any of
the provisions of this Lease, shall be deemed to control:
38.A. FREE RENT: Landlord agrees that Tenant may occupy the Premises
free of any rental obligation for the first two (2) months of the Term.
All other terms and conditions shall remain in force and effect during
this two month period. Landlord further agrees to allow Tenant to
occupy the Premises free of any rental obligation from the time, if
any, the contractor receives a certificate of occupancy and the
commencement date of January 1, 1998.
38.B. PREPAID RENT: Tenant agrees to pay in advance an amount of
$15,283.56 which will be used for the rent due for the months three (3)
through five (5).
38.C. TENANT FINISH ALLOWANCE: Landlord agrees to install, at its sole
cost, a finished ceiling. Tenant agrees to pay ten thousand dollars
($10,000.00) to Landlord upon lease execution for tenant finishes.
Landlord agrees to provide Tenant with a turnkey of tenant finishes for
the premises as depicted in the pricing drawings dated 11/18/97 as
drawn by Calsten & Associates, a copy of which is attached hereto as
Exhibit B.
38.D. RENT INCREASE: Landlord and Tenant agree that the base rental
rate will be increased by four percent (4%) annually beginning on March
1, 1999.
16
<PAGE> 20
38.E. RIGHT OF FIRST OPTION: Tenant shall have a right of first option
to lease the vacant space on Exhibit A. Should Landlord have a
prospective tenant interested in leasing all or a portion of the vacant
space, Tenant shall be given written notice thereof which shall include
the rental rate and general terms of the offer to Tenant, and tenant
shall have seven (7) days from receipt of notice in which to exercise
its right to lease the premises being offered or to refuse the offer.
If Landlord shall not have received a reply within seven (7) days,
Landlord shall have no further obligation to Tenant regarding said
offer and is to consider the offer refused, and Tenant shall have no
further rights thereafter to vacant space on Exhibit A.
38.F. RENEWAL OPTION: Provided Tenant is not in default under any term
or condition of the Lease, then Tenant will have the right to renew
this Lease for one (1) additional term of ten (10) years. The rental
rate for the renewal period will be determined by the then existing
market conditions but in no event shall it be less than the escalated
rental rate being paid by Tenant at the end of the initial lease term.
This renewal option must be exercised by Tenant no less than 180 days
prior to the expiration of the initial lease.
38.G. SECURITY DEPOSIT RETURN: Provided Tenant is not in default under
any term or condition of the Lease at the beginning of the sixty second
(62nd) month of occupancy, then Landlord agrees to apply the security
deposit as stated in Paragraph 35. Security Deposit to the current
monthly rental obligation. Tenant agrees to pay to Landlord any
difference between the security deposit and current rent obligation in
accordance with Paragraph 3.A. Base Rent.
38.H. LATE PAYMENT OF RENT: Monthly payments due and payable on the
first day of each month as provided in the Lease, which are not in the
possession of Landlord's Agent by the due date, are subject to a
service charge of $50.00 in each instance. Any rental payment not in
the possession of Landlord's Agent by the tenth (10th) day of each
month shall be subject to the additional payment of interest at the
annual rate of ten percent (10%). Such interest shall be computed from
the first day of each month for each unpaid monthly rental installment
until paid in full. Any waiver of the collection of said service charge
or said interest charge shall not prohibit the Landlord from collecting
of such charges at some future date. All waivers of such charges shall
be given by Landlord in writing to be effective.
38.I. RELOCATION AND TERMINATION: Landlord reserves the right, upon
giving ninety (90) days advance written notice to Tenant, to transfer
and remove the Tenant from the Premises to an other available rental
area within the building of equal or greater size, finishes and area
within the Building, at a then equivalent Base Rent to that payable by
Tenant during the Term. Landlord shall bear the actual, reasonable
out-of-pocket expenses of such relocation consisting of: (i) the
expense of moving Tenant; (ii) the reconstruction costs of Tenant
furnished and Landlord furnished improvements; (iii) telephone
relocation, connection and disconnection expenses; (iv) the costs of
relocating and rewiring all computer network systems; (v) all costs of
sending Tenant's customary
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<PAGE> 21
announcements of office relocation to clients and contacts; (vi) all
costs of replacing Tenant's stationary and business cards with the same
type and quality as that currently used by Tenant; (vii) the
administrative costs of notifying various contacts, agencies and other
of office move; and (viii) all other expenses directly related to
Landlord's relocation of Tenant. Upon the ninetieth (90) day after the
exercise of Landlord's election to relocate the Premises, this lease
shall be deemed to have been amended, and the substituted space shall
for all purposes be the demised Premises. Landlord and Tenant shall
cooperate in good faith in effecting such relocation as expeditiously
as possible.
38.J. COMMON AREAS: Landlord agrees to buildout a corridor and elevator
lobby using building standard finishes on the 14th floor at its own
expense. Landlord agrees to complete the corridor and lobby less than
ninety (90) days after the Commencement Date.
This Lease is offered for signature by Tenant and it is understood that the
Lease shall not be binding upon Landlord unless and until Landlord shall have
executed and delivered a fully executed copy of this Lease to Tenant.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, the day
and year first above written.
As to Tenant: TENANT:
Signed, sealed and delivered in
the presence of: INTERLAND, INC.
/s/ /s/ Ken Gavranovic
- --------------------------------- ------------------------------
Witness Print Name: Ken Gavranovic
Title: Vice President
/s/
- --------------------------------- ------------------------------
Witness Print Name: (SEAL)
Title:
As to Landlord: 34 Peachtree Associates, L.P.
/s/ Nancy James By: Tower Properties Inc.,
- --------------------------------- ------------------------------
Witness It's Sole General Partner
/s/ James R. Borders
- --------------------------------- ------------------------------
Witness James R. Borders,
President (SEAL)
18
<PAGE> 22
RULES AND REGULATIONS
1. The sidewalks, walks, plaza entries, corridors, concourses, ramps,
staircases, escalators and elevators shall not be obstructed or used for any
purpose other than ingress and egress to and from the Premises. No bicycle or
motorcycle shall be brought into the Building or kept on the Premises without
the consent of Landlord.
2. No freight, furniture or bulky matter of any description will be received
into the Building or carried into the elevators except in such a manner, during
such hours and using such elevators and passageways as may be approved by
Landlord, and then only having been scheduled in advance. Any hand trucks,
carryalls, or similar appliances used for the delivery or receipt of merchandise
or equipment shall be equipped with rubber tires, side guards and such other
safeguards as Landlord shall require.
3. Landlord shall have the right to prescribe the weight, position and manner of
installation of safes, files and/or other heavy equipment which shall, if
considered necessary by Landlord, be installed in a manner which shall insure
satisfactory weight distribution. All damage done to the Building by reason of a
safe or any other article of Tenant's of office equipment being on the Premises
shall be repaired at the expense of the Tenant. The time and manner of moving
safes, files and other heavy equipment shall be subject to prior approval by
Landlord.
4. Only persons authorized by Landlord will be permitted to furnish drinking
water, towels, barbering, shoe shining, floor polishing and other similar
services to Tenant, and only at hours and under regulations fixed by Landlord.
5. Tenant, or the employees, agents, servants, visitors or licensees of Tenant
shall not at any time place, leave or discard any rubbish, paper, articles or
objects of any kind whatsoever outside the doors of the Premises or in the
corridors or passageways of the Building. No animals or birds shall be brought
or kept in or about the Building.
6. Landlord shall have the right to prohibit any advertising by Tenant which, in
Landlord's opinion, tends to impair the reputation of the Building or its
desirability for offices, and upon written notice from Landlord, Tenant will
refrain from or discontinue such advertising.
7. Tenant shall not place, cause or allow to be placed any sign or lettering
whatsoever, at, in, about or upon the Premises, except in and at such places as
may be designated by Landlord and consented to by Landlord in writing. All
lettering and graphics on corridor doors shall conform to the standards
prescribed by Landlord. No trademark shall be displayed in any event.
8. Canvassing, soliciting or peddling in the Building is prohibited and Tenant
shall cooperate to prevent same.
9. Landlord shall have the right to exclude any person from the Building other
than during customary business hours, and any person in the Building will be
subject to identification by the
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<PAGE> 23
employees and agents of Landlord. All persons in or entering the Building shall
be required to comply with the security policies of the Building. If Tenant
desires any additional security service for the Premises, Tenant shall have the
right (with the advance written consent of Landlord) to obtain such additional
service at Tenant's sole cost and expense.
10. Only workmen employed, designated or approved by Landlord may be employed
for repairs, installations, alterations, painting, material moving and other
similar work that may be done on the Premises, by Tenant.
11. Tenant shall not do any cooking or conduct any restaurant, luncheonette or
cafeteria for the sale or service of food or beverages to its employees or to
others, or permit the delivery of any food or beverage to the Premises, except
by such persons delivering the same as shall be approved by Landlord and only
under regulations fixed by Landlord.
12. Tenant shall not bring or permit to be brought or kept in or on the Premises
any inflammable, combustible, corrosive, caustic, poisonous or explosive fluid,
material, chemical or substance, or cause or permit any odors to permeate in or
emanate from the Premises.
13. Tenant shall not mark, paint, drill into, or in any way deface any part of
the Building or the Premises. No boring, cutting or stringing of wires shall be
permitted, except with the prior written consent of Landlord, as Landlord may
direct. Tenant shall not install any resilient tile or similar floor covering in
the Premises except with the prior approval of Landlord. The use of cement or
other similar adhesive material is expressly prohibited.
14. No additional locks or bolts of any kind shall be placed on any door in the
Building or the Premises and no lock on any door therein shall be changed or
altered in any respect. Landlord shall furnish two keys for each lock on doors
in the Premises and shall, on Tenant's request and at Tenant's expense, provided
additional duplicate keys. All keys shall be returned to Landlord upon the
termination of this Lease. Landlord may at all times keep a pass key to the
Premises. All entrance doors to the Premises shall be left closed at all times,
and left locked when the Premises are not in use.
15. Tenant shall give immediate notice to Landlord in case of accidents in the
Premises or in the Building or of defects therein or in any fixtures or
equipment, or of any known emergency in the Building.
16. Tenant shall not use the Premises or permit the Premises to be used for
photographic, multilith or multigraph reproductions except in connection with
its own business.
17. Tenant shall not sue or permit any portion of the Premises to be used as an
office for a public stenographer or typist, offset printing, the sale of liquor
or tobacco, a barber or manicure shop, an employment bureau, a labor union of
office, a doctor's or dentist's of office, a dance or music studio, any type of
school, or for any sue other than those specifically granted in this Lease.
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<PAGE> 24
18. Tenant shall not advertise for laborers giving the Premises as an address,
nor pay such laborer at a location in the Premises.
19. The requirements of Tenants will be attended to only upon application at the
offices of the Building. Employees of Landlord shall not perform any work or do
anything outside of their regular duties, unless under special instructions from
the office of Landlord.
20. Tenant shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which is
allowed by law. Business machines and mechanical equipment belong to Tenant
which cause noise, vibration or any other nuisance that may be transmitted to
the structure or other portions of the Building or to the Premises, to such a
degree as to be objectionable to Landlord or which interfere with the use or
enjoyment by other tenants of their premises or the public portion of the
Building, shall be placed and maintained by Tenant, at Tenant's expense, in
settings of cork, rubber or spring type vibration eliminators sufficient to
eliminate noise or vibration.
21. No draperies, shutters or other covering may be installed by Tenant between
the building standard window covering and the exterior windows or walls.
22. Tenant shall not place, or install or operate within the Premises or any
other part of the Building any engine, stove or machinery, or conduct mechanical
operations therein, without the written consent of Landlord.
23. No portion of the Premises or any other part of the Building shall at any
time be used or occupied as sleeping or lodging quarters.
21
<PAGE> 1
EXHIBIT 10.21(b)
FIRST AMENDMENT TO LEASE
THIS AMENDMENT, dated this 6th day of July, 1998, between TCB #4,
L.L.C. a Delaware limited liability company ("Landlord") and INTERLAND, INC.
("Tenant"), for the premises located in the City of Atlanta, County of Fulton,
State of Georgia, commonly known as 34 Peachtree, Suite 1400, 34 Peachtree
Street (the "Premises") as shown and identified on the floor plan attached to
this Amendment as Exhibit "A1".
WITNESSETH:
WHEREAS, Landlord's predecessor, 34 Peachtree Associates, L.P. and
Tenant, entered into that certain Lease dated November 19, 1997, (hereinafter
collectively referred to as the "Lease"); and
WHEREAS, Landlord and Tenant desire to amend the Lease as more fully
set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Definitions. Unless otherwise specifically set forth herein, all
capitalized terms herein shall have the same meaning as set forth in
the Lease.
2. Premises - Paragraph 1: the Lease is hereby amended to include the
Expansion Premises consisting of approximately 6,031 rentable square
feet, making the total rentable square footage approximately 11,042.
3. Paragraph 3.A.(a) of the Lease is hereby amended to read as follows:
Rental of one hundred thirty-four thousand seven hundred twelve &
36/100 Dollars ($134,712.36) per year ("Base Rent"), payable in equal
monthly installments of eleven thousand two hundred and twenty-six &
03/100 Dollars ($11,226.03), in advance on the first day of each
calendar month during the Term, beginning upon the earlier of
substantial completion of the Expansion Premises or September 15, 1998;
4. Paragraph 38.I. of the Lease is hereby deleted in its entirety;
5. Paragraph 35. of the Lease is hereby amended to increase "Deposit" with
Landlord as security for the performance of Tenants obligations from
$5,094.52 to a sum of $11,226.03.
6. Landlord, at its expense, shall provide up to $75,289.50 to be applied
towards leasehold improvements below finished ceiling, to include
construction drawings, contractors supervision to build out the
Expansion Premises on the fourteenth floor in accordance
<PAGE> 2
with the attached Exhibit "B-1". Any costs in excess of said allowance
shall be the sole responsibility of the Tenant.
7. Incorporation. Except as modified herein, all other terms and
conditions of the Lease between the parties above described, as
attached hereto, shall continue in full force and effect.
8. Limitation of Landlord's Liability. Redress for any claims against
Landlord under this Amendment or under the Lease shall only be made
against Landlord to the extent of Landlord's interest in the property
to which the Premises are a part. The obligations of Landlord under
this Amendment and the Lease shall not be personally binding on, nor
shall any resort be had to the private properties of, any of its
trustees or board of directors and officers, as the case may be, the
general partners thereof or any beneficiaries, stockholders, employees
or agents of Landlord, or its investment manager.
IN WITNESS WHEREOF, Landlord and Tenant have executed the Amendment as
of the day and year first written above.
LANDLORD: TENANT:
TCB #4 L.L.C., a Delaware limited
liability company INTERLAND, INC.
By: RREEF MANAGEMENT COMPANY, a California
corporation
By: /s/ Ken Gavranovic
By: /s/ Faye Z. Phillips ------------------------
--------------------------------------- Ken Gavranovic
Faye Z. Phillips
Title: Vice President
Title: Vice President, District Manager ---------------------
-------------------------------------- Date: July 21, 1998
Date: July 24, 1998 ----------------------
---------------------------------------
<PAGE> 3
EXHIBIT B-1
EXPANSION ALTERATIONS
1. Landlord's Work. Landlord shall provide design and construction of the
work described in Schedule I to be attached hereto ("Landlord's Work"). As
further provided herein, Tenant shall be responsible for the incremental cost of
Landlord's Work in excess of the Maximum TI Allowance (defined below). The
certificate of Landlord's space planner that the work to be done by Landlord
pursuant to this Exhibit B-1 has been substantially completed shall be adequate
evidence that the Premises has been completed in accordance with the
requirements of the Lease and that possession thereof has been deemed delivered
to Tenant, for all purposes of the Lease, including the commencement of the
payment of rent.
2. Cost and Allowance.
2.1 Prior to commencing any of Landlord's Work, Landlord shall submit
to Tenant for Tenant's approval a written estimate of the cost of Landlord's
Work (an "Estimate"). Landlord may require Tenant to deposit that amount of the
amount of the Estimate which exceeds the Maximum TI Allowance with Landlord
within five (5) days after Landlord's written request therefor. Such deposit
shall be held as security for the payment of, and shall be credited, without
interest, against the sums payable by Tenant under this Lease.
2.2 This Lease and the rental rates provided for herein are premised on
a total cost of Landlord's Work not to exceed $16.50 per square foot, or
$75,289.50 ("Maximum TI Allowance"). The "cost of Landlord's Work" includes,
without limitation:
2.2.1 All costs and expenses actually incurred by Landlord
pertaining to Landlord's Work, including, but not limited to, costs charged by
contractors, subcontractors and general and other conditions costs and expenses
in connection with preparation of the Premises for occupancy;
2.2.2 All costs and expenses of preparation of the plans for such
construction, and site inspection and contract administration of Landlord's
consulting space planners and/or engineers;
2.2.3 All costs of permits, licenses and other approvals required
for the performance of Landlord's Work; and
2.2.4 A construction management fee to Landlord of five percent
(5%) of the total of all such costs under the foregoing Paragraphs 2.2.1, 2.2.2
and 2.2.3.
2.3 If the total cost of Landlord's Work exceeds the Maximum TI
Allowance, the entire amount of such excess shall be borne by Tenant and shall
be paid to Landlord by Tenant upon demand as additional rent under the Lease.
<PAGE> 4
3. Miscellaneous.
3.1 Except as set forth in this Exhibit B-1, Landlord has no other
agreement with Tenant and has no obligation to do any work with respect to the
Premises. Any other work in the Premises which may be permitted by Landlord
pursuant to the terms and conditions of the Lease shall be done at Tenant's sole
cost and expense and in accordance with the terms and provisions of the Lease.
3.2 All rights and remedies of Landlord herein created or otherwise
existing at law or equity are cumulative, and the exercise of one or more such
rights or remedies shall not be deemed to exclude or waive the right to the
exercise of any other rights or remedies. All such rights and remedies may be
exercised and enforced concurrently and whenever and as often as deemed
desirable.
3.3 This Exhibit B-1 shall not be deemed applicable to any additional
space added to the original Premises at any time or from time to time, whether
by any options under the Lease or otherwise, or to any portion of the original
Premises or any additions thereto in the event of a renewal or extension of the
original term of the Lease, whether by any options under the Lease or otherwise.
4. Recapture of Concessions. Tenant understands and agrees that in
entering into this Lease, Landlord is relying upon receipt of all the base rent
to become due with respect to all of the Leased Premises over the full term of
this Lease for amortization, including an interest factor of ten (10%) per annum
(the "Interest Rate") of the Concession Amount. For purposes hereof, the
"Concession Amount" shall be defined as the aggregate of the Maximum TI
Allowance and the brokers' commissions becoming due by reason of this Lease.
Accordingly, Tenant agrees that if this Lease or Tenant's right to possession of
the Leased Premises leased hereunder shall be terminated as of any date
("Termination Date") prior to the expiration of the full Term hereof by reason
of a default of Tenant, there shall be due and owing to Landlord as of the day
prior to the Termination Date, as rent in addition to all other amounts owed by
Tenant as of such Date, the amount ("Unamortized Amount") of the Concession
Amount determined as set forth below; provided, however, that in the event that
such amounts are recovered by Landlord pursuant to any other provision of this
Lease, Landlord agrees that is shall not attempt to recover such amounts
pursuant to this paragraph.
For the purposes hereof, the Unamortized Amount shall be determined in the same
manner as the remaining principal balance of a mortgage with the Interest Rate
payable in level payments over the same full term of the Lease would be
determined; to illustrate, according to a standard mortgage amortization table
the principal amount outstanding at the end of the fifth year of a loan of
$1,000.000 payable in level payments with interest at 8% over ten years will be
$598.00 assuming all payments to that point are made as due.
<PAGE> 1
EXHIBIT 10.21(c)
SECOND AMENDMENT TO AGREEMENT OF LEASE
This Second Amendment (the "Second Amendment") is made and entered into
on August 27, 1999, but is effective for all purposes as of September 15, 1999
(the "Effective Date"), by and between TCB #4 L.L.C., a Delaware limited
liability company, successor in interest to 34 Peachtree Associates, L.P.
("Peachtree"), ("Landlord"), and INTERLAND, INC., ("Tenant"), whose mailing
address is 34 Peachtree Street, NW, Suite 1400, Atlanta, Georgia 30303.
RECITALS:
WHEREAS, Landlord's predecessor, Peachtree, and Tenant entered into a
lease dated November 19, 1997 (the "Original Lease") for certain premises on the
fourteenth floor (the "Original Premises") in the building known as One Park
Tower located at 34 Peachtree Street, N.W., Atlanta, Georgia ("Building") and
the Original Lease was amended by the First Amendment To Lease dated July 19,
1998 ("First Amendment"), to add to the Original Premises additional space on
the fourteenth floor of the Building (hereinafter collectively referred to as
the "Lease"); and
WHEREAS, Landlord and Tenant desire to amend the Lease as more fully
set forth below.
I. All terms, covenants and conditions contained in this Second
Amendment shall have the same meaning as in the Lease, and shall govern should a
conflict exist with previous terms and conditions.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Landlord and Tenant agree as follows:
1. Recitals. The recitals set forth above are hereby incorporated herein
as if fully set forth.
2. Expansion of Premises. From September 15, 1999 through September 14,
2000 (the "Expansion Premises Term") the Premises shall be expanded to
include Suite 730, Suite 740 and Suite 780 of the Building (hereinafter
referred to as "New Suite 730") consisting of 3,701 rentable square
feet as identified on the floor plan attached to this Second Amendment
as Exhibit "A-1". New Suite 730 is marked on Exhibit "A-1" with
diagonal lines.
3. Rent for New Suite 730. paragraph 3.A.(a) of the Lease is amended by
the addition of the following provision: Tenant hereby agrees to pay to
Landlord rental of Four Thousand Six Hundred Twenty Six Dollars and
25/100 ($4,625.25) per month for New Suite 730 payable in advance on
the first day of each calendar month of the Expansion Premises Term,
provided however that rental for September 1999 shall be due and
payable in the
<PAGE> 2
amount of $2,312.63 (i.e. 50% of the aforesaid monthly rental as Tenant
will only occupy New Suite 730 for half of such month), and likewise
rental for September 2000 shall also be due and payable in the amount
of $2,312.63. Together with the execution of this Second Amendment,
Tenant has delivered the September 1999 and October 1999 rental to
Landlord in the amount of $6,937.88 and Landlord acknowledges receipt
of such rental.
4. Tenant's Proportionate Share. As of the Effective Date, Tenant's
Proportionate Share shall include an additional 1.31% for Suite 730.
5. After Hours HVAC. Landlord's current charge for after-hours HVAC
service is $90.00 per hour, which is subject to change at any time.
6. Tenant Improvement Allowance: "As Is". Landlord shall have no
obligation to perform any construction or make any additional
improvements or alterations, or to afford any allowance to Tenant for
improvements or alterations, in connection with this Second Amendment.
Tenant acknowledges and agrees that all construction obligations of
Landlord under the Lease have been performed in full and accepted, and
Tenant hereby accepts New Suite 730 in its "as is" condition. Landlord
will install a lock on the entrance door to Suite 730 and key the same
as Suite 780. Landlord at Tenant's cost will provide New Suite 730 with
150 amps of 480 volt power.
7. Incorporation. Except as modified herein, all other terms and
conditions of the Lease shall continue in full force and effect.
8. Brokers. Each of the parties represents and warrants to the other that
it has not dealt with any broker or finder in connection with this
Second Amendment, other than Habersham Management Group representing
the Landlord and Eric Lemboris & Associates representing the Tenant,
whose commission shall be paid by the Landlord. Each of the parties
agrees to indemnify, defend and protect the other from and against, any
and all costs, fees and other expenses resulting from a breach by the
party of their covenant under this section.
9. Limitation of Landlord Liability. Redress for any claims against
Landlord under this Lease shall only be made against Landlord to the
extent of Landlord's interest in the property to which the Premises are
a part. The obligations of Landlord under the Lease shall not be
personally binding on, nor shall any resort be had to the private
properties of, any of its trustees or board of directors and officers,
as the case may be, the general partners thereof or any beneficiaries,
stockholders, employees or agents of Landlord, or the investment
manager.
<PAGE> 3
IN WITNESS WHEREOF, Landlord and Tenant have executed this Second
Amendment to Agreement of Lease as of the day and year first written above.
LANDLORD: TENANT:
TCB #4 L.L.C., a Delaware limited
liability company INTERLAND, INC.
By: RREEF MANAGEMENT
COMPANY, a California corporation
By: /s/ Faye Z. Phillips
---------------------------------------
Faye Z. Phillips
By: /s/ Ken Gavranovic
Title: Vice President -- District Manager --------------------------
------------------------------------- Ken Gavranovic
Date: Title: President
-------------------------------------- -----------------------
Date: August 30, 1999
------------------------
<PAGE> 4
EXHIBIT A-1
attached to and made a part of Lease bearing the
Lease Reference Date of _________________, 1999 between
TCB #4 L.L.C., a Delaware limited liability company, as Landlord
and Interland, Inc., as Tenant
PREMISES
Exhibit A is intended only to show the general layout of the Premises as of the
beginning of the Term of this Lease. It does not in any way supersede any of
Landlord's rights set forth in Section 17.2 with respect to arrangements and/or
locations of public parts of the Building and changes in such arrangements
and/or locations. It is not to be scaled; any measurements or distances shown
should be taken as approximate.
[GRAPHIC MATERIAL OMITTED]
<PAGE> 1
EXHIBIT 10.22(a)
AMENDED AND RESTATED
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease"), made as of this 29th day of September,
1999, between Landlord, as hereinbelow defined, and Tenant, as hereinbelow
defined.
W I T N E S S E T H:
WHEREAS, Landlord and Tenant have heretofore entered into that certain
Lease Agreement (the "Original Lease"), dated as of February 26, 1999, pursuant
to which Tenant has leased all of the Second Floor consisting of 17,371 square
feet in an office building known as Centennial Tower located at 101 Marietta
Street, City of Atlanta, Fulton County, Georgia;
WHEREAS, the Original lease was heretofore modified and amended
pursuant to that certain First Amendment to Lease Agreement (the "First
Amendment"), dated as of April 1, 1999, between Landlord and Tenant, and that
certain Second Amendment to Lease Agreement (the "Second Amendment"), dated as
of May 21, 1999, between Landlord and Tenant (the Original Lease, as so modified
and amended by the First Amendment and the Second Amendment, is hereinafter
referred to as the "Amended Lease");
WHEREAS, Landlord and Tenant desire to further modify the Amended Lease
for purposes of leasing or agreeing to lease an additional 35,841 square feet
consisting of all of the Third and Fourth Floors of Centennial Tower; and
WHEREAS, Landlord and Tenant desire to enter into this Lease for
purposes of amending and restating the Amended Lease in its entirety;
NOW, THEREFORE, FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100
DOLLARS ($10.00) AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, Landlord and Tenant do hereby
modify, amend and restate the Amended Lease so that from and after the date
hereof, this Lease shall govern exclusively and in all respects the obligations
of Landlord and Tenant described herein:
1. DEFINITIONS
As used herein, the following capitalized words shall have the
following meanings:
"Actual Costs" means the actual amount paid or incurred by Landlord for
Operating Costs during any Calendar Year.
"Agreed Interest Rate" shall have the meaning set forth in Paragraph 10
of this Lease.
"Approximate Rentable Area of the Premises" means, from the
Commencement Date through the date immediately preceding the Third Floor
Expansion Effective Date or the Fourth Floor Expansion Effective Date, as the
case may be, 17,371 rentable square feet. Effective as of the Third Floor
Expansion Effective Date, the Approximate Rental Area of the Premises shall be
increased by 17,736 rentable square feet. Likewise, effective as of the Fourth
Floor Expansion Effective Date (which may occur prior to, contemporaneously
with, or after the Third Floor Expansion Effective Date), the Approximate Rental
Area of the Premises shall be increased by an additional 18,105 rentable square
feet.
"Base Rent" means the aggregate amount of Base Rent payable with
respect to the Premises, as
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<PAGE> 2
indicated hereinbelow:
<TABLE>
<CAPTION>
RENTAL
RATE PER
RENTABLE MONTHLY
DATE: SQ. FT. ANNUAL BASE RENT BASE RENT
----- ------- ---------------- ---------
<S> <C> <C> <C>
From The Commencement Date $13.80 $239,719.80 plus the product One-Twelfth (1/12th) of
of July 22, 1999 through obtained by multiplying the square the amount calculated in
July 31, 2000: footage of the Third Floor the column to the
Expansion Premises and/or the immediate left hereof.
Fourth Floor Expansion Premises by
$13.80 after the Effective Dates
thereof
From August 1, 2000 through $14.71 $782,748.52 $65,229.04
July 31, 2001
From August 1, 2001 through $15.26 $812,015.12 $67,667.93
July 31, 2002
From August 1, 2002 through $15.89 $845,538.68 $70,461.56
July 31, 2003
From August 1, 2003 through $16.89 $898,750.68 $74,895.89
July 31, 2004
From August 1, 2004 through $17.15 $912,585.80 $76,048.82
July 31, 2005
From August 1, 2005 through $17.43 $927,485.16 $77,290.43
July 31, 2006
From August 1, 2006 through $17.72 $942,916.64 $78,576.39
July 31, 2007
From August 1, 2007 through $18.01 $958,348.12 $79,862.34
July 31, 2008
From August 1, 2008 through $18.31 $974,311.72 $81,192.64
July 31, 2009
</TABLE>
"Base Year Operating Costs" means the amount of Operating Costs
actually incurred by Landlord with respect to the Premises, as adjusted in
accordance with subsection 6(c) hereinbelow, for calendar year 1999 with respect
to the Initial Premises and calendar year 2000 with respect to the Third Floor
Expansion Premises and the Fourth Floor Expansion Premises, respectively.
"Broker" means, collectively, Landlord's Broker and Tenant's Broker, if
any.
"Building" means the multi-story office building constructed on the
Property.
"Building Rentable Area" means 637,006 square feet.
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<PAGE> 3
"Calendar Year" means each calendar year of the Lease Term.
"Commencement Date" shall have the meaning set forth in subparagraph
4(b) of this Lease.
"Estimated Costs" means Landlord's reasonable estimate of Actual Costs
for each Calendar Year which shall be prepared in good faith by Landlord.
"Fourth Floor Expansion Effective Date" means the date upon which
substantial completion of the Tenant Improvements to be constructed by Tenant in
the Fourth Floor Expansion Premises occurs, which date shall in no event and
under no circumstances be later than March 1, 2000 unless substantial completion
is delayed beyond such date as a result of any delay by Landlord, Landlord's
contractor's or agents in completing Landlord's Work (if any) with respect to
the Fourth Floor Expansion Premises, or as a result of any action or inaction of
Landlord, Landlord's contractors or agents, in which event the foregoing date
shall be extended for each day of such Landlord delay (it being understood,
however, that any Tenant Delay shall not operate to delay in any respect
whatsoever the Fourth Floor Expansion Effective Date). For purposes of this
Paragraph, substantial completion of the Tenant Improvements to be constructed
by Tenant in the Fourth Floor Expansion Premises shall be deemed to have
occurred when Tenant has substantially completed the work to be constructed or
installed pursuant to the provisions of the Fourth Floor Expansion Premises
Lease Improvement Agreement, subject only to completion of punchlist items by
Tenant's general contractor (and exclusive of the installation of all telephone
and other communications facilities and equipment, including installation of the
Telecommunications Equipment, and other finish work to be performed by parties
other than Tenant). In the event of any dispute as to when and whether the work
performed or required to be performed by Tenant has been substantially
completed, the certificate of the AIA registered architect rendering services
with respect to the Tenant Improvements on or about the Fourth Floor Expansion
Premises or a temporary or final certificate of occupancy issued by the local
governing authority shall be conclusive evidence of such completion, effective
on the date of such architect's certificate or said temporary or final
certificate of occupancy.
"Fourth Floor Expansion Premises" means all of the space on the 4th
floor of the Building, being the space labeled as such on Exhibit "B-1" attached
hereto, consisting of 18,105 rentable square feet (representing the rentable
square footage of the entire Fourth Floor of the Building), together with any
improvements now or at any time hereinafter comprising or built into such space.
"Fourth Floor Expansion Premises Lease Improvement Agreement" means the
Fourth Floor Expansion Premises Lease Improvement Agreement attached hereto as
Exhibit "E" and by this reference incorporated herein.
"Fourth Floor Expansion Premises Schedule of Improvements" means the
scheduling matters set forth on Exhibit "E-1" attached hereto and by this
reference incorporated herein.
"Health/Fitness Facility" shall have the meaning set forth in Paragraph
46 of this Lease.
"Initial Improvements Schedule of Improvements" means the scheduling
matters set forth in Exhibit "C-1" attached hereto and by this reference
incorporated herein.
"Initial Premises" means all of the space on the 2nd floor of the
Building labeled as such on Exhibit "B" attached hereto, consisting of
approximately 17,371 square feet, together with any improvements now or at any
time hereinafter comprising or built into such space.
"Landlord" means 101 Marietta Street Associates, a Georgia general
partnership, its successors and assigns.
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<PAGE> 4
"Landlord's Address" means 101 Marietta Street Associates c/o
Insignia/ESG, Inc., Suite 3325, 101 Marietta Street, Atlanta, Georgia 30303.
"Landlord's Allowance" shall have the meaning set forth in the Primary
Lease Improvement Agreement and the Fourth Floor Expansion Premises Lease
Improvement Agreement, as the case may be.
"Landlord's Broker" means Insignia/ESG, Inc.
"Landlord's Punch List" means the schedule of punchlist items relating
to Landlord's Work and the Tenant Improvements to be constructed by Landlord in
the Third Floor Expansion Premises, which schedule shall be prepared by Landlord
and approved by Tenant within ten (10) days after the Premises being improved by
Landlord have been substantially completed by Landlord and delivered to Tenant;
provided, however, that such schedule shall not include any items of work which
will substantially interfere with Tenant's use of such Premises.
"Landlord's Work" shall have the meaning set forth in the Primary Lease
Improvement Agreement and the Fourth Floor Expansion Premises Lease Improvement
Agreement, as the case may be.
"Lease" means this Lease, including all exhibits attached hereto.
"Lease Date" means the date set forth in the first paragraph of this
Lease.
"Lease Improvement Agreements" means, collectively, the Primary Lease
Improvement Agreement and the Fourth Floor Expansion Premises Lease Improvement
Agreement.
"Lease Term" means the period commencing on the Commencement Date and
terminating on the last day of the 120th month thereafter (that is, July 31,
2009), as the same may be extended in accordance with the terms hereof.
"Operating Costs" means all expenses incurred by Landlord as reasonably
determined by Landlord to be necessary or appropriate for the operation,
maintenance, and repair of the Building, the personal property used in
conjunction therewith, the land upon which the Building is situated. Operating
Costs shall include, but are not limited to, all expenses incurred by Landlord
for heating, cooling, electricity, water, gas, sewers, refuse collection,
telephone, cable and other communication services not chargeable to tenants, and
similar utility services; the cost of supplies, janitorial and cleaning,
security services, landscaping maintenance and replacements, window washing,
insurance, management fees, services of independent contractors performing
duties necessary to the operation of the Building, personal and real property
taxes, the cost of maintaining and operating the Building's Health/Fitness
Facility (subject to the provisions of Paragraph 46 of this Lease), alterations
or improvements made to the Building by reason of the laws and/or the
requirements of any insurer, mortgagee (only where such requirements from
insurer or mortgagee concern safety or structural features of the Building and
are commercially reasonable in light of requirements generally imposed in the
insurance or real estate lending industries with respect to similar buildings),
or governmental agency, the amortization (together with reasonable financing
charges) of the cost of installation (including labor and materials) of capital
investment items amortized in accordance with generally accepted accounting
principles and Internal Revenue Service rules and regulations, the cost of
compensation (including employment taxes and fringe benefits) of all persons who
perform duties in connection with such Operating Costs, including the Building
manager, and any other expense or charge which, when determined in accordance
with accepted principles of sound management and accounting practices applicable
to first-class office building complexes and consistently applied, would be
considered an expense of maintaining, operating or repairing the Building and
the land upon which it is situated.
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<PAGE> 5
Operating Costs does not include the following: Leasing commissions,
finders' fees, brokerage fees and similar fees, and costs incurred with the
negotiation or enforcement of leases but not management fees; rent under any
ground leases; costs of furnishing services to other tenants or occupants to the
extent that such services are materially in excess of services Landlord offers
to all tenants at Landlord's expense; lease takeover costs incurred by Landlord
in connection with new leases at the Property; costs and expenses of the sale of
all or any portion of the Property; amounts received by Landlord through the
proceeds of insurance to the extent the proceeds are compensation for expenses
which were previously included in operating expenses; expenses for which
Landlord is reimbursed through insurance; costs incurred by Landlord with
respect to repairs, goods, and services (including utilities sold and supplied
to tenants and occupants of the Property) to the extent that Landlord is
entitled to reimbursement for such costs; costs incurred by Landlord due to the
violation by Landlord of the terms and conditions of any lease of space in the
Property; interest, points and fees on debt or amortization or for any mortgage
or mortgages encumbering the Property, or any part thereof, and all principal,
escrow deposits and other sums paid on or in respect to any indebtedness
(whether or not secured by a mortgage lien) and on any equity participation of
any lender or lessor, and all costs incurred in connection with any financing,
refinancing or syndication of the Property, or any part thereof; depreciation
and, except as otherwise provided herein, amortization; the costs of the
original construction of the Property and the improvements, income, franchise,
transfer, inheritance, capital stock, estate, profit, gift, gross receipts or
succession taxes; salaries, fringe benefits and other compensation for personnel
not directly involved in the operation or management of the Building; costs of
repairs or replacements incurred by reason of fire or other casualty or
condemnation in excess of the value of the insurance deductible; costs for
performing tenant installations for any individual tenant or for performing work
or furnishing services to or for individual tenants at such tenant's expense and
any other contribution by Landlord to the cost of tenant improvements to the
extent such work is reimbursed or capitalized; Landlord's general corporate
overhead and general administrative expenses, except as related to the operation
or maintenance of the Building; rentals and other related expenses incurred in
leasing air-conditioning systems, elevators or other equipment ordinarily
considered to be of a capital nature except for customary office equipment. All
special assessments by the local governing authority, which may be paid by
Landlord in installments, shall be paid by Landlord in the maximum number of
installments permitted by law and charged as operating expenses only in the year
in which the assessment installment is actually paid.
"Permitted Use" means general office purposes and, with respect to the
Third Floor Expansion Premises and the Fourth Floor Expansion Premises only (and
any portion of the Fifth Floor of the Building leased by Tenant pursuant to the
terms of Paragraph 3 of the Special Stipulations, or otherwise), general office
purposes and the installation, operation, maintenance, replacement and other
lawful uses by Tenant of the Telecommunications Equipment.
"Plans" shall have the meaning set forth in the Lease Improvement
Agreements.
"Premises" means, initially from and after the Commencement Date, the
Initial Premises until the Third Floor Expansion Effective Date or the Fourth
Floor Expansion Effective Date, respectively, on which effective dates the
Premises shall then and thereafter until the expiration or earlier termination
of this Lease include the Third Floor Expansion Premises and the Fourth Floor
Expansion Premises, as the case may be.
"Primary Lease Improvement Agreement" means the Primary Lease
Improvement Agreement attached as Exhibit "C" and by this referenced
incorporated herein.
"Property" means the land on which the Building is erected, which land
is more particularly described in Exhibit "F" attached hereto and by this
reference incorporated herein.
"Rent" means Base Rent plus Tenant's Share of Operating Costs plus all
other charges and other
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<PAGE> 6
amounts owed by Tenant to Landlord pursuant to this Lease.
"Rules and Regulations" means the rules and regulations for occupants
of the Building, as set forth in Exhibit "A" attached hereto and by this
reference incorporated herein, together with such reasonable modifications
thereof and additions thereto from time to time put in effect by Landlord.
"Schedule of Improvements" means the timing for performance by
Landlord, Tenant, and certain other parties of various responsibilities for
purposes of completing the Tenant Improvements, as more particularly described
and identified on the Initial Improvements Schedule of Improvements, the Third
Floor Expansion Premises Schedule of Improvements and the Fourth Floor Expansion
Premises Schedule of Improvements, respectively.
"Security Deposit" means the sum of the cash deposited by Tenant with
Landlord to be held by Landlord as security for Tenant's obligations under the
Lease in the manner expressed in Paragraph 33 hereof.
"Special Stipulations" means the matters set forth in Exhibit "G"
attached hereto and by this reference incorporated herein.
"Telecommunications Equipment" shall mean all telephone switching
equipment, computers, consoles, servers, instruments, wires, cabling,
distribution, devices, and other equipment installed in the Fourth Floor
Expansion Premises (and, with Landlord's prior written consent [which consent
shall not be unreasonably withheld, conditioned or delayed] and satisfaction of
the applicable terms and conditions of this Lease governing installation, use
and operation, may be installed on the Third Floor Expansion Premises and any
portion of the Fifth Floor of the Building leased by Tenant pursuant to the
terms of Paragraph 3 of the Special Stipulations, or otherwise) and used by
Tenant in connection with the operation by Tenant of Tenant's lawful business,
including, without limitation, internet web site hosting and design,
installation and maintenance, and telecommunications operations procedures and
matters incidental and accessory thereto. Without limiting the scope of the
preceding definition, a Schedule of Telecommunications Equipment originally
contemplated to be installed within the Fourth Floor Expansion Premises is
attached hereto as Exhibit "I" and by this reference incorporated herein. Any
material change in the kind, character or quality of the Telecommunications
Equipment described on such Exhibit "I" that may materially impact the capacity
of the Building to support such Telecommunications Equipment from a load
bearing, electrical, mechanical or any other capacity shall be disclosed in
writing by Tenant to Landlord and approved by Landlord in writing, which
approval shall not to be unreasonably withheld, conditioned or delayed.
"Tenant" means Interland, Inc., a Georgia corporation.
"Tenant Improvements" means the Tenant Improvements described and
identified in the Primary Lease Improvement Agreement and the Fourth Floor
Expansion Premises Lease Improvement Agreement.
"Tenant's Broker" means Eric Lemboris & Associates.
"Tenant's Cost" shall have the meaning set forth in the Primary Lease
Improvement Agreement and the Fourth Floor Expansion Premises Lease Improvement
Agreement, as the case may be.
"Tenant's Delay" means any delay in substantial completion of the
Tenant Improvements as a result of (a) Tenant's failure to agree to plans,
specifications and cost estimates before the dates referred to in the Schedule
of Improvements, (b) Tenant's request for materials, finishes or installations
other than Landlord's standard, (c) Tenant's changes in plans, or (d) the
performance or completion by a party
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<PAGE> 7
employed by Tenant.
"Tenant's Pro Rata Share" means a ratio, the numerator of which is the
Approximate Rentable Area of the Premises, and the denominator of which is the
Building Rentable Area, subject to increase or decrease due to an increase or
decrease of the rentable square footage of either the Building or the Premises.
Tenant's Pro Rata Share shall be adjusted for partial years at the beginning and
end of the Lease Term.
"Third Floor Expansion Effective Date" means the date upon which the
Third Floor Expansion Premises has been substantially completed (as defined in
subparagraph 4(c), below) in accordance with the plans and specifications
therefor (other than any immaterial work described and identified on Landlord's
Punch List which cannot be completed on such date, provided such incompletion
will not substantially interfere with Tenant's use of the Third Floor Expansion
Premises); provided, however, that the date of substantial completion for
purposes of determining the Third Floor Expansion Effective Date and the payment
of Rent with respect to the Third Floor Expansion Premises shall be accelerated
by the number of days of any Tenant Delay, and shall in any event be no later
than March 1, 2000 unless a work or other delay is caused by Landlord or its
agents or contractors by reason of any of such parties' failure to timely
complete Landlord's Work or the Tenant Improvements in the Third Floor Expansion
Premises, or otherwise.
"Third Floor Expansion Premises" means all of the Third Floor of the
Building, being the space labeled as such on Exhibit "B-2" attached hereto,
consisting of 17,736 rentable square feet, together with any improvements now or
at any time hereinafter comprising or built into such space.
"Third Floor Expansion Premises Schedule of Improvements" means the
scheduling matters set forth in Exhibit "C-2" attached hereto and by this
reference incorporated herein.
2. PREMISES AND PROPERTY
Landlord hereby demises and leases to Tenant and Tenant hereby accepts
and leases from Landlord the Premises.
3. USE
Tenant shall use and occupy the Premises for the Permitted Use and for
no other use or purpose without the prior written consent of Landlord. Tenant
shall not do or permit anything to be done in or about the Premises which will
in any way obstruct or interfere with the rights of other tenants or occupants
of the Building, nor use or allow the Premises to be used for any improper,
immoral, unlawful, or objectionable purpose or for any business, use, or purpose
deemed to be disreputable or inconsistent with the operation of a first-class
office building, nor shall Tenant cause, maintain or permit any nuisance in, on,
or about the Premises. Tenant shall not commit or suffer the commission of any
waste in, on, or about the Premises.
4. TERM AND POSSESSION
(1) The term of this Lease shall be for the Lease Term (or until
sooner terminated as herein provided) beginning on the
Commencement Date, except that if the Commencement Date is
other than the first day of a calendar month, the Lease Term
shall be extended for the remainder of that calendar month at
the end of the term.
(2) The Commencement Date shall be July 22, 1999.
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<PAGE> 8
(3) Landlord agrees to perform the work required to be performed
by Landlord under the Lease Improvement Agreements with
diligence, subject to events and delays due to causes beyond
Landlord's reasonable control. The Initial Premises and the
Third Floor Expansion Premises shall be deemed substantially
completed and possession delivered when Landlord has
substantially completed the work to be constructed or
installed pursuant to the provisions of the Primary Lease
Improvement Agreement with respect thereto, subject only to
the completion of items on Landlord's Punch List (and
exclusive of the installation of all telephone and other
communications facilities and equipment and other finish work
to be performed by parties other than Landlord). In the event
of any dispute as to when and whether the work performed or
required to be performed by Landlord has been substantially
completed, the certificate of an A.I.A. registered architect
rendering services with respect to the Tenant Improvements on
or about the Initial Premises or the Third Floor Expansion
Premises, as the case may be, or a temporary or final
certificate of occupancy issued by the local governing
authority shall be conclusive evidence of such completion,
effective on the date of said architect's certificate or said
temporary or final certificate of occupancy. Landlord shall
deliver Landlord's Punch List to Tenant simultaneously with
the delivery of the Initial Premises and the Third Floor
Expansion Premises, as the case may be. Tenant shall approve
or make reasonable additions to Landlord's Punch List within
five (5) days after delivery of the Initial Premises and the
Third Floor Expansion Premises, as the case may be. Subject to
delays caused by Tenant or otherwise beyond Landlord's
reasonable control, Landlord shall complete the items listed
on Landlord's Punch List within thirty (30) days following
delivery of the Initial Premises and the Third Floor Expansion
Premises, as the case may be.
(4) If substantial completion of the Third Floor Expansion
Premises, or possession thereof by Tenant, is delayed because
any tenant or other occupant thereof holds over and the
Landlord is delayed, using good faith efforts in Landlord's
discretion in acquiring possession thereof, Landlord shall not
be deemed in default, nor in any way liable to Tenant because
of such delay, and Tenant agrees to accept possession of such
premises at such time as Landlord is able to tender the same,
which date shall thenceforth be deemed the Third Floor
Expansion Effective Date notwithstanding any other provision
hereof to the contrary.
(5) The taking of possession by Tenant shall be deemed
conclusively to establish that the Building and the Premises
with respect to which possession is so taken have been
completed in accordance with the plans and specifications and
are in good and satisfactory condition as of when possession
was so taken (except for such items, if any, as are described
in Landlord's Punch List). Contemporaneously with execution of
this Lease and thereafter and upon the occurrence of each of
the Third Floor Expansion Effective Date and the Fourth Floor
Expansion Effective Date, Tenant shall execute and deliver to
Landlord a commencement and estoppel certificate in the form
attached hereto as Exhibit "D" and by this reference
incorporated herein, as modified to accurately reflect the
terms of this Lease.
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<PAGE> 9
5. RENT
(1) Tenant shall pay to Landlord Base Rent as set forth in
Paragraph 1 hereof and other items of Rent as set forth herein
commencing on the Commencement Date and throughout the Lease
Term, monthly in advance (unless otherwise specified in this
Lease) on or before the first day of each month during the
term hereby demised in lawful money of the United States,
without demand, deduction or offset whatsoever, to Landlord at
Landlord's Address or to such other firm or to such other
place as Landlord may from time to time designate in writing.
If the Commencement Date occurs on a day other than the first
day of a calendar month, the monthly rental for such month
shall be appropriately prorated.
(2) Tenant agrees that if Rent or any other payment due hereunder
from Tenant to Landlord remains unpaid ten (10) days after
said amount is due, the amount of such unpaid rent or other
payment shall be increased by a late charge to be paid to
Landlord by Tenant in an amount equal to the greater of (i)
Fifty and No/100 Dollars ($50.00) per day that such payment is
delinquent, or (ii) five percent (5%) of the amount of the
delinquent rent or other payment. The amount of the late
charge to be paid to Landlord by Tenant for any month shall be
computed on the aggregate amount of delinquent rents and other
payments, including all accrued late charges, then
outstanding. Tenant agrees that such amount is a reasonable
estimate of the loss and expense to be suffered by Landlord as
a result of such late payment by Tenant and may be charged by
Landlord to defray such loss and expense. The provisions of
this paragraph in no way relieve Tenant of the obligation to
pay Rent or other payments on or before the date on which they
are due, nor do the terms of this paragraph in any way affect
Landlord's remedies pursuant to Paragraph 21 of this Lease in
the event said Rent or other payment is unpaid after the date
due.
6. ADJUSTMENTS TO RENT
(1) [INTENTIONALLY OMITTED]
(2) Tenant's Share of Increased Operating Costs. In addition to
payment of Base Rent and all other charges provided for in
this Lease, Tenant shall pay as part of Rent Tenant's Pro Rata
Share of any increase in the total annual Operating Costs.
Said payments shall be made in the following manner:
(i) At least thirty (30) days prior to the commencement of
each Calendar Year during the term hereof, Landlord shall furnish Tenant with a
written statement, prepared in good faith, setting forth the Estimated Costs for
such Calendar Year, and a statement showing the amount by which Tenant's Pro
Rata Share of the Estimated Costs exceeds Tenant's pro rata share of Base Year
Operating Costs. Tenant shall pay one-twelfth (1/12) of its Pro Rata Share of
such excess monthly.
(ii) Within ninety (90) days after the close of each Calendar
Year, Landlord shall deliver to Tenant a written statement setting forth the
Actual Costs during that Calendar Year. If such Actual Costs exceed the
Estimated Costs paid by Tenant to Landlord for such Calendar Year, Tenant shall
pay to Landlord its Pro Rata Share of such excess within forty-five (45) days
after receipt of such statement. If the statement shows such Actual Costs to be
less than the Estimated Costs, then Landlord shall credit the difference against
rent due for the calendar months next following receipt of Landlord's written
statement, or refund the difference to Tenant if the term has expired.
(3) Gross Up of Operating Costs. Anything to the contrary in this
Paragraph 6 notwithstanding, in the event that the Building is
not at least 95% occupied during any period of calendar year
1999 or any subsequent or Calendar Year, Landlord shall make
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reasonable adjustments necessary to project what the Actual
Costs would have been had the Building been 95% occupied
during the full term of the year and those projected Operating
Costs shall be deemed to be the Actual Costs for purposes of
this Paragraph.
7. COMPLIANCE WITH LAWS
Tenant shall not use the Premises or permit anything to be done in or
about the Premises which will in any way conflict with any law, statute,
ordinance, or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Except as may be contemplated by the
provisions of Paragraphs 4, 5, 6, 8 and 14 of the Special Stipulations, Tenant
shall not do or permit anything to be done on or about the Premises or bring or
keep anything therein which will in any way increase the rate of any insurance
upon the Building or any of its contents or cause a cancellation of said
insurance or otherwise affect said insurance in any manner and Tenant shall, at
its sole cost and expense, promptly comply with all laws, statutes, ordinances,
and governmental rules, regulations, or requirements now in force or which may
hereafter be in force and with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted relating to or
affecting the condition, use, or occupancy of the Premises, excluding structural
changes not related to or affected by alterations or improvements made by or for
Tenant or Tenant's acts. The judgment of any court of competent jurisdiction or
the admission of Tenant in an action against Tenant, whether Landlord be a party
thereto or not, that Tenant has so violated any such law, statute, ordinance,
rule, regulation, or requirement, shall be conclusive evidence of such violation
as between Landlord and Tenant.
8. ALTERATIONS
Tenant shall not make or suffer to be made any alterations, additions,
or improvements in, on, or to the Premises or any part thereof without the prior
consent of Landlord. Any such alterations, additions, or improvements in, on, or
to said Premises, except for Tenant's movable furniture and equipment, shall, at
Landlord's election, immediately become Landlord's property. Except as otherwise
provided in the Special Stipulations, at the expiration or sooner termination of
the term herein provided, such alterations, additions or improvements shall, at
Landlord's option, either (i) remain on the Premises without compensation to
Tenant, or (ii) with respect to alterations made after the Commencement Date
(other than Tenant Improvements), be removed by Tenant at Tenant's sole cost and
expense and Tenant shall forthwith and with all due diligence, at its sole cost
and expense, repair and restore the Premises to the condition existing prior to
installation of such alterations, ordinary wear and tear excepted. At the time
that Tenant request's Landlord's prior consent to any alteration, Tenant may
request Landlord's determination as to whether such alteration, addition or
improvement shall, at the termination of the Lease, remain a part of the
Premises as Landlord's property, or be removed by Tenant as described
hereinabove. In the event Landlord consents to the making of any alteration,
addition, or improvement by Tenant, the same shall be made by Tenant, at
Tenant's sole cost and expense, in accordance with all applicable laws,
ordinances, and regulations and all requirements of Landlord's and Tenant's
insurance policies, and in accordance with plans and specifications approved by
Landlord. Any contractor, subcontractor or other person selected by Tenant to
make such alterations, additions or improvements, must first be approved in
writing by Landlord, or, at Landlord's option, the alteration, addition, or
improvement shall be made by Landlord for Tenant's account and Tenant shall
reimburse Landlord for the cost thereof within twenty (20) days after receipt of
a statement. Landlord and Tenant recognize that some types of alterations,
additions or improvements to the Premises may affect the density of use of the
Premises, and that such changes may require mechanical changes in how Building
services are provided to the Premises. Therefore, in considering any proposed
alterations, additions or improvements, Landlord may also require that Tenant
reimburse Landlord for the cost of changes to mechanical systems providing
Building services to the Premises (e.g., re-routing or otherwise adjusting HVAC
conduits serving the Premises). Landlord shall have the right to assess an
administrative fee to cover Landlord's expense in reviewing any proposed
alteration, addition or improvement (other than with respect to the Tenant
Improvements with respect to which Tenant is required to pay a construction
management fee in
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accordance with the terms of the Leasehold Improvement Agreements). In addition,
subject in all respects to the qualifications contained in the parenthetical
contained in the immediately preceding sentence, if such alteration, addition or
improvement is approved, Landlord shall also have the right to assess an
administrative fee to cover Landlord's expense in supervising Tenant's work in
implementing such alteration, addition or improvement. Such assessments of
administrative fees shall be payable upon demand, and shall be considered part
of Rent under this Lease.
9. REPAIR
(1) By taking possession of the Premises, Tenant accepts the
Premises with respect to which possession is so taken as being
in the condition in which Landlord is obligated to deliver
them and otherwise in good order, condition and repair (except
for such items, if any, as are described in Landlord's Punch
List). Tenant shall, at all times during the term hereof at
Tenant's sole cost and expense, keep the Premises and every
part thereof in good order, condition and repair, excepting
ordinary wear and tear, damage thereto by fire, earthquake,
Act of God or the elements. Tenant shall upon the expiration
or sooner termination of the term hereof, unless Landlord
demands otherwise as in Paragraph 8 hereof provided, surrender
to Landlord the Premises and all repairs, changes,
alterations, additions, and improvements thereto in the same
condition as when received, or when first installed, ordinary
wear and tear, damage by fire, earthquake, Act of God, or the
elements excepted. It is hereby understood and agreed that
Landlord has no obligation to alter, remodel, improve, repair,
decorate, or paint the Premises or any part thereof except as
specified in the Initial Premises Lease Improvement Agreement
and the Expansion Space Lease Improvement Agreement, and that
no representations respecting the condition of the Premises or
the Building have been made by Landlord to Tenant, except as
specifically herein set forth.
(2) Tenant shall repair all damage to the Building including
common areas, restrooms, hallways, elevators, or any other
area, fixture, or equipment of the Building caused by Tenant's
installation or removal of its property or resulting from any
negligent act or conduct of Tenant, its employees,
contractors, agents, licensees or invitees.
(3) All maintenance or repairs made by Tenant shall be made in
accordance with all applicable laws, ordinances and
regulations, and all requirements of Landlord's and Tenant's
insurance policies and any contractor or person selected by
Tenant to make the same, and all subcontractors must first be
approved in writing by Landlord, or, at Landlord's option, the
maintenance or repair shall be made by Landlord for Tenant's
account and Tenant shall reimburse Landlord for the cost
thereof within twenty (20) days after receipt of a statement.
In any event, all repairs shall be equal in quality and
workmanship to the original work.
10. LIENS
Tenant shall keep the Premises free from any liens arising out of any
work performed, material furnished, or obligations incurred by Tenant. In the
event that Tenant shall not, within ten (10) days following the imposition of
any such lien, cause the same to be released of record by payment or posting of
a proper bond, Landlord shall have, in addition to all other remedies provided
herein and by law, the right, but not the obligation, to cause the same to be
released by such means as it shall deem proper, including payment of the claim
giving rise to such lien. All such sums paid by Landlord and all expenses
incurred by it in connection therewith shall be considered additional rent and
shall be payable to it by Tenant on demand and with interest at the rate of
eighteen percent (18%) per annum or the rate four percent (4%) higher than the
prime commercial lending rate from time to time of Wachovia Bank, N.A.,
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whichever is more, provided however that if such rate exceeds the maximum rate
permitted by law the maximum lawful rate shall apply; the interest rate so
determined is hereinafter called the "Agreed Interest Rate." Landlord shall have
the right at all times to post and keep posted on the Premises any notices
permitted or required by law, or which Landlord shall deem proper for the
protection of Landlord, the Premises, the Building, and any other party having
an interest therein, from mechanics' and materialmen's liens, and Tenant shall
give to Landlord at least five (5) business days prior written notice of
commencement of any construction on the Premises.
11. ASSIGNMENT AND SUBLETTING
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(1) Tenant shall not sell, assign, encumber, or otherwise transfer
by operation of law or otherwise this Lease or any interest
herein, sublet the Premises or any portion thereof, or suffer
any other person to occupy or use the Premises or any portion
thereof, without the prior written consent of Landlord as
provided herein, nor shall Tenant permit any lien to be placed
on the Tenant's interest by operation of law. Tenant shall, by
written notice, advise Landlord of its desire from and after a
stated date (which shall not be less than thirty (30) days nor
more than ninety (90) days after the date of Tenant's notice)
to sublet the Premises or any portion for any part of the term
hereof; and in such event Landlord shall have the right, to be
exercised by giving written notice (a "Recapture Notice") to
Tenant within fifteen (15) business days after receipt of
Tenant's notice, to terminate this Lease as to the portion of
the Premises described in Tenant's notice and such notice
shall, if given, terminate this Lease with respect to the
portion of the Premises therein described as of the date
stated in Tenant's notice; provided, however, that Tenant may
elect to withdraw any such assignment or subletting notice
upon receipt of a Recapture Notice from Landlord by delivering
written notice (a "Reinstatement Notice") to Landlord of such
withdrawal within three (3) business days from receipt of a
Recapture Notice and, upon receipt by Landlord of the
Reinstatement Notice, the original notice sent by Tenant to
Landlord for purposes of requesting an assignment or sublease
of Tenant's interest hereunder shall be withdrawn and this
Lease shall remain unaltered and in full force and effect. Any
assignment or subletting notice by Tenant shall state the name
and address of the proposed subtenant, and Tenant shall
deliver to Landlord a true and complete copy of the proposed
sublease with said notice. If said notice shall specify all of
the Premises and Landlord shall give a Recapture Notice with
respect thereto, this Lease shall terminate on the date stated
in Tenant's notice (unless any such Recapture Notice is
withdrawn as provided hereinabove by Tenant's timely delivery
of a Reinstatement Notice to Landlord). If, however, this
Lease shall terminate pursuant to the foregoing with respect
to less than all the Premises, the rent, as defined and
reserved hereinabove and as adjusted pursuant to Paragraph 6,
shall be adjusted on a pro rata basis to the number of square
feet retained by Tenant, and this Lease as so amended shall
continue thereafter in full force and effect. If Landlord,
upon receiving said notice by Tenant with respect to any of
the Premises, shall not exercise its right to terminate,
Landlord will not unreasonably withhold or delay its consent
to Tenant's subletting the Premises specified in said notice.
Landlord, acting reasonably and in good faith, may deny
consent to an assignment or sublease if, by way of
illustration but not limitation, (i) the credit rating of the
proposed assignee or sublessee is unacceptable, (ii) the type
of business to be conducted by the proposed assignee or
sublessee on the Premises is in violation of any exclusive
rights granted to other tenants of the Building or is
inappropriate for a first class office building, (iii) the
density of use of the Premises by the proposed assignee or
sublessee is significantly greater than the then current
density of use of the Premises by Tenant, or (iv) the rate of
compensation, including, but not limited to, all rent
requested by Tenant for the portion of the Premises to be
subleased or for the assignment of the Lease would impact upon
or impair Landlord's ability to rent space in the Building at
the then market rate as offered by Landlord. Tenant shall, at
Tenant's own cost and expense, discharge in full any
outstanding commission obligation on the part of Landlord with
respect to this Lease, and any commissions which may be due
and owing as a result of any proposed assignment or
subletting, whether or not the Lease is terminated pursuant
hereto and rented by Landlord to the proposed subtenant or any
other tenant. Tenant shall pay to Landlord immediately upon
receipt fifty percent (50%) of all rent or other consideration
received by Tenant from any such assignee or subtenant, either
initially or over the term of the assignment or sublease,
which is in excess of (x) the rental obligation required under
the terms of this Lease for the Premises or portion thereof
for which consent is granted, and (y) marketing fees,
brokerage
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commissions and build-out expenses of Tenant in entering into
such assignment or sublease.
(2) Any subletting hereunder by Tenant shall not result in
Tenant's being released or discharged from any liability under
this Lease. As a condition to Landlord's prior written consent
as provided for in this Paragraph 11, the subtenant or
subtenants shall agree in writing to comply with and be bound
by all of the terms, covenants, conditions, provisions, and
agreements of this Lease, and Tenant shall deliver to Landlord
promptly after execution, an executed copy of each sublease
and an agreement of said compliance by each subtenant. If an
event of default, as hereinafter defined, should occur while
the Premises or any part thereof are then sublet, Landlord, in
addition to any other remedies herein provided or provided by
law, may at its option collect directly from the subtenant all
rents and other sums becoming due to Tenant under the sublease
and apply the rent against any sums due to Landlord by Tenant
hereunder, and Tenant hereby authorizes and directs any such
subtenant to make payments of rent directly to Landlord upon
receipt of notice from Landlord. No direct collection by
Landlord from any subtenant will be construed to constitute a
novation or a release of Tenant from the further performance
of its obligations hereunder. Receipt by Landlord of rent from
any assignee, subtenant, or occupant of the Premises will not
be deemed a waiver of the covenants contained in this Lease or
a release of Tenant under the Lease. The receipt by Landlord
from any subtenant obligated to make payments of rent will be
a full and complete release, discharge, and acquittance to the
subtenant of its obligations to Tenant to the extent of any
such amount of rent so paid to Landlord. Landlord is
authorized and empowered, on behalf of Tenant to endorse the
name of Tenant upon any check, draft, or other instrument
payable to Tenant with respect to the Premises and evidencing
payment of rent, or any part thereof, and to receive and apply
the proceeds therefrom in accordance with the terms hereof.
(3) Landlord's consent to any sale, assignment, encumbrance,
subletting, occupation, lien, or other transfer shall not
release Tenant from any of Tenants obligations hereunder or be
deemed to be consent to any subsequent occurrence. Any sale,
assignment, encumbrance, subletting, occupation, lien or other
transfer of this Lease which does not comply with the
provisions of this Paragraph 11 shall be void.
(4) Any transfer of this Lease by merger, consolidation, or
liquidation or any change in ownership of or power to vote the
majority of outstanding voting stock of Tenant or, if Tenant
is a partnership, any withdrawal, replacement or substitution
of any partner or partners, either general or limited, shall
constitute an assignment whether the result of a single or
series of transactions, and shall be subject to Landlord's
approval under subparagraph 11 (a); provided, however, that
Landlord's approval shall not be required to any transfer of
this Lease by merger, consolidation, the sale of Tenant or any
portion thereof, a public offering, a change in the legal
structure of Tenant or any change in ownership of or power to
vote the majority of outstanding voting stock of Tenant,
whether the result of a single transaction or of a series of
transactions if following such transfer the net worth of
Tenant or its successor equals or exceeds the net worth of
Tenant immediately prior to such transfer (collectively,
"Permitted Transfers"). A Permitted Transfer shall not be
deemed a sublease, assignment or transfer of this Lease for
purposes of Special Stipulations 2 or 3 set forth on Exhibit
"G" hereto.
12. INSURANCE AND INDEMNIFICATION
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(1) Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord and any of its partners for
any injury or damage to any person or property in or about the
Premises by or from any cause whatsoever, excepting Landlord's
gross negligence or willful acts, and, without limiting the
generality of the foregoing, whether caused by water leakage
of any character from the roof, walls, basement, or other
portion of the Premises or the Building, or caused by gas,
fire, Acts of God, discharge of sprinklers, excessive heat or
cold, sewage, odors, noise, bursting or leakage of pipes or
plumbing fixtures, riot, strike, court order, governmental
body or authority, other tenants, or explosion of the Building
or the complex of which it may be a part or any, part thereof.
Tenant will hold Landlord harmless from damages due to the
interruption of Tenant's business caused by any damage
whatsoever.
(2) Tenant shall hold Landlord harmless from and defend Landlord
against any and all claims or liability from any injury or
damage to any person or property whatever: (i) occurring in,
on, or about the Premises or any part thereof, and (ii)
occurring in, on, or about any facilities (including without
limitations, elevators, stairways, passageways or hallways),
the use of which Tenant may have in conjunction with other
tenants of the Building, when such injury or damage shall be
caused in part or in whole by the act, neglect, fault of, or
omission of any duty with respect to the same by Tenant, its
agents, servants, employees or any other person entering the
Premises with express or implied invitation of Tenant. Tenant
further agrees to indemnify and save harmless Landlord against
and from any and all claims by or on behalf of any person,
firm, or corporation, arising from the conduct or management
of any work or thing whatsoever done by Tenant in or about the
Premises, and will further indemnify and save Landlord
harmless against and from any and all claims arising from any
breach or default on the part of Tenant in the performance of
any covenant or agreement on the part of Tenant to be
performed pursuant to the terms of this Lease, or arising from
any act or negligence of Tenant, or any of its agents,
contractors, servants, employees or licensees and from and
against all costs, counsel fees, expenses and liabilities
incurred in connection with any such claim or action or
proceeding brought thereon. Landlord hereby indemnifies and
agrees to save Tenant harmless against any and all liability,
loss, cost, damage or expense, including without limitation
court costs and reasonable attorney's fees, imposed on Tenant
and caused by the negligence or willful misconduct of
Landlord, its employees, agents or contractors, or occurring
in connection with any default of Landlord hereunder. All
property in the Building or Premises belonging to Tenant, its
agents, employees, or invitees shall be there at the risk of
Tenant. Tenant agrees to indemnify and save harmless Landlord
against claims for damage to, theft, misappropriation, or loss
of said property unless said claims are caused directly or
indirectly through Landlord's gross negligence. Furthermore,
and subject to the proviso set forth in the immediately
preceding sentence with respect to Landlord's gross
negligence, in case any action or proceeding shall be brought
against Landlord by reason of any claims or liability, Tenant
agrees to defend such action or proceedings at Tenant's sole
expense by counsel reasonably satisfactory to Landlord. The
provisions of this Paragraph 12 shall survive the expiration
or termination of this Lease with respect to any claims or
liability occurring prior to such expiration or termination.
(3) Tenant agrees to purchase at its own expense and to keep in
force during the term of this Lease the following policies of
insurance: (i) worker's compensation/employer's liability
insurance with a limit of $1,000,000; (ii) commercial general
liability insurance in respect of the Premises and the conduct
or operation of business therein, including personal injury
and property damage, with contractual liability endorsement,
with a combined single limit of not less than Three Million
Dollars ($3,000,000.00); and (iii)
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business auto liability insurance with a limit of $1,000,000
(stating any hired and non-owned autos, or any auto). Said
policies shall: (a) name Landlord as an additional insured and
insure Landlord's contingent liability under this Lease
(except for the worker's compensation policy, which shall
instead include a waiver of subrogation endorsement in favor
of Landlord), (b) be issued by an insurance company or
companies which is/are acceptable to Landlord and licensed to
do business in the State of Georgia, and (c) provide that said
insurance shall not be canceled unless thirty (30) days prior
written notice shall have been given to Landlord. Said policy
or policies or certificates thereof shall be delivered to
Landlord by Tenant upon commencement of the term of the Lease
and upon each renewal of said insurance. In addition, Landlord
may request a copy of any of the aforementioned insurance
policies not more than once per year. The purchase of such
insurance shall not release Tenant of any legal obligations
contained within this Lease.
13. WAIVER OF SUBROGATION
Each of Landlord and Tenant hereby releases the other from any and all
liability or responsibility to the other or anyone claiming through or under
them by way of subrogation or otherwise for any loss or damage to property
caused by fire or any other perils insured in policies of insurance covering
such property, even if such loss or damage shall have been caused by the fault
or negligence of the other party, or anyone for whom such party may be
responsible, including any other tenants or occupants of the remainder of the
Building; provided, however, that this release shall be applicable and in force
and effect only to the extent that such release shall be lawful at that time and
in any event only with respect to loss or damage occurring during such times as
the releasor's policies shall contain a clause or endorsement to the effect that
any such release shall not adversely affect or impair said policies or prejudice
the right of the releasor to recover thereunder and then only to the extent of
the insurance proceeds payable under such policies. Each of Landlord and Tenant
agrees that it will require its insurance carriers to include in its policies
such a clause or endorsement. Failure to obtain such an endorsement shall not
release the waiver contained in this Lease.
14. SERVICES AND UTILITIES
(1) Landlord shall maintain the public and common areas of the
Building, including lobbies, stairs, elevators, corridors, and
restrooms, the windows in the Building, the mechanical,
plumbing, and electrical equipment serving the Building, and
the structure itself, in good order and condition except for
damage occasioned by the act of Tenant, which damage shall be
repaired by Landlord at Tenant's expense.
(2) Provided the Tenant shall not be in default hereunder and
subject to the provisions elsewhere herein contained,
including the Rules and Regulations of the Building, Landlord
agrees to furnish to the Premises during "Normal Business
Hours" (as hereinafter defined) or otherwise as stated herein:
(1) heating and air conditioning consistent with the type
of service provided in other first class office
buildings in the Atlanta metropolitan area, and
otherwise consistent with the building standard of
air volume described and identified in Paragraph 12
of Exhibits "C-3" and "E-2" attached hereto and by
this reference made a part hereof. Additional or
after-hours heating and air conditioning will be
available to Tenant at Tenant's sole cost and expense
at all times outside Normal Business Hours at the
building standard charge for such services as
determined from time to time by Landlord;
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(2) elevator service to Tenant's floor;
(3) water to the restrooms and drinking fountains;
(4) electric current in reasonably sufficient amounts for
normal business use (in amounts not to exceed either
in voltage, rate of capacity, use or overall load
that which is described on Exhibit "H" attached
hereto and by this reference made a part hereof),
including operation of building standard lighting and
general office machines of a type which require no
more than a 110 volt duplex outlet; and
(5) security services during the times and in a manner
that such services are in Landlord's judgment
customarily furnished in comparable office buildings
in the immediate market area, including a security
system for the Building, on-site guard(s) in the
Building, a key-card access system serving the
Building, and security cameras in the parking garage
serving the Building; and janitorial services on
weekdays in a manner that such services are in
Landlord's judgment customarily furnished in
comparable office buildings in the immediate market
area; and
(6) All building standard fluorescent lighting. All
incandescent and nonstandard fluorescent lights shall
be maintained at Tenant's expense;
(7) All temperature control devices and air diffusers;
and
(8) All Tenant entry door hardware, including locks,
hinges, and closers.
The services described in items (2), (3), (4), (6) and (7) above shall
be furnished twenty-four (24) hours per day, seven (7) days per week, subject to
the provisions of subparagraph (f) of this Paragraph 14.
(3) For the purpose of this Lease, normal business hours ("Normal
Business Hours") shall be from 8:00 am. to 6:00 p.m. Monday
through Friday and from 8:00 am. to 1:00 p.m. on Saturday,
excluding holidays established by Landlord. Notwithstanding
the foregoing, Tenant shall have access to the Premises
twenty-four (24) hours per day, seven (7) days per week.
(4) Landlord shall provide additional or after hours heating or
air conditioning at Tenant's request upon at least twenty-four
(24) hours advance notice, and Tenant shall pay the building
standard charge for such services as determined from time to
time by Landlord. As of the date of this Lease, the building
standard charge for additional or after hours heating or air
conditioning is $50.00 per hour per floor of the Building (or
portion thereof if Tenant occupies less than a full floor),
with such rate being subject to change at Landlord's
discretion. The obligation hereunder to make such additional
utilities available will be subject to the rules and
regulations of any municipal or any other governmental
authority regulating the business of providing such utility
service. Tenant agrees to keep closed all window coverings, if
any, when necessary because of the sun's position, and Tenant
also agrees at all times to cooperate fully with Landlord and
to abide by all regulations and requirements which Landlord
may prescribe for the proper functioning and protection of
said heating, ventilating, and air conditioning system. Except
with respect to the Telecommunications Equipment, Tenant will
not, without the prior written consent of Landlord (which
consent shall not be unreasonably withheld or delayed), use
any heat generating equipment, machines, or excess lighting in
the Premises which affect the amount of energy required to
maintain the temperature
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otherwise maintained by the heating, ventilating and air
conditioning system. In the event of such consent, Landlord
reserves the right to install supplementary air conditioning
equipment and the cost thereof, including the ongoing cost of
additional electricity, chilled water (if available), and/or
domestic water consumed as a result of the use of such
equipment, shall be paid by Tenant to Landlord upon demand.
The type, size and location of such supplemental air
conditioning equipment shall be determined or approved by
Landlord.
(5) Except with respect to the Telecommunications Equipment and
the Supplemental HVAC relating thereto (as more particularly
addressed in the Special Stipulations, including the
provisions of Paragraph 18 thereof requiring separate metering
for purposes of calculating Tenant's electrical usage in
excess of the Building standard), Tenant will not, without
written consent of Landlord, use within the Premises or the
Building any device or machine, in any number or combination
thereof or for any number of hours, which will in any way
cause Tenant to use electricity or water in excess of that
which Landlord has established as standard for the Building
for use of the Premises during Normal Business Hours for use
as general office space. Moreover, with respect to electrical
service (and except as contemplated by the first sentence of
this Paragraph), Tenant's use thereof shall not exceed, either
in voltage, rate of capacity, use beyond Normal Business
Hours, or overall load, that which Landlord deems to be
standard for the Building. For purposes hereof, "electrical
standard" for the Building is more fully described and
identified on Exhibit "H" attached hereto and by this
reference made a part hereof. Except as otherwise contemplated
by the provisions of Paragraphs 4, 5 and 10 of the Special
Stipulations, if Tenant in Landlord's judgment shall require
such additional water or electrical current, Tenant shall
first procure the consent of Landlord, which consent may not
be unreasonably withheld or delayed (and, if withheld with
respect to any request for additional electrical current,
shall be further governed by the provisions of Paragraph 10 of
the Special Stipulations), and Landlord may cause a special
meter to be installed so as to measure such additional
domestic water, chilled water (if available), or electrical
current. The cost of any such meters and of installation,
maintenance, and repair thereof shall be paid for by Tenant,
and Tenant agrees to pay Landlord or the utility company, as
the case may be, on demand, for the ongoing cost of
consumption of such additional water or electricity. In the
event that Landlord is responsible for reading the meter and
invoicing the Tenant, Landlord shall be entitled to charge the
Tenant the reasonable additional expenses for so doing.
(6) Landlord shall not be in default hereunder or be liable for
any damage directly or indirectly resulting from, nor shall
the rental herein reserved be abated by reason of, the (i)
installation, use, or interruption of use of any equipment in
connection with the furnishing of any of the foregoing
services or utilities, or the making of repairs or
improvements to the Premises or the Building, or (ii) failure
to furnish or delay in furnishing any such services or
utilities when such failure is caused by Acts of God or the
elements, strikes, governmental orders, accidents, or other
conditions beyond the reasonable control of the Landlord or by
the making of repairs or improvements to the Premises or to
the Building; unless, however, any matter described in the
foregoing Subparagraph (i) of this Subparagraph results from
the gross negligence or willful misconduct of Landlord, its
agents or employees, in which case Rent hereunder shall be
abated on a pro rata basis for any portion of the Premises
rendered untenantable as a result thereof should Building
services to the Premises (including, without limitation, water
and electricity serving the Premises) be interrupted for ten
(10) consecutive
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Business days.
(7) It shall be Tenant's responsibility and expense to install,
move, maintain, adjust, and repair its property and fixtures,
including but not limited to, its: signage, pictures, bulletin
boards, plaques, furniture, above standard flooring, filing
cabinets, computer cables. computer equipment, business
machines, draperies, blinds, kitchen appliances, special water
heaters, kitchen cabinets, private restroom fixtures, special
air conditioning or power conditioning equipment, locks for
furniture and filing cabinets, paging systems, modular
furniture components (including task lighting. flat wiring,
and power distribution cables), combination locks, specialty
electrical devices, exhaust fans, fire extinguishers, carpet
squares, and/or other furniture, fixtures, or equipment
installed by Tenant, or which were supplied, specified, or
requested by Tenant and installed by Landlord.
(8) Any sums payable under this Paragraph shall be considered
additional rent and Landlord shall have the same remedies for
a default in payment of such sums as for a default in the
payment of rent.
(9) Tenant may contract for additional or supplemental janitorial
services to the Premises (at Tenant's sole cost and expense)
so long as Tenant uses the same janitorial service engaged by
Landlord from time to time and provides Landlord with a copy
of the separate agreement entered into with such janitorial
service describing the scope and nature of services to be
rendered within the Premises.
15. ESTOPPEL CERTIFICATE
Within ten (10) days following any written request which Landlord may
make from time to time, Tenant shall execute and deliver to Landlord a
certificate substantially in the form attached hereto as Exhibit "D" attached
hereto (as modified to accurately reflect the terms of this Lease) or in such is
the form as is reasonably requested by any mortgagee, beneficiary, purchaser or
prospective purchaser of the building or any interest thereon, indicating
thereon any exceptions thereto which may exist at that time. Failure of the
Tenant to execute and deliver such certificate shall constitute an acceptance of
the Premises and acknowledgment by Tenant that the statements included in
Exhibit "D" (as modified to accurately reflect the terms of this Lease) are true
and correct without exception.
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16. HOLDING OVER
Tenant will, at the termination of this Lease by lapse of time or
otherwise, yield up immediate possession to Landlord. If Tenant retains
possession of the Premises or any part thereof after such termination or if any
of Tenant's property remains which Landlord has previously requested be removed,
then Landlord may serve written notice upon Tenant that such holding over
constitutes either (i) creation of a month to month tenancy, upon the terms and
conditions set forth in this Lease, or (ii) creation of a tenancy at sufferance,
in any case upon the terms and conditions set forth in this Lease; provided,
however, that the monthly rental [or daily rental under (ii)] shall, in addition
to all other sums which are to be paid by Tenant hereunder, whether or not as
additional rent, be equal to one hundred fifty percent (150%) of the rental
being paid monthly to Landlord under this Lease immediately prior to such
termination [prorated in the case of (ii) on the basis of a 365 day year for
each day Tenant remains in possession]. If no such notice is served, then a
tenancy at sufferance shall be deemed to be created at the rent in the preceding
sentence. Tenant shall also pay to Landlord all damages sustained by Landlord
resulting from retention of possession by Tenant, including the loss of any
proposed subsequent tenant for any portion of the Premises. The provisions of
this paragraph shall not constitute a waiver by Landlord of any right of entry
as herein set forth; nor shall receipt of any rent or any other act in apparent
affirmance of the tenancy operate as a waiver of the right to terminate this
Lease for a breach of any of the terms, covenants, or obligations herein on
Tenant's part to be performed.
17. SUBORDINATION
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So long as Tenant is not disturbed from possession of the Premises
unless and until Tenant has defaulted hereunder and all applicable notice, grace
and cure periods have expired, this Lease shall be subject and subordinate
(without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination) at all times to: (a) all ground leases
or underlying leases which may now exist or hereafter be executed affecting the
Building, the Property, or any part thereof, and (b) the lien of any first
mortgage or deed to secure debt which may now exist or hereafter be executed in
any amount for which said Building, land, ground leases or underlying leases, or
Landlord's interest or estate in any of said items is specified as security,
together with all renewals, modifications, consolidations, participations,
replacements, and extensions of any such first mortgage or deed to secure debt.
Notwithstanding the foregoing, Landlord or the holder of any first mortgage or
deed to secure debt on the Building or the Property or any part thereof shall
have the right to subordinate or cause to be subordinated in whole or in part
any such ground leases or underlying leases or any such liens to this Lease (but
not in respect to priority of entitlement of insurance or condemnation
proceeds). In the event that any ground lease or underlying lease terminates for
any reason or any first mortgage or deed to secure debt is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the Tenant of the
successor in interest to Landlord at the option of such successor in interest.
Tenant covenants and agrees to execute and deliver, upon demand by Landlord or
the holder of any first mortgage or deed to secure debt on the Building or the
Property or any part thereof and in the form requested by Landlord or the holder
of any first mortgage or deed to secure debt on the Building or the Property or
any part thereof, any additional documents evidencing the priority of
subordination of this Lease with respect to any such ground leases or underlying
leases or the lien of any such mortgage or deed to secure debt, provided,
however, that Tenant receives from the holder of such mortgage or deed to secure
debt an agreement in form reasonably satisfactory to Tenant and said holder
that, so long as Tenant is not in default under this Lease, Tenant shall not be
disturbed in its possession of the Premises, and that any action or proceeding
in lieu thereof will not result in the cancellation or termination of this
Lease, and that in the event of any such foreclosure or sale, this Lease shall
continue in full force and effect, as a direct lease between Tenant and the then
owner of the Premises upon all terms, covenants and conditions herein. Tenant
hereby irrevocably appoints Landlord as attorney-in-fact of Tenant to execute,
deliver, and record any such documents in the name and on behalf of Tenant so
long as such nondisturbance assurances are contained therein. Landlord hereby
represents and warrants that the Property is not presently encumbered by a
mortgage or deed to secure debt.
18. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the Rules and
Regulations. Landlord shall not be responsible for the nonperformance by any
other tenant or occupant of the Building of any of the Rules and Regulations.
19. ENTRY BY LANDLORD
Landlord reserves and shall at all times upon reasonable verbal notice
to Tenant (except in case of emergency) have the right to enter the Premises to
inspect the same to determine if Tenant is complying with all terms and
provisions of this Lease, to perform Tenant's obligations under this Lease in
accordance with Paragraph 25 hereof, to supply janitorial service and any other
service to be provided by Landlord to Tenant hereunder (it being understood that
Tenant may elect to contract directly for its own janitorial service with
Landlord's approved vendor in accordance with Section 14(i) hereof) and, with
reasonable prior notice, to show said Premises to prospective purchasers,
mortgagees or tenants, to post notices of nonresponsibility, and to alter,
improve, or repair the Premises and any portion of the Building of which the
Premises are a part or to which access is conveniently made through the
Premises, without abatement of rent and may for that purpose erect, use, and
maintain scaffolding, pipes, conduits, and other necessary structures in and
through the Premises where reasonably required by the character of
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the work to be performed, provided that entrance to the Premises shall not be
blocked thereby, and further provided that the business of Tenant shall not be
interfered with unreasonably. In the case of any alteration, improvements or
repairs requiring access to or construction within the Fourth Floor Expansion
Premises, Landlord shall use reasonable efforts in designing such improvements
to avoid wherever possible the Fourth Floor Expansion Premises and, where
required, shall use reasonable efforts to minimize any impact on the Fourth
Floor Expansion Premises or any use by Tenant thereof. In connection with the
aforesaid and except for the gross negligence or willful misconduct of Landlord,
its agents or employees, Tenant hereby waives any claim for damages for any
injury or inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby. For each of the aforesaid purposes, Tenant agrees that its doors shall
be keyed to Landlord's building standard master keying system and that Landlord
shall at all times have and retain master or pass keys with which to unlock all
of the doors in, upon, and about the Premises, and Landlord shall have the right
to use any and all means which Landlord may deem necessary or proper to open
said doors in an emergency, in order to obtain entry to any portion of the
Premises, and any entry to the Premises, or portions thereof obtained by
Landlord by any of said means, or otherwise, shall not under any circumstances
be construed or deemed to be a forcible or unlawful entry into, or a detainer
of, the Premises, or an eviction, actual or constructive, of Tenant from the
Premises or any portions thereof. Landlord shall also have the right at any
time, without the same constituting an actual or constructive eviction and
without incurring any liability to Tenant therefor, to change the arrangement
and/or location of entrances or passageways, doors and doorways and corridors,
elevators, stairs, toilets, or other public parts of the Building.
20. INSOLVENCY OR BANKRUPTCY
The appointment of a receiver to take possession of all or
substantially all of the assets of Tenant or an assignment of Tenant for the
benefit of creditors, or any action taken or suffered by Tenant under any
insolvency, bankruptcy, or reorganization act shall at Landlord's option
constitute a breach of this Lease by Tenant. In addition to other remedies for
default as set forth in Paragraph 21 hereof, upon the happening of any such
event or at any time thereafter, at Landlord's option, this Lease shall
terminate five (5) days after written notice of termination from Landlord to
Tenant. In no event shall this Lease be assigned or assignable by operation of
law or by voluntary or involuntary bankruptcy proceedings or otherwise and in no
event shall this Lease or any rights or privileges hereunder be an asset of
Tenant under any bankruptcy, insolvency, or reorganization proceedings.
21. DEFAULT
(1) The following events shall be deemed to be events of default
by Tenant under this Lease:
(1) Tenant shall fail to pay when or before due any sum
of money becoming due to be paid to Landlord
hereunder, whether such sum be any installment of the
Base Rent herein reserved, any other amount treated
as Rent hereunder, or any other payment or
reimbursement to Landlord required herein, whether or
not treated as additional Rent hereunder, and such
failure shall continue for a period of five (5)
business days from written notice from Landlord to
Tenant that such payment was due; provided, however,
that Landlord shall only be required to give such
written notice two (2) times in any twelve (12) month
period and any further failure by Tenant within such
twelve (12) month period to pay any such sum within
five (5) days of the date such payment is due shall
constitute an immediate default hereunder with no
requirement that Landlord give any such further
written notice; or
(2) Tenant shall fail to comply with any term, provision,
or covenant of this Lease
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other than by failing to pay when or before due any
sum of money becoming due to Landlord hereunder, and
shall not cure such failure within twenty (20) days
(forthwith, if the default involves a hazardous
condition) after written notice thereof to Tenant or,
in the event that any such cure is not capable of
being completed within such twenty (20) day period,
Tenant fails to commence its cure within such twenty
(20) day period or thereafter fails to pursue such
cure with diligence to completion within sixty (60)
days from the date of original receipt of written
notice of default; or
(3) Tenant shall fail to vacate the Premises immediately
upon termination of this Lease, by lapse of time or
otherwise, or upon termination of Tenant's right to
possession only; or
(4) The leasehold interest of Tenant shall be levied upon
under execution or be attached by process of law or
Tenant shall fail to contest diligently the validity
of any lien or claimed lien and give sufficient
security to Landlord to insure payment thereof or
shall fail to satisfy any judgment rendered thereon
and have the same released, and such default shall
continue for ten (10) days after written notice
thereof to Tenant; or
(5) Tenant shall fail to perform any of its obligations
under any agreement with Landlord other than this
Lease and such failure shall continue for a period of
twenty (20) days after written notice from Landlord
to Tenant; or
(6) Default by any Guarantor of this Lease of the terms
of its Guaranty, or the bankruptcy or insolvency of
any Guarantor.
(2) Upon the occurrence of any such events of default described in
this Paragraph or elsewhere in this Lease, Landlord shall have
the option to pursue any one or more of the following remedies
without any notice or demand whatsoever:
(1) Landlord may, at its election, terminate this Lease
or terminate Tenant's right to possession only,
without terminating the Lease;
(2) Upon any termination of this Lease, whether by lapse
of time or otherwise, or upon any termination of
Tenant's right to possession without termination of
the Lease, Tenant shall surrender possession and
vacate the Premises immediately and deliver
possession thereof to Landlord, and Tenant hereby
grants to Landlord full and free license to enter
into and upon the Premises in such event with or
without process of law and to repossess Landlord of
the Premises as of Landlord's former estate and to
expel or remove Tenant and any others who may be
occupying or within the Premises and to remove any
and all property therefrom, without being deemed in
any manner guilty of trespass, eviction, or forcible
entry or detainer, and without incurring any
liability for any damage resulting therefrom, Tenant
hereby waiving any right to claim damage for such
re-entry and expulsion, and without relinquishing
Landlord's right to rent or any other right given to
Landlord hereunder or by operation of law;
(3) Upon termination of this Lease, whether by lapse of
time or otherwise, Landlord shall be entitled to
recover as damages, all Rent and other sums due and
payable by Tenant on the date of termination, plus
the sum of: (i) an amount equal to the then present
value of the entire amount of the Rent calculated
using a discount
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rate equal to the average discount rate for auctioned
3-month Treasury Bills as of the date of termination
of this Lease, and other sums provided herein to be
paid by Tenant for the residue of the stated term
hereof, less the fair rental value of the Premises
for such residue (taking into account the time and
expense necessary to obtain a replacement tenant or
tenants, including expenses hereinafter described in
Paragraph 21(b)(4) relating to recovery of the
Premises, preparation for reletting and for reletting
itself), and (ii) the cost of performing any other
covenants which would have otherwise been performed
by Tenant.
(4) (i) Upon any termination of Tenant' s right to
possession only without termination of the Lease,
Landlord may, at Landlord's option, enter into the
Premises, remove Tenant's signs and other evidences
of tenancy, and take and hold possession thereof as
provided in Paragraph 21(b)(2) above, without such
entry and possession terminating the Lease or
releasing Tenant in whole or in part from any
obligation, including Tenant's obligation to pay the
Rent, hereunder for the full term. In any such case,
Tenant shall pay forthwith to Landlord the Rent due
from month to month as same becomes due for the
residue of the stated term hereof plus any other sums
provided herein to be paid by Tenant,
(ii) Landlord shall use commercially reasonable
efforts to relet the Premises or any part thereof for such
Rent and upon such terms as Landlord in its sole discretion
shall determine (including the right to relet the Premises for
a greater or lesser term than that remaining under this Lease,
the right to relet the Premise as a part of a larger area, and
the right to change the character or use made of the Premises)
and Landlord shall not be required to accept any tenant
offered by Tenant or to observe any instructions given by
Tenant about such reletting. In any such case, Landlord may
make repairs, alterations and additions in or to the Premises,
and redecorate the same to the extent Landlord deems necessary
or desirable, and Tenant shall, upon demand, pay the cost
thereof, together with Landlord's expenses of reletting
including, without limitation, any broker's commission
incurred by Landlord. If the consideration collected by
Landlord upon any such reletting plus any sums previously
collected from Tenant are not sufficient to pay the full
amount of all Rent, together with the costs of any repairs,
alterations, additions, redecorating, and Landlord's expenses
of reletting and the collection of the rent accruing therefrom
(including reasonable attorney's fees and reasonable broker's
commissions,) Tenant shall pay to Landlord the amount of such
deficiency upon demand and Tenant agrees that Landlord may
file suit to recover any sums failing due under this section
from time to time;
(5) Landlord may, at Landlord's option, enter into and
upon the Premises, with or without process of law, if
Landlord determines in its sole discretion that
Tenant is not acting within a commercially reasonable
time to maintain, repair, or replace anything for
which Tenant is responsible hereunder and correct the
same, without being deemed in any manner guilty of
trespass, eviction or forcible entry and detainer,
and without incurring any liability for any damage
resulting therefrom, and Tenant agrees to reimburse
Landlord, on demand, as additional Rent for any
expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this
Lease;
(6) Any and all property which may be removed from the
Premises by Landlord pursuant to the authority of the
Lease or by law, to which Tenant is or may be
entitled, may be handled, removed, and stored, as the
case may be, by or at the
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direction of Landlord at the risk, cost and expense
of Tenant, and Landlord shall in no event be
responsible for the value, preservation, or
safekeeping thereof. Tenant shall pay to Landlord,
upon demand, any and all expenses incurred in such
removal and all storage charges against such property
so long as the same shall be in Landlord's possession
or under Landlord's control. Any such property of
Tenant not retaken by Tenant from storage within
thirty (30) days after removal from the Premises
shall, at Landlord's option, be deemed conveyed by
Tenant to Landlord under this Lease as by a bill of
sale without further payment or credit by Landlord to
Tenant.
(3) Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies herein provided or any
other remedies provided by law (all such remedies being
cumulative) nor shall pursuit of any remedy herein provided
constitute a forfeiture or waiver of any Rent due to Landlord
hereunder or any damages accruing to Landlord by reason of the
violation of any of the terms, provisions, and covenants
herein contained. No act or thing done by Landlord or its
agents during the term hereby granted shall be deemed a
termination of this Lease or an acceptance of the surrender of
the Premises, and no agreement to terminate this Lease or
accept a surrender of the Premises shall be valid unless in
writing signed by Landlord. Landlord's acceptance of the
payment of Rent or other payments hereunder after the
occurrence of an event of default shall not be construed as a
waiver of such default, unless Landlord so notifies Tenant in
writing. Forbearance by Landlord in enforcing one or more of
the remedies herein provided upon an event of default shall
not be deemed or constitute a waiver of such default or of
Landlord's right to enforce any such remedies with respect to
such default or any subsequent default. If, on account of any
breach or default by Tenant in Tenant's obligations under the
terms and conditions of this Lease, it shall become necessary
or appropriate for Landlord to employ or consult with an
attorney concerning or to enforce or defend any of Landlord's
rights or remedies hereunder, Tenant agrees to pay any
reasonable attorney's fees so incurred.
(4) Without limiting the foregoing, Tenant hereby appoints and
designates the Premises as a proper place for service of
process upon Tenant and agrees that service of process upon
any office manager or corporate officer of Tenant within the
Premises shall constitute personal service of such process
upon Tenant (provided, however, Landlord does not hereby waive
the right to serve Tenant with process by any other lawful
means) provided that a copy of such process is also mailed to
Tenant at the Premises by U.S. Certified Mail, and Tenant
hereby further expressly waives any right to trial by jury.
22. DAMAGE BY FIRE, ETC.
(1) If the Building, improvements, or Premises are rendered
partially or wholly untenantable by fire or other casualty,
and if such damage cannot, in Landlord's reasonable
estimation, be materially restored within one hundred twenty
(120) days of such damage, then Landlord may, at its sole
option, terminate this Lease as of the date of such fire or
casualty. Landlord shall exercise its option provided herein
by written notice to Tenant within sixty (60) days of such
fire or other casualty. For purposes hereof, the Building,
improvements, or Premises shall be deemed "materially
restored" if they are in such condition as would not prevent
or materially interfere with Tenant's use of the Premises for
the purpose for which it was then being used.
(2) If this Lease is not terminated pursuant to Paragraph 22(a),
then Landlord shall proceed with all due diligence to repair
and restore the Building and the Premises, at Landlord's
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cost, (except that Landlord may elect not to rebuild if such
damage occurs during the last year of the term exclusive of
any option which is unexercised at the date of such damage).
Any restoration of the Premises by Landlord shall not include
replacement of furniture, equipment or other items of Tenant's
property.
(3) If this Lease shall be terminated pursuant to this Paragraph
22(a), the term of this Lease shall end on the date of such
damage as if that date had been originally fixed in this Lease
for the expiration of the term hereof. If this Lease shall not
be terminated by Landlord pursuant to this Paragraph 22(a) and
in the event that Landlord should fail to complete such
repairs and material restoration within one hundred eighty
(180) days after the date of such damage, Tenant may, at its
option and as its sole remedy, terminate this Lease by
delivering written notice to Landlord, whereupon the Lease
shall end on the date of such notice as if the date of such
notice were the date originally fixed in this Lease for the
expiration of the term hereof, provided, however, that if
construction is delayed because of changes, deletions, or
additions in construction requested by Tenant, strikes,
lockouts, casualties, Acts of God, war, material or labor
shortages, governmental regulation or control or other causes
beyond the reasonable control of Landlord, the period for
restoration, repair or rebuilding shall be extended for the
amount of time Landlord is so delayed.
(4) Tenant agrees that during any period of restoration or repair
of the Premises, Tenant shall continue the operation of
Tenant's business within the Premises to the extent
practicable. During the period from the date of the damage or
the date all or a portion of the Premises is rendered
untenantable until the date that the untenantable portion of
the Premises is materially restored, the Rent shall be reduced
to the extent of the proportion of the Premises which is
untenantable, however, there shall be no abatement of other
sums to be paid by Tenant to Landlord as required by this
Lease.
(5) In no event shall Landlord be required to rebuild, repair or
replace any part of the partitions, fixtures, additions and
other improvements constructed or installed by Tenant pursuant
to the provisions of Paragraph 8 hereof or any of the
improvements constructed or installed by Tenant pursuant to
the terms of the Fourth Floor Expansion Premises Lease
Improvement Agreement. Landlord has the right but not the
obligation to rebuild, repair, or replace at Tenant's expense
so much of the partitions, fixtures, additions and other
improvements as may be necessary to ensure that the Premises
are materially restored. Any insurance which may be carried by
Landlord or Tenant against loss or damage to the Building or
Premises shall be for the sole benefit of the party carrying
such insurance and under its sole control except that
Landlords insurance may be subject to control by (i) the
holder or holders of any indebtedness secured by a mortgage or
deed to secure debt covering any interest of Landlord in the
Premises, the Building, or the Property, and/or (ii) the
ground lessor of the Property.
(6) Notwithstanding anything herein to the contrary, in the event
the holder of any indebtedness secured by a mortgage or deed
to secure debt covering the Premises, Building, or Property or
the ground lessor of the Property requests that any insurance
proceeds be paid to it, then Landlord shall have the right to
terminate the Lease by delivering written notice of
termination to Tenant within fifteen (15) days after such
requirement is made by any such person, whereupon the Lease
shall end on the date of such damage as if the date of such
damage were the date originally fixed in this Lease for the
expiration of the Lease Term.
(7) In the event of any damage or destruction to the Building or
the Premises by any peril
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covered by the provisions of this Paragraph 22, Tenant shall,
upon notice from Landlord, remove forthwith, at its sole cost
and expense, all or such portion of the property belonging to
the Tenant or its licensees from all of the Building or the
Premises, or such portion, as Landlord shall request. Tenant
hereby indemnifies and holds Landlord harmless from any loss,
liability, costs, and expenses, including attorney's fees,
arising out of any claim or damage or injury as a result of
any alleged failure to secure the Premises properly prior to
such removal and/or during such removal, except for loss,
liability, cost or expense caused by the negligence of
Landlord, its agents or employees.
23. CONDEMNATION
(1) If any substantial part of the Premises, Building or Property
should be taken for any public or quasi-public use under
governmental law, ordinance, or regulation, or by right of
eminent domain, or by private purchase in lieu thereof and the
taking would prevent or materially interfere with Tenant's
then existing Permitted Use of the Premises, this Lease shall
terminate effective when the physical taking shall occur in
the same manner as if the date of such taking were the date
originally fixed in this Lease for the expiration of the term
hereof.
(2) If part of the Premises, Building, or Property shall be taken
for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof, and this Lease is not
terminated as provided in Paragraph 23(a), this Lease shall
not terminate but the Rent payable hereunder during the
unexpired portion of this Lease shall be reduced to such
extent, if any, as may be fair and reasonable under all of the
circumstances, and Landlord shall undertake to restore the
Building and Premises to a condition suitable for Tenant's
use, as near to the condition thereof prior to such taking as
is reasonably feasible under all circumstances.
(3) Tenants shall not share in any condemnation award or payment
in lieu thereof or in any award for damages resulting from any
grade change of adjacent streets, the same being hereby
assigned to Landlord by Tenant; provided, however, that Tenant
may separately claim and receive from the condemning
authority, if legally payable, compensation for Tenant's
removal and relocation costs and for Tenant's loss of business
and/or business interruption, except that no such claim shall
diminish or otherwise adversely affect Landlord's award or the
awards of any and all ground and underlying lessors and
mortgages.
(4) Notwithstanding anything to the contrary contained in this
Paragraph 23, if the temporary use or occupancy of any part of
the Premises shall be taken or appropriated under power of
eminent domain during the term of this Lease, this Lease shall
be and remain unaffected by such taking or appropriation and
Tenant shall continue to pay in full all Rent payable
hereunder by Tenant during the term of this Lease. In the
event of any such temporary appropriation or taking, Tenant
shall be entitled to receive that portion of any award which
represents compensation for the use of or occupancy of the
Premises during the term of this Lease, and Landlord shall be
entitled to receive that portion of any award which represents
the cost of restoration of the Premises and the use and
occupancy of the Premises after the end of the Lease Term.
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24. SALE BY LANDLORD
The covenants and obligations of Landlord hereunder shall be binding
upon the Landlord named herein and its successors and assigns, only with respect
to their respective periods of time as Landlord hereunder. In the event of a
sale or conveyance by Landlord of the Building, the same shall operate to
release Landlord from any future liability upon any of the covenants or
conditions, express or implied, herein contained in favor of Tenant, and in such
event Tenant agrees to look solely to the successor in interest of Landlord in
and to this Lease. Tenant agrees to attorn to the purchaser or assignee in any
such sale.
25. RIGHT OF LANDLORD TO PERFORM
All covenants and agreements to be performed by the Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent except as expressly provided herein.
If the Tenant shall fail to pay any sum of money, other than Rent, required to
be paid by it hereunder or shall fail to perform any other act on its part to be
performed hereunder, and such failure shall continue for ten (10) days after
notice thereof by the Landlord, the Landlord may, but shall not be obligated so
to do, and without waiving or releasing the Tenant from any obligations of the
Tenant, make any such payment or perform any such act on the Tenant's part to be
made or performed as in this Lease provided. All sums so paid by the Landlord
and all necessary incidental costs, together with interest thereon at the Agreed
Interest Rate from the date of such payments by the Landlord, shall be payable
as additional Rent to the Landlord on demand, and the Tenant covenants to pay
any such sums, and the Landlord shall have, in addition to any other right or
remedy of the Landlord, the same rights and remedies in the event of nonpayment
thereof by the Tenant as in the case of default by the Tenant in the payment of
the Rent.
26. SURRENDER OF PREMISES
(1) At the end of the term or any renewal thereof or other sooner
termination of this Lease, the Tenant will peaceably deliver
up to the Landlord possession of the Premises, together with
all improvements or additions (other than improvements
specifically authorized or required to be removed by Tenant
pursuant to the terms of this Lease and the Special
Stipulations attached hereto) upon or belonging to the same,
by whomsoever made, in the same condition as received, or
first installed, reasonable wear and tear, damage by fire,
earthquake, Act of God, or the elements alone excepted. Tenant
may, upon the termination of this Lease, remove all movable
furniture and equipment belonging to Tenant, at Tenant's sole
cost, repairing any damage caused by such removal. Property
not so removed shall be deemed abandoned by the Tenant, and
title to the same shall thereupon pass to Landlord. Upon
request by Landlord, unless otherwise agreed to in writing by
Landlord, Tenant shall remove, at Tenant's sole cost, any or
all permanent improvements or additions to the Premises
installed by or at the expense of Tenant and all movable
furniture and equipment belonging to Tenant which may be left
by Tenant and repair any damage resulting from such removal.
(2) The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, shall not work a merger, and
shall, at the option of the Landlord, either terminate all or
any existing subleases or subtenancies, or operate as an
assignment to Landlord of any or all such subleases or
subtenancies.
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27. WAIVER
If either Landlord or Tenant waives the performance of any term,
covenant or condition contained in this Lease, such waiver shall not be deemed
to be a waiver of any subsequent break or nonperformance of the same or any
other term, covenant, or condition contained herein. Furthermore, the acceptance
of Rent by Landlord shall not constitute a waiver of any preceding breach by
Tenant of any term, covenant or condition of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time Landlord accepted such
Rent. Failure by Landlord to enforce any of the terms, covenants, or conditions
of this Lease for any length of time shall not be deemed to waive or to decrease
the right of Landlord to insist thereafter upon strict performance by Tenant.
Waiver by Landlord of any term, covenant, or condition contained in this Lease
may only be made by a written document signed by Landlord.
28. NOTICES
All notices and demands which may or are required to be given by either
party to the other hereunder shall be in writing and shall be deemed given when
delivered or mailed as required below. All notices and demands by one party to
the other shall be either delivered to the Premises or sent by a commercial
interstate courier service offering proof of delivery or by United States
Certified or Registered mail, postage and fees prepaid. Notices and demands by
Landlord to Tenant shall be addressed to the Tenant at the Premises in care of
Mr. Ken Gavranovic, with a copy to Alon Panovka, Esq., 5064 Roswell Road, Suite
D-101, Atlanta, Georgia 30342, or to such other place as the Tenant may from
time to time designate in a notice to the Landlord. Notices and demands by
Tenant to the Landlord shall be addressed to the Landlord at Landlord's Address,
or to such other firm or to such other place as Landlord may from time to time
designate in a notice to the Tenant. If requested by Landlord, Tenant shall send
copies of any notices and demands by Tenant to the holder or holders of any
mortgage or deed to secure debt on the Property or any part thereof.
29. CERTAIN RIGHTS RESERVED TO THE LANDLORD
The Landlord may enter upon the Premises and/or may exercise any or all
of the following rights hereby reserved without being deemed guilty of an
eviction or disturbance of the Tenant's use or possession and without being
liable in any manner to the Tenant and without abatement of Rent or affecting
any of the Tenant's obligations hereunder:
(1) To change the name or street address of the Building;
(2) To install and maintain a sign or signs on the exterior of the
Building;
(3) To designate all sources furnishing sign painting and
lettering, food and beverage vending services, towels, carpet
cleaning service, toilet supplies, lamps and bulbs used on the
Premises;
(4) To retain at all times pass keys to the Premises;
(5) To grant to anyone the exclusive right to conduct any
particular business or undertaking in the Building; provided,
however, that the granting of any such exclusive rights shall
in no way limit or restrict Tenant's right to use and enjoy
the Premises or the rights expressly granted to Tenant under
this Lease;
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(6) To close the Building after regular working hours and on the
legal or nationally observed holidays subject, however, to
Tenants right of admittance, under such reasonable regulations
as Landlord may prescribe from time to time, which may
include, by way of example but not of limitation, that persons
entering or leaving the Building identify themselves to a
watchman by registration or otherwise and that said persons
establish their right to enter or leave the Building; and
(7) To take any and all measures, including inspections, repairs,
alterations, decorations, additions, and improvements to the
Premises or the Building, and identification and admittance
procedures for access to the Building as may be necessary or
desirable for the safety, protection, preservation or security
of the Premises or the Building or the Landlord's interests,
or as Landlord may deem necessary or desirable in the
operation of the Building.
30. ABANDONMENT
If Tenant shall be dispossessed by process of law, or otherwise, any
personal property belonging to Tenant and left on the Premises shall, at the
option of Landlord, be deemed to be abandoned and title thereto shall thereupon
pass to Landlord, in addition to other remedies available to Landlord for
Tenants defaults under this Lease.
31. SUCCESSORS AND ASSIGNS
Subject to the provisions of Paragraph 11 hereof, the terms, covenants,
and conditions contained herein shall be binding upon and inure to the benefit
of the heirs, successors, executors, administrators, and assigns of the parties
hereto.
32. ATTORNEY'S FEES
In the event that any action or proceeding is brought to enforce any
term, covenant, or condition of this Lease on the part of Landlord or Tenant,
the prevailing party in such litigation shall be entitled to reasonable
attorney's fees to be fixed by the court in such action or proceeding.
33. SECURITY DEPOSIT
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(1) Tenant shall pay to Landlord upon execution of this Lease a
Security Deposit in the amount of $372,227.00 for the faithful
performance of all terms, covenants, and conditions of this
Lease. Tenant agrees that Landlord may apply said Security
Deposit to remedy any failure by Tenant to repair or maintain
the Premises or to perform any other terms, covenants, and
conditions contained herein. If Tenant has kept and performed
all terms, covenants, and conditions of this Lease during the
term hereof and the Security Deposit has not been applied to
Rent as provided below in this Paragraph, Landlord will on the
termination hereof, promptly return said sum to Tenant or the
last permitted assignee of Tenant's interest hereunder at the
expiration of the Lease term. Should Landlord use any portion
of said sum to cure any default by Tenant hereunder, Tenant
shall forthwith replenish said sum to such original amount.
Landlord shall not be required to keep the Security Deposit
separate from its general funds. Tenant shall be entitled to
interest on any such deposit in an amount equal to one-half of
the interest accruing thereon from time to time. Landlord
shall deposit the Security Deposit in a money market account
with such depository as Landlord and Tenant may mutually agree
upon from time to time. Tenant's share of interest on the
Security Deposit shall accrue and be added to the Security
Deposit, and shall be disbursed from time to time at the time
and in the manner the Security Deposit is disbursed in
accordance with the terms of this Paragraph. Landlord's share
of such interest shall be paid to Landlord from time to time
as Landlord may direct and shall be retained by Landlord (not
as security, but for its own account) in consideration for the
execution of this Lease and the administration of the account
in which the Security Deposit is deposited. Upon the
occurrence of any events of default described in Paragraph 21
of this Lease (subject to any applicable notice, grace and
cure periods), the Security Deposit shall become due and
payable to Landlord for application of the proceeds thereof
against Tenant's obligations hereunder in such manner as
Landlord may direct.
(2) Subject to other terms and conditions contained in this Lease,
if the Building is conveyed by Landlord voluntarily or
involuntarily, said Security Deposit shall be turned over to
(or credited to the account of) the Landlord's grantee or
successor and, if so, Tenant hereby releases Landlord from any
and all liability with respect to said deposit and its
application or return. Should Landlord fail or refuse to so
transfer or credit any voluntary or involuntary transferee of
the Property with the Security Deposit (or any portion of the
Security Deposit then held by Landlord), Tenant shall
nonetheless be entitled to a credit against Rent accruing from
time to time hereunder (in the amount of any such undisbursed
portion of the Security Deposit so held by Landlord) at the
time and in the manner the Security Deposit is required to be
applied toward payment of Rent under this Paragraph, until
such Security Deposit is so applied in full.
(3) A portion of the Security Deposit in the amount of $279,170.00
(the "Principal Deposit") shall be held by Landlord as
hereinabove provided until such time as Tenant has established
to the reasonable satisfaction of Landlord that Tenant has (i)
actually received $10,000,000.00 or more in cash from the
issuance and sale of stock in Tenant as a result of one or
more public offerings in a recognized stock exchange, or
through the private placement and sale of stock in Tenant, and
(ii) taking into account receipt of such $10,000,000.00 in
cash, Tenant has a net worth of not less than $10,000,000.00
according to generally accepted accounting principles
consistently applied. At such time as Tenant has satisfied
each of the foregoing conditions (but not otherwise), Landlord
shall thereafter apply the Principal Deposit against Rent and
other charges due and payable under this Lease at the time the
same become due and payable hereunder. At such time as the
Principal Deposit has been fully applied against Rent or other
obligations of Tenant hereunder, Tenant shall resume payment
of Rent and such other
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charges at the time and in the manner the same become due and
payable as contemplated by the terms and conditions of this
Lease.
(4) The remaining portion of the Security Deposit (other than the
Principal Deposit) in the amount of $93,057.00 (the
"Additional Deposit") shall be held by Landlord as hereinabove
provided until the third anniversary of the Commencement Date,
at which time Landlord shall apply the Additional Deposit
against Rent and other charges due and payable under the Lease
at the time the same become due and payable hereunder so long
as no event of default has occurred and is continuing under
this Lease. In addition, in the event that the conditions
described in the foregoing subparagraphs 33(c)(i) and (ii) are
satisfied as a result of the issuance and sale of stock in
Tenant in connection with one or more initial public offerings
in a recognized stock exchange (but not from the private sale
of stock pursuant to a private placement memorandum, or
otherwise) on or before the third anniversary of the
Commencement Date, Landlord shall thereafter apply the
Additional Deposit against Rent and other charges due and
payable under this Lease at the time the same become due and
payable hereunder. If, and only if, at the time Landlord is
required under this subparagraph to apply the Additional
Deposit against Rent or other Tenant obligations Landlord is
at the same time then required to apply the Principal Deposit
against such obligations (or vice versa, as the case may be),
Landlord is nonetheless authorized and directed to hold the
Additional Deposit and apply the same against Rent and other
obligations at such time as the Principal Deposit has been
fully applied thereto. At such time as the Additional Deposit
has been fully applied against Rent or other obligations of
Tenant hereunder, Tenant shall resume payment of Rent and such
other charges at the time and in the manner the same become
due and payable as contemplated by the terms and conditions of
this Lease.
34. FINANCIAL STATEMENTS
Within ten (10) days following Landlord's request therefor, Tenant
shall provide to Landlord copies of (a) if available, the most recent fiscal
year financial statements for Tenant and any Guarantors of this Lease, as
audited by a certified public accountant, and (b) the most recent fiscal quarter
financial statements for Tenant and any Guarantors of this Lease, as certified,
respectively, by Tenant and each such Guarantor. The financial statements shall
include, but not necessarily be limited to, a balance sheet, statements of
income and retained earnings, and a statement of source and uses of funds. All
such statements shall be prepared in accordance with the generally accepted
accounting principles.
35. TENANT AUTHORITY
If Tenant signs as a corporation or partnership, each of the persons
executing this Lease on behalf of Tenant does hereby covenant and warrant that
Tenant is a duly authorized and existing corporation or partnership, as the case
may be, that Tenant has and is qualified to do business in Georgia, that the
corporation or partnership has full right and authority to enter into this
Lease, and that each and all of the persons signing on behalf of the corporation
or partnership are authorized to do so. Upon Landlord's request, Tenant shall
provide Landlord with evidence reasonably satisfactory to Landlord confirming
the foregoing covenants and warranties.
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36. MORTGAGEE AND GROUND LESSOR APPROVALS
The approval or consent of Landlord shall not be deemed to have been
unreasonably withheld for purposes of any provisions of this Lease requiring
such consent if any mortgagee (which shall include the holder of any deed to
secure debt ) of the Premises, Building, or Property or any portion thereof, or
the ground lessor of the Property, shall refuse or withhold its approval or
consent thereto. Any requirement of Landlord pursuant to this Lease which is
imposed pursuant to the direction of any such mortgagee or ground lessor shall
be deemed to have been reasonably imposed by Landlord if made in good faith.
37. MISCELLANEOUS
(1) Time is of the essence of this Lease and all of its
provisions. Periods of time expressed in days for performance,
unless otherwise specified, shall mean calendar days.
(2) This Lease shall in all respects be governed by the laws of
the State of Georgia.
(3) This Lease, together with its exhibits, contains all the
agreements of the parties hereto and supersedes any previous
negotiations. There have been no representations made by the
Landlord or any representative or agent of Landlord, or
understandings made between the parties other than those set
forth in this Lease and its exhibits. This Lease may not be
modified except by a written instrument by the parties hereto.
(4) All obligations of Tenant hereunder not fully performed as of
the expiration or earlier termination of the term of this
Lease shall survive the expiration or earlier termination of
the term hereof.
(5) If any clause, phrase, provision, or portion of this Lease or
the application thereof to any person or circumstance shall be
invalid or unenforceable under applicable law, such event
shall not affect, impair, or render invalid or unenforceable
the remainder of this Lease or any other clause, phrase,
provision or portion hereof, nor shall it affect the
application of any other clause, phrase, provision, or portion
hereof to other persons or circumstances, and it is also the
intention of the parties to this Lease that in lieu of each
such clause, phrase, provision, or portion of this Lease that
is invalid or unenforceable, there be added as a part of this
Lease contract a clause, phrase, provision or portion as
similar in terms to such invalid or unenforceable clause,
phrase, provision or portion as may be possible and be valid
and enforceable.
(6) Whenever a period of time is herein described for action to be
taken by Landlord, the Landlord shall not be liable or
responsible for, and there shall be excluded from the
computation for any such period of time, any delays due to
causes of any kind whatsoever which are beyond the control of
Landlord.
(7) Notwithstanding any other provision of this Lease to the
contrary, if the Commencement Date hereof shall not have
occurred before twelve (12) months following the date hereof,
this Lease shall be null and void and neither party shall have
any liability or obligation to the other hereunder. The
purpose and intent of this provision is to avoid the
application of the rule against perpetuities to this Lease.
(8) Anything contained in the foregoing provisions of this section
to the contrary notwithstanding, neither Tenant nor any other
person having an interest in the possession, use, occupancy,
or utilization of the Premises shall enter into any lease,
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sublease, license, concession, or other agreement for use,
occupancy, or utilization of space in the Premises which
provides for rental or other payment for such use, occupancy,
or utilization based, in whole or in part, on the net income
or profits derived by any person from the Premises leased,
used, occupied or utilized (other than an amount based on a
fixed percentage or percentages of receipts of sales), and any
such proposed lease, sublease, license, concession, or other
agreement shall be absolutely void and ineffective as a
conveyance of any right of interest in the possession, use,
occupancy, or utilization of any part of the Premises.
38. LANDLORD'S LIEN'S
(1) In addition to any statutory lien for Rent in Landlord's
favor, Landlord shall have and Tenant hereby grants to
Landlord a continuing security interest for all rentals and
other sums of money becoming due hereafter from Tenant, upon
all goods, wares, equipment, fixtures, furniture, inventory,
accounts, contract rights, chattel paper, and other personal
property of Tenant situated on the Premises, and following any
Tenant default such property shall not be removed therefrom
without the consent of Landlord until all arrearages in Rent
as well as any and all other sums of money then due to
Landlord hereunder shall first have been paid and discharged.
So long as Tenant is not in default under this Lease beyond
any applicable notice, grace or cure period hereunder,
Landlord shall agree to subordinate its security interest
contained herein in favor of security interests granted by
Tenant for purposes of financing personal property located
within the Premises.
(2) In the event of a default under this Lease, Landlord shall
have, in addition to any other remedies provided herein or by
law, all rights and remedies under the Uniform Commercial
Code, including without limitation the right to sell the
property described in this Paragraph 38 at public or private
sale upon five (5) days' notice to Tenant. Tenant hereby
agrees that this Lease shall constitute a security agreement
and further agrees to execute such financing statements and
other instruments necessary or desirable in Landlord's
discretion to perfect the security interest hereby created.
Any statutory lien for Rent is not hereby waived, the express
contractual lien herein granted being in addition and
supplementary thereto.
39. QUIET ENJOYMENT
Landlord represents and warrants that it has full right and authority
to enter into this Lease and that Tenant, while paying the rental and performing
its other covenants and agreements herein set forth, shall peaceably and quietly
have, hold, and enjoy the Premises for the term hereof without hindrance or
molestation from Landlord or any party claiming by, through or under Landlord,
and Landlord shall defend Tenant's quiet enjoyment of the Premises, subject to
the terms and provisions of this Lease. In the event this Lease is a sublease,
then Tenant agrees to take the Premises subject to the provisions of the prior
leases. Landlord shall not be liable for any interference or disturbance by
other tenants or third persons, nor shall Tenant be released from any of the
obligations of this Lease because of such interference or disturbance.
40. LANDLORD'S LIABILITY
Any liability of Landlord hereunder shall be enforceable only out of
Landlord's interest in the Building or Property and in no event out of the
separate assets of any constituent partner of Landlord. No holder or beneficiary
of any mortgage or deed to secure debt on any part of the Property shall have
any liability to Tenant hereunder for any default of Landlord.
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41. NO ESTATE
This contract shall create the relationship of Landlord and Tenant, and
no estate shall pass out of Landlord. Tenant has only a usufruct, not subject to
levy and sale and not assignable by Tenant, except as provided for herein and in
compliance herewith.
42. [INTENTIONALLY OMITTED]
43. LEASE EFFECTIVE DATE
Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution by both Landlord and Tenant.
44. HAZARDOUS MATERIALS
Tenant shall not cause or permit the escape, disposal, or release of
any biologically or chemically active or other hazardous substances or materials
in, on, or about the Premises. Neither Tenant nor Landlord shall allow the
storage or use of such substances or materials in, on, or about the Premises 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 Premises any such materials or substances except to use in
the ordinary course of Tenant's business, and then only after written notice has
been given to Landlord of the identity of such substances or materials
excepting, however, ordinary office and cleaning supplies. 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 6901 et seq., any applicable state or local
laws and the regulations adopted under these acts. If any lender or governmental
agency shall ever require testing to ascertain whether or not there has been any
release of hazardous materials in, on, or about the Premises, then the
reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand
as additional charges if such requirement applies to Tenant's use and occupancy
of the Premises. 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
introduced by Tenant on the Premises. In all events, Tenant shall indemnify
Landlord in the manner elsewhere provided in this Lease from any release of
hazardous materials in, on, or about 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.
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45. BROKERAGE PROVISIONS.
Landlord and Tenant represent and warrant that no broker, commission
agent, real estate agent or salesperson other than Broker has participated in
the negotiation of this Lease, its procurement or the procurement of Landlord or
Tenant. Landlord's Broker has represented Landlord in this transaction and shall
be paid a commission by Landlord pursuant to a separate, written agreement.
Tenant's Broker has represented Tenant in this transaction and shall be paid a
commission by Landlord pursuant to a separate, written agreement. Landlord and
Tenant hereby acknowledge and agree that no person, firm, corporation or entity
other than Broker is or shall be entitled to the payment of any fee, commission,
compensation or other form of remuneration in connection herewith in any manner.
Landlord shall and does hereby indemnify and agree to hold Tenant harmless from
and against any claims, demands, actions and judgments of any and all brokers,
agents and other intermediaries alleging a commission, fee or other payment to
be owing by reason of Landlord's dealings, negotiations or communications in
connection with this Lease or the demise of the Premises. Likewise, Tenant shall
and does hereby indemnify and agree to hold Landlord harmless from and against
any claims, demands, actions and judgments of any and all brokers (other than
Broker), agents and other intermediaries alleging a commission, fee or other
payment to be owing by reason of Tenant's dealings, negotiations or
communications in connection with this Lease or the demise of the Premises. The
terms of this Paragraph 45 shall survive the expiration or other termination of
this Lease.
46. HEALTH/FITNESS FACILITY
Landlord and Tenant acknowledge and agree that Landlord has constructed
and operates in the Project a health and fitness facility (the "Health/Fitness
Facility"), and that the cost of maintaining and operating the Health/Fitness
Facility shall be included as a part of Operating Costs. If at any time during
the term of this Lease Landlord makes membership in the Health/Fitness Facility
available to tenants of the Project for a fee such that the membership fees
collected are sufficient to cover the expense of operating and maintaining the
Health/Fitness Facility, then such operation and maintenance costs shall not be
included as part of Operating Costs. In addition, only the amount by which the
operating and maintenance expenses of the Health/Fitness Facility exceed the
revenues derived therefrom shall be included in Operating Costs. In any event,
Landlord shall at all times have the right to require, as a condition to access
to the Health/Fitness Facility, that each individual entering the Health/Fitness
Facility sign an appropriate form documenting a waiver of claims against
Landlord and the operator of the Health/Fitness Facility.
47. SPECIAL STIPULATIONS
In the event of a conflict between the provisions set forth in the body
of this Lease and the provisions of the Special Stipulations, if any, the terms
of the Special Stipulations shall control.
48. PREPAID BASE RENT
Landlord has received a prepayment of Base Rent from Tenant in the
amount of $97,953.94 with respect to the Initial Premises. Such Base Rent
Prepayment shall be applied to Base Rent payments due from Tenant under the
Lease, commencing on the Commencement Date and on the first day of each
succeeding month thereafter until exhausted, at which time Tenant shall resume
making payments of Base Rent to Landlord as set forth in Paragraph 5 hereof. In
the event that the remaining portion of such prepaid Base Rent is insufficient
to pay the full amount of Base Rent due to Landlord in any month, Tenant shall
pay the remainder upon the due date thereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease under
seal as of the day and year first above written.
<TABLE>
<S> <C> <C> <C> <C> <C>
LANDLORD: TENANT:
101 MARIETTA STREET ASSOCIATES, a INTERLAND, INC.,
Georgia general partnership a Georgia corporation
By: Lennar Marietta Holdings, Inc., a Georgia By: /s/ Ken Gavranovic
corporation, managing general partner --------------------------------
Name: Ken Gavranovic
By: /s/ Mark A. Griffith --------------------------
------------------------------------- Title: President
Name: Mark A. Griffith -------------------------
-------------------------------
Title: Vice President
-----------------------------
(Affix Corporate Seal) (Affix Corporate Seal)
Date: September 27, 1999 Date: September 24, 1999
---------------------------------------- ------------------------------
ATTEST/WITNESS: WITNESS:
/s/ /Charlene Roberts /s/ A. Panovka
- ---------------------------------------------- ------------------------------------
Its: Administrative Assistant Name: a. Panovka
----------------------------------------- ------------------------------
</TABLE>
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SCHEDULE OF EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT "A": RULES AND REGULATIONS
EXHIBIT "A-1": TENANT MOVE-IN RULES AND REGULATIONS
EXHIBIT "B": INITIAL PREMISES
EXHIBIT "B-1": FOURTH FLOOR EXPANSION PREMISES
EXHIBIT "B-2": THIRD FLOOR EXPANSION PREMISES
EXHIBIT "C": PRIMARY LEASE IMPROVEMENT AGREEMENT
EXHIBIT "C-1": INITIAL PREMISES SCHEDULE OF IMPROVEMENTS
EXHIBIT "C-2": THIRD FLOOR EXPANSION PREMISES SCHEDULE OF IMPROVEMENTS
EXHIBIT "C-3": LANDLORD'S WORK FOR INITIAL PREMISES AND THIRD FLOOR EXPANSION
PREMISES
EXHIBIT "D": ESTOPPEL CERTIFICATE
EXHIBIT "E": FOURTH FLOOR EXPANSION PREMISES LEASE IMPROVEMENT AGREEMENT
EXHIBIT "E-1": SCHEDULE OF FOURTH FLOOR EXPANSION PREMISES IMPROVEMENTS
EXHIBIT "E-2": LANDLORD'S WORK FOR FOURTH FLOOR EXPANSION PREMISES
EXHIBIT "F": LEGAL DESCRIPTION
EXHIBIT "G": SPECIAL STIPULATIONS
EXHIBIT "H" BUILDING STANDARD ELECTRICAL SPECIFICATIONS
EXHIBIT "I" SCHEDULE OF TELECOMMUNICATIONS EQUIPMENT
</TABLE>
<PAGE> 39
EXHIBIT "A"
RULES AND REGULATIONS
1. Sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by tenants or used by them for any purpose
other than for ingress to and egress from their respective premises.
The halls, passages, exits, entrances, elevators, escalators and
stairways are not intended for the use of the general public and
Landlord shall in all cases retain the right to control and prevent
access thereto by all persons whose presence, in the judgment of
Landlord, shall be prejudicial to the safety, character, reputation and
interests of the Building and its tenants, provided that nothing herein
contained shall be construed to prevent such access to persons with
whom any tenant normally deals in the ordinary course of such tenant's
business unless such persons are engaged in illegal activities. No
tenant, and no employees or invitees of any tenant, shall go upon the
roof of the Building, except as authorized by Landlord or as permitted
by the provisions of the Special Stipulations governing access thereto
and the use thereof.
2. No sign, placard, picture, name, advertisement or notice, visible from
the exterior of the premises shall be inscribed, painted, affixed,
installed or otherwise displayed by any tenant either on its premises
or any part of the Building without the prior written consent of
Landlord, and Landlord shall have the right to remove any such sign,
placard, picture, name, advertisement, or notice without notice to and
at the expense of that tenant.
If Landlord shall have given such consent to any tenant at any time,
whether before or after the execution of the lease, such consent shall
in no way operate as a waiver or release of any of the provisions
hereof or of such lease, and shall be deemed to relate only to the
particular sign, placard, picture, name, advertisement or notice so
consented to by Landlord and shall not be construed as dispensing with
the necessity of obtaining the specific written consent of Landlord
with respect to any other such sign, placard, picture, name,
advertisement or notice.
All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of the tenant by a person
approved by Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of tenants only
and Landlord reserves the right to exclude any other names therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awnings, hangings or decorations shall be attached to, hung,
or placed in or used in connection with, any window or door on the
premises of any tenant without the prior written consent of Landlord.
In any event and with the prior written consent of Landlord, all such
items shall be installed in such a manner that they shall in no way be
visible from the exterior of the Building. No articles shall be placed
or kept on the window sills so as to be visible from the exterior of
the Building. No articles shall be placed against glass partitions or
doors which might appear unsightly from outside the premises of any
tenant.
If Landlord shall determine that articles located in any tenant's
premises can be seen through any glass partitions or doors between the
Premises and any common areas of the Building and that such articles
are placed or arranged in an unsightly manner, Landlord may install
tinting or frosting on such glass partitions or doors.
5. Landlord reserves the right to exclude from the Building between the
hours of 6 p.m. and 8 a.m. Monday through Friday, and at all hours on
Saturdays, Sundays, and holidays all persons who
EXHIBIT "A"
Page 1 of 6
<PAGE> 40
are not tenants or their accompanied guests in the Building. Each
tenant shall be responsible for all persons which it allows to enter
the Building and shall be liable to Landlord for all acts of such
persons.
Landlord shall in no case be liable for damages for error with regard
to the admission to or exclusion from the Building of any person other
than actual damages arising by reason of Landlord's gross negligence or
willful misconduct.
During the continuance of any invasion, mob, riot, public excitement or
other circumstance rendering such action advisable in Landlord's
reasonable, good faith opinion, Landlord reserves the right to prevent
access to the Building by closing the doors, or otherwise, for the
safety of tenants and protection of the Building and property in the
Building.
6. No tenant shall employ any person or persons other than the janitor or
Landlord for the purpose of cleaning the Premises unless otherwise
agreed to by Landlord in writing. Except with the written consent of
Landlord, no person or persons other than those approved by Landlord
shall be permitted to enter the Building for the purpose of cleaning
the same. No tenant shall cause any unnecessary labor by reason of such
tenant's carelessness or indifference in the preservation of good order
and cleanliness of the premises. Landlord shall in no way be
responsible to any tenant for any loss of property on the premises,
however occurring, or for any damage done to the effects of any tenant
by the janitor or any other employee or any other person unless such
loss or damage arises by reason of Landlord's gross negligence.
Landlord shall not be responsible for the preservation of good order
and cleanliness of the premises when the premises are occupied after
Normal Business Hours.
7. Each tenant shall see that all doors of its premises are closed and
securely locked and must observe strict care and caution that all water
faucets and other utilities that are not being used by Tenant while
such premises are closed shall be carefully shut off, so as to prevent
waste or damage, and for any default or carelessness the tenant shall
make good all injuries sustained by other tenants or occupants of the
Building. On multiple-tenancy floors, all tenants shall keep the door
or doors to the Building corridors closed at all times except for
ingress and egress.
8. Each tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective
operation of the Building's heating and air conditioning, and shall
refrain from attempting to adjust any controls except for minor
adjustments to such controls for purposes of keeping the temperature of
the interior of the Premises within the range normally customary for
comparable Premises in the Atlanta metropolitan area. Each tenant shall
keep window coverings in its premises closed when the effect of
sunlight or cold weather would impose unnecessary loads on the
Building's heating or air conditioning systems.
9. Only one key or key-card for each office in the premises shall be
furnished to tenant without charge. Additional keys are available at a
charge of $3.00 each; additional key-cards are available at a charge of
$7.00 each. No additional lock, latch, key-card or bolt of any kind
shall be placed upon any door nor shall any changes be made in existing
locks, key-cards or mechanisms thereof without written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned
or delayed. If Landlord shall give its consent to a change in existing
locks, then tenant shall in each case furnish Landlord with the key,
key-card, or other appropriate mechanism for any such lock. At the
termination of the Lease, tenant shall return to Landlord all keys,
key-cards, or other mechanisms furnished to tenant by Landlord, or
otherwise procured by Tenant, and in the event of loss of any such
items so furnished, Tenant shall pay to Landlord the cost thereof.
EXHIBIT "A"
Page 2 OF 6
<PAGE> 41
10. No tenant shall make or have made additional copies of any keys or
access devices provided by Landlord. Each tenant, upon the termination
of the tenancy, shall deliver to Landlord all keys or access devices
for the Building, offices, rooms and toilet rooms which shall have been
furnished to the tenant or which the tenant shall have made. In the
event of the loss of any keys or access devices so furnished by
Landlord, tenant shall pay Landlord therefor.
11. The toilet rooms, toilets, urinals, wash bowls, and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever, including
coffee grounds, shall be thrown therein, and the expense of any
breakage, stoppage or damages resulting from violation of this rule
shall be borne by the tenant who, or whose employees or invitees, shall
have caused it.
12. Except in connection with Tenant's use and operation of the Generator
and/or the Supplemental HVAC system, as more particularly discussed in
the Special Stipulations, no tenant shall use or keep on its premises
or the Building any kerosene, gasoline or inflammable or combustible
fluid or material. Except for such Supplemental HVAC System, no tenant
shall use any method of heating or air conditioning other than that
supplied by Landlord.
13. Smoking is not permitted anywhere in the Building, or along the
Building grounds or in any parking facilities, except for in such
areas, if any, as shall be designated by Landlord from time to time.
14. No tenant shall use, keep or permit to be used or kept in its premises
any foul or noxious gas or substance or permit or suffer such premises
to be occupied or used in a manner offensive or objectionable to
Landlord 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 birds or animals other than
seeing eye dogs and like animals be brought or kept in or about any
premises of the Building.
15. No cooking shall be done or permitted by any tenant on its premises
except for cooking from which there are no strong or offensive odors in
standardized non-commercial microwave ovens (except that use by the
tenant of Underwriter's Laboratory approved equipment for the
preparation of coffee, tea, hot chocolate and similar beverages for
tenants and their employees shall be permitted, provided that such
equipment and use is in accordance with all applicable federal, state,
and city laws, codes, ordinances, rules and regulations) nor shall its
premises be used for lodging.
16. Except with the prior written consent of Landlord, no tenant shall sell
or permit the sale, at retail, of newspapers, magazines, periodicals,
theater tickets or any other goods or merchandise in or on its
premises, nor shall tenant carry on, or permit or allow any employee or
other person to carry on, the business of stenography, typewriting,
printing, photocopying or any similar business in or from its premises
for the service or accommodation of occupants of any other portion of
the Building, nor shall its premises be used for the storage of
merchandise or for manufacturing of any kind, or the business of a
public barber shop, beauty parlor, nor shall its premises be used for
any improper, immoral or objectionable purpose, or any business
activity other than that specifically provided for in that tenant's
lease.
17. If tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's reasonable
instructions for their installation. No tenant shall operate any
television, radio, recorder or sound system in such a manner as to
cause a nuisance to any other tenant of the Building.
EXHIBIT "A"
Page 3 of 6
<PAGE> 42
18. Landlord will act reasonably in directing electricians as to where and
how telephone, telegraph and electrical wires are to be introduced or
installed. No boring or cutting for wires will be allowed without the
prior written consent of Landlord. The location of burglar alarms,
telephones, call boxes and other office equipment affixed to the
premises shall be subject to the written approval of Landlord, which
approval shall not be unreasonably withheld or delayed.
19. Except as otherwise provided in the Special Stipulations, no tenant
shall install any radio or television antenna, loudspeaker or any other
device on the exterior walls or the roof of the Building. No tenant
shall interfere with radio or television broadcasting or reception from
or in the Building or elsewhere.
20. No tenant shall lay linoleum, tile, carpet or any other floor covering
so that the same shall be affixed to the floor of its premises in any
manner except as approved in writing by Landlord. The expense of
repairing any damage resulting from a violation of this rule or the
removal of any floor covering shall be borne by the tenant by whom, or
by whose contractors, employees or invitees, the damage shall have been
caused.
21. No furniture, freight, equipment, materials, supplies, packages,
merchandise, or other property will be received in the Building or
carried up or down the elevators except between such hours and in such
elevators as shall be reasonably designated by Landlord. Landlord,
acting reasonably, shall have the right to prescribe the weight, size
and position of all safes, furniture, files, bookcases or other heavy
equipment brought into the Building. Safes or other heavy objects
shall, if considered necessary by Landlord, stand on wood strips of
such thickness as determined by Landlord to be necessary to distribute
properly the weight thereof. Landlord will not be responsible for loss
of or damage to any such safe, equipment or property from any cause,
and all damage done to the Building by moving or maintaining any such
safe, equipment or other property shall be repaired at the expense of
the responsible tenant.
Business machines and mechanical equipment belonging to any tenant
which cause noise or vibration that may be transmitted to the structure
of the Building or to any space therein to such a degree as to be
objectionable to Landlord or to any tenants in the Building shall be
placed and maintained by tenant, at tenants expense, on vibration
eliminators or other devices sufficient to eliminate noise or
vibration. The persons employed to move such equipment in or out of the
Building must be acceptable to Landlord (acting reasonably) and must
carry appropriate amounts of liability and worker's compensation
insurance. Upon Landlord's request, Landlord shall be named as
additional insured under such person's liability insurance policy, and
Landlord may require proof of insurance in the form of a certificate of
insurance.
22. All movement in or out of the Building of furniture or office
equipment, or dispatch or receipt by tenants of any bulky material,
merchandise or materials which requires the use of elevators or
stairways, or movement through the Building entrances or lobby shall be
under the supervision of Landlord and in the manner agreed between the
tenant and Landlord by prearrangement before the performance as set
forth in the Tenant Move-In Rules and Regulations attached hereto as
Exhibit "A-1" and by this reference incorporated herein. Such
prearrangement initiated by Tenant will include the determination by
Landlord, and as to the time, method, and routing of movements and as
to limitations for safety and or other concern which may prohibit any
article, equipment or any other item from being brought into the
Building. Tenant assumes all risks as to the damage to articles moved
and injury to persons or public engaged or not engaged in such
movement, including equipment, property and personnel of Landlord if
damaged or injured as a result of acts in connection with carrying out
this service for a tenant from the time of entering the Building to
completion of work. All damages done to the Building by the
installation or
EXHIBIT "A"
Page 4 of 6
<PAGE> 43
removal of any property of a tenant or done by a tenant's property
while in the Building, shall be repaired at the expense of such tenant.
23. No tenant shall place a load upon any floor of its premises which
exceeds the load per square foot which such floor was designed (or
redesigned and retrofitted with Landlord's permission) to carry and
which is allowed by law. Without Landlord's consent, which consent
shall not be unreasonably withheld, conditioned or delayed, no tenant
shall mark, or drive nails (other than to hang pictures), screw or
drill into, the partitions, woodwork or plaster or in any way deface
its premises or any part thereof.
24. No tenant shall install, maintain or operate upon its premises any
vending machines without the written consent of Landlord.
25. There shall not be used in any space, or in the public areas of the
Building, either by any tenant or others, any hand trucks except those
equipped with rubber tires and side guards or other such
material-handling equipment as Landlord may approve. No other vehicles
of any kind shall be brought by any tenant into or kept in or about its
premises.
26. Each tenant shall store all of its trash and garbage within the
interior of its premises. No material shall be placed in the trash
boxes or receptacles if such material is of such nature that it may not
be disposed of in the ordinary and customary manner of removing and
disposing of trash and garbage in the city without violation of any law
or ordinance governing such disposal. All trash, garbage and refuse
disposal shall be made only through entryways and elevators provided
for such purposes and at such times as Landlord shall designate.
27. Canvassing, soliciting, distribution of handbills or any other written
materials, and peddling in the Building are prohibited and each tenant
shall cooperate to prevent the same. No tenant shall make room-to-room
solicitation of business from other tenants in the Building.
28. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules
and Regulations of the Building.
29. Without the prior written consent of Landlord, no tenant shall use the
name of the Building in connection with or in promoting or advertising
the business of such tenant except as that tenant's address.
30. Each tenant shall comply with all energy conservation, safety, fire
protection and evacuation procedures and regulations established by any
governmental agency, and all reasonable rules, regulations and
procedures established therefor by Landlord.
31. Tenant assumes any and all responsibility for protecting its premises
from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the premises closed.
32. The requirements of each tenant will be attended to only upon
application at the office of the Building by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside
of their regular duties unless under special instructions from
Landlord, and no employees will admit any person (tenant or otherwise)
to any office without specific instructions from Landlord.
33. No waiver by Landlord of any one or more of these Rules and Regulations
for the benefit of any particular tenant shall be construed as a waiver
of such Rules and Regulations in favor of any
EXHIBIT "A"
Page 5 of 6
<PAGE> 44
other tenant or tenants, nor prevent Landlord from thereafter enforcing
any such Rules and Regulations against any or all tenants of the
Building.
34. Landlord reserves the right to make such other reasonable rules and
regulations as in its judgment may from time to time be needed for
safety and security, for care and cleanliness of the Building and for
the preservation of good order therein, and to apply such rules and
regulations uniformly to all tenants of the Building. Each tenant
agrees to abide by all such Rules and Regulations hereinabove stated
and any additional reasonable rules and regulations which are adopted.
35. All wallpaper or vinyl fabric materials which any tenant may install on
painted walls shall be applied with a strippable adhesives. The use of
nonstrippable adhesives will cause damage to the walls when materials
are removed and repairs made necessary thereby shall be made by
Landlord at that tenant's expense.
36. Each tenant will refer all contractors, contractors' representatives
and installation technicians, rendering any service to such tenant, to
Landlord's reasonable supervision, approval, and control before
performance of any contractual service. This provision shall apply to
all work performed in the Building, including installations of
telephones, telegraph equipment, electrical devices and attachments and
installations of any nature affecting floors, walls, woodwork, trim,
windows, ceilings, equipment or any other physical portion of the
Building.
37. Each tenant shall give prompt notice to Landlord of any accidents to or
defects in plumbing, electrical fixtures, or heating apparatus so that
such accidents or defects may be attended to promptly.
38. Each tenant shall be responsible for the observance of all of the
foregoing Rules and Regulations by its employees, agents, clients,
customers, invitees and guests.
39. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify, alter or amend, in whole or in part,
the terms, covenants, agreements and conditions of any lease of any
premises in the Building.
EXHIBIT "A"
Page 6 of 6
<PAGE> 45
EXHIBIT "A-1"
TENANT MOVE-IN RULES AND REGULATIONS
THE FOLLOWING RULES AND REGULATIONS APPLY ONLY TO TENANT'S INITIAL MOVE INTO THE
INITIAL PREMISES AND THE THIRD FLOOR EXPANSION PREMISES, RESPECTIVELY.
49. Landlord, Tenant's representative responsible for coordinating the
move, and Tenant's furniture installation company, delivery company,
moving company and related vendors involved in the move shall meet no
less than fifteen (15) days prior to Tenant's scheduled move-in date to
coordinate times, establish methods of delivery and reserve use of the
loading docks, service corridors, elevators and stairwells for the
move. There will be no charge for the right to reserve or use the
loading docks, service corridors, elevators and stairwells for the
move.
50. Tenant's moving contractor will provide Landlord with a certificate of
insurance evidencing coverage of workmen's compensation insurance
affording applicable statutory coverage, and containing required
statutory limits.
51. All companies making deliveries in connection with the move are to
adhere to the moving rules and regulations pertaining to the protection
of the Premises and the Building. All costs associated with adhering to
such protection procedures shall be the responsibility of the Tenant
and/or Tenant's freight, moving or delivery company.
(1) Protection should be installed the evening prior to the move
and removed immediately upon completion. Tenant (or its moving
company) is responsible for leaving the area in as clean a
condition as it was prior to the move.
(2) The Building floor covering must be protected with masonite or
plywood along the prescribed route of movement through the
Building, as outlined by Landlord.
(3) The elevator lobbies, Building corridors and doors must be
protected with cardboard, plywood or other materials
pre-approved by Landlord.
(4) The elevator and entrance door frames must be protected with
2' x 4' boards at 90 degree angles taped to said door frames.
(5) The elevator cab walls and flooring must be protected with
masonite, plywood or soft pads.
(6) The movement of materials, furniture, etc. is limited only to
those corridors stairwells, elevators and service areas
designated by Landlord.
52. It is the Tenant's responsibility to notify Landlord of items to be
moved which are unusually large or heavy (in excess of 3,500 pounds) or
which may require review by Landlord. Any large items that cannot be
placed in the service elevator will require special hoisting
arrangements which will be made through the Landlord. Tenant's moving
contractor should include in the bid price to the Tenant any additional
charges required for extra services which may need to be provided by
the elevator contractor to hoist large items.
53. Access control personnel will be notified as to the move-in schedule
and will monitor the progress of the move. Any changes in the move-in
schedule must be reported to Landlord or
EXHIBIT "A-1"
Page 1 of 2
<PAGE> 46
Landlord's representative immediately. An emergency phone number will
be required by the access control personnel for the moving contractor's
supervisor and for the Tenant's representative responsible for
coordinating the move.
54. Landlord specifically reserves the right to modify any of these move-in
rules and regulations and to establish such additional reasonable rules
and regulations as in its reasonable judgment shall from time-to-time
be required for the safety, protection, care and cleanliness of the
Building, the operation thereof, the preservation and good order
therein or the protection and comfort of the other tenants of the
building and their agents, employees and guest.
EXHIBIT "A-1"
Page 2 of 2
<PAGE> 47
EXHIBIT "B"
[INITIAL PREMISES FLOOR PLAN]
[TO BE INSERTED]
EXHIBIT "B"
Page 1 of 1
<PAGE> 48
EXHIBIT "B-1"
[FOURTH FLOOR EXPANSION PREMISES FLOOR PLAN]
EXHIBIT "B-1"
Page 1 of 1
<PAGE> 49
EXHIBIT "B-2"
[THIRD FLOOR EXPANSION PREMISES FLOOR PLAN]
EXHIBIT "B-2"
Page 1 of 1
<PAGE> 50
EXHIBIT "C"
PRIMARY LEASE IMPROVEMENT AGREEMENT
55. GENERALLY
Landlord and Tenant acknowledge and agree that this Primary Lease
Improvement Agreement shall govern the terms and conditions on which Tenant
Improvements shall be constructed and installed in the Initial Premises and the
Third Floor Expansion Premises, as the case may be. The text of each of the
following paragraphs has been prepared specifically with reference to the
Initial Premises and, except as hereinafter provided, shall also apply in each
and every respect to the buildout of the Third Floor Expansion Premises.
Wherever the context so requires, any reference in this Primary Lease
Improvement Agreement to Tenant Improvements, Plans, Landlord's Work and
Tenant's Cost shall apply mutatis mutandis to the construction of Tenant
Improvements in the Third Floor Expansion Premises, with the following
exceptions. Landlord's Allowance for construction of Tenant Improvements shall
be $12.00 per rentable square foot with respect to the Third Floor Expansion
Premises. In addition, Landlord has not agreed to provide any additional other
tenant improvement allowance or so-called "Additional Allowance" (other than as
set forth in the immediately preceding sentence) to Tenant for purposes of
funding the cost of Tenant Improvements in the Third Floor Expansion Premises.
Moreover, in no event and under no circumstances shall the cap applied to
payment by Tenant of Tenant's Cost under subparagraph 4(b), below, apply in any
respect whatsoever to Tenant's obligation to pay for Tenant's Cost of Tenant
Improvements to the Third Floor Expansion Premises. In the event that the cost
of the Tenant Improvements for the Third Floor Expansion Premises is less than
Landlord's Allowance therefor (the "Remaining Allowance"), Tenant shall have the
right to apply any such Remaining Allowance toward payment of Tenant's Cost of
Tenant Improvements for the Fourth Floor Expansion Premises. Any portion of the
Remaining Allowance shall be disbursed by Landlord to Tenant upon satisfaction
of each and every condition set forth in subparagraph 2(c) of the Fourth Floor
Expansion Premises Lease Improvement Agreement.
56. IMPROVEMENTS
(1) At Tenant's expense, Landlord shall furnish and install
substantially in accordance with the construction drawings and
specifications approved by Tenant and Landlord, partitions,
doors, lighting fixtures, acoustical ceiling, floor coverings,
electrical outlets, telephone outlets, air conditioning, fire
sprinklers, signage, wall finishes, and construction clean-up
and other improvements required by Tenant which are normally
performed by the construction trades (the "Tenant
Improvements"). Landlord shall cause to be prepared at
Tenant's expense all architectural plans and specifications,
and all structural, mechanical and electrical engineering
plans and specifications (the "Plans") required for Tenant's
occupancy. The preparation of the Plans shall not include
selection of non-building standard finishes, or any fixtures
or furniture, or any other elements of interior design.
(2) At Landlord's expense, Landlord shall or has provided the
improvements described in Exhibit "C-3" attached hereto and by
this reference incorporated herein (hereinafter referred to as
"Landlord's Work").
(3) Landlord shall provide a construction management team that
will supervise and facilitate construction of all Tenant
Improvements. Such construction management team shall receive
a management fee in an amount equal to five percent (5%) of
all costs associated with the Tenant Improvements (including
any portion relating to "Tenant's Cost"(as
EXHIBIT "C"
Page 1 of 4
<PAGE> 51
hereinafter defined)). Such construction management fee shall
be paid to Landlord's construction manager as a disbursement
from "Landlord's Allowance" (as defined below).
(1)
57. LANDLORD'S ALLOWANCE
As Landlord's contribution to work provided in Paragraph 1(a), Landlord
shall provide Tenant with an allowance of Two Hundred Eight Thousand Four
Hundred Fifty-Two and 00/100 Dollars ($208,452.00) ("Landlord's Allowance") with
respect to the Initial Premises. Notwithstanding the above, Tenant may, at
Tenant's discretion, use all or any portion of Landlord's Allowance for costs
related to design and construction of the Tenant Improvements, Tenant's signage
costs, moving expenses and installation of Tenant's furniture; provided,
however, that as a condition to Tenant's right to use Landlord's Allowance for
such purposes, Tenant shall be required to improve and finish all portions of
the Initial Premises to at least the following minimum standards: (i) a fully
completed ceiling with lights connected and switched and ceiling tiles
installed; (ii) the base building heating, ventilating and air conditioning
system installed, including interior duct work, supply grills, and interior zone
controls; (iii) sprinkler heads installed or relocated in accordance with
applicable codes; (iv) a fully operational and certified life safety system
installed; (v) finished floors; (vi) all drywall surfaces fully skimmed, sanded,
painted and finished; (vii) standard electrical distribution outlets for
convenience power installed and connected; and (viii) a certificate of occupancy
from the appropriate governmental authority shall be issued for such space.
Landlord represents and warrants to Tenant that implementation of the Plans will
(i) exceed the minimum standards set forth in the immediately preceding
sentence, and (ii) result in the completion of all improvements called for in
the pricing drawings approved by Landlord and Tenant.
[THE FOLLOWING PARAGRAPH APPLIES ONLY TO CONSTRUCTION OF TENANT IMPROVEMENTS IN
THE INITIAL PREMISES, AND NOT OTHERWISE]
In addition to the Landlord's Allowance described above, Landlord
agrees to provide Tenant with an additional allowance with respect to
construction of Tenant Improvements in the Initial Premises up to the amount of
Forty-Nine Thousand Five Hundred Twenty-Two and 26/100 Dollars ($49,522.26),
which allowance is hereinafter referred to as the "Additional Allowance." Tenant
shall pay interest on the Additional Allowance in advance for the twelve month
period beginning on the Commencement Date at a rate of fifteen percent (15%) per
annum in the amount of up to Seven Thousand Four Hundred Twenty-Eight and 34/100
Dollars ($7,428.34), as follows: (i) the sum of Six Thousand Eight Hundred Four
and 83/100 Dollars ($6,804.83) shall be paid by Tenant to Landlord upon the full
execution and delivery of this Lease, and (ii) the balance of interest on the
Additional Allowance due to Landlord for the twelve month period beginning on
the Commencement Date, up to a maximum Six Hundred Twenty-Three and 51/100
dollars ($623.51), shall be paid by Tenant to Landlord upon demand. Upon the
first anniversary of the Commencement Date, Tenant shall elect either to (1)
repay to Landlord the full amount of the Additional Allowance, or (2) amortize
the Additional Allowance on a straight-line basis with interest at the rate of
fifteen percent (15%) per annum over the remainder of the Lease Term. In such
event, Tenant may prepay to Landlord all or any portion of the Additional
Allowance at any time and from time to time. Any such payments made by Tenant
shall be additional rent and shall, at Landlord's option, be paid as and when
Tenant's installments of Base Rent become due.
EXHIBIT "C"
Page 2 of 4
<PAGE> 52
58. TENANT'S COST
(1) Tenant shall bear the cost, if any, of the Tenant's
Improvements over and above the Landlord's Allowance and the
Additional Allowance (with respect to only the Initial
Premises)(such additional cost is hereinafter referred to as
"Tenant's Cost"). The cost of any modifications of any part of
the work described in Paragraph 1 already completed that are
requested by Tenant shall constitute part of Tenant's Cost. In
addition, subject to Landlord's approval (which approval shall
not be unreasonably withheld or delayed), Tenant may install
additional air conditioning units in the Initial Premises.
(2) Notwithstanding subparagraph (a) of this Paragraph 3 to the
contrary, Landlord agrees that Landlord shall be solely
responsible for and shall bear all cost and expenses incurred
in connection with the repairs, renovations and improvements
to the Initial Premises made in accordance with the Plans as
approved by Tenant in excess of $263,817.56; provided however,
that Tenant shall pay for all costs associated with any
Tenant-requested changes or modifications of the improvements
as defined by the Plans in Paragraph 1 of this Exhibit "C"
after the Plans have been approved by Tenant. Tenant will be
liable for any increase in construction costs if Tenant causes
a Tenant Delay.
(3) Tenant shall pay one-half (1/2) of all amounts payable by
Tenant to Landlord pursuant to this Paragraph 4 of this
Exhibit "C" immediately following Tenant's approval of the
price to be paid to Landlord as per subparagraph 5(b) hereof.
Tenant shall pay the remaining amounts immediately upon the
Commencement Date of the Lease (or, in the case of the Third
Floor Expansion Premises, upon the Third Floor Expansion
Effective Date).
59. PLANNING SCHEDULE
(1) Preparation and Approval of Plans:
(1) Landlord and Tenant shall diligently pursue the
preparation of the Plans in accordance with Exhibits
"C-1" and "C-2", as the case may be. Failure of
Tenant to provide said instructions by the dates
specified in Exhibits "C-1" and "C-2", as the case
may be, shall constitute a Tenant Delay.
(2) The Plans shall then be prepared in conformance with
Landlord's requirements and all applicable codes,
ordinances and laws, and shall specify materials and
details equal to or better than Landlord's building
standard. The Plans shall be subject to approval of
Landlord and the government officials having
jurisdiction. Landlord shall submit complete
construction plans to Tenant for approval and Tenant
shall approve said Plans in accordance with Exhibits
"C-1" and "C-2", as the case may be. Failure of
Tenant to approve the Plans in accordance with
Exhibits "C-1" and "C-2", as the case may be, shall
constitute a Tenant Delay.
(2) Upon receipt of the approved Plans, Landlord shall provide a
quotation based upon competitively bid subcontract pricing for
the work to Tenant for approval as the price to be paid by
Tenant to Landlord for Tenant's Cost. Upon written approval of
such price by Tenant, Landlord and Tenant shall be deemed to
have given final approval to the Plans as the basis on which
the quotation was made, and Landlord shall be authorized to
proceed with the improvements to the Initial Premises in
accordance with such Plans. Tenant will not unreasonably
withhold its approval of such price. Failure of Tenant to
EXHIBIT "C"
Page 3 of 4
<PAGE> 53
approve or disapprove such price in accordance with Exhibits
"C-1" and "C-2", as the case may be, or unreasonable
disapproval of such price, shall constitute a delay by Tenant
in accordance with the provisions of Paragraph 4(b) of the
Lease. Landlord shall not be obligated to proceed with any
improvements of the Initial Premises until such time as Tenant
approves a price for the Tenant's Cost. Exhibits "C-1" and
"C-2", as the case may be, provide the intermediate actions
required of both Landlord and Tenant to satisfy the schedule
hereof.
(3) Any delays caused by Tenant's revision or change orders to the
approved Plans shall not constitute a delay by Tenant in
accordance with the provisions of Paragraph 4(b) of this Lease
with respect to the Initial Premises so long as such revisions
or change orders are solely and reasonably related to Tenant's
election to expand the size of the Initial Premises from
12,917 rentable square feet, as originally contemplated by
Landlord and Tenant, to the present size of 17,371 rentable
square feet. Landlord hereby agrees that Tenant may occupy any
portion of the Initial Premises as same becomes ready for
Tenant's occupancy notwithstanding that the entire Initial
Premises is not ready for Tenant's occupancy at such time.
60. TENANT'S WORK
All work not within the scope of the normal construction trades
employed in the Building, including, but not limited to, furnishing and
installing of telephones, furniture, and office equipment shall be furnished and
installed by Tenant at Tenant's expense. Tenant shall adopt a schedule in
conformance with the schedule of Landlord's contractors and conduct its work in
such a manner as to maintain harmonious labor relations and as not to interfere
unreasonably with or delay the work of Landlord's contractors. Tenant's
contractors and subcontractors shall be acceptable to and approved by Landlord
and shall be subject to the administrative supervision of Landlord. Contractors
and subcontractors engaged by Tenant shall employ persons and means to insure so
far as may be possible the progress of the work without interruption on account
of strikes, work stoppages or similar causes for delay. Landlord shall give
access and entry to the Premises to Tenant and its contractors and
subcontractors and reasonable opportunity and time and reasonable use of
facilities to enable Tenant to adapt the Premises for Tenant's use; provided,
however, that if such entry is prior to the Commencement Date or the Third Floor
Expansion Effective Date, as the case may be, such entry shall be subject to all
the terms and conditions of the Lease, except the payment of Rent.
EXHIBIT "C"
Page 4 of 4
<PAGE> 54
EXHIBIT "C-1"
INITIAL PREMISES SCHEDULE OF IMPROVEMENTS
THE FOLLOWING SCHEDULE MORE CLEARLY DEFINES THE INTERMEDIATE STEPS
ESSENTIAL TO MEET THE DATES AS PROVIDED IN EXHIBIT "C", ALL OF WHICH LANDLORD
AND TENANT ACKNOWLEDGE AND AGREE HAVE BEEN DULY AND TIMELY SATISFIED BY LANDLORD
AND TENANT AS OF THE DATE OF EXECUTION OF THIS AMENDED AND RESTATED LEASE:
ACTION
1. TENANT PROVIDES PROGRAM INFORMATION TO LANDLORD AND/OR ARCHITECT:
2. PRELIMINARY SPACE PLAN DELIVERED TO TENANT BY LANDLORD:
3. TENANT'S ACCEPTANCE OF PRELIMINARY SPACE PLAN:
4. PRICING NOTES DELIVERED TO TENANT BY LANDLORD:
5. TENANT'S ACCEPTANCE OF PRICING NOTES:
6. DETAILED PRELIMINARY ESTIMATE COMPLETED BY LANDLORD AND DELIVERED TO
TENANT:
7. TENANT'S FINAL ACCEPTANCE OF PRELIMINARY SPACE PLAN AND PRICING
ESTIMATE NO LATER THAN:
8. DOCUMENTS TO TENANT BY LANDLORD:
9. [INTENTIONALLY OMITTED]
10. LANDLORD SHALL MAKE REVISIONS TO CONSTRUCTION DOCUMENTS, IF NECESSARY,
AND RELEASE THEM FOR BIDDING AND PERMITTING:
11. FINAL PRICING AND LANDLORD'S COSTS ON CONSTRUCTION DOCUMENTS DELIVERED
TO TENANT BY LANDLORD:
12. TENANT'S FINAL ACCEPTANCE OF ALL PLANS AND PRICING DELIVERED TO
LANDLORD NO LATER THAN:
13. COMMENCEMENT OF CONSTRUCTION, SUBJECT TO PERMIT APPROVAL BY CODE
OFFICIALS HAVING JURISDICTION:
14. SUBSTANTIAL COMPLETION AND START OF WORKSTATION INSTALLATION ON OR
ABOUT:
15. OCCUPANCY BY TENANT.
EXHIBIT "C-1"
Page 1 of 2
<PAGE> 55
NOTE: SCHEDULE ASSUMES ALL MATERIALS, EQUIPMENT, AND FINISHES ARE IN STOCK OR
AVAILABLE IN A TIMELY MANNER SO AS TO NOT DELAY THE JOB PROGRESS. SUBSTITUTION
OR DELETION OF SPECIFIED ITEMS MAY BE REQUIRED TO MAINTAIN SCHEDULE. LANDLORD'S
OBLIGATION TO MEET ANY OR ALL OF THE DATES SET FORTH ABOVE SHALL BE SUBJECT TO
LANDLORD'S ACTUAL RECEIPT OF TENANT'S APPROVALS, PROGRAM INFORMATION, ETC. ON OR
BEFORE THE DATES SET FORTH ABOVE.
EXHIBIT "C-1"
Page 2 of 2
<PAGE> 56
EXHIBIT "C-2"
THIRD FLOOR EXPANSION PREMISES SCHEDULE OF IMPROVEMENTS
THE FOLLOWING SCHEDULE MORE CLEARLY DEFINES THE INTERMEDIATE STEPS ESSENTIAL TO
MEET THE DATES AS PROVIDED IN EXHIBIT "C":
<TABLE>
<CAPTION>
ACTION
<S> <C> <C>
16. TENANT PROVIDES PROGRAM INFORMATION TO LANDLORD AND/OR ARCHITECT AND
DELIVERS PRELIMINARY SPACE PLAN TO LANDLORD:
17. LANDLORD'S COMMENTS ON TENANT'S PRELIMINARY SPACE PLAN AND PRELIMINARY September 14, 1999
SPACE PLAN DELIVERED TO TENANT BY LANDLORD:
8 days after
------------------------
Action 1
18. TENANT'S ACCEPTANCE OF PRELIMINARY SPACE PLAN:
4 days after
------------------------
Action 2
19. PRICING NOTES DELIVERED TO TENANT BY LANDLORD:
6 days after
------------------------
Action 3
20. TENANT'S ACCEPTANCE OF PRICING NOTES:
3 days after
------------------------
Action 4
21. DETAILED PRELIMINARY ESTIMATE COMPLETED BY LANDLORD AND DELIVERED TO
TENANT:
3 days after
------------------------
Action 5
22. TENANT'S FINAL ACCEPTANCE OF PRELIMINARY SPACE PLAN AND PRICING
ESTIMATE NO LATER THAN:
3 days after
------------------------
Action 6
23. CONSTRUCTION DOCUMENTS TO TENANT BY LANDLORD:
14 days after
------------------------
Action 7
24. LANDLORD SHALL MAKE REVISIONS TO CONSTRUCTION DOCUMENTS, IF NECESSARY,
AND RELEASE THEM FOR BIDDING AND PERMITTING:
7 days after
------------------------
Action 8
25. FINAL PRICING AND LANDLORD'S COSTS ON CONSTRUCTION DOCUMENTS DELIVERED
TO TENANT BY LANDLORD:
7 days after
------------------------
Action 9
26. TENANT'S FINAL ACCEPTANCE OF ALL PLANS AND PRICING DELIVERED TO
LANDLORD NO LATER THAN:
3 days after
------------------------
Action 10
27. COMMENCEMENT OF CONSTRUCTION, SUBJECT TO PERMIT APPROVAL BY CODE
OFFICIALS HAVING JURISDICTION:
3 days after
------------------------
Action 11
No later than March 1, 2000
28. SUBSTANTIAL COMPLETION AND OCCUPANCY BY TENANT.
</TABLE>
EXHIBIT "C-2"
Page 1 of 2
<PAGE> 57
NOTE: SCHEDULE ASSUMES ALL MATERIALS, EQUIPMENT, AND FINISHES ARE IN STOCK OR
AVAILABLE IN A TIMELY MANNER SO AS TO NOT DELAY THE JOB PROGRESS. SUBSTITUTION
OR DELETION OF SPECIFIED ITEMS MAY BE REQUIRED TO MAINTAIN SCHEDULE. LANDLORD'S
OBLIGATION TO MEET ANY OR ALL OF THE DATES SET FORTH ABOVE SHALL BE SUBJECT TO
LANDLORD'S ACTUAL RECEIPT OF TENANT'S APPROVALS, PROGRAM INFORMATION, ETC. ON OR
BEFORE THE DATES SET FORTH ABOVE.
EXHIBIT "C-2"
Page 2 of 2
<PAGE> 58
EXHIBIT "C-3"
LANDLORD'S WORK FOR INITIAL PREMISES AND
THIRD FLOOR EXPANSION PREMISES
1. STRUCTURE
Steel Structure with poured concrete floor over metal pan with a level
concrete floor (broom clean) ready for installation of glue down
carpeting (or other Tenant finish).
2. PERIMETER WALLS
Glass and precast concrete with the inside face of walls insulated and
with drywall installed, spackled, taped and sanded. Primer and paint
(or other finish) by Tenant.
3. COLUMNS AND CORE WALLS
(2) All columns shall be exposed. Framing, drywall and finish by
Tenant.
(3) The core walls shall be framed, drywalled, spackled, finished,
taped and sanded from slab to ceiling ready to accept a wall
finish. Core walls in public corridor will be finished by
Landlord. Core walls in Tenant space will be finished by
Tenant.
4. WINDOW TREATMENTS
1" horizontal mini-blinds at all perimeter glass.
5. DRAWINGS
The Landlord shall deliver the following base building
drawings/documents as needed by Tenant:
(a) A dimensional outline floor plan at a minimum scale of 1/8" =
1'0".
(b) Structural drawings showing the size and layout of the framing
for the Tenant's floor and the floor immediately above and
below.
(c) Mechanical and Electrical Drawings (as needed).
6. CORE
(a) Multi-Tenant Floor
Core complete with air conditioning, restrooms, finished
elevators, elevator lobby (with carpet, fire doors, lights,
finished walls and ceiling), stairways, ventilation shafts,
electrical/telephone rooms, mechanical room, janitor's closet,
and any required finished existing corridors (with carpet,
lights, finished walls and ceiling).
(b) Full-Floor Tenant
Core complete with air conditioning, restrooms, finished
elevators, unfinished elevator lobby, stairways, ventilation
shafts, electrical/telephone rooms, mechanical room and
janitor's closet.
7. DRINKING FOUNTAINS
One ADA accessible drinking fountain per floor.
EXHIBIT "C-3"
Page 1 of 4
<PAGE> 59
8. RESTROOMS
Two common ADA accessible restrooms finished according to building
standard with ceramic floors, ceramic wet walls, wallcovering on other
walls, finished ceilings, granite vanities, enclosed stalls,
accessories, fixtures, trim and lighting.
9. DOORS
Finished wood stain doors complete with metal frame trim and hardware,
installed on all doorways in the service core with lever handle
hardware.
10. TELEPHONE
Access in telephone and electrical rooms on each floor to wiring for
telephone. Landlord will provide and install the appropriate wiring
from the base of the Building to such telephone and electrical rooms.
Wiring from rooms shall be Tenant's responsibility, at Tenant's
expense, to install and subscribe to any such service if Tenant so
desires.
11. PLUMBING
One valved point of connection for cold water. Two points of connection
to waste and vent lines on each floor.
12. AIR CONDITIONING
Each floor is equipped with two (2) 15-ton multizone constant volume
airhandlers which provide approximately 12,000 cubic feet per minute
(CFM) per unit. Each of these handlers serves the primary ductwork for
5 zones (i.e., ten zones per floor). Six of the 10 zones per floor are
heated with thermostatically controlled duct heaters which range in
size from 5KW to 9KW. The lobby level and the top floor (floor 36) have
all zones heated with duct heaters. Two (2) Carrier centrifugal
chillers (1040 tons and 1070 tons) provide cooling to the building.
13. ELECTRICAL
An electrical capacity of 5 watts per square foot of rentable area for
low voltage electrical consumption (120/208 volts) and 4.5 watts per
square foot of rentable area for high voltage lighting and HVAC
(277/480 volts). Landlord will provide (but not install) up to one (1)
two foot x four foot fluorescent lighting fixture per one hundred (100)
rentable square feet of the Demised Premises. Separate submeters shall
be placed on all abnormal electrical consumptions as part of Tenant's
work.
Emergency power to serve elevators, emergency lighting, fire alarm and
security equipment will be provided by a diesel generator.
14. FIRE PROTECTION
(a) Fire Sprinklers
A complete, automatic fire protection system conforming to
NFPA 13 and hydraulically designed in accordance with NFPA 13
for Light Hazard Occupancy is provided for all tenant spaces
and common areas. Mechanical areas in the building are
designed in accordance with NFPA 13 for ordinary hazard
occupancies. Areas with completed ceilings will be provided
with chrome plated brass pendant heads centered in ceiling
tiles. Brass upright heads, mounted as required to meet base
system requirements will be installed in areas with unfinished
ceilings, with any turn downs and installation of pendant
heads performed as part of Tenant work. Lobby areas with
gypsum board ceilings will have concealed pendant heads with
flush ceiling coverplates.
EXHIBIT "C-3"
Page 2 of 4
<PAGE> 60
(b) Fire Alarm
A fire alarm system including pull stations, ceiling and duct
mounted smoke detectors, water flow switches and tamper
switches will be installed as required to initiate alarms,
horns, and strobe devices for occupant evacuation. The system
shall comply, at a minimum, with the applicable provisions of
the ADA, NFPA 101, NFPA 72, NFPA 90A, NFPA 90B, and the Safety
Code for Elevators (ASME A17.1). Tenant shall be required to
install compatible devices within the Premises and connect to
base Building riser as part of Tenant buildout. (Compatible
devices are those that are UL listed for fire alarms and UL
listed to be used with Notifier Fire Alarm systems).
15. CEILING
A 2'x2' ceiling grid installed at 8'9" above finished floor. Ceiling
tile will be stacked on floor. Tile to be 24" x 24" Beveled Tegular
Cortega by Armstrong or similar. Grid to be exposed narrow profile.
16. ELEVATORS
Building Elevators
(a) High Rise
The lobby and high rise floors (floors 20-34) are served by
five (5) 3500 pound capacity elevators each operating at 1000
feet per minute. Each of these elevators is a gearless
traction model.
(b) Low Rise
The low rise floors (floors 1-19, there is no floor 13) are
served by six (6) 3500 pound capacity elevators each operating
at 700 feet per minute. Each of these elevators is a gearless
traction model.
(c) Top Three Floors
The top three floors (floors 34-36) are served by one (1) 3000
pound capacity elevator operating at 200 feet per minute. This
elevator is a geared traction model.
(d) Freight Elevator
The main building's 36 floors (floors 1-36 and basement, but
there is no floor 13) are served by one (1) freight elevator.
The freight elevator has 3500 pounds of capacity and operates
at 1000 feet per minute. The freight elevator is a gearless
traction model.
Parking Deck and Loading Dock Elevators
- Parking Deck Elevator
The parking deck is served by two (2) 2000 pound capacity
passenger elevators operating at 300 feet per minute. Each of
these two elevators serves all seven levels of the parking
deck and two levels below the parking deck.
- Loading Dock Elevator
The loading dock elevator shuttles between the loading dock on
the east end of the building and the basement where transfer
can be made to the freight elevator. This elevator has 5000
pounds of capacity and operates at 35 feet per minute. The
loading dock elevator is a hydraulically operated model.
EXHIBIT "C-3"
Page 3 of 4
<PAGE> 61
Elevator Control System
The elevators are operated by a newly installed all-digital
SCR drive controller.
EXHIBIT "C-3"
Page 4 of 4
<PAGE> 62
EXHIBIT "D"
TENANT COMMENCEMENT AND ESTOPPEL CERTIFICATE
Landlord:
---------------------------------------------------------------------
Tenant:
-------
Premises:
----------------------------------------------------------------------
Area: Sq. Ft. Lease Date:
------------------------------------------- ---------------
The undersigned Tenant under the above-referenced lease (the "Lease")
hereby ratifies the Lease and certifies to ("Landlord") as owner of the real
property of which the premises demised under the Lease (the "Premises") is a
part, as follows:
1. That a complete copy of the Lease, including documents listed
in Paragraph 7 below (if any) is attached hereto as Exhibit "A" and is by this
reference incorporated herein.
2. That the term of the Lease commenced on ___________, _____ and
Tenant is in full and complete possession of the Premises and has commenced full
occupancy and use of the Premises, such possession having been delivered by
Landlord and having been accepted by Tenant.
3. That the Lease presently calls for monthly rent installments
of $____________, and that Tenant is paying monthly installments of rent of
$_____________ which commenced to accrue on the ___ day of _____________, ____.
4. That no advance rental or other payment has been made in
connection with the Lease, except rental for the current month. There is no
"free rent" or other concession under the remaining term of the Lease, and the
rent has been paid to and including, ________________, 19__.
5. That a security deposit in the amount of $___________ is being
held by Landlord, which amount is not subject to any set off reduction or to any
increase for interest or other credit due to Tenant.
6. That all obligations and conditions under said Lease to be
performed to date by Landlord or Tenant have been satisfied, free of defenses
and set-offs including all construction work in the Premises.
7. That the Lease is a valid lease and in full force and effect
and represents the entire agreement between the parties; that there is no
existing default on the part of Landlord or Tenant in any of the terms and
conditions thereof and no event has occurred which, with the passing of time or
giving of notice to both, would constitute an event of default, and that said
Lease has: (Initial One)
[ ] not been amended. modified, supplemented, extended, renewed or
assigned.
[ ] been amended, modified, supplemented, extended, renewed or
assigned as follows by the following described agreements:
EXHIBIT "D"
Page 1 of 2
<PAGE> 63
8. That the Lease provides for a primary term of ___ months; the
term of the Lease expires on the ____ day of ______________, ______; and that:
(Initial One)
[ ] neither the Lease nor any of the documents listed in Paragraph
7 (if any), contain an option for any additional term or
terms.
[ ] the Lease and/or the documents listed under Paragraph 7,
above, contain an option for __________ additional term(s) of
___________ year(s) and _____________ month(s) (each) at a
rent to be determined as follows:
9. That Landlord has not rebated, reduced or waived any amounts
due from Tenant under the Lease, whether orally or in writing, nor has Landlord
provided financing for, made loans or advances to, or invested in the business
of Tenant.
10. That, to the best of Tenant's knowledge, there is no apparent
or likely contamination of the real property or the Premises by hazardous
materials, and Tenant does not use, nor has Tenant disposed of, hazardous
materials in violation of environmental laws on the real property or the
Premises.
11. That there are no actions, voluntary or involuntary, pending
against the Tenant under the bankruptcy laws of the United States or any state
thereof.
12. That this certification is made knowing that the Landlord and
[list mortgagee, beneficiary, purchaser or prospective purchaser of the Building
or any interest therein] are relying upon the representations herein made.
Tenant:
, a
--------------------------------
corporation
-----------------------
By:
--------------------------------------
Dated: Typed Name:
---------------- -------------------------------
Title:
-------------------------------
Attachment:
Exhibit "A": Copy of the Lease
EXHIBIT "D"
Page 2 of 2
<PAGE> 64
EXHIBIT "E"
FOURTH FLOOR EXPANSION PREMISES LEASE IMPROVEMENT AGREEMENT
61. IMPROVEMENTS
(1) At Tenant's expense, Tenant shall furnish and install
substantially in accordance with the construction drawings and
specifications approved by Tenant and Landlord, partitions,
doors, lighting fixtures, floor coverings, electrical outlets,
building standard office telephone outlets, air conditioning
(including, without limitation, the "Supplemental HVAC
System", as defined in the Special Stipulations), fire
sprinklers and other fire protection systems, security
systems, signage, wall finishes, construction clean-up, and
other improvements to the Fourth Floor Expansion Premises
required by Tenant in the Fourth Floor Expansion Premises (the
"Fourth Floor Expansion Tenant Improvements"). Tenant shall
cause to be prepared at Tenant's expense all architectural
plans and specifications, equipment layout plans, and all
structural, mechanical and electrical engineering plans and
specifications (the "Fourth Floor Expansion Plans") required
for Tenant's occupancy. The Fourth Floor Expansion Plans shall
be subject to approval of Landlord and the government
officials having jurisdiction over same. Upon approval of the
Fourth Floor Expansion Plans, and prior to completion of the
Landlord's Fourth Floor Expansion Work as described in
subparagraph 1(b) of this Fourth Floor Expansion Premises
Lease Improvement Agreement, Tenant shall be authorized to
proceed with the Fourth Floor Expansion Tenant Improvements in
accordance with the Fourth Floor Expansion Plans.
(2) At Landlord's expense, Landlord shall provide the improvements
described in Exhibit "E-2" attached hereto and by this
reference incorporated herein (hereinafter referred to as
"Landlord's Fourth Floor Expansion Work") on or before January
1, 2000.
(3) Landlord shall provide a construction management team that
will supervise and facilitate Landlord's Fourth Floor
Expansion Work and the Fourth Floor Expansion Tenant
Improvements. Such construction management team shall receive
a management fee calculated as follows: (i) 5% of the amount
of all costs and expenses (including general conditions)
contained in the contract for construction of the Fourth Floor
Expansion Tenant Improvements entered into with Tenant's
general contractor approved by Landlord, other than any costs
or expenses associated with the purchase, construction or
installation of the Telecommunications Equipment, the
Generator, Generator Fuel Tank, and accompanying uninterrupted
power supply, and the Supplemental HVAC System (as such terms
are defined in the Special Stipulations) (collectively, the
"Specified Contract Amounts"), and (ii) 2 1/2% of the cost of
purchasing, constructing and installing the Generator,
Generator Fuel Tank, and accompanying uninterrupted power
supply and the Supplemental HVAC System (collectively, the
"Generator and Supplemental HVAC Costs"), with the maximum
amount due and payable by reason of the application of such 2
1/2% being limited to $50,000. Such construction management
fee shall be paid to Landlord's construction manager as a
disbursement from "Landlord's Fourth Floor Expansion
Allowance" (as defined below).
62. LANDLORD'S ALLOWANCE
(1) As Landlord's contribution to work provided in Paragraph 1(a),
Landlord shall provide Tenant with an allowance of Two Hundred
Seventeen Thousand Two Hundred Sixty and 00/100 Dollars
($217,260.00) with respect to the Fourth Floor Expansion
Premises (hereinafter referred to as "Landlord's Fourth Floor
Expansion Allowance"). Tenant and
EXHIBIT "E"
Page 1 of 4
<PAGE> 65
Landlord acknowledge and agree that at Tenant's option (and
subject to the Fourth Floor Expansion Plans), Tenant shall
have the right to utilize an exposed ceiling in any or all
areas of the Fourth Floor Expansion Premises in lieu of
ceiling grid and ceiling tile. Any such election by Tenant
must be noted on the Fourth Floor Expansion Plans. Landlord
and Tenant agree that such an election by Tenant will result
in savings to Landlord, and as such, Landlord agrees that it
shall provide Tenant with an additional credit in an amount
equal to the difference between (1) $6,100, and (2) the
product obtained by multiplying the sum of $6,100 by a
fraction, the numerator of which is the number of ceiling
tiles that Tenant elects to install in the Fourth Floor
Expansion Premises and the denominator of which is the number
of ceiling tiles that may be installed in the ceiling grid as
configured as of the date hereof (as denominated by Tenant on
the Fourth Floor Expansion Plans) (the "Fourth Floor Base
Building Credit Allowance"). The Fourth Floor Base Building
Credit Allowance shall be paid to Tenant in the same manner as
the Landlord's Fourth Floor Expansion Allowance. In addition,
in the event that Tenant elects to remove all or any portion
of the ceiling grid, Tenant shall pay Landlord an amount equal
to the product obtained by multiplying the sum of $12,920 by a
fraction, the numerator of which is the square footage of the
ceiling grid that is removed, and the denominator of which is
the total square footage of the ceiling grid actually
installed as of this date (as denominated by Tenant on the
Fourth Floor Expansion Plans), which amount shall be paid by
Tenant to Landlord on or before the Fourth Floor Expansion
Effective Date. Notwithstanding the above, Tenant may, at
Tenant's discretion, use up to Fifty-Four Thousand Three
Hundred Fifteen and 00/100 Dollars ($54,315.00) of Landlord's
Fourth Floor Expansion Allowance for costs related to design
and construction of the Fourth Floor Expansion Tenant
Improvements, Tenant's signage costs, moving expenses and
installation of Tenant's furniture.
(2) Landlord shall pay Landlord's Fourth Floor Expansion Allowance
to Tenant in multiple draws of no less than $50,000 each upon
satisfaction of the following conditions:
(1) Tenant shall provide Landlord no more frequently than
monthly with an affidavit ("Tenant's Affidavit")
wherein (i) Tenant submits that the Fourth Floor
Expansion Tenant Improvements completed as of such
date have been completed in accordance with the
Fourth Floor Expansion Plans, (ii) Tenant includes a
signed AIA Form G-702 Request for Payment (or other
form as may be reasonably specified by Landlord)(a
"Draw Request"); (iii) Tenant submits a schedule
listing all of the contractors, subcontractors,
materialmen and suppliers who have provided labor,
services and/or materials to the Fourth Floor
Expansion Premises as part of the construction of the
Fourth Floor Expansion Tenant Improvements
(collectively, "Contractors"), and lien waivers
therefrom through the date of such Tenant's
Affidavit, and (iv) Tenant attaches copies of all
invoices from Contractors; and
(2) Within five (5) business days of receipt of Tenant's
Affidavit, Landlord or Landlord's representative
shall have inspected the Fourth Floor Expansion
Premises and confirmed that the Fourth Floor
Expansion Tenant Improvements have been completed in
accordance with the Fourth Floor Expansion Plans,
which confirmation shall not be unreasonably
withheld, conditioned or delayed. Any failure by
Landlord to inspect and confirm that the Fourth Floor
Expansion Tenant Improvements have been completed in
accordance with the Fourth Floor Expansion Plans
within five (5) Business days of receipt of Tenant's
Affidavit shall be deemed to result in Landlord's
approval thereof.
(3) Upon satisfaction of each of the foregoing conditions
in this subparagraph 2(b), Landlord shall advance to
Tenant an amount equal to ninety percent (90%) of the
amount requested in Tenant's Draw Request, with the
balance of such amount (the "Retainage")
EXHIBIT "E"
Page 2 of 4
<PAGE> 66
being disbursed in accordance with the provisions of
subparagraph 2(c), below.
(3) Landlord shall advance any remaining balance of Landlord's
Fourth Floor Expansion Allowance to Tenant (including any and
all Retainage) upon satisfaction of the following conditions:
(1) Tenant shall have provided Landlord with Tenant's
Affidavits complying with the provisions of
subparagraph 2(b), above, and with full and final
lien waivers from all Contractors (including a final
affidavit and lien waiver from Tenant's general
contractor);
(2) Tenant has provided Landlord with a certification
from Tenant's architect of record (the "Architect's
Certificate") certifying that the Fourth Floor
Expansion Tenant Improvements have been completed in
accordance with the Fourth Floor Expansion Plans;
(3) Within five (5) business days of receipt of Tenant's
Affidavit and the Architect's Certificate, Landlord
or Landlord's representative shall have inspected the
Fourth Floor Expansion Premises and confirmed that
the Fourth Floor Expansion Tenant Improvements have
been completed in accordance with the Fourth Floor
Expansion Plans, which confirmation shall not be
unreasonably withheld, conditioned or delayed. Any
failure by Landlord to inspect and confirm that the
Fourth Floor Expansion Tenant Improvements have been
completed in accordance with the Fourth Floor
Expansion Plans within five (5) Business days of
receipt of Tenant's Affidavit and the Architect's
Certificate shall be deemed to result in Landlord's
approval thereof.
(4) Tenant shall have provided Landlord with a final
Certificate of Occupancy for the Fourth Floor
Expansion Premises;
(5) Tenant shall have been operating its business in the
Fourth Floor Expansion Premises for at least five (5)
business days; and
(6) Tenant shall have delivered to Landlord one (1)
complete set of "as-built" drawings of the Fourth
Floor Expansion Premises reflecting the construction
of the Fourth Floor Expansion Tenant Improvements.
63. TENANT'S COST
(1) Tenant shall bear the cost, if any, of the Fourth Floor
Expansion Tenant's Improvements over and above the Landlord's
Fourth Floor Expansion Allowance (such additional cost is
hereinafter referred to as "Tenant's Cost"). The cost of any
modifications of any part of the work described in Paragraph 1
already completed that are requested by Tenant shall
constitute part of Tenant's Cost.
(2) Tenant shall pay for all costs associated with any
Tenant-requested changes or modifications of the Fourth Floor
Expansion Tenant Improvements after the Fourth Floor Expansion
Plans have been approved by Landlord.
64. PLANNING SCHEDULE
(1) Tenant shall diligently pursue the preparation of the Fourth
Floor Expansion Plans in accordance with Exhibit "E-1". The
Fourth Floor Expansion Plans shall be prepared in
EXHIBIT "E"
Page 3 of 4
<PAGE> 67
conformance with Landlord's reasonable requirements and all
applicable codes, ordinances and laws, and shall specify
materials and details equal to or better than Landlord's
building standard. The Fourth Floor Expansion Plans shall be
subject to approval of Landlord (which approval shall not be
unreasonably withheld, conditioned or delayed), and the
government officials having jurisdiction. Tenant shall submit
complete construction plans to Landlord for approval and
Landlord shall approve said Fourth Floor Expansion Plans in
accordance with Exhibit "E-1".
(2) Upon Landlord's approval of the Fourth Floor Expansion Plans
and completion of Landlord's Fourth Floor Expansion Work,
Tenant shall be authorized to proceed with the improvement of
the Premises in accordance with the Fourth Floor Expansion
Plans. Exhibit "C-1" provides the intermediate actions
required of both Landlord and Tenant to satisfy the schedule
hereof. Landlord shall have the right to engage such technical
consultants, planners, and engineers as may be reasonably
required to assist Landlord in evaluating the Fourth Floor
Expansion Tenant Improvements and the Fourth Floor Expansion
Plans, all at Tenant's sole cost and expense; provided,
however, that in no event shall Tenant's cost therefor exceed
1.5% of aggregate amount of the Specified Contract Amounts and
the Generator and Supplemental HVAC Costs.
65. TENANT'S WORK
All work not within the scope of the normal construction trades
employed in the Building, including, but not limited to, furnishing and
installing of the Telecommunications Equipment, telephones, furniture, and
office equipment shall be furnished and installed by Tenant at Tenant's expense.
Tenant's Contractors shall be acceptable to and approved by Landlord (which
approval shall not be unreasonably withheld, conditioned or delayed), and shall
be subject to the reasonable administrative supervision of Landlord. Contractors
engaged by Tenant shall employ persons and means to insure so far as may be
possible the progress of the work without interruption on account of strikes,
work stoppages or similar causes for delay. Landlord shall give access and entry
to the Fourth Floor Expansion Premises to Tenant and its Contractors and
reasonable opportunity and time and reasonable use of facilities to enable
Tenant to adapt the Expansion Premises for Tenant's use; provided, however, that
if such entry is prior to the Fourth Floor Expansion Effective Date, such entry
shall be subject to all the terms and conditions of the Lease, except the
payment of Rent. In furtherance of the foregoing, Tenant covenants and agrees
that the Fourth Floor Expansion Plans shall include plans outlining specifically
the location of the conduit paths to be installed by Tenant. Any and all such
conduit paths shall be of a size approved by Landlord and shall be installed at
a location in the Building risers specified by Landlord. At Landlord's option,
Landlord may request Tenant to install additional conduit at the time Tenant
installs conduit in the risers for purposes of serving the Premises, and
Landlord shall pay for the cost and expense of such additional conduit and any
incremental labor cost (if any) incurred by Tenant as a result of installation
of such additional conduit. Tenant will not unreasonably withhold, condition or
delay its consent to Landlord's request to so install the additional conduit
described and identified in the immediately preceding sentence.
EXHIBIT "E"
Page 4 of 4
<PAGE> 68
EXHIBIT "E-1"
SCHEDULE OF FOURTH FLOOR EXPANSION PREMISES IMPROVEMENTS
THE FOLLOWING SCHEDULE MORE CLEARLY DEFINES THE INTERMEDIATE STEPS ESSENTIAL TO
MEET THE DATES AS PROVIDED IN EXHIBIT "C":
<TABLE>
<CAPTION>
ACTION DATE
<S> <C> <C>
1. PRELIMINARY SPACE PLAN DELIVERED TO September 2, 199
LANDLORD:
2. LANDLORD'S ACCEPTANCE OF PRELIMINARY SPACE September 10, 1999
PLAN REFLECTING LANDLORD'S COMMENTS:
14 days after
---------------------
3. CONSTRUCTION DOCUMENTS TO LANDLORD BY Action 2
TENANT:
5 days after
---------------------
4. LANDLORD'S REVIEW/ACCEPTANCE OF CONSTRUCTION DOCUMENTS Action 2
NO LATER THAN:
6 days after
---------------------
5. TENANT SHALL MAKE LANDLORD'S REVISIONS TO CONSTRUCTION Action 4
DOCUMENTS, IF NECESSARY, AND RELEASE LANDLORD APPROVED
CONSTRUCTION DOCUMENTS FOR BIDDING AND PERMITTING:
7 days after
---------------------
6. COMMENCEMENT OF CONSTRUCTION, SUBJECT TO PERMIT APPROVAL Action 5
BY CODE OFFICIALS HAVING JURISDICTION:
No later than March 1,
7. SUBSTANTIAL COMPLETION AND OCCUPANCY BY TENANT: 2000
</TABLE>
NOTE: SCHEDULE ASSUMES ALL MATERIALS, EQUIPMENT, AND FINISHES ARE IN STOCK OR
AVAILABLE IN A TIMELY MANNER SO AS TO NOT DELAY THE JOB PROGRESS. SUBSTITUTION
OR DELETION OF SPECIFIED ITEMS MAY BE REQUIRED TO MAINTAIN SCHEDULE. LANDLORD'S
OBLIGATION TO MEET ANY OR ALL OF THE DATES SET FORTH ABOVE SHALL BE SUBJECT TO
LANDLORD'S ACTUAL RECEIPT OF TENANT'S PLANS AND CONSTRUCTION DOCUMENTS, PROGRAM
INFORMATION, ETC. ON OR BEFORE THE DATES SET FORTH ABOVE.
EXHIBIT "E-1"
<PAGE> 69
EXHIBIT "E-2"
LANDLORD'S WORK FOR FOURTH FLOOR EXPANSION PREMISES
1. STRUCTURE
Steel Structure with poured concrete floor over metal pan with a level
concrete floor (broom clean) ready for installation of glue down
carpeting (or other Tenant finish).
2. PERIMETER WALLS
Glass and precast concrete with the inside face of walls insulated and
with drywall installed, spackled, taped and sanded. Primer and paint
(or other finish) by Tenant.
3. COLUMNS AND CORE WALLS
(2) All columns shall be exposed. Framing, drywall and finish by
Tenant.
(3) The core walls shall be framed, drywalled, spackled, finished,
taped and sanded from slab to ceiling ready to accept a wall
finish. Core walls in public corridor will be finished by
Landlord. Core walls in Tenant space will be finished by
Tenant.
4. WINDOW TREATMENTS
1" horizontal mini-blinds at all perimeter glass.
5. DRAWINGS
The Landlord shall deliver the following base building
drawings/documents as needed by Tenant:
(a) A dimensional outline floor plan at a minimum scale of 1/8" =
1'0".
(b) Structural drawings showing the size and layout of the framing
for the Tenant's floor and the floor immediately above and below.
(c) Mechanical and Electrical Drawings (as needed).
6. CORE
(a) Multi-Tenant Floor
Core complete with air conditioning, restrooms, finished
elevators, elevator lobby (with carpet, fire doors, lights,
finished walls and ceiling), stairways, ventilation shafts,
electrical/telephone rooms, mechanical room, janitor's closet,
and any required finished existing corridors (with carpet,
lights, finished walls and ceiling).
(b) Full-Floor Tenant
Core complete with air conditioning, restrooms,
finished elevators, unfinished elevator lobby, stairways,
ventilation shafts, electrical/telephone rooms, mechanical
room and janitor's closet.
7. DRINKING FOUNTAINS
One ADA accessible drinking fountain per floor.
EXHIBIT "E-2"
Page 1 of 3
<PAGE> 70
8. RESTROOMS
Two common ADA accessible restrooms finished according to building
standard with ceramic floors, ceramic wet walls, wallcovering on other
walls, finished ceilings, granite vanities, enclosed stalls,
accessories, fixtures, trim and lighting.
9. DOORS
Finished wood stain doors complete with metal frame trim and hardware,
installed on all doorways in the service core with lever handle
hardware.
10. TELEPHONE
Access in telephone and electrical rooms on each floor to wiring for
telephone. Landlord will provide and install the appropriate wiring
from the base of the Building to such telephone and electrical rooms.
Wiring from rooms shall be Tenant's responsibility, at Tenant's
expense, to install and subscribe to any such service if Tenant so
desires.
11. PLUMBING
One valved point of connection for cold water. Two points of connection
to waste and vent lines on each floor.
12. AIR CONDITIONING
Each floor is equipped with two (2) 15-ton multizone constant volume
airhandlers which provide approximately 12,000 cubic feet per minute
(CFM) per unit. Each of these handlers serves the primary ductwork for
5 zones (i.e., ten zones per floor). Six of the 10 zones per floor are
heated with thermostatically controlled duct heaters which range in
size from 5KW to 9KW. The lobby level and the top floor (floor 36) have
all zones heated with duct heaters. Two (2) Carrier centrifugal
chillers (1040 tons and 1070 tons) provide cooling to the building.
13. ELECTRICAL
An electrical capacity of 5 watts per square foot of rentable area for
low voltage electrical consumption (120/208 volts) and 4.5 watts per
square foot of rentable area for high voltage lighting and HVAC
(277/480 volts). Landlord will provide (but not install) up to one (1)
two foot x four foot fluorescent lighting fixture per one hundred (100)
rentable square feet of the Demised Premises. Separate submeters shall
be placed on all abnormal electrical consumptions as part of Tenant's
work.
Emergency power to serve elevators, emergency lighting, fire alarm and
security equipment will be provided by a diesel generator.
14. FIRE PROTECTION
(a) Fire Sprinklers
Subject to Tenant's right to install a dry sprinkler system
under Paragraph 5(f) of the Special Stipulations, a complete,
automatic fire protection system conforming to NFPA 13 and
hydraulically designed in accordance with NFPA 13 for Light
Hazard Occupancy is provided for all tenant spaces and common
areas. Mechanical areas in the building are designed in
accordance with NFPA 13 for ordinary hazard occupancies. Areas
with completed ceilings will be provided with chrome plated
brass pendant heads centered in ceiling tiles. Brass upright
heads, mounted as required to meet base system requirements
will be installed in areas with unfinished ceilings, with any
turn downs and installation of pendant heads
EXHIBIT "E-2"
Page 2 of 3
<PAGE> 71
performed as part of Tenant work. Lobby areas with gypsum
board ceilings will have concealed pendant heads with flush
ceiling coverplates.
(b) Fire Alarm
A fire alarm system including pull stations, ceiling and duct
mounted smoke detectors, water flow switches and tamper
switches will be installed as required to initiate alarms,
horns, and strobe devices for occupant evacuation. The system
shall comply, at a minimum, with the applicable provisions of
the ADA, NFPA 101, NFPA 72, NFPA 90A, NFPA 90B, and the Safety
Code for Elevators (ASME A17.1). Tenant shall be required to
install compatible devices within the Premises and connect to
base Building riser as part of Tenant buildout. (Compatible
devices are those that are UL listed for fire alarms and UL
listed to be used with Notifier Fire Alarm systems).
15. CEILING
A 2'x2' ceiling grid installed at 8'9" above finished floor which, if
removed by Tenant, shall be paid for by Tenant in the manner provided
in Paragraph 2(a) of the Fourth Floor Expansion Premises Lease
Improvement Agreement. Landlord shall cause ceiling tile to be
delivered to the Fourth Floor Expansion Premises in sufficient
quantities to be installed in the grid retained (or installed in
accordance with Building standard dimensions) by Tenant upon approval
by Landlord of the Fourth Floor Expansion Plans and request by Tenant
for delivery of such tile. Ceiling tile to be 24" x 24" Beveled Tegular
Cortega by Armstrong or similar.
16. ELEVATORS
Building Elevators
(a) High Rise
The lobby and high rise floors (floors 20-34) are served by
five (5) 3500 pound capacity elevators each operating at 1000
feet per minute. Each of these elevators is a gearless
traction model.
(b) Low Rise
The low rise floors (floors 1-19, there is no floor 13) are
served by six (6) 3500 pound capacity elevators each operating
at 700 feet per minute. Each of these elevators is a gearless
traction model.
(c) Top Three Floors
The top three floors (floors 34-36) are served by one (1) 3000
pound capacity elevator operating at 200 feet per minute. This
elevator is a geared traction model.
(d) Freight Elevator
The main building's 36 floors (floors 1-36 and basement, but
there is no floor 13) are served by one (1) freight elevator.
The freight elevator has 3500 pounds of capacity and operates
at 1000 feet per minute. The freight elevator is a gearless
traction model.
Parking Deck and Loading Dock Elevators
- Parking Deck Elevator
The parking deck is served by two (2) 2000 pound capacity
passenger elevators operating at 300 feet per minute. Each of
these two elevators serves all seven levels of the parking deck
and two levels below the parking deck.
- Loading Dock Elevator
The loading dock elevator shuttles between the loading dock on the
east end of the building and the basement where transfer can be
made to the freight elevator. This elevator has 5000 pounds of
capacity and operates at 35 feet per minute. The loading dock
elevator is a hydraulically operated model.
Elevator Control System
The elevators are operated by a newly installed all-digital SCR
drive controller.
EXHIBIT "E-2"
Page 3 of 3
<PAGE> 72
EXHIBIT "F"
LEGAL DESCRIPTION OF PROPERTY
PARCEL ONE
ALL THAT TRACT OR PARCEL of land lying and being in Land Lot 78 of the 14th
District, Fulton County, Georgia, being the entire city block bounded by Spring,
Walton, Cone and Marietta Streets as said streets are presently located in the
City of Atlanta, Georgia, and being more particularly described as follows:
BEGINNING at the intersection of the northwestern right-of-way line of Cone
Street (60 foot R/W) and the northeastern right-of-way line of Marietta Street
(variable R/W); thence along said northeastern right-of-way line of Marietta
Street North 41 degrees 09 minutes 36 seconds West a distance of 200.14 feet to
a point at the intersection of said northeastern right-of-way line with the
southeastern right-of-way line of Spring Street (50 foot R/W); thence along said
southeastern right-of-way line of Spring Street North 49 degrees 32 minutes 24
seconds East a distance of 230.87 feet to a nail placed at the intersection of
said southeastern right-of-way line with the southwestern right-of-way line of
Walton Street (60 foot R/W); thence along said southwestern right-of-way line of
Walton Street South 40 degrees 38 minutes 36 seconds East a distance of 200.21
feet to a nail placed at the intersection of said southwestern right-of-way line
and the northwestern right-of-way line of Cone Street; thence along said
northwestern right-of-way line of Cone Street South 49 degrees 33 minutes 39
seconds West a distance of 229.06 feet to a point at the intersection of said
northwestern right-of-way line and the northeastern right-of-way line of
Marietta Street and the POINT OF BEGINNING; said tract containing 1.05672 acres
according to a survey for Lennar Partners, Inc., Insignia Commercial Group, Inc.
and their Successors and Assigns, and Chicago Title Insurance Company, prepared
by Watts & Browning Engineers, Inc., dated March 1, 1995, last revised January
11, 1996, and bearing the certification of V.T. Hammond, Georgia Registered Land
Surveyor No. 2554.
EXHIBIT "F"
Page 1 of 1
<PAGE> 73
EXHIBIT "G"
SPECIAL STIPULATIONS
1. PARKING.
Subject in all respects to the terms of this Lease, from and after the
Commencement Date, Tenant shall have the right to use two (2) reserved
and thirty two (32) unreserved spaces (for a total of thirty four (34)
spaces) in the parking garage serving the Building. At the commencement
of the term of this Lease, parking rates for the reserved spaces shall
be One Hundred Twenty Five and No/100 dollars ($125.00) per reserved
space per month and Seventy-Five and No/100 dollars ($75.00) per
unreserved space per month. Landlord and Tenant acknowledge and agree
that such rates are subject to increases based on market conditions.
2. RENEWAL OPTION.
(a) Tenant, provided that it is not in default and has not sublet
the Premises or assigned this Lease, shall have one (1) option
to extend the term of this Lease for a period of five (5)
years. To exercise such option, Tenant shall be required to
give Landlord written notice of Tenant's desire to exercise
such option at least eight (8) months prior to the then
existing expiration date of the Lease Term.
(b) Within fifteen (15) days after Tenant's notice to Landlord
setting forth Tenant's desire to extend the Lease Term
pursuant to this Paragraph 2, Landlord shall notify Tenant as
to whether Landlord approves or denies such extension.
Landlord's decision shall be subject to Landlord's reasonable
evaluation and consideration of the following:
(i) whether there is an Event of Default under this Lease
or any condition which, with the giving of notice and
the passage of time, would constitute an Event of
Default under this Lease; and
(ii) the status of Tenant's credit at the time of Tenant's
notice of its desire to extend the Lease Term.
(c) During the Lease Term as extended by this extension option as
properly exercised and approved by Landlord, all terms and
conditions of this Lease shall remain unchanged and in full
force and effect, except that Base Rent during the Lease Term
as so extended shall be the then current effective market rate
for tenants for similar office space in the Building and as
determined in Landlord's reasonable judgment. In determining
said then current effective market rate, the following
factors, among others, shall be taken into account and given
effect: size, location of Premises, lease term, condition of
Premises, economic concessions then being granted by Landlord
to tenants, and services provided by Landlord.
(d) If Tenant is entitled to and properly exercises the foregoing
renewal option, Landlord shall prepare an amendment (the
"Renewal Amendment") to reflect changes in the Base Rent,
Lease Term, termination date and other appropriate terms.
Tenant shall execute and return such Renewal Amendment to
Landlord within fifteen (15) days after Tenant's receipt
thereof from Landlord. If Tenant, in its sole discretion, is
not satisfied with the terms of the Renewal Amendment offered
by Landlord, Tenant may decline to execute the same and this
Lease shall not be extended.
EXHIBIT "G"
Page 1 of 12
<PAGE> 74
3. RIGHT OF SECOND REFUSAL.
Tenant shall have the right of second refusal on the fifth (5th) floor
of the Building (the "Second Refusal Space"), subject to the prior
right of first refusal granted to Turner Broadcasting System, Inc. Such
right of second refusal shall be exercised as follows: In the event
that, at any time during the Lease Term, Landlord receives and desires
to accept one or more offers (each, an "Offer") to lease a Second
Refusal Space and any other tenant of the Building with a prior right
of first refusal with respect thereto declines to exercise its right of
first refusal with respect to such Second Refusal Space, then Landlord
shall advise Tenant in writing (the "Advice") of such facts. The Advice
shall include a statement that the Advice is being given pursuant to
the right of second refusal granted in this Lease and a statement that
Tenant must respond to the Advice within ten (10) days of its receipt
of same or lose its right to lease the offered space. The Advice shall
also include the identity of the prospective tenant and a true, correct
and complete copy of the signed Offer. Tenant may lease such Second
Refusal Space in its entirety only, under the terms contained in the
Offer or on such other terms as may be acceptable to Landlord in its
reasonable discretion, by delivering written notice (the "Notice of
Exercise") of its election to lease the Second Refusal Space covered by
such Offer to Landlord within said ten (10) days period, except that
Tenant shall have no such right of second refusal, and Landlord need
not provide Tenant with an Advice, if:
1. Tenant is in default under the Lease at the time
Landlord would otherwise deliver the Advice; or
2. the Premises, or any portion thereof, is sublet at
the time Landlord would otherwise deliver the Advice;
or
3. the Lease has been assigned prior to the date
Landlord would otherwise deliver the Advice; or
4. Tenant is not occupying the Premises on the date
Landlord would otherwise deliver the Advice.
The term for the Second Refusal Space shall commence upon the
commencement date specified in the Advice and thereupon such Second
Refusal Space shall be considered a part of the Premises, provided that
all of the terms specified in the Advice shall govern Tenant's leasing
of the Second Refusal Space and, only to the extent that they do not
conflict with the Advice, the terms and conditions of this Lease shall
apply to the Second Refusal Space.
The Second Refusal Space (including improvements and
personalty, if any) shall be accepted by Tenant in its condition and
as-built configuration existing on the earlier of the date Tenant takes
possession of the Second Refusal Space or the date the term for such
Second Refusal Space commences, unless the Advice specifies any work to
be performed by Landlord in the Second Refusal Space, in which case
Landlord shall perform such work in the Second Refusal Space.
The rights of Tenant hereunder with respect to any Second
Refusal Space shall terminate on the earlier to occur of (i) the date
six (6) months prior to the expiration date of the original Lease Term
(without regard to renewals or extensions thereof); (ii) with respect
only to any Second Refusal Space described in an Advice (but not
otherwise), Tenant's failure to exercise its right of second refusal
within the ten (10) day period provided hereinabove with respect to any
such Second Refusal Space for which an Advice is so given by Landlord;
and (iii) with respect only to any Second Refusal Space described in an
Advice (but not otherwise), the date Landlord would have provided
Tenant an Advice thereof if Tenant had not been in violation of one or
more of the conditions set forth hereinabove.
EXHIBIT "G"
Page 2 of 12
<PAGE> 75
If Tenant exercises its right of second refusal, Landlord shall
prepare an amendment (the "Amendment") adding the Second Refusal Space
to the Premises on the terms set forth in the Advice, and reflecting
the changes in the Base Rent, Approximate Rentable Area of the
Premises, Tenant's Pro Rata Share, and other appropriate terms. A copy
of the Amendment shall be (i) sent to Tenant within a reasonable time
after receipt of the Notice of Exercise executed by Tenant, and (ii)
executed by Tenant and returned to Landlord within ten (10) days
thereafter.
4. TELECOMMUNICATIONS EQUIPMENT.
Upon, prior to or after completion of the Fourth Floor Expansion
Premises, Tenant shall have the right, to install the
Telecommunications Equipment in the Fourth Floor Expansion Premises.
Tenant agrees that all such equipment shall comply with all applicable
Lease provisions. Tenant (or its authorized representative) shall (a)
install the Telecommunications Equipment in compliance with all
applicable codes, ordinances, and statutes, (b) be responsible to
obtain all governmental approvals, permits, licenses, and the like
related to such installation and the operation of the
Telecommunications Equipment, (c) comply with all insurance
requirements applicable thereto, and (d) indemnify and hold Landlord
harmless for any claims, damages, losses, liabilities, or expenses
(including reasonable attorneys' fees) which Landlord may incur or
sustain by reason of any failure of Tenant to install the
Telecommunications Equipment in compliance with all applicable codes,
ordinances, and statutes and for any damage to the Premises, Building,
or Property caused by such installation. Landlord shall not be liable
for the failure of the Telecommunications Equipment (unless caused by
the negligent action or failure to act by Landlord or its agents) or
for the improper installation thereof by Tenant. Upon the expiration or
sooner termination of this Lease, Tenant will remove the
Telecommunications Equipment and the cabling from the risers, along
with any ancillary equipment or structures and shall repair any damage
to the Premises, the Building, or any other improvements to the
Property caused thereby. Tenant covenants that the Telecommunications
Equipment will not emit radiation in excess of that which may be
permitted under applicable law or regulation, as same may be modified
from time to time, including, without limitation, regulations of the
Federal Communications Commission, the Environmental Protection Agency,
and the Occupational Safety and Health Administration, applicable to
the emission of radiation from active telecommunications equipment or
similar facilities. Other than with respect to the rights of any
tenants, occupants or licensees under any currently existing leases or
licenses for space at the Property to continue to use and enjoy any
telecommunications or other equipment, Landlord will not knowingly
perform (or fail to perform) any act or permit any tenant, occupant or
licensor of the Property, and their respective employees and invitees,
or any other person or entity to perform (or fail to perform) any act,
that may interfere with or impede Tenant's use of the
Telecommunications Equipment. Tenant understands and agrees, however,
that Landlord may be required to shut down the power or other Building
services from time to time and, in such event, Landlord shall cooperate
with Tenant to the fullest extent possible to schedule such matters at
a time that may be mutually convenient in order to permit to the
fullest extent possible Tenant to continue to use the
Telecommunications Equipment in an unimpeded and uninterrupted manner.
Except in the case of emergency, Landlord shall provide Tenant with
written notice at least three (3) Business days prior to the date that
Landlord intends to shut down the power or other Building services. In
the event that Landlord so shuts down the power or other Building
services, in no event and under no circumstances shall Tenant's use of
the Generator, the Rooftop Equipment or the Supplement HVAC Systems be
impeded or interrupted unless such power or other Building services are
shut down as a result of an emergency. Landlord shall act reasonably
and in good faith for purposes of determining whether a state of
emergency exists sufficient to require the power or other Building
services to be shut down from time to time.
EXHIBIT "G"
Page 3 of 12
<PAGE> 76
5. SUPPLEMENTAL HVAC.
Subject to (i) compliance with all rules, regulations, statutes and
codes of any governmental authority having jurisdiction thereover, (ii)
Landlord's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, and (iii) Tenant's
removal and restoration obligation set forth below, Tenant shall have
the right to install supplemental heating, ventilation and
air-conditioning systems (the "Supplemental HVAC Systems"), to provide
HVAC capacity to the Premises sufficient for Tenant's Permitted Use.
The foregoing shall include granting to Tenant a right of access to,
and the non-exclusive use of, areas outside the Premises (including
areas within which the Building HVAC equipment and accessories are
located), for installation, maintenance, repair and (if necessary)
replacement of certain components of such Supplemental HVAC Systems;
provided such access shall be coordinated with Landlord and conducted
at such times and in such manner as is reasonably approved by Landlord
in order to ensure that any such work is performed properly, in
compliance with all applicable legal requirements and with a minimum of
disruption to, interference with and/or interruption of the quiet use
and enjoyment by all tenants of the Building of their respective
premises and the common areas. Although the precise location of the
principal components of the Supplemental HVAC Systems cannot be finally
determined until such time as Landlord has reviewed Tenant's Plans with
respect thereto, Landlord presently anticipates that such principal
components will be located in the parking garage directly across from
the northeast side of the second floor of the Building. The precise
location of the Supplemental HVAC Systems (and its principal
components) shall be identified by Landlord upon approval by Landlord
of Tenant's Plans. Any parking spaces eliminated as a result of the
installation of the Supplement HVAC Systems shall be paid for by Tenant
at the prevailing rate from time to time, and any such parking spaces
so utilized by Tenant for installing and operating the Supplement HVAC
Systems shall reduce the number of parking spaces otherwise available
to Tenant pursuant to the terms and provisions of Paragraph 1 of these
Special Stipulations. In connection with Landlord's evaluation and
identification of the location of the Supplemental HVAC Systems (and
its principal components), Tenant acknowledges and agrees that Landlord
must approve the size, weight, drainage, and other specifications of
the Supplemental HVAC Systems, its integration with any Building
systems, and any impact it may have thereon, and that Tenant shall
install at Landlord's direction such screening as Landlord may require
for purposes of making the area surrounding the Supplemental HVAC
Systems esthetically pleasing and reducing any noise and vibration
emanating from the Supplemental HVAC Systems (which screening shall be
constructed and installed by Tenant at its sole cost and expense).
Although the precise location of the Supplemental HVAC Systems (and its
principal components) cannot be identified as of this date, Landlord
hereby represents and warrants that it will designate an area of the
Property outside the Premises for purposes of locating, constructing
and installing the Supplemental HVAC Systems (and its principal
components). In connection with the foregoing, Tenant shall be
permitted to vent out the portion of the Fourth Floor Expansion
Premises (the precise location of which shall be approved by Landlord)
which faces the rear of the Building, at Tenant's sole cost and
expense. Tenant (a) shall install the Supplemental HVAC Systems in
compliance with all applicable codes, ordinances, and statutes, (b)
shall be responsible to obtain all governmental approvals, permits,
licenses, and the like related to such installation, (c) shall comply
with all legal and insurance requirements applicable thereto, and (d)
shall indemnify and hold Landlord harmless for any claims, damages,
losses, liabilities, or expenses (including reasonable attorneys' fees)
which Landlord may incur or sustain by reason of any failure of Tenant
to install the Supplemental HVAC Systems in compliance with all
applicable codes, ordinances, and statutes and for any damage to the
Premises, Building, or Property caused by such installation. Landlord
shall not be liable for the failure of the Supplemental HVAC Systems
(unless caused by the negligent action or failure to act by Landlord or
its agents) or for the improper installation thereof by Tenant. Upon
the expiration or sooner termination of this Lease, Tenant shall remove
the Supplemental HVAC Systems installed pursuant hereto (along with any
and all ancillary equipment or structures) from the Premises and repair
any damage to the Premises or Building caused by such removal.
EXHIBIT "G"
Page 4 of 12
<PAGE> 77
6. GENERATOR.
Subject to (i) compliance with all rules, regulations, statutes and
codes of any governmental authority having jurisdiction thereover, (ii)
Landlord's prior written consent as to the location and design and
installation plans and specifications therefor, which consent shall not
be unreasonably withheld, delayed or conditioned, and (iii) Tenant's
removal and restoration obligation set forth below, Tenant shall have
the right to purchase and install one generator (including any
necessary appurtenant equipment that is a part thereof, the
"Generator") and one fuel storage tank for the Generator (the
"Generator Fuel Tank") in the lower level of the parking garage of the
Building at a spot to be more specifically identified by Landlord (the
"Generator Area"). The precise location of the Generator shall be
determined based on the size and specifications of the Generator
submitted by Tenant to and approved by Landlord. Any parking spaces
eliminated after the date hereof as a result of the installation of the
Generator and Generator Fuel Tank shall be paid for by Tenant at the
prevailing rate from time to time, and any such parking spaces so
utilized by Tenant for installing and operating the Generator and
Generator Fuel Tank shall reduce the number of parking spaces otherwise
available to Tenant pursuant to the terms and provisions of Paragraph 1
of these Special Stipulations. Additionally, Landlord shall furnish a
pathway for Tenant to run lines from the Premises to the Generator at a
location chosen by Landlord as more fully set forth in Paragraph 7
hereof. Tenant's installation, use and operation of the Generator and
the Generator Fuel Tank shall be exercised: (1) in such manner as will
not create any hazardous condition or interfere with or impair the
operation of the heating, ventilation, air conditioning, plumbing,
electrical, fire protection, life safety, public utilities or other
systems or facilities in the Building; (2) in compliance with all
applicable laws, codes and regulations and the requirements of any
board of fire insurance underwriters or other similar bodies now or
hereafter constituted relating to or affecting thereto; (3) in such a
manner as will not directly or indirectly interfere with, delay,
restrict or impose any expense, work or obligation upon Landlord in the
use or operation of such Building; and (4) at Tenant's cost, including
the cost of repairing all damage to the Building and any personal
injury and/or property damage attributable to the installation,
inspection, adjustment, maintenance, removal or replacement of any
equipment, apparatus or facilities pursuant to this Paragraph 6. In
connection with Tenant's use of the Generator and the Generator Fuel
Tank, and subject to the above-stated responsibilities of Tenant,
Tenant shall have the right to operate the Generator at such intervals
and for such periods of time as may be recommended by or required by
the manufacturer of such generator for testing or maintenance purposes,
or at such other intervals as Tenant deems necessary in its reasonable
judgment for purposes of operating its business; provided (i) to the
fullest extent possible, Tenant will provide notice to Landlord of the
scheduled times for such regular testing and operation for maintenance
purposes, (ii) Tenant will use all reasonable and diligent efforts to
perform any testing or periodic operation for maintenance purposes
outside of Normal Business Hours (it being acknowledged by Landlord
that certain testing and operation for maintenance and other business
purposes will necessarily take place during peak operational periods,
which may include during Normal Business Hours), and (iii) such testing
will be performed in a manner reasonably calculated to minimize any
inconvenience to other tenants and occupants of the Building, and their
respective employees and invitees.
Tenant will obtain prior to the installation of the Generator and
Generator Fuel Tank, any and all necessary licenses, approvals and
permits necessary for the installation, maintenance and use of the
Generator, Generator Fuel Tank and any equipment installed in
connection therewith. Tenant shall indemnify and hold Landlord harmless
from and against any and all loss, cost (including reasonable
attorney's fees incurred in defending Landlord), damage or liability
arising out of any violations of any laws, statutes, ordinances, rules
or regulations, or arising out of the use, operation and maintenance of
the Generator and the Generator Fuel Tank, including, without
EXHIBIT "G"
Page 5 of 12
<PAGE> 78
limitation any damage Landlord may sustain as a result of the
malfunction, leaking or any other condition of the Generator, Generator
Fuel Tank or other related equipment described in this paragraph. If
the rate of any insurance carried by Landlord is increased as a result
of Tenant's installation of the Generator and related Generator Fuel
Tank, then Tenant will pay to Landlord within thirty (30) days after
Landlord delivers to Tenant a certified statement from Landlord's
insurance carrier stating that the rate increase was caused thereby, a
sum equal to the difference between the original premium and the
increased premium resulting therefrom. Upon the expiration or sooner
termination of this Lease, Tenant shall remove the Generator and
Generator Fuel Tank along with any ancillary equipment or structures
and shall repair any damage to the Premises, the Building, or any other
improvements to the Property caused thereby.
7. CONNECTING RIGHTS.
Landlord agrees that the right of Tenant to install the facilities and
systems described in Paragraphs 4, 5, 6, 10 and 13 hereof includes (i)
the right to connect such systems to the Premises by running supply
lines, connections, cabling and other appropriate means of connection
from the areas of the Building within which certain equipment forming a
part of such systems are installed to all areas of the Premises,
including the use of vertical risers, core areas and other means of
connection as are shown on the Plans or as may otherwise be designated
by Landlord in good faith, and (ii) a right of access to such areas in
order to perform necessary maintenance, repair, replacement (if
necessary) and testing, provided such access shall be coordinated with
Landlord and conducted at such times and in such manner as is
reasonably approved by Landlord in order to ensure that any such work
is performed properly, in compliance with all applicable legal
requirements and with a minimum of disruption to, interference with
and/or interruption of the quiet use and enjoyment by all tenants of
the Building of their respective premises and the common areas.
Landlord warrants and represents that the right of quiet enjoyment
granted by Landlord to other tenants of the Building will not impede or
unreasonably interfere with the rights granted to Tenant in
subparagraphs (i) and (ii) of this Paragraph (it being understood,
however, that such Tenant rights shall be subject to the reasonable
rules and regulations of Landlord designed to minimize any disruption
to or interference with the quiet use and enjoyment by other tenants of
the Building). In performing the connections and other activities
described in this Paragraph, Tenant (a) shall perform same in
compliance with all applicable codes, ordinances, and statutes, (b)
shall be responsible to obtain all governmental approvals, permits,
licenses, and the like related thereto, (c) shall comply with all legal
and insurance requirements applicable thereto, (d) shall repair and/or
restore any areas of Building or Land affected thereby, and (e) shall
indemnify and hold Landlord harmless for any claims, damages, losses,
liabilities, or expenses (including reasonable attorneys' fees) which
Landlord may incur or sustain by reason of any failure of Tenant to
perform same in compliance with all applicable codes, ordinances, and
statutes and for any damage to the Premises, Building, or Property
caused thereby. Unless Landlord notifies Tenant no later than ninety
(90) days prior to the last day of the Lease Term that it is requiring
Tenant to surrender the connections and lines described in this
Paragraph 7 as redesigned by Tenant in accordance herewith upon the
expiration or sooner termination of this Lease (in which case the same
shall be surrendered by Tenant at such time), then Tenant will, on or
before the date of expiration or sooner termination of this Lease (and
at Tenant's sole expense), remove such connections and repair any
damage to the Premises, the Building, or any other improvements to the
Property caused thereby, provided the foregoing removal obligation will
not be construed to require the removal of any cables or
telecommunications lines which thereafter continues to serve as a
connection to telecommunications service being provided to tenants of
the Building. Landlord agrees to cooperate with Tenant and its general
contractor to facilitate such access, provided (i) such access will be
scheduled at night or during other non-business hours, or at such other
times as may be consented to by the affected tenants, consistent with
the rights of such tenants pursuant to
EXHIBIT "G"
Page 6 of 12
<PAGE> 79
their leases, including the right of quiet enjoyment, (ii) such work
shall be performed in accordance with all of the provisions of this
Paragraph 7 with regard to the performance of such work by Tenant and
its contractors, and (iii) such work will be performed as expeditiously
as possible, in a manner which will cause a minimum of disturbance and
disruption to the affected tenants, and in all events in a manner which
will not violate the rights of such affected tenants, or their quiet
enjoyment, under their respective leases. Without limitation, unless
approved by the affected tenant(s), the foregoing will include
protection of any furniture, fixtures and/or equipment of such affected
tenants, removal of construction equipment, tools and other items
necessary to perform such work from the affected areas except when such
work is actively being conducted, and daily clean-up of construction
debris, dust and materials in a manner acceptable to the affected
tenants.
8. FLOOR LOADING.
Tenant agrees that it shall not place a load upon any floor which
exceeds the load per square foot which such floor was designed to carry
and which is allowed by law; provided, however, that Landlord shall
permit reinforcing the load capacity of the Fourth Floor Expansion
Premises and the Third Floor Expansion Premises (and, possibly, the
Fifth Floor in the event Tenant occupies the Fifth Floor pursuant to
this Lease, or otherwise) (collectively, the "Permitted Reinforcement
Floors"), pursuant to plans and specifications approved by Landlord
(which approval shall not be unreasonably withheld, conditioned or
delayed), so long as (a) Tenant shall remove any and all improvements
constructed or installed by Tenant for purposes of so reinforcing the
Permitted Reinforcement Floors upon the expiration or earlier
termination of the Lease, and (b) any and all improvements so
constructed or installed by Tenant for purposes of so reinforcing the
Permitted Reinforcement Floors are located within the Premises leased
from time to time by Tenant (and the Fifth Floor of the Building in the
event Tenant occupies such Fifth Floor pursuant to this Lease, or such
other areas in, on or about the interior of the Building core as
permitted by Landlord in writing, which permission shall not be
unreasonably withheld, conditioned or delayed.), and shall not be
visible in any way from the exterior of the Premises.
9. FIRE PROTECTION.
Landlord consents and agrees to the installation by Tenant of a fire
protection system within the Fourth Floor Expansion Premises, which
shall be a FM200 fire suppression, dry sprinkler system (or such other
system approved by Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed). Landlord will enable Tenant to
connect up to ten (10) zones to Landlord's fire alarm system. All costs
including programming the system shall be at Tenant's sole cost and
expense. All costs associated with the modification or removal of any
existing Landlord systems shall be at Tenant's sole cost and expense.
10. ELECTRICAL.
In order to accommodate and provide adequate electrical service for
Tenant's Permitted Use within the Fourth Floor Expansion Premises,
Tenant will be permitted to supplement the electrical service serving
the Fourth Floor Expansion Premises in order to utilize at all times
during the Term an additional 2,000 amps of 3 Phase, 480 volt
electrical service available to the Building (in addition to that which
is currently available as part of the Building standard), provided that
such service will be installed from the Building electrical room to the
Fourth Floor Expansion Premises at Tenant's sole expense, all in
accordance with plans approved by Landlord, not to be unreasonably
withheld, conditioned or delayed. At such time as Landlord's
electrician has certified that such additional 2000 amps of electrical
service is available in the Building electrical room for Tenant's
installation into the Fourth Floor Expansion Premises, Tenant agrees
EXHIBIT "G"
Page 7 of 12
<PAGE> 80
to pay Landlord a single, lump sum payment of $50,000.00 for such
electrical service, which amount shall be deemed and construed to be a
Tenant Cost under the terms of the Fourth Floor Expansion Premises
Lease Improvement Agreement (and therefore eligible for payment from
Landlord's Fourth Floor Expansion Allowance in accordance with the
terms of the Fourth Floor Expansion Premises Lease Improvement
Agreement). Landlord hereby warrants and represents that the aforesaid
additional 2000 amps are presently available to the Building and will
remain available to the Building for Tenant's sole and exclusive use
during the Term. Without limitation, Tenant agrees that any
modifications to the electrical systems contemplated herein must be
performed and conducted at such times and in such manner as will avoid
to the fullest extent possible and practical any disruption or
interruption in electrical service to the Building which are either
occupied or otherwise in use. Landlord must approve any disruption or
interruption in electrical service to any other areas of the Building,
which approval shall not be unreasonably withheld, conditioned or
delayed so long as such interruption is scheduled during non-business
hours. In addition, upon notice by Tenant submitted no earlier than the
first anniversary of the Fourth Floor Expansion Effective Date (and no
later than the third anniversary of the Fourth Floor Expansion
Effective Date, after which time Tenant's rights contemplated in this
sentence shall expire), Tenant shall have the right to request an
additional 1,000 amps of 3 Phase, 480 volt electrical service (in
addition to that which is described hereinabove) for purposes of
servicing the Fourth Floor Expansion Premises, but not otherwise. Upon
receipt of Tenant's request, Landlord shall provide Tenant with an
estimate of the cost of providing such service to the Building
electrical room. Upon receipt of Tenant's payment of the anticipated
cost of providing such electrical service (together with a fee in the
amount of ten percent (10%) of such cost to be paid to Landlord on
account of the cost to order, construct, and install such additional
service to the Building electrical room), Landlord shall enter into
such contracts as may be necessary or appropriate, if any, for purposes
of arranging for such additional electrical service to be provided to
the Building electrical room, and shall thereafter diligently pursue
the construction and installation of such service through completion.
Landlord hereby warrants and represents that the aforesaid additional
1000 amps are presently available to the Building and will remain
available to the Building for Tenant's sole and exclusive use during
the Term if Tenant exercises its rights thereto as provided herein on
or before the third anniversary of the Fourth Floor Expansion Date (at
which time Tenant's right to such additional amps shall terminate if
not then exercised by Tenant pursuant to the terms hereof). In the
event that Tenant requests any additional electrical service beyond
that which is described in the immediately preceding provisions of this
Special Stipulation, Landlord shall cooperate in good faith with Tenant
to provide such additional service so long as the allocation of such
additional service shall not, in Landlord's sole determination,
adversely affect Landlord's ability to provide existing or future
tenants of the Building with the level of electrical service Landlord
may anticipate to be utilized by such tenants. In the event that
Landlord is unable to accommodate Tenant's request for additional
electrical service in excess of the additional 3000 amps described
hereinabove, Landlord shall cooperate with Tenant to permit Tenant to
purchase additional electrical service directly from Georgia Power or
any other provider of electrical service to the Building. Any and all
costs and expenses associated with such installation or use of the
additional power shall be paid for by Tenant. In the event that
Landlord is in a position to accommodate Tenant's request for
additional electrical service beyond that which is expressly provided
for in this Special Stipulation, Landlord shall provide Tenant with an
estimate of the cost of providing such service. Upon receipt of
Tenant's payment of the anticipated cost of providing such additional
electrical service (together with a fee in the amount of ten percent
(10%) of such cost to be paid to Landlord on account of the cost to
order, construct and install such additional service to the Building
electrical room), Landlord shall enter into such contracts as may be
necessary or appropriate for purposes of arranging for such additional
electrical service to be provided to the Building electrical room for
installation to the Premises by Tenant, and shall thereafter diligently
pursue the construction and installation of such service to the
Building electrical room through completion.
EXHIBIT "G"
Page 8 of 12
<PAGE> 81
11. SOUND CONTROL.
Tenant is responsible for taking the necessary measures to reduce any
sound transmissions caused by Tenant's Telecommunications Equipment
between the Premises and the adjacent premises. In addition, the
Generator, including radiator, shall be installed in a walk-around
type, sound attenuating enclosure which shall limit the sound to no
more than 85 dBA as measured at three (3) feet from any side, top or
bottom, under all operating conditions.
12. ADDITIONAL SECURITY SYSTEM.
Tenant hereby agrees to the exercise by Landlord and its agents and
employees, within their sole discretion, of such security measures as
Landlord deems necessary or appropriate for the Building.
Notwithstanding the foregoing, Tenant may install a security system
within the Premises, provided such system and its installation (i)
shall be subject to Landlord's prior written approval, which shall not
be unreasonably withheld (provided it shall not be unreasonable for
Landlord to deny consent to any system which is not compatible with the
building's overall security and fire safety and life safety systems),
(ii) shall be in accordance with all applicable legal requirements
(iii) shall be performed at Tenant's sole expense, and shall be
otherwise installed in accordance with the provisions governing
alterations under Section 8 of the Lease.
13. MFS FIBER.
Landlord and Tenant agree to cooperate for purposes of facilitating the
installation by MFS/Worldcom of fiber optic service (the "MFS Fiber")
to the Building. Landlord and Tenant acknowledge that there are no
assurances that MFS/Worldcom will agree to install the MFS Fiber to the
Building, and neither such party shall have any obligation to pay any
cost or expense in connection with such installation to the Building.
In the event that MFS/Worldcom so elects to install the MFS Fiber to
the Building, Tenant shall pay the cost and expense of installing such
cable, conduit, and other improvements as may be required for purposes
of connecting the MFS Fiber from the point at which the MFS Fiber is
installed in the Building to the Premises. Landlord agrees that in the
event that the MFS Fiber is installed in the Building, Landlord shall
(a) use reasonable efforts to cooperate with MFS/Worldcom to ensure the
continuous operation and maintenance of the MFS Fiber in the Building
and the Premises during the Lease Term, and (b) take no action which
would cause the termination or interruption of the MFS Fiber service to
the Building or the Premises without Tenant's prior consent, which
consent shall not be unreasonably withheld, conditioned or delayed.
14. ROOF EQUIPMENT.
It is understood by Landlord that Tenant may desire to install two
satellite dishes and a microwave relay station antenna (the "Roof
Equipment") on the roof of the Building for the purpose of transmitting
and receiving aerial transmissions. At least thirty (30) days prior to
the time that Tenant contemplates installation of the Roof Equipment,
Tenant shall deliver to Landlord detailed specifications for the Roof
Equipment, and Landlord and Tenant shall use their reasonable efforts
to determine and agree to a location on the roof of the Building where,
and a method by which, the Roof Equipment can be installed by Tenant
(but at no cost or expense to Landlord) without, in the reasonable
judgment of Landlord and the design architect of the Building (which
judgment shall not be unreasonably withheld or delayed), interfering
with or impeding the operations of Landlord or the operations of any
present tenant of the Building at the time the Roof Equipment is
installed, or requiring any design or other changes to the Building.
EXHIBIT "G"
Page 9 of 12
<PAGE> 82
At such time as the location and installation method are thus
determined and agreed, Tenant, at its sole cost and expense, may
install such Roof Equipment at the location and in the manner agreed by
Landlord and Tenant at such time as Landlord shall reasonably designate
(it being understood and agreed that Landlord hereby represents and
warrants that Landlord shall reserve at all times during the Term of
the Lease space sufficient on the Roof to install the Roof Equipment of
the kinds and types customarily installed by communication companies
with communications requirements comparable to Tenant's). If the agreed
location for the Roof Equipment is in such a position that the Roof
Equipment will be visible from the ground, Landlord may require that
Tenant, at Tenant's expense, provide, install and maintain an
appropriate screen around the Roof Equipment. Tenant shall cause the
installation of the Roof Equipment and any screen to be conducted in a
good, workmanlike and lien-free manner that will not interfere with or
impede the operation of the Building and the conduct of business by
other tenants of the Building. Tenant shall perform such installation,
and shall at all times maintain and operate the Roof Equipment in such
a manner as to always be in compliance with all applicable governmental
codes, statutes, ordinances, rules and regulations and all requirements
of Landlord's and Tenant's insurance policies, and shall obtain such
licenses or permits as may be required by applicable law. Landlord
makes no warranties whatsoever as to the permissibility of, or the
ability to obtain licenses or permits with respect to, the Roof
Equipment. Prior to installation of the Roof Equipment and throughout
the Lease Term upon Landlord's request, Tenant shall provide Landlord
with documentation (i) evidencing that Tenant has entered into an
appropriate contract for the regular maintenance and monitoring of the
Roof Equipment, and (ii) confirming that Tenant's liability insurance
as required under Paragraph 12 of this Lease covers all of Tenant's
activities in installing, maintaining and operating the Roof Equipment.
Tenant agrees that it shall pay Landlord as additional Rent the sum of
$1,200.00 per year for each satellite dish comprising a portion of the
Roof Equipment installed pursuant to the provisions of this Special
Stipulation, and $1,000.00 per year for the microwave relay station
antenna comprising the balance of such Roof Equipment. Landlord shall
incur no cost or expense related to or arising out of the Roof
Equipment or the purchase, installation, maintenance, repair or
operation of the Roof Equipment, Tenant agreeing to pay all of same.
Tenant hereby indemnifies and agrees to hold Landlord harmless from and
against any and all loss, cost, damage and liability incurred by
Landlord arising out of or related to the Roof Equipment or Tenant's
purchase, installation, maintenance, repair or operation of the Roof
Equipment. If at any time during the term of this Lease after the
initial installation of the Roof Equipment, Landlord determines that
the location or operation of the Roof Equipment impedes the operation
of the Building or impedes the operations of any tenant (other than any
Tenant in the Building prior to the date hereof which Tenant hereby
covenants not to disturb through the use of the Roof Equipment) or
proposed tenant of the Building, then Landlord, at Landlord's expense
(and without disruption or interruption of the operation of the Rooftop
Equipment during any period of relocation without Tenant's consent,
which consent shall be provided at reasonable times upon reasonable
notice), may relocate the Roof Equipment to another location on the
roof which location shall be subject to Tenant's reasonable approval.
In addition, Tenant hereby recognizes, understands and agrees that
Landlord is entitled to install for its own account, or permit the
installation by other tenants or persons, other antenna and
telecommunication facilities on the roof of the Building without
Tenant's approval or consent after the date hereof so long as the
installation and/or operation of such antenna or other
telecommunications equipment will not unreasonably interfere with the
operation of Tenant's Roof Equipment. At the end of the Lease Term,
Tenant, at Tenant's sole cost and expense, shall remove the Roof
Equipment from the Building, and shall restore the roof of the Building
to its condition as of the Commencement Date.
EXHIBIT "G"
Page 10 of 12
<PAGE> 83
15. INTERPRETATION.
In the event of any direct or indirect conflict between the terms of
this Exhibit "G" and the terms of the body of this Lease, and any
Exhibits hereto, this Exhibit "G" shall govern and control in all
respects.
16. ACCESS.
Subject in all respects to the provisions of this Lease governing
casualty, condemnation, governmental regulation or intervention and
emergencies, Tenant and Tenant's employees, agents, sub-contractors,
invitees, assignee's and licensee's shall have continuous and
uninterrupted access (24 hours per day on every day of each year during
the Lease Term) to the Premises, Telecommunications Equipment,
Supplemental HVAC Systems, Generator Area, Generator, Generator Fuel
Tank, the connectors described in Paragraph 5(d) of this Exhibit "G",
the Roof Equipment, and the MFS Fiber (collectively, the "Tenant
Area"), for purposes concerning or pertaining to Tenant's Permitted
Use, including without limitation, the delivery, installation,
maintenance and repair of equipment or other personal property therein
or thereto.
17. QUIET ENJOYMENT.
Landlord represents and warrants that Tenant shall peaceably and
quietly have, hold and enjoy the right to use the Tenant Area without
interference, hindrance or molestation from Landlord or any party
claiming by, through or under Landlord upon (and subject to) the terms
and conditions of this Lease.
18. ADDITIONAL BUILDING SERVICES.
Landlord and Tenant have agreed that Tenant may install the
Supplemental HVAC Systems that will require additional chilled water as
part of the installation and operation thereof. As such, Tenant shall
cause a special meter or submeter (as directed by Landlord) to be
installed in order to measure the actual amount of chilled water
consumed by Tenant. In addition, Landlord and Tenant anticipate that
the Telecommunications Equipment and the Supplemental HVAC Systems will
result in the use of electrical current in excess of the building
standard allocated in accordance with Exhibit "H"attached hereto. Upon
receipt of Tenant's Plans for the Fourth Floor Expansion Premises,
Landlord shall cooperate with Tenant for purposes of identifying such
meters and submeters as may be required to be installed for purposes of
measuring the amount of electrical current so utilized by Tenant in
excess of the foregoing building standard allocation, and Tenant shall
construct and install such meters or submeters as part of the Fourth
Floor Expansion Tenant Improvements. The cost and expense of such
meters or submeters, as the case may be, for purposes of measuring
chilled water and/or electricity shall be paid for and installed by
Tenant at its sole cost and expense. Landlord shall cause such meters
or submeters to be read monthly, in arrears, and shall render an
invoice to Tenant for the services measured thereby to be paid at the
time and in the manner Base Rent and other charges are required to be
paid hereunder.
Finally, Landlord and Tenant acknowledge that this Lease permits Tenant
to install Telecommunications Equipment on the Third Floor Expansion
Premises (and, possibly, the Fifth Floor in the event that Tenant
occupies the Fifth Floor pursuant to the terms of this Lease, or
otherwise) (the "Additional Telecommunications Space"). In the event
that Tenant elects to utilize Additional Telecommunications Space for
the construction, installation and operation of Telecommunications
Equipment, Landlord must review and approve (which approval shall not
be unreasonably withheld, conditioned or delayed) all equipment, tenant
improvement, and other plans proposed by Tenant for purposes of
constructing, installing and operating any Telecommunications Equipment
within the Additional Telecommunications Space as a condition to
Landlord's permission to so construct, install and operate any
Telecommunications Equipment
EXHIBIT "G"
Page 11 of 12
<PAGE> 84
within the Additional Telecommunications Space. Tenant hereby ratifies
and confirms the provisions of the Lease requiring Tenant to pay for
any increased usage in electricity (including any additional electrical
amperage contemplated by the provisions of Paragraph 10 of these
Special Stipulations), water, or other utilities serving the Premises
in excess of those services generally consumed by tenants of general
office space, and shall install such meters or submeters (as directed
by Landlord) for purposes of measuring the consumption of such
additional utilities or other services as a result of the installation
of the Telecommunications Equipment in the Additional
Telecommunications Space, or otherwise.
EXHIBIT "H"
BUILDING STANDARD ELECTRICAL SPECIFICATIONS
BUILDING STANDARD RATED ELECTRICAL DESIGN LOAD:
LOW VOLTAGE - 2 WATTS PER RENTABLE SQUARE FOOT
HIGH VOLTAGE - 2 WATTS PER RENTABLE SQUARE FOOT
BUILDING STANDARD CIRCUITS:
LOW VOLTAGE - 1 PER 250 RENTABLE SQUARE FOOT
HIGH VOLTAGE - 1 PER 800 RENTABLE SQUARE FOOT
BUILDING STANDARD ELECTRICAL CONSUMPTION LEVELS:
LOW VOLTAGE - 2 WATTS PER RENTABLE SQUARE FOOT AVERAGE PER FLOOR FOR
EACH NORMAL BUSINESS HOUR
HIGH VOLTAGE - 2 WATTS PER RENTABLE SQUARE FOOT AVERAGE PER FLOOR FOR
EACH NORMAL BUSINESS HOUR
Page 12 of 12
<PAGE> 85
LEASE
TABLE OF CONTENTS
<TABLE>
<S> <C>
AND PROPERTY ............................................................................. 7
AND POSSESSION ........................................................................... 7
TO RENT .................................................................................. 9
WITH LAWS ................................................................................ 10
AND SUBLETTING ........................................................................... 12
AND INDEMNIFICATION ...................................................................... 14
OF SUBROGATION ........................................................................... 16
AND UTILITIES ............................................................................ 16
CERTIFICATE .............................................................................. 19
OVER ..................................................................................... 20
AND REGULATIONS .......................................................................... 21
BY LANDLORD .............................................................................. 21
OR BANKRUPTCY ............................................................................ 22
BY FIRE, ETC ............................................................................. 25
BY LANDLORD .............................................................................. 28
OF LANDLORD TO PERFORM ................................................................... 28
OF PREMISES .............................................................................. 28
RIGHTS RESERVED TO THE LANDLORD .......................................................... 29
AND ASSIGNS .............................................................................. 30
'S FEES .................................................................................. 30
DEPOSIT .................................................................................. 30
STATEMENTS ............................................................................... 32
AUTHORITY ................................................................................ 32
AND GROUND LESSOR APPROVALS .............................................................. 33
'S LIEN .................................................................................. 34
ENJOYMENT ................................................................................ 34
'S LIABILITY ............................................................................. 34
ESTATE ................................................................................... 35
EFFECTIVE DATE ........................................................................... 35
MATERIALS ................................................................................ 35
PROVISIONS ............................................................................... 36
/FITNESS FACILITY ........................................................................ 36
STIPULATIONS ............................................................................. 36
BASE RENT ................................................................................ 36
</TABLE>
i
<PAGE> 1
EXHIBIT 10.22(b)
FIRST AMENDMENT TO AMENDED AND RESTATED LEASE
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LEASE (hereinafter
referred to as this "Amendment") is made and entered into as of the 23rd day of
November, 1999, by and between 101 MARIETTA STREET ASSOCIATES ("Landlord") and
INTERLAND, INC. ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into that certain Lease Agreement
dated February 26, 1999 (the "Original Lease"), covering premises in the office
building commonly known as "Centennial Tower" located at 101 Marietta Street,
City of Atlanta, Fulton County, Georgia, as modified and amended pursuant to
that certain First Amendment to Lease Agreement, dated as of April 1, 1991,
between Landlord and Tenant, and that certain Second Amendment to Lease
Agreement, dated as of May 21, 1999, between Landlord and Tenant, and as Amended
and Restated pursuant to that certain Amended and Restated Lease Agreement,
dated as of September 28, 1999, between Landlord and Tenant (the Original Lease,
as so modified, amended and restated, is hereinafter referred to as the
"Lease"); and
WHEREAS, Landlord and Tenant desire to modify and amend the Lease as
more fully set forth below;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant do hereby
covenant and agree as follows:
1. DEFINITIONS. For all purposes of this Amendment, unless
otherwise expressly provided in this Amendment or unless the context in which
such term is used indicates a contrary intent, the capitalized terms not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Lease.
2. MODIFICATION AND AMENDMENT OF LEASE. Landlord and Tenant do
hereby modify and amend the Lease as follows:
(1) The definition of "Approximate Rentable Area of the
Premises" appearing in Paragraph 1 of the Lease is hereby modified and amended
by adding the following provision at the end thereof:
"In addition, effective as of the Fifth Floor
Expansion Effective Date (which may occur prior to, contemporaneously with, or
after the Third Floor Expansion Effective Date and/or the Fourth Floor Expansion
Effective Date), the Approximate Rentable Area of the
<PAGE> 2
Premises shall be increased by 18,105 square feet."
(2) The definition of "Base Rent" appearing in Paragraph
1 of the Lease is hereby modified and amended by adding the following provision
at the end thereof:
"In addition, from and after the Fifth Floor
Expansion Effective Date, Base Rent shall also mean
and include the following additional Base Rent:
<TABLE>
<CAPTION>
RENTAL ANNUAL MONTHLY
RATE PER RENTABLE BASE BASE
DATE: SQ. FT. RENT RENT
----- ----------------- ------ -------
<S> <C> <C> <C>
From The Fifth Floor $15.00 $271,575.00 $22,631.25
Expansion Effective Date
through July 31, 2000
From August 1, 2000 $15.75 $285,153.75 $23,762.81
through July 31, 2001
From August 1, 2001 $16.50 $298,732.50 $24,894.37
through July 31, 2002
From August 1, 2002 $17.25 $312,311.25 $26,025.93
through July 31, 2003
From August 1, 2003 $17.75 $321,363.75 $26,780.31
through July 31, 2004
From August 1, 2004 $18.50 $334,942.50 $27,911.87
through July 31, 2005
From August 1, 2005 $18.75 $339,468.75 $28,289.06
through July 31, 2006
From August 1, 2006 $19.25 $348,521.25 $29,043.43
through July 31, 2007
From August 1, 2007 $19.75 $357,573.75 $29,797.81
through July 31, 2008
From August 1, 2008 $20.25 $366,626.25 $30,552.18
through July 31, 2009
</TABLE>
(3) The definition of "Base Year Operating Costs"
appearing in Paragraph 1 of the Lease is hereby modified and amended by
replacing the word "and" in the fourth line
<PAGE> 3
thereof with a comma, and by adding the phrase "and the Fifth Floor Expansion
Premises" to the fourth line thereof immediately following the word "Premises"
and before the word ", respectively".
(4) The Lease is hereby modified and amended by adding
the following new definitions immediately after the defined term "Estimated
Costs" and immediately preceding the defined term "Fourth Floor Expansion
Effective Date":
"'Fifth Floor Expansion Effective Date' means the
date upon which the Fifth Floor Expansion Premises has been substantially
completed (as defined in subparagraph 4(c), below) in accordance with the plans
and specifications therefor (other than any immaterial work described and
identified on Landlord's Punch List which cannot be completed on such date,
provided such incompletion will not substantially interfere with Tenant's use of
the Fifth Floor Expansion Premises); provided, however, that the date of
substantial completion for purposes of determining the Fifth Floor Expansion
Effective Date and the payment of Rent with respect to the Fifth Floor Expansion
Premises shall be accelerated by the number of days of any Tenant Delay, and
shall in any event be no later than June 1, 2000 unless a work or other delay is
caused by Landlord or its agent or contractors by reason of any of such parties'
failure to timely complete Landlord's Work or the Tenant Improvements in the
Fifth Floor Expansion Premises, or otherwise."
"'Fifth Floor Expansion Premises' means all of the
Fifth Floor of the Building, being the space labeled as such on Exhibit 'B-3'
attached hereto, consisting of 18,105 rentable square feet, together with any
improvements now or at any time hereinafter comprising or built into such
space."
"'Fifth Floor Expansion Premises Lease Improvement
Agreement' means the Fifth Floor Expansion Premises Lease Improvement Agreement
attached hereto as Exhibit 'J' and by this reference incorporated herein."
"'Fifth Floor Expansion Premises Schedule of
Improvements' means the scheduling matters set forth on Exhibit 'J-1' attached
hereto and by this reference incorporated herein."
(5) The definition of "Landlord's Allowance" appearing in
Paragraph 1 of the Lease is hereby modified and amended by replacing the word
"and" in the second line thereof with a comma, and by adding the phrase "and the
Fifth Floor Expansion Premises Lease Improvement Agreement" to the second line
thereof immediately following the word "Agreement" and before the words ", as
the".
(6) The definition of "Landlord's Punch List" appearing
in Paragraph 1 of the Lease is hereby modified and amended by adding the phrase
"and the "Fifth Floor Expansion Premises, as the case may be," to the second
line thereof immediately following the word "Premises" and before the word ",
which".
3
<PAGE> 4
(7) The definition of "Landlord's Work" appearing in
Paragraph 1 of the Lease is hereby modified and amended by replacing the word
"and" in the second line thereof with a comma, and by adding the phrase "and the
Fifth Floor Expansion Premises Lease Improvement Agreement," to the second line
thereof immediately following the word "Agreement" and before the word ", as
the".
(8) The definition of "Lease Improvement Agreements"
appearing in Paragraph 1 of the Lease is hereby modified and amended by
replacing the word "and" in the second line thereof with a comma, and by adding
the phrase "and the Fifth Floor Expansion Premises Lease Improvement Agreement"
at the end of such definition immediately following the word "Agreement".
(9) The definition of "Premises" appearing in Paragraph 1
of the Lease is hereby modified and amended by adding the phrase "or the Fifth
Floor Expansion Effective Date" to the second line thereof immediately following
the word "Date" and before the word ", respectively"; and by replacing the word
"and" in the fourth line thereof with a comma, and by adding the phrase "and the
Fifth Floor Expansion Premises" to the fourth line thereof immediately following
the word "Premises" and before the words ", as the".
(10) The definition of "Schedule of Improvements"
appearing in Paragraph 1 of the Lease is hereby modified and amended by
replacing the word "and" in the fourth line thereof with a comma, and by adding
the phrase "and the Fifth Floor Expansion Premises Schedule of Improvements" to
the fifth line thereof immediately following the word "Improvements" and before
the word ", respectively".
(11) The definition of "Tenant Improvements" appearing in
Paragraph 1 of the Lease is hereby modified and amended by replacing the word
"and" in the second line thereof with a comma, and by adding the phrase "and the
Fifth Floor Expansion Premises Lease Improvement Agreement" at the end of such
definition immediately following the word "Agreement".
(12) The definition of "Tenant's Cost" appearing in
Paragraph 1 of the Lease is hereby modified and amended by replacing the word
"and" in the first line thereof with a comma, and by adding the phrase "and the
Fifth Floor Expansion Premises Lease Improvement Agreement" to the second line
thereof immediately following the word "Agreement" and before the words ", as
the".
(13) Subparagraph (4)(c) of the Lease, appearing on pages
7 and 8 thereof, is hereby modified and amended by replacing the word "and" in
the third line thereof with a comma, and by adding the phrase "and the Fifth
Floor Expansion Premises" at the end of the third line thereof immediately
following the word "Premises". Subparagraph 4(c) of the Lease is hereby further
modified and amended by adding the phrase "(or the Fifth Floor Expansion
4
<PAGE> 5
Premises Lease Improvement Agreement, as the case may be)" to the sixth line
thereof immediately following the word "Agreement" and before the word "with".
In addition, such subparagraph (4)(c) is hereby further modified and amended by
adding the phrase "or the Fifth Floor Expansion Premises" to the 13th line
thereof immediately following the word "Premises" and before the words ", as the
case". Such subparagraph (4)(c) is hereby further modified and amended by
replacing the word "and" in the 17th, 19th and 22nd lines thereof with commas,
and by adding the phrase "and the Fifth Floor Expansion Premises" to each such
line immediately following the word "Premises" and before the words ", as the
case" in each of the foregoing lines of such subparagraph.
(14) Subparagraph 4(d) of the Lease, appearing on page 8
thereof, is hereby modified and amended by adding the phrase "or the Fifth Floor
Expansion Premises" to the first line thereof immediately following the word
"Premises" and before the words ", or possession". Such subparagraph 4(d) is
hereby further modified and amended by adding the phrase "or the Fifth Floor
Expansion Effective Date, as the case may be," to the 7th line thereof
immediately following the words "Effective Date" and before the word
"notwithstanding".
(15) Paragraph 4(e) of the Lease, appearing on page 8
thereof, is hereby modified and amended by replacing the word "and" in the 6th
line there of with a comma, and by adding the phrase "and the Fifth Floor
Expansion Effective Date" to the 7th line thereof immediately following the word
"Date" and before the words ", Tenant shall".
(16) Paragraph 9(a) of the Lease, appearing on pages 10
and 11 thereof, is hereby modified and amended by deleting the 14th and 15th
lines thereof in their entirety, and by substituting in lieu thereof the
following new provision: "Primary Lease Improvement Agreement, the Fourth Floor
Expansion Premises Lease Improvement Agreement, and the Fifth Floor Expansion
Premises Lease Improvement Agreement, and that no representations respecting the
condition of the".
(17) Paragraph 33 of the Lease, appearing on Pages 27
through 29 thereof, is hereby modified and amended by adding the following new
subparagraph (e) immediately following subparagraph (d) appearing on Page 29
thereof:
"(e) In the event that the conditions described and
identified in subparagraph 33(c)(i) and (ii) are not
satisfied on or before December 15, 1999, then Tenant
shall be required to deposit with Landlord the
additional sum of $137,185.50 as additional security
in consideration for the leasing by Tenant of the
Fifth Floor Expansion Premises, which sum of
$137,185.50 shall be deposited by Tenant with
Landlord on or before January 15, 1999. Such
additional Security Deposit shall become for all
purposes a part of the Principal Deposit, and shall
be held and disbursed by Landlord at the time and in
the manner provided for disbursement of the Principal
Deposit pursuant to the provisions of subparagraph
33(c) hereof."
5
<PAGE> 6
(18) Exhibit "A-1" of the Lease is hereby modified and
amended by replacing the word "and" in the second line thereof with a comma, and
by adding the phrase "the Fourth Floor Expansion Premises and the Fifth Floor
Expansion Premises" at the end of the second line thereof immediately following
the word "PREMISES".
(19) The Lease is hereby modified and amended by attaching
thereto Exhibit "B-3", Exhibit "J", Exhibit "J-1" and Exhibit "J-2" attached to
this First Amendment and hereby incorporated into the Lease in their entirety.
(20) Paragraph 1 of the Special Stipulations attached as
Exhibit "G" to the Lease is hereby modified and amended by deleting the first
sentence thereof in its entirety, and by substituting in lieu thereof the
following new sentence: "Subject in all respects to the terms of this Lease
(including, without limitation, the provisions of Special Stipulation 5 and 6
hereinbelow), from and after the Commencement Date, Tenant shall have the right
to use two (2) reserved and sixty two (62) unreserved spaces (for a total of
sixty four (64) spaces) in the parking garage serving the Building."
(21) Paragraph 3 of the Special Stipulations attached as
Exhibit "G" to the Lease is hereby modified and amended as follows:
(1) By deleting from the first line thereof the
words and numbers "fifth (5th) floor" in
their entirety, and by substituting in lieu
thereof the phrase "sixth (6th), seventh
(7th) and eighth (8th) floors (each of which
floors contain 18,105 rentable square
feet)";
(2) By adding the phrase "(except with respect
to Rent and tenant improvement allowances
which shall be determined as hereinafter
provided)" to the 12th line thereof
immediately following the word "Offer" and
before the words "or on";
(3) By adding the phrase "(except with respect
to Rent and tenant improvement allowances
which shall be determined as hereinafter
provided)" to the third line of the second
full paragraph thereof immediately following
the words "in the Advice" and before the
words "shall govern";
(4) By deleting the last two lines of the third
full paragraph in their entirety, beginning
with the words "commences unless the" and
ending with the words "Second Refusal
Space", and by substituting in lieu thereof
the following provisions: "commences. In
addition, notwithstanding anything to the
contrary contained in the Advice, or
otherwise, Rent for any Second Refusal Space
so accepted by
6
<PAGE> 7
Tenant shall be the per square foot Base
Rent in effect with respect to the Fifth
Floor Expansion Premises and, in addition,
Tenant shall pay Tenant's Pro Rata Share of
any increase in Operating Costs over the
calendar year 2000 Base Year Operating
Costs. In addition, in the event that Tenant
commences paying Rent on any Second Refusal
Space within twelve months from the date of
the Fifth Floor Expansion Effective Date
(the "TI Cut-Off Date") then, with respect
to such Second Refusal Space, but not
otherwise, Landlord shall provide Tenant
with a tenant improvement allowance per
rentable square foot of such Second Refusal
Space of $12.00. In addition, in the event
that Tenant commences paying Rent on any
Second Refusal Space at any time on or after
the TI Cut-Off Date then, with respect to
such Second Refusal Space, but not
otherwise, Landlord shall provide Tenant
with a tenant improvement allowance per
square foot of such Second Refusal Space in
an amount equal to the product obtained by
multiplying $12.00 by a fraction, numerator
of which is the number of full calendar
months remaining in the initial Term of this
Lease as of the date on which Tenant is
required to begin payment of Rent pursuant
to the terms of the Advice, and the
denominator of which is 109;"
(5) By adding the phrase "(except with respect
to Rent and the tenant improvement allowance
which shall be determined as provided
hereinabove)" to the third line of the last
paragraph thereof immediately following the
word "Advice" and before the words ", and
reflecting".
(6) By adding the following new paragraph
immediately following the last paragraph
thereof: "Landlord hereby represents that it
has delivered proper notice to Turner
Broadcasting System, Inc. (`TBS') with
respect to its refusal rights concerning the
Premises heretofore leased by Tenant; that
TBS has failed or refused to exercise its
refusal rights with respect thereto; and
that TBS' time period within which it may
exercise its refusal rights with respect to
the 6th, 7th and 8th floors of the Building
is limited to a period of ten (10) days from
the date of receipt of proper notice
triggering TBS' refusal rights with respect
to such floors.
(22) The Lease is hereby further modified and amended by
adding the following new paragraph to the Special Stipulations attached as
Exhibit "G" to the Lease, immediately following Paragraph 18 thereof:
7
<PAGE> 8
"19. Monument Signage. Landlord hereby covenants and agrees to
construct a monument sign in front of the Building on which Tenant may install
its name on both sides thereof at the time and in the manner provided by this
Paragraph. At such time as Tenant actually occupies, has exercised its refusal
rights with respect to, or has executed a lease for not less than 71,000
rentable square feet of space in the Building (exclusive of unexercised
expansion, right of first refusal, or similar options), Tenant shall be entitled
to place its name at a location designated by Landlord on such monument sign.
The location, size and materials of such monument signage shall be approved by
Landlord in its discretion. All monument signs shall be of equivalent size, and
the monument shall be of a sufficient size to permit installation of not less
than four (4) signs thereon. Tenant shall be required to pay for any and all
costs and expenses associated with the design, construction, and installation of
such signage (as opposed to the cost of the monument), and for the removal
thereof, upon the expiration or earlier termination of this Lease. In addition,
in the event that (i) Tenant, after the installation of such signage at any time
occupies less than 71,000 rentable square feet of space in the Building,
Landlord may elect at its sole option to require Tenant to remove its signage at
Tenant's sole cost and expense, and (ii) at any time there are three or more
tenants occupying more rentable square footage of the Building than Tenant (even
if Tenant occupies 71,000 rentable square feet or more of the Building),
Landlord may require Tenant to remove its signage at Tenant's sole cost and
expense; provided, however, that no tenant in the Building will be entitled to
place its signage on the monument sign unless such tenant occupies square
footage in an amount equal to or greater than the lesser of (a) 71,000 rentable
square feet, or (b) the rentable square footage actually leased and occupied by
Tenant from time to time."
3. INTERPRETATION. If any conflict between the terms of this
Amendment and the terms of the Lease occurs, the terms of this Amendment shall
govern and control in all respects. It is the intention of Landlord and Tenant
with respect to the subject matter hereof that the terms of this Amendment shall
supersede and replace in each and every respect the terms and provisions of the
Lease which the parties intend to modify pursuant to the terms hereof.
4. BINDING EFFECT; HEADINGS; APPLICABLE LAW. All the terms and
provisions of this Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The headings in
this Amendment are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof. This Amendment shall be governed by and
construed in accordance with the laws of the State of Georgia.
5. RATIFICATION. Except as hereinabove set forth, the Lease shall
remain unmodified and in full force and effect, and Landlord and Tenant do
hereby ratify and confirm the Lease, as modified and amended herein.
6. COUNTERPARTS. This Amendment may be executed in multiple
counterparts, each of which is to be deemed original for all purposes.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
under seal as of the date first above written.
LANDLORD:
101 MARIETTA STREET ASSOCIATES
By: /s/ MARK A. GRIFFITH
----------------------------------------
Name: Mark A. Griffith
-----------------------------------
Title: Vice President
---------------------------------
[CORPORATE SEAL]
TENANT:
INTERLAND, INC.
By: /s/ BART HAHN
----------------------------------------
Name: Bart Hahn
-----------------------------------
Title: Managing Director
---------------------------------
[CORPORATE SEAL]
9
<PAGE> 10
EXHIBIT "J"
FIFTH FLOOR EXPANSION PREMISES
LEASE IMPROVEMENT AGREEMENT
1. GENERALLY
Landlord and Tenant acknowledge and agree that this Fifth Floor
Expansion Premises Lease Improvement Agreement shall govern the terms and
conditions on which Tenant Improvements shall be constructed and installed in
the Fifth Floor Expansion Premises. The text of each of the following paragraphs
has been prepared specifically with reference to the buildout of the Fifth Floor
Expansion Premises. Landlord's Allowance for construction of Tenant Improvements
shall be $12.00 per rentable square foot with respect to the Fifth Floor
Expansion Premises. Landlord has not agreed to provide any additional other
tenant improvement allowance (other than as set forth in the immediately
preceding sentence) to Tenant for purposes of funding the cost of Tenant
Improvements in the Fifth Floor Expansion Premises.
2. IMPROVEMENTS
(1) At Tenant's expense, Landlord shall furnish and install
substantially in accordance with the construction drawings and
specifications approved by Tenant and Landlord, partitions,
doors, lighting fixtures, acoustical ceiling, floor coverings,
electrical outlets, telephone outlets, air conditioning, fire
sprinklers, signage, wall finishes, and construction clean-up
and other improvements required by Tenant which are normally
performed by the construction trades (the "Tenant
Improvements"). Landlord shall cause to be prepared at
Tenant's sole cost and expense all architectural plans and
specifications, and all structural, mechanical and electrical
engineering plans and specifications (the "Plans") required
for Tenant's occupancy. The preparation of the Plans shall not
include selection of non-building standard finishes, or any
fixtures or furniture, or any other elements of interior
design.
(2) At Landlord's expense, Landlord shall or has provided the
improvements described in Exhibit "J-3" attached hereto and by
this reference incorporated herein (hereinafter referred to as
"Landlord's Work").
(3) Landlord shall provide a construction management team that
will supervise and facilitate construction of all Tenant
Improvements. Such construction management team shall receive
a management fee in an amount equal to five percent (5%) of
all costs associated with the Tenant Improvements (including
any portion relating to "Tenant's Cost"(as hereinafter
defined)). Such construction management fee shall be paid to
Landlord's construction manager
EXHIBIT "J"
<PAGE> 11
as a disbursement from "Landlord's Allowance" (as defined
below).
(1)
3. LANDLORD'S ALLOWANCE
As Landlord's contribution to work provided in Paragraph 1(a), Landlord
shall provide Tenant with an allowance of Two Hundred Seventeen Thousand Two
Hundred Sixty and 00/100 Dollars ($217,260.00) ("Landlord's Allowance") with
respect to the Fifth Floor Expansion Premises. Notwithstanding the above, Tenant
may, at Tenant's discretion, use all or any portion of Landlord's Allowance for
costs related to design and construction of the Tenant Improvements, Tenant's
signage costs, moving expenses and installation of Tenant's furniture; provided,
however, that as a condition to Tenant's right to use Landlord's Allowance for
such purposes, Tenant shall be required to improve and finish all portions of
the Fifth Floor Expansion Premises to at least the following minimum standards:
(i) a fully completed ceiling with lights connected and switched and ceiling
tiles installed; (ii) the base building heating, ventilating and air
conditioning system installed, including interior duct work, supply grills, and
interior zone controls; (iii) sprinkler heads installed or relocated in
accordance with applicable codes; (iv) a fully operational and certified life
safety system installed; (v) finished floors; (vi) all drywall surfaces fully
skimmed, sanded, painted and finished; (vii) standard electrical distribution
outlets for convenience power installed and connected; and (viii) a certificate
of occupancy from the appropriate governmental authority shall be issued for
such space. Landlord represents and warrants to Tenant that implementation of
the Plans will (i) exceed the minimum standards set forth in the immediately
preceding sentence, and (ii) result in the completion of all improvements called
for in the pricing drawings approved by Landlord and Tenant.
4. TENANT'S COST
(1) Tenant shall bear the cost, if any, of the Tenant's
Improvements over and above the Landlord's Allowance (such
additional cost is hereinafter referred to as "Tenant's
Cost"). The cost of any modifications of any part of the work
described in Paragraph 1 already completed that are requested
by Tenant shall constitute part of Tenant's Cost. In addition,
subject to Landlord's approval (which approval shall not be
unreasonably withheld or delayed, but which may be conditioned
on Tenant's payment of all utility costs therefor), Tenant may
install additional air conditioning units in the Fifth Floor
Expansion Premises.
(2) [INTENTIONALLY OMITTED]
(3) Tenant shall pay one-half (1/2) of all amounts payable by
Tenant to Landlord pursuant to this Paragraph 4 of this
Exhibit "J" immediately following Tenant's approval of the
price to be paid to Landlord as per subparagraph 5(b) hereof.
Tenant shall pay the remaining amounts immediately upon the
Fifth Floor Expansion Effective Date.
EXHIBIT "J"
<PAGE> 12
5. PLANNING SCHEDULE
1.
(1) Preparation and Approval of Plans:
(1) Landlord and Tenant shall diligently pursue the
preparation of the Plans in accordance with Exhibits
"J-1" and "J-2", as the case may be. Failure of
Tenant to provide said instructions by the dates
specified in Exhibits "J-1" and "J-2", as the case
may be, shall constitute a Tenant Delay.
(2) The Plans shall then be prepared in conformance with
Landlord's requirements and all applicable codes,
ordinances and laws, and shall specify materials and
details equal to or better than Landlord's building
standard. The Plans shall be subject to approval of
Landlord and the government officials having
jurisdiction. Landlord shall submit complete
construction plans to Tenant for approval and Tenant
shall approve said Plans in accordance with Exhibits
"J-1" and "J-2", as the case may be. Failure of
Tenant to approve the Plans in accordance with
Exhibits "J-1" and "J-2", as the case may be, shall
constitute a Tenant Delay.
(2) Upon receipt of the approved Plans, Landlord shall provide a
quotation based upon competitively bid subcontract pricing for
the work to Tenant for approval as the price to be paid by
Tenant to Landlord for Tenant's Cost. Upon written approval of
such price by Tenant, Landlord and Tenant shall be deemed to
have given final approval to the Plans as the basis on which
the quotation was made, and Landlord shall be authorized to
proceed with the improvements to the Initial Premises in
accordance with such Plans. Tenant will not unreasonably
withhold its approval of such price. Failure of Tenant to
approve or disapprove such price in accordance with Exhibits
"J-1" and "J-2", as the case may be, or unreasonable
disapproval of such price, shall constitute a delay by Tenant
in accordance with the provisions of Paragraph 4(b) of the
Lease. Landlord shall not be obligated to proceed with any
improvements of the Fifth Floor Expansion Premises until such
time as Tenant approves a price for the Tenant's Cost.
Exhibits "J-1" and "J-2", as the case may be, provide the
intermediate actions required of both Landlord and Tenant to
satisfy the schedule hereof.
(3) Landlord hereby agrees that Tenant may occupy any portion of
the Fifth Floor Expansion Premises as same becomes ready for
Tenant's occupancy notwithstanding that the entire Fifth Floor
Expansion Premises is not ready for Tenant's occupancy at such
time.
EXHIBIT "J"
<PAGE> 13
6. TENANT'S WORK
All work not within the scope of the normal construction trades
employed in the Building, including, but not limited to, furnishing and
installing of telephones, furniture, and office equipment shall be furnished and
installed by Tenant at Tenant's expense. Tenant shall adopt a schedule in
conformance with the schedule of Landlord's contractors and conduct its work in
such a manner as to maintain harmonious labor relations and as not to interfere
unreasonably with or delay the work of Landlord's contractors. Tenant's
contractors and subcontractors shall be acceptable to and approved by Landlord
and shall be subject to the administrative supervision of Landlord. Contractors
and subcontractors engaged by Tenant shall employ persons and means to insure so
far as may be possible the progress of the work without interruption on account
of strikes, work stoppages or similar causes for delay. Landlord shall give
access and entry to the Premises to Tenant and its contractors and
subcontractors and reasonable opportunity and time and reasonable use of
facilities to enable Tenant to adapt the Premises for Tenant's use; provided,
however, that if such entry is prior to the Fifth Floor Expansion Effective
Date, such entry shall be subject to all the terms and conditions of the Lease,
except the payment of Rent.
EXHIBIT "J"
<PAGE> 14
EXHIBIT "J-1"
FIFTH FLOOR EXPANSION PREMISES SCHEDULE OF IMPROVEMENTS
THE FOLLOWING SCHEDULE MORE CLEARLY DEFINES THE INTERMEDIATE STEPS ESSENTIAL TO
MEET THE DATES AS PROVIDED IN EXHIBIT "J":
<TABLE>
<S> <C> <C>
ACTION
1. TENANT PROVIDES PROGRAM INFORMATION TO LANDLORD AND/OR ARCHITECT AND
DELIVERS PRELIMINARY SPACE PLAN TO LANDLORD: On or before ten (10)
days from the date of
execution by both
Landlord and Tenant of
the First Amendment to
Amended and Restated
Lease
2. LANDLORD'S COMMENTS ON TENANT'S PRELIMINARY SPACE PLAN AND PRELIMINARY
SPACE PLAN DELIVERED TO TENANT BY LANDLORD: 8 days
------------------------
after
Action 1
3. TENANT'S ACCEPTANCE OF PRELIMINARY SPACE PLAN: 4 days
------------------------
after
Action 2
4. PRICING NOTES DELIVERED TO TENANT BY LANDLORD: 6 days
------------------------
after
Action 3
5. TENANT'S ACCEPTANCE OF PRICING NOTES: 3 days
------------------------
after
Action 4
6. DETAILED PRELIMINARY ESTIMATE COMPLETED BY LANDLORD AND DELIVERED TO 3 days
TENANT: ------------------------
after
Action 5
7. TENANT'S FINAL ACCEPTANCE OF PRELIMINARY SPACE PLAN AND PRICING ESTIMATE 3 days
NO LATER THAN: ------------------------
after
Action 6
8. CONSTRUCTION DOCUMENTS TO TENANT BY LANDLORD: 14 days
------------------------
after
Action 7
</TABLE>
EXHIBIT "J-1"
<PAGE> 15
<TABLE>
<S> <C> <C>
9. LANDLORD SHALL MAKE REVISIONS TO CONSTRUCTION DOCUMENTS, IF NECESSARY,
AND RELEASE THEM FOR BIDDING AND PERMITTING: 7 days
------------------------
after
Action 8
10. FINAL PRICING AND LANDLORD'S COSTS ON CONSTRUCTION DOCUMENTS DELIVERED
TO TENANT BY LANDLORD: 7 days
------------------------
after
Action 9
11. TENANT'S FINAL ACCEPTANCE OF ALL PLANS AND PRICING DELIVERED TO LANDLORD 3 days
NO LATER THAN: ------------------------
after
Action 10
12. COMMENCEMENT OF CONSTRUCTION, SUBJECT TO PERMIT APPROVAL BY CODE
OFFICIALS HAVING JURISDICTION: 3 days
------------------------
after
Action 11
13. SUBSTANTIAL COMPLETION AND OCCUPANCY BY TENANT. No later than June 1, 2000
</TABLE>
NOTE: SCHEDULE ASSUMES ALL MATERIALS, EQUIPMENT, AND FINISHES ARE IN STOCK OR
AVAILABLE IN A TIMELY MANNER SO AS TO NOT DELAY THE JOB PROGRESS. SUBSTITUTION
OR DELETION OF SPECIFIED ITEMS MAY BE REQUIRED TO MAINTAIN SCHEDULE. LANDLORD'S
OBLIGATION TO MEET ANY OR ALL OF THE DATES SET FORTH ABOVE SHALL BE SUBJECT TO
LANDLORD'S ACTUAL RECEIPT OF TENANT'S APPROVALS, PROGRAM INFORMATION, ETC. ON OR
BEFORE THE DATES SET FORTH ABOVE.
EXHIBIT "J-1"
<PAGE> 16
EXHIBIT "J-2"
LANDLORD'S WORK FOR FIFTH FLOOR EXPANSION PREMISES
1. STRUCTURE
Steel Structure with poured concrete floor over metal pan with a level
concrete floor (broom clean) ready for installation of glue down
carpeting (or other Tenant finish).
2. PERIMETER WALLS
Glass and precast concrete with the inside face of walls insulated and
with drywall installed, spackled, taped and sanded. Primer and paint
(or other finish) by Tenant.
3. COLUMNS AND CORE WALLS
(a) All columns shall be exposed. Framing, drywall and finish by
Tenant.
(b) The core walls shall be framed, drywalled, spackled, finished,
taped and sanded from slab to ceiling ready to accept a wall
finish. Core walls in public corridor will be finished by
Landlord. Core walls in Tenant space will be finished by
Tenant.
4. WINDOW TREATMENTS
1" horizontal mini-blinds at all perimeter glass.
5. DRAWINGS
The Landlord shall deliver the following base building
drawings/documents as needed by Tenant:
(a) A dimensional outline floor plan at a minimum scale of 1/8" =
1'0".
(b) Structural drawings showing the size and layout of the framing
for the Tenant's floor and the floor immediately above and
below.
(c) Mechanical and Electrical Drawings (as needed).
6. CORE
(a) Multi-Tenant Floor
Core complete with air conditioning, restrooms, finished
elevators, elevator lobby (with carpet, fire doors, lights,
finished walls and ceiling), stairways, ventilation shafts,
electrical/telephone rooms, mechanical room, janitor's closet,
and any
EXHIBIT "J-2"
<PAGE> 17
required finished existing corridors (with carpet, lights,
finished walls and ceiling).
(b) Full-Floor Tenant
Core complete with air conditioning, restrooms, finished
elevators, unfinished elevator lobby, stairways, ventilation
shafts, electrical/telephone rooms, mechanical room and
janitor's closet.
7. DRINKING FOUNTAINS
One ADA accessible drinking fountain per floor.
8. RESTROOMS
Two common ADA accessible restrooms finished according to building
standard with ceramic floors, ceramic wet walls, wallcovering on other
walls, finished ceilings, granite vanities, enclosed stalls,
accessories, fixtures, trim and lighting.
9. DOORS
Finished wood stain doors complete with metal frame trim and hardware,
installed on all doorways in the service core with lever handle
hardware.
10. TELEPHONE
Access in telephone and electrical rooms on each floor to wiring for
telephone. Landlord will provide and install the appropriate wiring
from the base of the Building to such telephone and electrical rooms.
Wiring from rooms shall be Tenant's responsibility, at Tenant's
expense, to install and subscribe to any such service if Tenant so
desires.
11. PLUMBING
One valved point of connection for cold water. Two points of connection
to waste and vent lines on each floor.
12. AIR CONDITIONING
Each floor is equipped with two (2) 15-ton multizone constant volume
airhandlers which provide approximately 12,000 cubic feet per minute
(CFM) per unit. Each of these handlers serves the primary ductwork for
5 zones (i.e., ten zones per floor). Six of the 10 zones per floor are
heated with thermostatically controlled duct heaters which range in
size from 5KW to 9KW. The lobby level and the top floor (floor 36) have
all zones heated with duct heaters. Two (2) Carrier centrifugal
chillers (1040 tons and 1070 tons) provide cooling to the building.
13. ELECTRICAL
An electrical capacity of 5 watts per square foot of rentable area for
low voltage electrical consumption (120/208 volts) and 4.5 watts per
square foot of rentable area for high
EXHIBIT "J-2"
<PAGE> 18
voltage lighting and HVAC (277/480 volts). Landlord will provide (but
not install) up to one (1) two foot x four foot fluorescent lighting
fixture per one hundred (100) rentable square feet of the Demised
Premises. Separate submeters shall be placed on all abnormal electrical
consumptions as part of Tenant's work.
Emergency power to serve elevators, emergency lighting, fire alarm and
security equipment will be provided by a diesel generator.
14. FIRE PROTECTION
(a) Fire Sprinklers
A complete, automatic fire protection system conforming to
NFPA 13 and hydraulically designed in accordance with NFPA 13
for Light Hazard Occupancy is provided for all tenant spaces
and common areas. Mechanical areas in the building are
designed in accordance with NFPA 13 for ordinary hazard
occupancies. Areas with completed ceilings will be provided
with chrome plated brass pendant heads centered in ceiling
tiles. Brass upright heads, mounted as required to meet base
system requirements will be installed in areas with unfinished
ceilings, with any turn downs and installation of pendant
heads performed as part of Tenant work. Lobby areas with
gypsum board ceilings will have concealed pendant heads with
flush ceiling coverplates.
(b) Fire Alarm
A fire alarm system including pull stations, ceiling and duct
mounted smoke detectors, water flow switches and tamper
switches will be installed as required to initiate alarms,
horns, and strobe devices for occupant evacuation. The system
shall comply, at a minimum, with the applicable provisions of
the ADA, NFPA 101, NFPA 72, NFPA 90A, NFPA 90B, and the Safety
Code for Elevators (ASME A17.1). Tenant shall be required to
install compatible devices within the Premises and connect to
base Building riser as part of Tenant buildout. (Compatible
devices are those that are UL listed for fire alarms and UL
listed to be used with Notifier Fire Alarm systems).
15. CEILING
A 2'x2' ceiling grid installed at 8'9" above finished floor. Ceiling
tile will be stacked on floor. Tile to be 24" x 24" Beveled Tegular
Cortega by Armstrong or similar. Grid to be exposed narrow profile.
EXHIBIT "J-2"
<PAGE> 19
16. ELEVATORS
Building Elevators
(a) High Rise
The lobby and high rise floors (floors 20-34) are served by
five (5) 3500 pound capacity elevators each operating at 1000
feet per minute. Each of these elevators is a gearless
traction model.
(b) Low Rise
The low rise floors (floors 1-19, there is no floor 13) are
served by six (6) 3500 pound capacity elevators each operating
at 700 feet per minute. Each of these elevators is a gearless
traction model.
(c) Top Three Floors
The top three floors (floors 34-36) are served by one (1) 3000
pound capacity elevator operating at 200 feet per minute. This
elevator is a geared traction model.
(d) Freight Elevator
The main building's 36 floors (floors 1-36 and basement, but
there is no floor 13) are served by one (1) freight elevator.
The freight elevator has 3500 pounds of capacity and operates
at 1000 feet per minute. The freight elevator is a gearless
traction model.
Parking Deck and Loading Dock Elevators
- Parking Deck Elevator
The parking deck is served by two (2) 2000 pound capacity
passenger elevators operating at 300 feet per minute. Each of
these two elevators serves all seven levels of the parking
deck and two levels below the parking deck.
- Loading Dock Elevator
The loading dock elevator shuttles between the loading dock on
the east end of the building and the basement where transfer
can be made to the freight elevator. This elevator has 5000
pounds of capacity and operates at 35 feet per minute. The
loading dock elevator is a hydraulically operated model.
Elevator Control System
The elevators are operated by a newly installed all-digital
SCR drive controller.
EXHIBIT "J-2"
<PAGE> 1
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of April 1, 2000, by and
between INTERLAND, INC., a Georgia corporation (the "Company"), headquartered in
Atlanta, Georgia, and MARK ALEXANDER ("Executive"), an individual residing in
Dunwoody, Georgia.
WHEREAS, the Company desires to employ Executive and to establish
certain terms and conditions of his employment by entering into an employment
agreement with Executive as hereinafter provided;
WHEREAS, Executive desires such employment with the Company on the
terms and conditions provided herein; and
WHEREAS, in the course of his employment, Executive will gain knowledge
of the business, affairs, finances, management, marketing programs and
philosophy, suppliers, distributors, customers, clients and methods of operation
of the Company and the Company would suffer irreparable harm if Executive were
to use such knowledge, information and business acumen in competition with the
Company or other than in the proper performance of his duties hereunder.
THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereby agree as follows:
1. Employment and Term. (a) Subject to the terms and conditions
of this Agreement, the Company hereby employs Executive, and Executive hereby
accepts employment, as Senior Vice President - Sales & Marketing of the Company
and shall have such responsibilities, duties and authority as may from time to
time be assigned to Executive by the Chief Executive Officer and the Board of
Directors. Executive hereby agrees that during the Term of this Agreement he
will devote substantially all his working time, attention and energies to the
diligent performance of his duties as Senior Vice President - Sales & Marketing
of the Company, provided that the Executive may also serve on boards of
directors or trustees of other
<PAGE> 2
companies and organizations, as long as such service does not materially
interfere with the performance of his duties hereunder. Nothing herein shall
preclude the Board, in its sole discretion, from changing Executive's title and
duties if the Board has concluded in its reasonable judgment that such change
is in the Company's best interests, subject to the terms of Section 12(g) of
this Agreement.
(b) Unless earlier terminated as provided in Section 3,
Executive's employment under this Agreement shall be for a term of 3 year(s),
commencing on April 1, 2000 and ending on April 1, 2003. Executive's employment
with the Company shall end with the termination of this Agreement unless the
Company gives Executive written notice not less than thirty (30) days before
the expiration of this Agreement that the Company desires to continue
Executive's employment. If such notice is given, upon the expiration of this
Agreement, Executive shall continue to be employed by the Company as an "at
will" employee on the same basis as other Company employees who are "at will"
and do not have employment agreements.
(c) Executive warrants that Executive is not under any obligation,
contractual or otherwise, limiting or affecting Executive's ability or right to
perform freely services for Company.
2. Compensation and Benefits. As compensation for his services
during the Term of this Agreement, Executive shall be paid and receive the
amounts and benefits set forth below:
(a) An initial base salary ("Initial Base Salary") of $150,000.00,
subject to withholding of all applicable taxes, expressed as an annual amount
but payable in equal installments shall be paid to Executive. Executive's
Initial Base Salary shall be reviewed for adjustments at such time as the Board
conducts salary reviews for its executive management generally, but not less
frequently than annually. Executive's salary shall be payable in accordance
with the Company's regular payroll practices in effect from time to time for
executive management of the Company.
(b) Executive shall participate in the Company's bonus incentive
compensation program, as long as it is available to executive officers of the
Company, and, based on Executive's performance, may be entitled to a bonus of
up to 20% of Executive's Base Salary.
(c) In connection with commencement of employment, the Company has
granted prior to the date of this Agreement to Executive options for 175,000
shares of Company
2
<PAGE> 3
Common Stock, as granted by the Board and under the terms and conditions set
forth in a separate stock option agreement.
(d) Executive shall be entitled to participate in the Company's
stock option plan, at the discretion of the Board, and the amount and terms of
any stock option grant shall be set forth in a separate agreement.
(e) Executive shall participate in, or receive benefits under, any
then current "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended) or employee
benefit arrangement made available by the Company to its executives generally,
including plans (to the extent offered) providing 401(k) benefits, health care,
life insurance, disability and similar benefits. Without limiting the
foregoing, Executive shall be entitled to two (2) weeks of vacation per year,
in accordance with the Company's vacation pay policy.
3. Benefits Upon Termination.
(a) If Executive's employment is terminated either by the Company
(other than for Cause) or by the Executive for Good Reason or if Executive
becomes Disabled, Executive shall be entitled to the payments and benefits in
(b) and (c) below. If Executive dies prior to his termination of employment, his
designated beneficiary or beneficiaries will be entitled to the payments in (d)
below. Payments and benefits under subsections (b) and (c) are subject to
Executive's execution of a separation agreement acceptable to the Company which
will include a complete release of any and all claims relating to his
employment. If Executive's employment is terminated by the Company for Cause or
by the Executive voluntarily (other than for Good Reason), this Agreement shall
end as of the Termination Date of Executive's employment and Executive will be
entitled to no further payments or benefits (except as otherwise required by
law). The Term of this Agreement automatically ends as of the Termination Date.
The provisions of Sections 4-11 survive any termination of this Agreement or
termination of employment, other than by reason of Executive's death.
(b) Subject to and in accordance with the provisions of Section
3(a), Executive shall continue to receive Executive's Base Salary as then in
effect (subject to withholding of all applicable taxes) for the period
commencing as of the Termination Date and continuing until the
3
<PAGE> 4
later of (1) end of the Term of this Agreement set forth in Paragraph 1(b) or
(2) one year. Payment shall be made in the same manner as it was being paid as
of the Termination Date; provided that if Executive terminates employment for
Good Reason due to a reduction in Executive's Base Salary, Executive's Base
Salary shall be paid at the rate in effect immediately before such reduction
for purposes of this subsection. During any period that he is paid hereunder,
Executive shall be on call to consult with the Company with respect to the
Company's Business at reasonable times and places and upon reasonable notice.
Reasonable out of pocket business expenses incurred in connection with such
consulting shall be reimbursed. Any amounts Executive has due and owing to the
Company may offset any amounts paid under this Agreement.
(c) If Executive properly elects COBRA coverage for group health
benefits upon his Termination Date and timely pays the premiums charged, if
any, under the Company's group health plan to active employees for the coverage
elected, Company shall pay the balance of Executive's COBRA premium during the
period payments are made under Section 3(b) above but not beyond the COBRA
continuation period. Thereafter, Executive will be charged the normal COBRA
premium for any remaining period of COBRA coverage. Group term life insurance
benefits, if any, shall be continued at the same level and in the same manner
as for active employees during the period payments are made under Section 3(b)
above. Any additional coverages Executive had at termination, including
dependent coverage, will also be continued for the period during which payments
are made under Section 3(b) on the same terms as before termination and to the
extent permitted by the applicable policies or contracts. Any costs Executive
was paying for such coverages at the time of termination shall be paid by
Executive through deduction from the amounts payable under Section 3(b) or, if
such withholding cannot be done, by separate check payable to the Company each
month in advance. If Executive qualifies (or would qualify) for the Company's
long term disability plan, the effective date of long term disability plan
coverage shall be treated as a Date of Termination for purposes of this Section
3.
(d) If the Executive dies prior to termination of employment under
Section 3(a) above, his designated beneficiary or beneficiaries will be
entitled to receive amounts (subject to applicable taxes) equal to Executive's
Base Salary as in effect at the date of death for a period
4
<PAGE> 5
from the date of death to the later of (1) the end of the Term of this
Agreement set forth in Paragraph 1(b) or (2) one year. Amounts shall be paid in
installments in the same manner as the Executive was being paid as of his date
of death. Members of Executive's family shall be entitled to continuation of
benefits in accordance with Company policies.
4. Confidential Information. During the term of employment and
continuing subsequent to any termination or expiration of this Employment
Agreement, Executive shall maintain Confidential Information as secret and
confidential unless Executive is required to disclose Confidential Information
pursuant to the terms of a valid and effective order issued by a court of
competent jurisdiction or a governmental authority. Executive shall use
Confidential Information solely for the purpose of carrying out those duties
assigned him as an employee of Company and not for any other purpose. The
disclosure of Confidential Information to Executive shall not be construed as
granting to Executive any license under any copyright, trade secret or any right
of ownership or right to use the information whatsoever. All physical items,
including electronic media, containing Confidential Information, including,
without limitation, any business plan, Company know-how, collection methods and
procedures, advertising techniques, marketing plans and methods, sales
techniques, documentation, contracts, reports, letters, notes, any computer
media, client lists, and all other information and materials of Company's
business and operations, shall remain the exclusive and confidential property of
Company and shall be returned, along with any copies or notes of Executive made
thereof or therefrom, to Company when Executive ceases his employment with
Company.
5. Non-Disparagement. Executive shall not at any time make false,
misleading or disparaging statements about the Company, including its products,
services, management, employees, and customers.
6. Non-Solicitation of Customers. Executive hereby covenants and
agrees that at no time during Executive's employment with Company and for a
period of one year immediately following termination of Executive's employment
with Company, whether voluntary or involuntary, shall Executive, directly or
indirectly, for himself or on behalf of another, solicit, divert
5
<PAGE> 6
or take away any strategic partner, business, customer, client or supplier of
Company that Executive contacted, directly or indirectly, during Executive's
employment with Company.
7. Non-Solicitation of Employees. Executive hereby covenants and
agrees that at no time during Executive's employment with Company and for a
period of one year immediately following termination of Executive's employment
with Company, whether voluntary or involuntary, will Executive act in any way
with the purpose or effect of soliciting, recruiting, or encouraging, directly
or indirectly, any Person who is or was at any time during the one year period
prior to the Termination Date to leave the employ of Company, its divisions or
its subsidiaries.
8. Limitations on Post-Termination Competition. Executive hereby
covenants and agrees that at no time during Executive's employment with Company
and for a period of one year immediately following termination of Executive's
employment with Company, whether voluntary or involuntary, Executive shall not
perform Services within the Territory for any Person providing or offering goods
or services identical to or reasonably substitutable for Company's Business.
Executive acknowledges that (i) this covenant has unique, substantial, and
immeasurable value to Company, (ii) this covenant is reasonably limited in scope
and geography to protect Company's legitimate business interests, including its
property, confidential information and relationships, good will, economic
advantage, and customer relationships; (iii) the agreements, covenants and
undertakings of Executive set forth in this Agreement will not preclude
Executive from becoming gainfully employed following termination of employment
with Company; and (iv) the services Executive intends and is expected to provide
are special and unique.
9. Works. Executive acknowledges that Executive's work on and
contributions to documents, programs, methodologies, protocols, and other
expressions in any tangible medium (collectively, "Works") are within the scope
of Executive's employment and part of Executive's duties, responsibilities or
assignment. Executive's work on and contributions to the Works will be rendered
and made by Executive for, at the instigation of, and under the overall
direction of, Company, and all such work and contributions, together with the
Works, are and at all times shall
6
<PAGE> 7
be regarded, as "work made for hire" as that term is used in the United States
Copyright Laws. Without limiting this acknowledgment, Executive assigns,
grants, and delivers exclusively to Company all rights, titles, and interests
in and to any such Works, and all copies and versions, including all copyrights
and renewals. Executive will execute and deliver to Company, its successors and
assigns, any assignments and documents Company requests for the purpose of
establishing, evidencing, and enforcing or defending its complete, exclusive,
perpetual, and worldwide ownership of all rights, titles, and interests of
every kind and nature, including all copyrights, in and to the Works, and
Executive constitutes and appoints Company as its agent to execute and deliver
any assignments or documents Executive fails or refuses to execute and deliver,
this power and agency being coupled with an interest and being irrevocable.
10. Inventions and Ideas. Executive shall disclose promptly to
Company, and only to Company, any invention or idea of Executive (developed
alone or with others) conceived or made during Executive's employment by
Company or within six months of the Termination Date. Executive assigns to
Company any such invention or idea in any way connected with Executive's
employment or related to Company's business, research or development, or
demonstrably anticipated research or development, and will cooperate with
Company and sign all papers deemed necessary by Company to enable it to obtain,
maintain, protect and defend patents covering such inventions and ideas and to
confirm Company's exclusive ownership of all rights in such inventions, ideas
and patents, and irrevocably appoints Company as its agent to execute and
deliver any assignments or documents Executive fails or refuses to execute and
deliver promptly, this power and agency being coupled with an interest and
being irrevocable. This constitutes the Company's written notification that
this assignment does not apply to an invention for which no equipment,
supplies, facility or trade secret information of the Company was used and
which was developed entirely on Executive's own time, unless (a) the invention
relates (i) directly to the business of the Company, or (ii) to the Company's
actual or demonstrably anticipated research or development, or (b) the
invention results from any work performed by Executive for the Company.
11. Relief for Breach. Because any breach or threatened breach of
Sections 4 through 10 of this Agreement by Executive would result in continuing
material and irreparable harm to
7
<PAGE> 8
Company, and because it would be difficult or impossible to establish the full
monetary value of such damage, Company shall be entitled to injunctive relief
in the event of Executive's breach or threatened breach of this Agreement.
Injunctive relief is in addition to any other available remedy, including
termination of this Agreement and damages. In the event of any threatened
breach by Executive, Company may suspend any payment due to Executive under
Paragraph 3 and if Executive has breached this Agreement, any remaining amounts
to be paid under Paragraph 3 shall be forfeited. In the event of any breach or
threatened breach by either Executive or the Company which results in
court-ordered relief, the breaching party shall reimburse the non-breaching
party for its reasonable attorneys' fees and other expenses incurred to obtain
such relief.
12. Definitions. For purposes of this Agreement, the following
definitions shall apply:
(a) "Board" or "Board of Directors" - means the Board of Directors
of the Company.
(b) "Business" - means Company's business of hosting, designing
and developing Web sites and supporting resellers of Web hosting services and
hosts of large Web sites through co-location and dedicated server programs.
(c) "Cause" - means the termination of Executive by the Company
for one or more of the following reasons:
(1) If, in its good faith judgment, the Board
determines that Executive has committed an act or acts which constitute
a felony (other than traffic-related offenses);
(2) If, in its good faith judgment, the Board
determines that the Executive has violated laws or Company policies
which result in material injury to the Company;
(3) If the Executive commits an act or acts of
dishonesty or fraud resulting or intended to result directly or
indirectly in significant gain or personal enrichment to the Executive
at the expense of the Company or to the significant detriment of the
Company;
8
<PAGE> 9
(4) Upon the willful and continued failure by
the Executive substantially to perform his duties with the Company
(other than any such failure resulting from incapacity due to
mental or physical illness constituting a Disability, as defined
herein); or
(5) If, in its good faith judgment, the Board
determines that the Executive has violated or threatened to violate
the provisions of Paragraphs 4 to 10 above or any other material
breach of this Agreement.
Executive shall not be deemed to have been involuntarily terminated for Cause
unless and until there shall have been delivered to him a copy of a resolution
duly adopted by the Board, finding that, in the good faith opinion of the Board,
Executive engaged or threatened to engage in conduct set forth above and
specifying the particulars thereof in detail. For purposes of subsections (2),
(3), (4) and (5), the Board must also deliver to Executive a demand in writing
for performance or cure, which demand specifically identifies the manner in
which the Board believes that Executive's conduct falls within such subsection
and details the Board's requirements for Executive to "cure" such conduct, if
appropriate. Involuntary termination occurs when Executive fails to "cure"
within the time period given by the Board and in accordance with the terms
provided by the Board. For purposes of this Agreement, no act or failure to act
by Executive shall be deemed to be "willful" unless done or omitted to be done
by Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interests of the Company.
(d) "Confidential Information" - means information, without regard
to form, relating to Company's customers, operation, finances, and business
that derives economic value, actual or potential, from not being generally
known to other Persons, including, but not limited to, technical or
nontechnical data, formulas, patterns, compilations (including compilations of
customer information), programs, models, concepts, designs (including without
limitation, designs for Company's remote development and consulting center)
devices, methods, techniques, processes, financial data or lists of actual or
potential customers (including identifying information about customers),
whether or not in writing. Confidential Information includes information
disclosed to Company by third parties that Company is obligated to maintain as
confidential. Confidential Information subject to this Agreement may include
information that is
9
<PAGE> 10
not a trade secret under applicable law, but information not constituting a
trade secret only shall be treated as Confidential Information under this
Agreement for a three year period after the Termination Date.
(e) "Customers" - means strategic partners or customers of
Company's Business (1) that Executive contacted directly, or supervised
directly or indirectly through others contacting on behalf of Company, during
the one year period preceding the Termination Date; or (2) about whom Executive
possessed Confidential Information during the one year period preceding the
Termination Date.
(f) "Disability" - means the meaning ascribed to such term or its
variations, such as "Disabled", in the Company's long-term disability plan
covering the Executive, or in the absence of such plan, a meaning consistent
with Section 22(e)(3) of the Code.
(g) "Good Reason" means that one or more of the following has
occurred and, after giving the Company written notice of the occurrence and of
Executive's intention to resign from employment and the Company not curing the
event within 30 days of such written notice:
(i) a material diminution of position, duties,
responsibilities, authority or title or the
assignment of duties materially inconsistent with
Executive's position;
(ii) a reduction in Executive's Base Salary (annualized
rate);
(iii) relocation of Executive's work location outside the
Territory;
(iv) a material breach of this Agreement by the Company;
or
(v) the failure of a successor to the Company to assume
in writing this Agreement upon becoming a successor
or assignee of the Company.
Notwithstanding the foregoing, Executive's written consent to the
occurrence of any matter of Good Reason is a waiver of Executive's rights under
this Agreement to terminate his employment for that Good Reason.
(h) "Person" - means any individual, corporation, bank,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or other entity.
(i) "Services" - means the services described on the Annex to this
Agreement which is made a part hereof.
10
<PAGE> 11
(j) "Termination Date" - means the last day Executive is employed
by or providing services for Company, whether the separation is voluntary or
involuntary, with or without Cause, or with or without advance notice.
(k) "Territory" - means the area within a 50 mile radius of the
city limits of Atlanta, Georgia. Executive acknowledges that Executive will
perform services on behalf of Company in the Territory.
13. Contract Non-Assignable. The parties acknowledge that this
Agreement has been entered into due to, among other things, the special skills
of Executive, and agree that this Agreement may not be assigned or transferred
by Executive, in whole or in part, without the prior written consent of the
Company.
14. Successors; Binding Agreement.
(a) In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement, in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Company terminated the Executive's employment without Cause,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Termination Date.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amount would still be payable to Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
Executive) if Executive had continued to live, all such amounts, unless
otherwise provided
11
<PAGE> 12
herein, shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of Executive's estate.
15. Other Agents. Nothing in this Agreement is to be interpreted
as limiting the Company from employing other personnel on such terms and
conditions as may be satisfactory to the Company.
16. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered or seven days after mailing if
mailed, first class, certified mail, postage prepaid:
To the Company: Interland, Inc.
101 Marietta Street, 2nd Fl.
Atlanta, GA 30303
Attention: President
With a copy to: Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309-4530
Attention: David A. Stockton, Esq.
To the Executive: Mark Alexander
Interland, Inc.
101 Marietta Street, 2nd Fl.
Atlanta, GA 30303
Any party may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
17. Provisions Severable. Rights and restrictions in this
Agreement may be exercised and are applicable only to the extent they do not
violate any applicable laws, and are intended to be limited to the extent
necessary so they will not render this Agreement illegal, invalid, or
unenforceable. If any term shall be held illegal, invalid, or unenforceable by
a court of competent jurisdiction, the remaining terms shall remain in full
force and effect. This Agreement does not in any way limit Company's rights
under the laws of unfair competition, trade secret,
12
<PAGE> 13
copyright, patent, trademark or any other applicable law(s), which are in
addition to rights under this Agreement. The existence of a claim by Executive,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to Company's enforcement of this Agreement.
18. Waiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or the future performance of any such term
or condition or of any other term or condition of this Agreement, unless such
waiver is contained in a writing signed by the party making the waiver.
19. Amendments and Modifications. This Agreement may be amended or
modified only by a writing signed by both parties hereto.
20. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter hereof and
Executive's employment with the Company. This Agreement supersedes all prior
negotiations, discussions, agreements and undertakings, both written and oral,
among the parties hereto, with respect to Executive's terms and conditions of
employment with the Company. This Agreement may not be enlarged, modified or
altered except in a writing signed by the parties as provided in Section 20
hereof.
21. Governing Law. The validity and effect of this Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Georgia. Each party irrevocably (a) consents to the exclusive
jurisdiction and venue of the courts of Fulton County, State and federal courts
in the Northern District of Georgia, in any action arising under or relating to
this Agreement, and (b) waives any jurisdictional defenses (including personal
jurisdiction and venue) to any such action.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EXECUTIVE:
/s/ Mark Alexander
----------------------------------------------
Mark Alexander
COMPANY:
INTERLAND, INC.
By: /s/ Kenneth Gavranovic
-------------------------------------------
Kenneth Gavranovic
President & Chief Executive Officer
[ANNEX CONTINUES ON NEXT PAGE]
14
<PAGE> 15
ANNEX
TO
NONCOMPETITION PROVISIONS OF SECTION 8
OF EMPLOYMENT AGREEMENT
Name of Employee: Mark Alexander
Title: Senior Vice President - Sales & Marketing
Description of Services: Senior Vice President (and senior officer) responsible
for all aspects of the Company's sales, marketing and business development
functions.
Date of Agreement: April 1, 2000
15
<PAGE> 1
EXHIBIT 10.25
================================================================================
SUNTRUST PLAZA GARDEN OFFICES
LEASE AGREEMENT
by and between
SUNTRUST PLAZA ASSOCIATES, LLC,
a Georgia limited liability company
and
INTERLAND, INC.
a Georgia corporation
May 16, 2000
Atlanta, Georgia
===============================================================================
<PAGE> 2
SUNTRUST PLAZA GARDEN OFFICES
ATLANTA, GEORGIA
<TABLE>
<CAPTION>
OFFICE LEASE
BASIC LEASE INFORMATION
<S> <C>
Date: May 16, 2000
Landlord: SunTrust Plaza Associates, LLC,
a Georgia limited liability company
Tenant: Interland, Inc., a Georgia corporation
Paragraph 1, Premises: Suite 500
Subparagraph (h) Suite 560
Paragraph 1, Rentable Area of Premises: 50,863 square feet
of Rentable Area
Subparagraph (j)
Paragraph 1, Rentable Area of Office Tower: 650,712 square feet
Subparagraph (j) of Rentable Area
Paragraph 1, Tenant's Percentage Share: 7.8165%
------
Subparagraph (l)
Paragraph 2 Commencement Date: Fifteen (15) days after
Delivery Date
Paragraph 2 Expiration Date: One day prior to the tenth (10th)
anniversary of the Commencement Date
for the initial portion of the Premises
Paragraph 3, Base Rental (per annum per square foot of
Subparagraph (a) Rentable Area of Premises): $16.25 for first Lease Year,
increasing each year thereafter
by 2.5% of the Base Rental in the
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
then expiring Lease Year
</TABLE>
<TABLE>
<CAPTION>
Paragraph 31 Security Deposit: Beginning of
Lease Year Security Deposit
---------- ----------------
<S> <C> <C> <C>
Year 1 $1,695,000
Year 2 $1,483,000
Year 3 $1,186,500
Year 4 $847,500
Year 5 $593,000
Years 6&7 $339,000
Years 8-10 $212,000
Paragraph 33 Tenant's Address
for Notices:
Prior to Commencement Date:
Interland, Inc.
101 Marietta Street
Suite 200
Atlanta, GA 30303
Attn: _____________________
Following Commencement Date:
Interland, Inc.
303 Peachtree Center Avenue
Suite 500
Atlanta, GA 30308
Attn: _____________________
Paragraph 33 Landlord's Address
for Notices:
SunTrust Plaza Associates, LLC
c/o Portman Management Company
303 Peachtree Street
Suite LL-120
Atlanta, Georgia 30308
Attn: Property Manager
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
with copy sent to:
SunTrust Plaza Associates, LLC
c/o SunTrust Real Estate Corporation
919 East Main Street
Post Office Box 26665
Richmond, VA 23261-6665
Attn: Ms. Susan C. Gallienne
Paragraph 42 Exhibits:
EXHIBIT A - Legal Description
EXHIBIT B - Floor Plan(s)
EXHIBIT C - Initial Improvement of
the Premises
EXHIBIT C-1 - Definition of Premises Shell
EXHIBIT D - Rules and Regulations
EXHIBIT E - Additional Provisions
</TABLE>
iii
<PAGE> 5
BASIC LEASE INFORMATION CONTINUED . . .
EXHIBIT F - Memorandum of Commencement
of Rental
EXHIBIT G - Technical Specifications
Exhibit C - Initial Improvement of the Premises:
Landlord's Contribution (per square foot of Rentable Area
of Premises): $28.00
Exhibit E - Design Fee Allowance
$2.00 per square foot of Rentable Area of Premises
The provisions of the Lease identified above in the margin are those provisions
where references to particular Basic Lease Information appear. Each such
reference shall incorporate the applicable Basic Lease Information. In the event
of any conflict between any Basic Lease Information and the Lease, the Lease
shall control.
LANDLORD:
SUNTRUST PLAZA ASSOCIATES, LLC,
a Georgia limited liability company
By: SUNTRUST BANKS, INC.,
as Managing Partner
By: /s/ Susan C. Gallienne
---------------------------
Title: First Vice President
------------------------
[SEAL]
TENANT:
INTERLAND, INC.,
a Georgia corporation
By: /s/ Chris Covington
---------------------------
Title: Senior Vice President
------------------------
iv
<PAGE> 6
[SEAL]
SUNTRUST PLAZA GARDEN OFFICES
ATLANTA, GEORGIA
<TABLE>
<CAPTION>
==============================================================================
TABLE OF CONTENTS Page
----
<S> <C> <C> <C>
1. Definitions.................................................................................... 1
2. Term; Completion of Improvements............................................................... 5
3. Rental......................................................................................... 6
4. Use............................................................................................ 8
5. Services....................................................................................... 9
6. Taxes Payable by Tenant........................................................................ 10
7. Alterations.................................................................................... 10
8. Liens.......................................................................................... 11
9. Repairs........................................................................................ 11
10. Destruction or Damage.......................................................................... 12
11. Insurance...................................................................................... 13
12. Release and Subrogation........................................................................ 13
13. Indemnification................................................................................ 14
14. Compliance with Legal Requirements............................................................. 15
15. Assignment and Subletting...................................................................... 15
16. Rules.......................................................................................... 17
17. Entry by Landlord.............................................................................. 18
18. Events of Default.............................................................................. 18
19. Remedies....................................................................................... 19
20. Landlord's Right to Cure Defaults.............................................................. 20
21. Attorney's Fees................................................................................ 21
22. Landlord's Default............................................................................. 21
23. Eminent Domain................................................................................. 22
24. Subordination.................................................................................. 22
25. No Merger...................................................................................... 24
26. Sale........................................................................................... 24
27. Estoppel Certificate........................................................................... 24
28. No Light, Air or View Easement................................................................. 24
29. Holding Over................................................................................... 24
30. Abandonment.................................................................................... 25
31. Security Deposit............................................................................... 25
32. Waiver......................................................................................... 26
33. Notices........................................................................................ 26
34. Complete Agreement............................................................................. 27
35. Corporate Authority............................................................................ 27
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
36. [Intentionally Deleted]........................................................................ 27
37. Personalty of Tenant........................................................................... 27
38. Quiet Enjoyment................................................................................ 27
39. Hazardous Substances........................................................................... 27
40. Force Majeure.................................................................................. 28
41. Miscellaneous.................................................................................. 29
42. Exhibits; Additional Provisions ............................................................... 29
</TABLE>
iv
<PAGE> 8
SUNTRUST PLAZA GARDEN OFFICES
LEASE
THIS LEASE (hereinafter referred to as the "Lease"), dated as of May
____, 2000 (for the purpose of reference only), is made and entered into by and
between SUNTRUST PLAZA ASSOCIATES, LLC, a Georgia limited liability company
(hereinafter referred to as the "Landlord") and INTERLAND, INC., a Georgia
Corporation (hereinafter referred to as "Tenant");
W I T N E S S E T H:
Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the Premises for the term and subject to the terms, covenants,
agreements and conditions hereinafter set forth, to each and all of which
Landlord and Tenant hereby mutually agree.
1. DEFINITIONS. For the purposes of this Lease and in addition to
the terms defined elsewhere in this Lease, the following defined terms shall
have the meanings ascribed thereto in this Paragraph 1:
(a) "Additional Rental" shall mean the sums payable
pursuant to subparagraph 3(a)(2) of this Lease.
(b) "Base Rental" shall mean the sums payable pursuant to
subparagraph 3(a)(1) of this Lease.
(c) "Building" shall mean the land and other real
property located in Atlanta, Georgia, as more particularly described on Exhibit
A attached hereto and made a part hereof, the building constructed thereon known
as "SunTrust Plaza Garden Offices" (which name may be changed at Landlord's sole
discretion), and all other improvements on or appurtenances to said real
property.
(d) "Default Rate" shall mean a rate per annum equal to
the lesser of (i) the Prime Rate plus three (3) percentage points or (ii) the
highest rate of interest permitted by law. (e) "Delivery Date" as defined in
Paragraph 2(a).
(f) "Office Tower" shall mean all office floors of the
Building.
(g) "Operating Expenses" shall mean the aggregate of all
costs and expenses of ownership, management, operation and maintenance of the
Building and supporting
1
<PAGE> 1
EXHIBIT 10.26
STOCK PURCHASE AGREEMENT
AMONG
INTERLAND, INC.
AND
BELL ATLANTIC INVESTMENTS, INC.
DATED MAY 8, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS 1
2. SALE AND PURCHASE OF SHARES 1
2.1. SALE AND PURCHASE OF SHARES 1
2.2. CLOSING 1
2.3. SALE AND PURCHASE OF ADDITIONAL SHARES 2
2.4. PURCHASE PRICE AND PAYMENT FOR ADDITIONAL SHARES 2
2.5. SECOND CLOSING 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2
3.1. ORGANIZATION AND STANDING 3
3.2. SUBSIDIARIES 3
3.3. CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS 4
3.4. CAPITAL STRUCTURE OF THE COMPANY 4
3.5. S-1 REGISTRATION STATEMENT 5
3.6. FINANCIAL STATEMENTS 5
3.7. NO LIABILITIES 5
3.8. TAXES 5
3.9. CONDUCT OF BUSINESS; ABSENCE OF MATERIAL ADVERSE CHANGE 6
3.10. TITLE TO PROPERTY AND ASSETS 8
3.11. INTELLECTUAL PROPERTY 8
3.12. BOOKS AND RECORDS 9
3.13. LITIGATION; DISPUTES 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.14. LABOR RELATIONS 10
3.15. ENVIRONMENTAL 10
3.16. RESTRICTIONS AND CONSENTS 11
3.17. AUTHORITY; AUTHORIZATION; NO CONFLICT 12
3.18. ABSENCE OF VIOLATION 13
3.19. COMPLIANCE WITH LAW; APPROVALS 13
3.20. BINDING OBLIGATION 14
3.21. SYSTEMS 14
3.22. COMPANY'S NAMES, BUSINESS AND LOCATION OF COMPANY ASSETS 15
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR 15
4.1. ORGANIZATION AND STANDING 15
4.2. AUTHORIZATION 15
4.3. BINDING OBLIGATION 16
4.4. NO REGISTRATION UNDER THE SECURITIES ACT 16
4.5. ACQUISITION FOR INVESTMENT 16
4.6. EVALUATION OF MERITS AND RISKS OF INVESTMENT 17
4.7. ADDITIONAL INFORMATION 17
4.8. STOCK CERTIFICATE LEGEND 17
4.9. QUALIFIED INSTITUTIONAL BUYER 17
5. CLOSING DELIVERABLES 18
5.1. OPINION OF COUNSEL 18
5.2. DOCUMENTS AT CLOSING 18
5.3. CONSENTS 18
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
6. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION REMEDIES 18
6.1. SURVIVAL OF REPRESENTATIONS 18
6.2. AGREEMENT OF THE COMPANY AND THE INVESTOR TO INDEMNIFY 19
6.3. CONDITIONS OF INDEMNIFICATION 19
6.4. SPECIFIC PERFORMANCE 20
6.5. REMEDIES CUMULATIVE 21
6.6. LIMITS FOR RECOVERY OF LOSSES 21
7. MISCELLANEOUS 21
7.1. ADDITIONAL ACTIONS AND DOCUMENTS 21
7.2. NO BROKERS 21
7.3. JURY WAIVER 22
7.4. PUBLICITY 22
7.5. EXPENSES 22
7.6. ASSIGNMENT 22
7.7. ENTIRE AGREEMENT; AMENDMENT 22
7.8. WAIVER 23
7.9. SEVERABILITY 23
7.10. GOVERNING LAW 23
7.11. NOTICES 23
7.12. HEADINGS 25
7.13. EXECUTION IN COUNTERPARTS 25
7.14. LIMITATION ON BENEFITS 25
7.15. BINDING EFFECT 25
</TABLE>
- iii -
<PAGE> 5
EXHIBIT A DEFINITIONS
EXHIBIT B FORM OF KILPATRICK STOCKTON LLP LEGAL OPINION
EXHIBIT C ARTICLES OF AMENDMENT OF ARTICLES OF
INCORPORATION
EXHIBIT D AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
- iv -
<PAGE> 6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Purchase Agreement") is
entered into as of May 8, 2000 by and among Interland, Inc., a Georgia
corporation (the "Company") and Bell Atlantic Investments, Inc., a Delaware
corporation ("Bell Atlantic" or the "Investor").
WHEREAS, the Company desires to issue and sell to the
Investor, and the Investor desires to subscribe for and acquire from the
Company, an equity interest in the Company, upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
For all purposes of this Purchase Agreement, certain
capitalized terms specified in Exhibit A shall have the meanings set forth in
that Exhibit A, except as otherwise expressly provided.
2. SALE AND PURCHASE OF SHARES
2.1. SALE AND PURCHASE OF SHARES
The Company agrees to issue and sell to the Investor, and the
Investor is subscribing for and agrees to purchase from the Company, an
aggregate of 1,111,111 shares of Series A Stock (the "Initial Investment") at a
price per Share of $9.00 for an aggregate purchase price of $10,000,000.
2.2. CLOSING
The closing of the Initial Investment shall take place simultaneously
with the Company's receipt by wire transfer of immediately available funds in
the amount of $10,000,000 from the Investor, as payment in full for the shares
of Series A Stock subscribed for and being purchased by the Investor in the
Initial Investment (the "Closing"). At the Closing, the Company shall issue and
deliver to the Investor a stock certificate or certificates in definitive form,
registered in the Investor's name, representing the Initial Investment.
2.3. SALE AND PURCHASE OF ADDITIONAL SHARES
At the Second Closing (as defined below), and on the terms and subject
to the conditions set forth in this Agreement, the Company shall issue, sell and
deliver to the Investor, and the
<PAGE> 7
Investor hereby subscribes for and agrees to purchase and accept from the
Company, the number of shares (the "Additional Shares") of Common Stock of the
Company equal to the number obtained by dividing (A) $15,000,000 by (B) a number
equal to the lesser of (i) the midpoint of the expected range of offering prices
reflected on the Company's first filing with the Securities and Exchange
Commission of a registration statement covering the sale of its Common Stock and
(ii) the actual price to the public in such offering, and rounding the number
obtained thereby to the nearest whole number.
2.4. PURCHASE PRICE AND PAYMENT FOR ADDITIONAL SHARES
In consideration of the sale of the Additional Shares to the Investor,
the Investor shall pay to the Company at the Second Closing the aggregate
purchase price of $15,000,000.00 (the "Purchase Price"). The Purchase Price
shall be paid in cash by wire transfer of immediately available federal funds to
an account designated in writing by the Company.
2.5. SECOND CLOSING
The closing of the transactions contemplated in Section 2.3 and Section
2.4 hereof (the "Second Closing") shall take place at the offices of Kilpatrick
Stockton LLP, 1100 Peachtree Street NE, Suite 2800, Atlanta, Georgia, at 10:00
a.m., Atlanta time, on the 3rd day after the Company's registration statement is
declared effective and the offering made pursuant thereto is priced. The date on
which the Second Closing takes place is herein referred to as the "Second
Closing Date". At the Second Closing (i) the Company shall deliver to the
Investor the executed stock certificate representing the Additional Shares duly
issued in the name of the Investor, and (ii) the Investor shall deliver the
Purchase Price to Company by wire transfer of immediately available funds in the
amount of $15,000,000 from the Investor.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the Disclosure Schedule to
the Stock Purchase Agreement (as hereinafter defined) dated December 2, 1999
(the "Disclosure Schedule"), the Company represents and warrants as of December
2, 1999 (which representation and warranty shall be deemed to include the
disclosure with respect thereto so specified in the Disclosure Schedule) to the
Investor that each of the representations and warranties as set forth in SECTION
3.5 through SECTION 3.23, inclusive, of that certain Stock Purchase Agreement
entered into as of December 2, 1999 by and among the Company, Crest
Communications Partners L.P., Crest Entrepreneurs Fund L.P., Boulder Ventures
III, L.P., and the other investors set forth on Exhibit D thereto (the "Stock
Purchase Agreement"), is true and correct and each such representation and
warranty shall be incorporated by reference and made a part hereof; provided,
however, for purposes of this Agreement, each reference to the (i) "Purchase
Agreement" made therein shall mean this Agreement, and (ii) "Investors" made
therein shall refer to the Investor. The disclosures made in the Disclosure
Schedule with respect to a Section of this Purchase Agreement shall also be
deemed disclosures with respect to all other applicable Sections of this
Agreement. Investor hereby acknowledges and agrees that except as otherwise
provided below each of such representations and warranties made by the Company
herein and any and all
- 2 -
<PAGE> 8
disclosures made by the Company in the Disclosure Memorandum shall be effective
as of December 2, 1999 and the Company shall be under no obligation to
supplement or otherwise update such information subsequent to December 2, 1999
except as otherwise provided below. In addition, the Company hereby makes the
following representations and warranties as of the date hereof or other date
expressly set forth therein.
3.1. ORGANIZATION AND STANDING
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia and has all
requisite corporate power and corporate authority to own, operate and lease its
Assets, to carry on its business as currently conducted and to carry out the
transactions contemplated hereby. The Company has made available to the Investor
complete and correct copies of the certificate or articles of incorporation and
by-laws of the Company, with all amendments thereto, as in effect on the date of
this Purchase Agreement. The Company is not qualified to conduct business in any
other jurisdiction, and neither the nature of the business conducted by, nor the
character of the Assets owned, leased or otherwise held by, the Company makes
such qualification necessary except where the failure to be so qualified would
not have a Material Adverse Effect.
3.2. SUBSIDIARIES
Except as set forth on the Disclosure Schedule, the Company
has no Subsidiaries and no equity investment or other interest in, nor has the
Company made advances or loans to, any corporation, association, partnership,
joint venture or other entity, other than credit extended in the Ordinary Course
of Business, except as set forth in the Disclosure Schedule. The Disclosure
Schedule sets forth (a) the authorized capital stock of each direct and indirect
Subsidiary of the Company and the percentage of the outstanding capital stock of
each Subsidiary directly or indirectly owned by the Company, and (b) the nature
and amount of any such equity investment, other interest or advance. All of such
shares of capital stock of Subsidiaries directly or indirectly held by the
Company have been duly authorized and validly issued and are outstanding, fully
paid and nonassessable. The Company directly, or indirectly through wholly owned
Subsidiaries, owns all such shares of capital stock of the direct or indirect
Subsidiaries free and clear of all Encumbrances. Each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its state or jurisdiction of incorporation (as listed in the Disclosure
Schedule), and has all requisite corporate power and authority to own, operate
and lease its Assets and to carry on its business as currently conducted. Each
Subsidiary is qualified to conduct business and is in good standing in the
states, countries and territories listed in the Disclosure Schedule. The
Subsidiaries are not qualified to conduct business in any other jurisdictions,
and neither the nature of their businesses nor the character of the Assets
owned, leased or otherwise held by them makes any such qualification necessary.
There is no state, country or territory wherein the absence of licensing or
qualification as a foreign corporation would have a Material Adverse Effect.
- 3 -
<PAGE> 9
3.3. CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS
The Company has Furnished to the Investor a true and complete
copy of the certificate or articles of incorporation of the Company, as
currently in effect, certified as of a recent date by the Secretary of State (or
comparable governmental authority) of the respective jurisdictions of
incorporation, and a true and complete copy of the bylaws of the Company, as
currently in effect.
3.4. CAPITAL STRUCTURE OF THE COMPANY
Upon consummation of the purchase by the Investor of the
shares of Common Stock contemplated hereby, the authorized capital stock of the
Company will consist solely of (i) 200,000,000 shares of Common Stock, of which
(a) 23,058,498 shares are currently issued and outstanding, (b) 12,163,968
shares are reserved for issuance upon conversion of the Series A Stock, (c)
7,000,000 shares are reserved for issuance pursuant to the Company's Option
Plan, (d) 400,000 shares are reserved for issuance pursuant to options issued to
consultants and advisors to the Company and (d) 63,282,712 shares are authorized
but unissued and unreserved and (ii) 25,000,000 shares of Preferred Stock, of
which (a) 12,163,968 shares of Series A Stock are issued and outstanding and (b)
2,100,000 shares of Series A-1 Convertible Participating Preferred Stock, no par
value per share, are authorized but unissued. All issued and outstanding shares
of capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable and free of any preemptive rights. Except as
set forth in this SECTION 3.4, no shares of capital stock of the Company or any
Subsidiary have been reserved for any purpose. Except as set forth in this
SECTION 3.4, there are no outstanding securities convertible into or
exchangeable or exercisable for the capital stock of the Company, or warrants or
options to purchase or to subscribe for any shares of such stock or other
securities of the Company. There are no outstanding Agreements affecting or
relating to the voting, issuance, purchase, redemption, repurchase, transfer or
registration for sale under the Securities Act of any securities of the Company
or any Subsidiary, except as contemplated hereunder.
3.5. S-1 REGISTRATION STATEMENT
The Company's S-1 registration statement (File No. 333- 32556) filed
with the SEC under the Securities Act (the "SEC Documents") did not, as of the
date of this Agreement, and will not as of the date it is declared effective by
the SEC contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.6. FINANCIAL STATEMENTS
The audited balance sheets of the Company as of the end of the fiscal
years ending December 31, 1999 and 1998, and the audited statements of income,
shareholders' equity and cash flow for such periods and the unaudited balance
sheet as of March 31, 2000 and statement of income for the three month period
then ended, in each case as contained in the Registration Statement (the
"Financial Statements"): (i) are in accordance with the books and records of the
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Company, (ii) present fairly in all material respects the financial position of
the Company as of the respective dates and the results of operations and cash
flow for the respective periods indicated, and (iii) have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior accounting periods except for the absence of footnotes.
3.7. NO LIABILITIES
Except as reflected in the Financial Statements, as of March
31, 2000, there existed no liabilities (whether contingent or absolute, matured
or unmatured, known or unknown) of the Company other than (i) incurred in the
Ordinary Course of Business and in amounts that are not individually Material,
and (ii) for taxes, assessments and other governmental charges, if such taxes,
assessments and other charges (x) are not yet due and payable, or (y) are due
and payable but can be paid hereafter without penalty or interest and for which
a proper accrual relating thereto is reflected in the Audited Financial
Statements and which will be paid before penalty or interest begins to accrue
thereon. Except as described in the Disclosure Schedule, since March 31, 2000,
the Company has not incurred any liabilities (whether contingent or absolute,
matured or unmatured, known or unknown) other than in the Ordinary Course of
Business and in amounts that are not individually or in the aggregate Material.
3.8. TAXES
(a) The Company has (or, in the case of returns becoming
due after the date hereof and on or before the Closing Date, will have prior to
the Closing Date) duly filed (or obtained extensions with respect to) all Tax
Returns required to be filed on or before the Closing Date with respect to all
applicable Taxes. No penalties or other charges are or will become due with
respect to any such Tax Returns as the result of the late filing thereof. All of
the Tax Returns are (or, in the case of returns becoming due after the date
hereof and on or before the Closing Date, will be) true and complete in all
Material respects. The Company: (i) has paid all Taxes due or claimed to be due
by any taxing authority in connection with any such Tax Returns; or (ii) has
established (or, in the case of amounts becoming due after the date hereof,
prior to the Closing Date will have paid or established) in the Financial
Statements provided to the Investor adequate reserves (in conformity with
generally accepted accounting principles consistently applied) for the payment
of such Taxes. The amounts set up as reserves for Taxes on the Financial
Statements are sufficient for the payment of all unpaid Taxes as of the dates
thereof, whether or not such Taxes are disputed or are yet due and payable, for
or with respect to the period, and for which the Company may be liable in its
own right or as a transferee of the Assets of, or successor to, any corporation,
person, association, partnership, joint venture or other entity.
(b) The Company, either individually or in its own right
or as a transferee, does not have and on the Closing Date will not have any
liability for Taxes payable for or with respect to any periods prior to and
including the Closing Date in excess of the amounts actually paid prior to the
Closing Date or reserved for in the Financial Statements (other than Taxes
accruing after March 31, 2000 in the Ordinary Course of Business which are not
payable on or prior to the Closing Date).
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(c) There is no action, suit, proceeding, audit,
investigation or claim pending or, to the Knowledge of the Company, threatened
in respect of any Taxes for which the Company is or may become liable, nor has
any deficiency or claim for any such Taxes been proposed, asserted or, to the
Knowledge of the Company, threatened. The Company has not consented to any
waivers or extensions of any statute of limitations with respect to the
collection or assessment of any Taxes against the Company. There is no
Agreement, waiver or consent providing for an extension of time with respect to
the assessment or collection of any Taxes against the Company and no power of
attorney granted by the Company with respect to any tax matters is currently in
force.
3.9. CONDUCT OF BUSINESS; ABSENCE OF MATERIAL ADVERSE CHANGE
Except as otherwise contemplated by the terms of this Purchase
Agreement or as set forth in the Disclosure Schedule, since March 31, 2000 (the
"Reference Date"), there has been no material adverse change in the business,
operations, prospects, condition (financial or otherwise), Assets or liabilities
of the Company. Except as set forth in the Disclosure Schedule or as
contemplated hereunder, since the Reference Date, the Company has conducted
business substantially in the manner heretofore conducted and only in the
Ordinary Course of Business, and the Company has not:
(a) incurred any loss Materially and adversely affecting
any of its Assets as the result of any fire, explosion, flood, windstorm,
earthquake, labor trouble, riot, accident, act of God or public enemy or armed
forces, or other casualty;
(b) incurred, or become subject to, any obligation or
liability (absolute or contingent, matured or unmatured, known or unknown),
except current liabilities incurred in the Ordinary Course of Business and liens
for current taxes, assessments or governmental charges or levies on property not
yet due and delinquent;
(c) discharged or satisfied any Encumbrance or paid any
obligation or liability (absolute or contingent, matured or unmatured, known or
unknown) other than current liabilities shown in the Financial Statements and
current liabilities incurred since the Reference Date in the Ordinary Course of
Business;
(d) declared or made payment of, or set aside for
payment, any dividends or distributions of any Assets, or purchased, redeemed or
otherwise acquired any of its capital stock, any securities convertible into
capital stock, or any other securities;
(e) mortgaged, pledged or subjected to any Encumbrance
any Material Assets, except for (i) Encumbrances reflected in the Financial
Statements of the Company or on the Disclosure Schedule, (ii) Encumbrances
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or irregularities in
title thereto which do not Materially detract from the value of, or impair the
use of, such property by the Company in the operation of its business, and (iii)
liens for current taxes, assessments or governmental charges or levies on
property not yet due and delinquent;
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(f) sold, exchanged, transferred or otherwise disposed of
any Material Assets, or canceled any Material debts or claims, except in each
case in the Ordinary Course of Business;
(g) written down the value of any Material Assets or
written off as uncollectible any Material notes or accounts receivable, except
write-downs and write-offs in the Ordinary Course of Business, none of which,
individually or in the aggregate, are Material;
(h) made any change in any method of accounting or
accounting practice; or
(i) made an Agreement to do any of the foregoing.
3.10. TITLE TO PROPERTY AND ASSETS
The Company has good, valid and marketable title to all
Material Assets owned by it, free and clear of all Encumbrances other than those
referred to in the Financial Statements (or the notes thereto) and liens for
taxes not yet due and payable. The Company does not own any real estate, and the
Company is not a United States Real Property Holding Company as defined under
Section 897 of the Code. All personal property of the Company is in good
operating condition and repair in all material respects (ordinary wear and tear
and routinely scheduled maintenance excepted) and is suitable and adequate for
the uses for which it is intended or is being used.
3.11. INTELLECTUAL PROPERTY
(a) The Company owns, or is licensed or otherwise
possesses all necessary rights to use all patents, trademarks, trade names,
service marks, trade dress, logos, domain names, copyrights and any applications
or registrations therefor, maskworks, schematics, technology, know-how, trade
secrets, formulas, compositions, technical data, designs, drawings,
specifications, inventory, inventions, ideas, algorithms, processes, computer
software programs and applications (in both source code and object code form),
and tangible or intangible proprietary information or material and all reissues,
extensions and renewals thereof ("Intellectual Property") that are used in the
business or products of the Company as the business is now conducted and as
proposed to be conducted. The Intellectual Property owned or used by the Company
is free and clear of all Encumbrances.
(b) Except as disclosed on the Disclosure Schedule, the
Company has taken (or, with respect to Third Party Intellectual Property Rights
that are Material to the Company's business or products, has ensured that the
owner thereof has taken) all necessary action in all appropriate jurisdictions,
both domestic and foreign, to register and maintain the registration of all
Intellectual Property that is Material to the Company's business or products
that may be registered.
(c) To the Knowledge of the Company, there is no actual
or suspected unauthorized use, disclosure, infringement or misappropriation of
any Intellectual Property rights of the Company, or any Third Party Intellectual
Property Rights, that are Material to the
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<PAGE> 13
Company's business or properties, to the extent licensed by or through the
Company, by any third party, including any employee or former employee of the
Company. The Company has not notified any third party that it believes such
third party is interfering with, infringing or misappropriating any of the
Company's Intellectual Property or engaging in any act of unfair competition.
The Company has the right to bring an action for the infringement of all of its
Intellectual Property. The Company has taken all reasonably necessary measures
to protect and maintain its rights in the Intellectual Property. Except as set
forth on the Disclosure Schedule, there are no royalties, fees or other payments
or compensation payable by the Company to any person by reason of the ownership,
use, sale or disposition of Intellectual Property.
(d) The Company is not, nor will it be as a result of the
execution and delivery of this Purchase Agreement, the Common Stock or the
Agreements contemplated hereby, or the performance of its obligations
thereunder, in breach of any license, sublicense or other agreement relating to
the Intellectual Property, including Third Party Intellectual Property Rights.
(e) The Company has no Knowledge that the conduct of the
business of the Company infringes any patent, trademark, service mark,
copyright, trade secret or other proprietary right of any third party. There are
no pending or, to the Company's Knowledge, threatened claims against the Company
alleging that the conduct of its business infringes any Intellectual Property
rights of others. The Intellectual Property of the Company is not subject to any
outstanding injunction, judgment, order, decree, ruling or charge. To the
Company's Knowledge, the Company has not engaged in unfair competition against
any third party.
3.12. BOOKS AND RECORDS
The books of account, stock records, minute books and other
records of the Company are true and accurate in all Material respects and have
been maintained in accordance with good business practices and the matters
contained therein are appropriately and accurately reflected in the Financial
Statements.
3.13. LITIGATION; DISPUTES
(a) Except as described in the Disclosure Schedule, there
are no actions, suits, claims, arbitrations, proceedings or known investigations
pending or, to the Knowledge of the Company, threatened or reasonably
anticipated against, affecting or involving the Company, or its business or
Assets, or the transactions contemplated by this Purchase Agreement before or by
any court, arbitrator or governmental authority, domestic or foreign. The
Company is not operating under, subject to or in default with respect to any
order, award, writ, injunction, decree or judgment of any court, arbitrator or
governmental authority. The Company has Furnished to the Investor copies of all
pleadings filed with respect to any Material litigation in which the Company is
engaged.
(b) The Company is not currently involved in nor, to the
Knowledge of the Company, reasonably anticipates any material dispute with any
of its current or former employees, agents, brokers, distributors, vendors,
customers, business consultants, franchisees,
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franchisers, representatives or independent contractors (or any current or
former employees of any of the foregoing persons or entities) which would
reasonably be expected to have a Material Adverse Effect.
3.14. LABOR RELATIONS
There are no strikes, work stoppages, grievance proceedings,
union organization efforts or other controversies pending or, to the Knowledge
of the Company, threatened or reasonably anticipated between the Company and (a)
any current or former employees of the Company, or (b) any union or other
collective bargaining unit representing the employees. The Company is in
compliance in all Material respects with all Laws relating to employment or the
workplace, including, without limitation, provisions relating to wages, hours,
collective bargaining, safety and health, work authorization, equal employment
opportunity, immigration, withholding, unemployment compensation, worker's
compensation, employee privacy and right to know. There are no collective
bargaining agreements, employment agreements between the Company and any of its
employees, or professional service agreements not terminable at will without
penalty relating to the businesses and Assets of the Company. The consummation
of the transactions contemplated hereby will not cause the Company or the
Investor to incur or suffer any liability relating to, or obligation to pay,
severance, termination or other payments to any person or entity.
3.15. ENVIRONMENTAL
(a) The Company has complied and is in compliance with,
and the facilities occupied by the Company and all improvements thereon are in
compliance with, all Environmental Laws relating to or affecting the Company,
except where the failure to comply would not have a Material Adverse Effect.
(b) The Company has no liability under any Environmental
Law that would have a Material Adverse Effect and it is not responsible for any
liability of any other person under any Environmental Law. There are no pending
or, to the Knowledge of the Company, threatened actions, suits, orders, claims,
legal proceedings or other proceedings based on, nor has the Company or any
officer or director, directly or indirectly received any formal or informal
notice of any complaint, order, directive, citation, notice of responsibility,
notice of potential responsibility, or information request from any governmental
authority or any other person or entity or knows or suspects any fact(s) which
might reasonably form the basis for any such actions or notices arising out of
or attributable to: (i) the current or past presence, Release, or threatened
Release of Hazardous Materials at or from any part of the Real Property; (ii)
the off-site disposal or treatment of Hazardous Materials originating on or from
the Real Property or the business or Assets of the Company; or (iii) any
violation of Environmental Laws at any part of the Real Property or arising from
the Company's activities (or the activities of such Person's predecessors in
title) involving Hazardous Materials.
(c) The Company has been duly issued, and currently has
and will maintain through the Closing Date, all permits, licenses, certificates
and approvals required under any
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<PAGE> 15
Environmental Law with respect to its Assets and business that the failure to
have and maintain would cause a Material Adverse Effect. Except in accordance
with such permits, licenses, certificates and approvals, to the Knowledge of the
Company, there has been no Release of Hazardous Materials at, or, under, or from
the Real Property occupied by the Company. There are no permits, licenses,
certificates or approvals required under any Environmental Law that are
non-transferable or which require consent, notification or other action to
remain in full force and effect following consummation of the transactions
contemplated by this Purchase Agreement.
(d) No Real Property owned or previously owned by the
Company and, to the Knowledge of the Company, no Real Property currently leased
by the Company from third parties, either (i) contains any underground
improvements, including but not limited to treatment or storage tanks, or
underground piping associated with such tanks, used currently or in the past for
the management of Hazardous Materials, or (ii) is or has been used as a dump or
landfill or consists of filled in land or wetlands.
(e) To the Knowledge of the Company, neither PCBs nor
asbestos-containing materials are present on or in the Real Property occupied by
the Company.
(f) To the Knowledge of the Company, no Encumbrance in
favor of any person relating to or in connection with any Claim under any
Environmental Law has been filed or attached to Real Property currently leased
by the Company from a third party.
3.16. RESTRICTIONS AND CONSENTS
There are no Agreements, Laws or other restrictions of any
kind to which the Company is a party or to which the Company's Assets are
subject that would prevent or restrict the execution, delivery or performance of
this Purchase Agreement or prohibit or limit the continued operation of the
business of the Company after the date hereof on substantially the same basis as
heretofore operated, as a result of the execution, delivery or performance of
this Purchase Agreement. The Disclosure Schedule lists all Agreements and Laws
that require the consent or acquiescence of any person or entity not party to
this Purchase Agreement with respect to any aspect of the execution, delivery or
performance of this Purchase Agreement by the Company.
3.17. AUTHORITY; AUTHORIZATION; NO CONFLICT
(a) The Company has all requisite corporate power and
authority to enter into this Purchase Agreement and the other Documents
contemplated hereby and to carry out its obligations hereunder and thereunder.
The execution, delivery and performance of this Purchase Agreement and the other
Documents contemplated hereby by the Company have been duly authorized by all
necessary corporate action. The issuance of the shares of Series A Stock to be
purchased by the Investor hereunder has been duly authorized by all requisite
corporate action of the Company and, upon delivery to the Investor of
certificates therefor against payment in accordance with the terms of this
Purchase Agreement, the shares of Series A Stock will (i) be validly issued,
fully paid and nonassessable, (ii) have the rights, preferences and privileges
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described in Exhibit C hereto, (iii) be free and clear of preemptive rights,
(iv) subject to the Investor's representations and warranties contained herein,
be issued in compliance with the Securities Act and any applicable state
securities laws and the rules and regulations promulgated thereunder, and (v) be
free and clear of Encumbrances, other than Encumbrances that might have been
created by the Investor and the Encumbrances imposed under this Purchase
Agreement and the Documents contemplated hereby. The issuance of the Common
Stock issuable upon conversion of the Series A Stock has been duly authorized by
all requisite corporate action and such Common Stock has been reserved for
issuance upon conversion of the Series A Stock and, when issued upon conversion
of the Series A Stock in accordance with the terms of Exhibit C hereto, will be
(i) validly issued, fully paid and nonassessable, (ii) free and clear of
preemptive rights, (iii) issued in compliance with the Securities Act and any
applicable state securities laws and the rules and regulations promulgated
thereunder and (iv) free and clear of Encumbrances, other than Encumbrances that
might have been created by the Investor and the Encumbrances imposed under this
Purchase Agreement and the Documents contemplated hereby.
(b) The execution, delivery and performance by the
Company of this Purchase Agreement and all other Documents contemplated hereby,
the fulfillment of and compliance with the respective terms and provisions
hereof and thereof, and the consummation by the Company of the transactions
contemplated hereby and thereby, do not and will not: (a) conflict with, or
violate any provision of, any Law having applicability to the Company or any of
its Assets, or any provision of the certificate or articles of incorporation or
bylaws of the Company; (b) conflict with, or result in any breach of, or
constitute a default under any Material Agreement to which the Company is a
party or by which the Company or any of its Assets may be bound; or (c) result
in or require the creation or imposition of or result in the acceleration of any
indebtedness, or of any Encumbrance of any nature upon, or with respect to any
of the Material Assets of the Company.
3.18. ABSENCE OF VIOLATION
The Company is not in violation of or default under, nor has
the Company breached, any term or provision of its certificate or articles of
incorporation or bylaws or any Material Agreement or restriction to which the
Company is a party or by which the Company is bound or any of its Material
Assets are bound or affected. Neither the Company nor any of its officers,
directors, employees or agents (or, to the Company's Knowledge, stockholders,
distributors, representatives or other persons acting on the express, implied or
apparent authority of such entity) have paid, given or received or have offered
or promised to pay, give or receive, any bribe or other unlawful, questionable
payment of money or other thing of value, any extraordinary discount, or any
other unlawful or unusual inducement, to or from any person, business
association or governmental official or entity in the United States or elsewhere
in connection with or in furtherance of the business of the Company (including,
without limitation, any offer, payment or promise to pay money or other thing of
value (a) to any foreign official or political party (or official thereof) for
the purposes of influencing any act, decision or omission in order to assist the
Company in obtaining business for or with, or directing business to, any person,
or (b) to any person, while knowing that all or a portion of such money or other
thing of value will be offered, given or promised to any such official or party
for such purposes. The
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business of the Company is not in any manner dependent upon the making or
receipt of such payments, discounts or other inducements.
3.19. COMPLIANCE WITH LAW; APPROVALS
Except as set forth in the Disclosure Schedule:
(a) The operations of the Company have been conducted, in
all Material respects, in compliance with all Laws and regulations applicable to
the Company's business.
(b) The Company has not received notice of any violation
(or of any investigation, inspection, audit, or other proceeding by any
governmental authority involving allegations of any violation) of any Law, nor
is it in material default with respect to any Law, and to the Knowledge of the
Company, no investigation, inspection, audit, or other proceeding by any
governmental authority involving allegations of violation of any Law is
threatened or contemplated;
(c) The Company has all licenses, franchises, permits,
authorizations or approvals from all governmental authorities ("Approvals")
required for the conduct of the business of the Company and the occupancy and
operation, for its present uses, of the real and personal property which the
Company owns or leases, except where the failure to have such Approvals would
not, individually or in the aggregate, have a Material Adverse Effect, and the
Company is not in violation of any such Approvals or any terms or conditions
thereof.
(d) All such Approvals are in full force and effect, have
been issued to and fully paid for by the holder thereof and, to the Knowledge of
the Company, no suspension or cancellation thereof has been threatened; and
(e) No such Approvals will in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this Purchase
Agreement or any of the other agreements contemplated hereunder or executed
herewith.
3.20. BINDING OBLIGATION
This Purchase Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms, is in full
force and effect and constitutes a legal, valid and binding obligation of, and
is legally enforceable against, the Company, and, to the Company's Knowledge,
the other parties thereto (except as enforceability may be limited or affected
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws and equitable principles now or hereafter in effect and
affecting the rights and remedies of creditors generally); and each Document to
be executed by the Company pursuant hereto, when executed and delivered in
accordance with the provisions thereof, shall be a valid and binding obligation
of the Company, enforceable in accordance with its terms.
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<PAGE> 18
3.21. SYSTEMS
Except as set forth in the Disclosure Schedule and with such
other exceptions as will not, individually or in the aggregate, have a Material
Adverse Effect, (i) all of the Systems services' and platform servers are
running, or peaking, at no higher than 60% of capacity, (ii) all of the Systems'
services are replicated in a redundant manner across available platform servers,
(iii) all remote physical points of presence ("POPs") are secure, conform to
equipment manufacturers' recommended environmental parameters, and contain an
uninterrupted power supply with a battery backup of at least 30 minutes, (iv)
the existing power plant at the Company's main location is equipped with an
uninterrupted power supply with a battery backup of at least 60 minutes, (v) all
deployed dial-in modem, modem shelf and corresponding technology conform to
applicable industry standards necessary to support traffic at a rate of 44.5
Mgbps or above, and (vi) all Systems owned, leased by or licensed to or by the
Company are Year 2000 Compliant.
3.22. COMPANY'S NAMES, BUSINESS AND LOCATION OF COMPANY ASSETS
The Company has conducted business under the names "Interland,
Inc." and "Cumberland Title and Closing Corporation" and no other names. The
Company is in the business of providing web hosting services. Other than
engaging in business as a real estate title company under the name "Cumberland
Title and Closing Corporation," the Company has not engaged in and does not
currently engage in any other business. The Company has not engaged in business
as a real estate title company at any time within the past ten (10) years. The
Company's chief executive office and principal place of business is located at
101 Marietta Street, Atlanta, Georgia 30303. Substantially all of the Company's
physical Assets are located at the same address as its chief executive office
and the Company does not currently have any places of business other than at
such address or as disclosed in the Disclosure Schedule. Set forth in the
Disclosure Schedule is a complete and accurate listing of all locations at which
the Company has conducted business over the last ten (10) years.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to the Company as
follows:
4.1. ORGANIZATION AND STANDING
The Investor is duly organized, validly existing and in good
standing under the laws of the state or jurisdiction of its formation and has
the full and unrestricted power and authority to enter into this Purchase
Agreement and to carry out the transactions contemplated hereby.
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<PAGE> 19
4.2. AUTHORIZATION
The execution, delivery and performance by the Investor of
this Purchase Agreement and all other Documents contemplated hereby, the
fulfillment of and the compliance with the respective terms and provisions
hereof and thereof, and the consummation by the Investor of the transactions
contemplated hereby and thereby have been duly authorized, and will not: (a)
conflict with, or violate any term or provision of the Investor's certificate or
agreement of limited partnership or other governing documents or (b) conflict
with, or result in any breach of, or constitute a default under, any Agreement
to which the Investor is a party or by which such Investor is bound. No other
action is necessary for the Investor to enter into this Purchase Agreement and
all other Documents contemplated hereby and to consummate the transactions
contemplated hereby and thereby.
4.3. BINDING OBLIGATION
This Purchase Agreement constitutes a valid and binding
obligation of the Investor, enforceable in accordance with its terms, is in full
force and effect and constitutes a legal, valid and binding obligation of, and
is legally enforceable against, the Investor, and, to the Investor's Knowledge,
the other parties thereto (except as enforceability may be limited or affected
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws and equitable principles now or hereafter in effect and
affecting the rights and remedies of creditors generally). Each Document to be
executed by the Investor pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of the Investor, enforceable in accordance with its terms, shall be in full
force and effect and shall constitute a legal, valid and binding obligation of,
and shall be legally enforceable against, the Investor, and, to the Investor's
Knowledge, the other parties thereto (except as enforceability may be limited or
affected by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws and equitable principles now or hereafter in
effect and affecting the rights and remedies of creditors generally).
4.4. NO REGISTRATION UNDER THE SECURITIES ACT
The Investor understands that the Series A Stock to be
purchased by it at Closing and the Common Stock to be purchased at the Second
Closing pursuant to the terms of this Purchase Agreement have not and will not
be registered under the Securities Act or any state securities laws and will be
issued in reliance upon exemptions contained in the Securities Act or
interpretations thereof and in the applicable state securities laws, and cannot
be offered for sale, sold or otherwise transferred unless the shares being
acquired hereunder subsequently is so registered or qualify for exemption from
registration under the Securities Act.
4.5. ACQUISITION FOR INVESTMENT
The shares of Series A Stock and Common Stock is being
acquired under this Purchase Agreement by the Investor in good faith solely for
its own account, for investment and
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<PAGE> 20
not with a view toward distribution within the meaning of the Securities Act.
The shares of Series A Stock and Common Stock will not be offered for sale, sold
or otherwise transferred by the Investor without either registration or
exemption from registration under the Securities Act and any applicable state
securities laws (and the delivery of investment representation letters and legal
opinions reasonably satisfactory to the Company, as reasonably requested by the
Company).
4.6. EVALUATION OF MERITS AND RISKS OF INVESTMENT
The Investor has knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
its investment hereunder. The Investor is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act. The Investor understands and is
able to bear any economic risks associated with such investment (including,
without limitation, the necessity of holding the shares for an indefinite period
of time, inasmuch as the shares have not been registered under the Securities
Act or any state securities laws).
4.7. ADDITIONAL INFORMATION
The Investor acknowledges that it has been afforded the
opportunity to ask questions and receive answers concerning the Company and to
obtain additional information that it has requested to verify the accuracy of
the information contained herein. Notwithstanding the foregoing, nothing
contained herein shall operate to modify or limit in any respect the
representations and warranties of the Company or to relieve it from any
obligations to the Investor for breach thereof or the making of misleading
statements of material fact or the omission of material facts in connection with
the transactions contemplated herein.
4.8. STOCK CERTIFICATE LEGEND
The Investor acknowledges and agrees that each certificate
representing the Series A Stock and Common Stock shall bear the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
- 15 -
<PAGE> 21
4.9. QUALIFIED INSTITUTIONAL BUYER
The Investor hereby certifies that it is a "qualified
institutional buyer" as defined in Rule 144A promulgated by the Securities and
Exchange Commission pursuant to the Securities Act.
5. CLOSING DELIVERABLES
Contemporaneously with the execution of this Agreement, the
Company shall deliver to the Investor the following:
5.1. OPINION OF COUNSEL
The Purchasers shall have received an opinion of Kilpatrick
Stockton LLP, counsel to the Company, dated as of the Closing Date, to the
effect and in the form attached hereto as Exhibit B.
5.2. DOCUMENTS AT CLOSING
All documents required to be furnished by the Company to the
Investor prior to or at Closing shall have been so furnished.
5.3. CONSENTS
(a) The Investor shall have received all consents,
authorizations and approvals of governmental and private parties which are
required to be obtained in order to consummate the transactions contemplated
hereby, and such consents, authorizations and approvals shall be in full force
and effect on the Closing Date.
(b) The Company shall have received all consents,
authorizations and approvals of governmental and private parties which are
required to be obtained in order to consummate the transactions contemplated
hereby, and such consents, authorizations and approvals be in full force and
effect on the Closing Date.
6. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION REMEDIES
6.1. SURVIVAL OF REPRESENTATIONS
All representations, warranties, covenants, and other
Agreements made by any party to this Purchase Agreement herein or pursuant
hereto shall also be deemed made on and as of the Closing Date as though such
representations, warranties, covenants, indemnities and other Agreements were
made on and as of such date, and all the representations, warranties, covenants,
indemnities and other Agreements shall survive the Closing Date for a period of
two years.
- 16 -
<PAGE> 22
6.2. AGREEMENT OF THE COMPANY AND THE INVESTOR TO INDEMNIFY
(a) Subject to the conditions and provisions of this
SECTION 6, the Company hereby agrees to indemnify, defend and hold harmless the
Investor Indemnified Persons from and against and in any respect of all Claims
asserted against, resulting to, imposed upon or incurred by the Investor
Indemnified Persons (whether such Claims are by, against or relate to the
Company or any other party, including a governmental entity), directly or
indirectly, by reason of or resulting from (i) any misrepresentation or breach
of any representation or warranty, or noncompliance with any covenants or other
Agreements, given or made by the Company in this Purchase Agreement or in the
Disclosure Schedule or Exhibits attached hereto or in any Document Furnished by
or on behalf of the Company pursuant to this Purchase Agreement, (ii) the
Company's prior activities as a real estate title company, (iii) any unlawful or
fraudulent actions taken by Waldemar Fernandez prior to the date of this
Purchase Agreement, and (iv) any Claims which may be brought by Waldemar
Fernandez against the Company or the Investor for any actions taken prior to the
date of this Purchase Agreement.
(b) Subject to the conditions and provisions of this
Section 6, the Investor hereby agrees to indemnify, defend and hold harmless the
Company Indemnified Persons from and against and in any respect of all Claims
asserted against, resulting to, imposed upon or incurred by the Company
Indemnified Persons, directly or indirectly, by reason of or resulting from any
misrepresentation or breach of any representation or warranty, or noncompliance
with any covenants or other Agreements, given or made by the Investor in this
Purchase Agreement or in any Document Furnished by or behalf of the Investor
pursuant to this Purchase Agreement.
(c) Except as set forth below, it shall be a condition to
the right of any Indemnified Person to indemnification pursuant to this SECTION
6 that such Indemnified Person shall assert a Claim for indemnification within
two years following the Closing Date. Notwithstanding the foregoing, (x) any
Claim made pursuant to this SECTION 6 relating to a breach of SECTION 3 may be
made throughout the period ending one year following the latter of (i) the
expiration of all applicable statutes of limitation (including extensions), and
(ii) the final determination of (and the expiration of time to appeal) any
audit, examination, investigation or other proceeding relating to Taxes covered
by, or any Claim under, SECTION 3 hereof and (y) any Claim made pursuant to this
SECTION 6 relating to the items set forth in SECTION 6.2(A)(II) through (V) may
be made at any time.
6.3. CONDITIONS OF INDEMNIFICATION
The obligations and liabilities of the Company and the
Investor hereunder with respect to their respective indemnities pursuant to this
SECTION 6, resulting from any Claim shall be subject to the following additional
terms and conditions:
(a) The indemnified party shall give prompt written
notice to the indemnifying party of any Claim which is asserted against,
resulting to, imposed upon or incurred by such indemnified party and which may
give rise to liability of the indemnifying party pursuant to this SECTION 6,
stating (to the extent known or reasonably anticipated) the nature and
-17-
<PAGE> 23
basis of such Claim and the amount thereof. The omission of the indemnified
party so to notify the indemnifying party of any Claim shall not relieve the
indemnifying party from any liability it may have hereunder except to the extent
that (i) the liability was caused or increased by such omission, or (ii) the
ability of the indemnifying party to reduce or defend against the liability was
materially adversely affected by the omission.
(b) The indemnifying party may engage counsel with
respect to any such Claim, the representation (including the compromise or
settlement of any Claim) to be undertaken on behalf of the indemnified party,
and the indemnified party shall have right to approve counsel (which approval
shall not be unreasonably withheld). The indemnified party shall have the prior
right to approve any compromise or settlement of any Claim by counsel engaged by
the indemnifying party (which approval shall not be unreasonably withheld),
unless such compromise or settlement contains a full release of the indemnified
party of any and all liability and does not impose any restrictions on the
indemnified party or its business or affairs. In the event the indemnifying
party elects not to undertake the defense of the Claim by its own counsel, or in
the event that the indemnified party reasonably believes that representation by
counsel designated by the indemnifying party would be inappropriate due to
actual or potential conflicts of interest, the indemnified party will undertake
the defense thereof by one counsel or other representatives designated by it, at
the cost and expense of the indemnifying party. In any event, the indemnifying
parties will advance all expenses of the indemnified parties as incurred.
6.4. SPECIFIC PERFORMANCE
In addition to any other remedies which the Investor may have
at law or in equity, the Company hereby acknowledges that the shares and the
Company are unique, and that the harm to the Investor resulting from breaches by
the Company of its obligations cannot be adequately compensated by damages.
Accordingly, the Company agrees that the Investor shall have the right to have
all obligations, undertakings, Agreements, covenants and other provisions of
this Purchase Agreement specifically performed by the Company and that the
Investor shall have the right to seek an order or decree of such specific
performance in any of the courts of the United States of America or of any state
or other political subdivision thereof.
6.5. REMEDIES CUMULATIVE
The remedies provided herein shall be cumulative and shall not
preclude the assertion by the Company or the Investor of any other rights or the
seeking of any other remedies against the other, or their respective successors
or assigns.
6.6. LIMITS FOR RECOVERY OF LOSSES
The Company shall not be liable as the indemnifying party for
any Claims under this Section 6 unless and until the aggregate amount of all
Claims hereunder by the Investor or other indemnified parties equals or exceeds
$250,000, in which case the Company shall be liable for all Claims in the
aggregate in excess of $250,000. The limitations set forth in the prior
-18-
<PAGE> 24
sentence shall not apply to Claims against the Company relating to the items set
forth in SECTION 6.2(A)(II) through (IV) and the Investor Indemnified Persons
shall be entitled to indemnification from the Company for any Claims relating to
the items set forth in SECTION 6.2(A)(II) through (IV) without any limitation.
In all cases, and notwithstanding anything herein to the contrary, the Company
shall be subject to a maximum aggregate limit of all Claims against it equal to
the aggregate purchase price paid by the Investor for the shares purchased
hereunder.
7. MISCELLANEOUS
7.1. ADDITIONAL ACTIONS AND DOCUMENTS
After Closing, each of the parties hereto hereby agrees to
take or cause to be taken such further actions, to execute, deliver and file or
cause to be executed, delivered and filed such further Documents, and will
obtain such consents, as may be necessary or as may be reasonably requested in
order to fully effectuate the purposes, terms and conditions of this Purchase
Agreement.
7.2. NO BROKERS
Each of the parties hereto represents and warrants to the
other parties (and to each of them that), such party has not engaged any broker,
finder or agent in connection with the transactions contemplated by this
Purchase Agreement and has not incurred (and will not incur) any unpaid
liability to any broker, finder or agent for any brokerage fees, finders' fees
or commissions, with respect to the transactions contemplated by this Purchase
Agreement. Each party agrees to indemnify, defend and hold harmless each of the
other parties from and against any and all claims asserted against such parties
for any such fees or commissions by any persons purporting to act or to have
acted for or on behalf of the indemnifying party.
7.3. JURY WAIVER
THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN AN
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS PURCHASE
AGREEMENT OR ANY OF THE TRANSACTIONS OR AGREEMENTS CONTEMPLATED HEREBY.
7.4. PUBLICITY
Neither the Investor nor the Company shall issue any press
release or make any public disclosure regarding the transaction contemplated
hereby unless such press release or public disclosure is approved by those
parties expressly mentioned by name in the press release in advance.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the SEC or other regulatory bodies, make such
statements with respect to the transactions contemplated hereby as each may be
advised by counsel as legally
-19-
<PAGE> 25
necessary or advisable and may make such disclosure as it is advised by its
counsel as required by law.
7.5. EXPENSES
Each party hereto shall pay its own expenses incident to this
Purchase Agreement and the transactions contemplated hereunder, including all
legal and accounting fees and disbursements.
7.6. ASSIGNMENT
The Investor shall have the right to assign its rights and
obligations under this Purchase Agreement, in whole or in part, to any Affiliate
of the Investor or to designate any of its Affiliates (to the extent permitted
by Law) to receive directly the shares to be purchased hereunder or to exercise
any of the rights of the Investor, or to perform its obligations, provided that
such assignee shall have been deemed to have made the representations and
warranties contained in ARTICLE 4 hereof. The Company shall not assign its
rights and obligations under this Purchase Agreement, in whole or in part,
whether by operation of law or otherwise, without the prior written consent of
the Investor, and any such assignment contrary to the terms hereof shall be null
and void and of no force and effect. In no event shall the assignment by the
Company or any Investor of its rights or obligations under this Purchase
Agreement, whether before or after the Closing, release the Company or the
Investor from their respective liabilities and obligations hereunder.
7.7. ENTIRE AGREEMENT; AMENDMENT
This Purchase Agreement, including the Disclosure Schedule,
the Exhibits and other Documents referred to herein or Furnished pursuant
hereto, constitutes the entire Agreement among the parties hereto with respect
to the transactions contemplated herein, and it supersedes all prior oral or
written Agreements, commitments or understandings with respect to the matters
provided for herein. No amendment or modification of this Purchase Agreement
shall be valid or binding unless set forth in writing and duly executed and
delivered by the Company and the Investor.
7.8. WAIVER
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Purchase Agreement or under
any other Documents Furnished in connection with or pursuant to this Purchase
Agreement shall impair any such right, power or privilege or be construed as a
waiver of any default or any acquiescence therein. No single or partial exercise
of any such right, power or privilege shall preclude the further exercise of
such right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
-20-
<PAGE> 26
7.9. SEVERABILITY
If any part of any provision of this Purchase Agreement or any
other Agreement or document given pursuant to or in connection with this
Purchase Agreement shall be invalid or unenforceable in any respect, such part
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provision or the
remaining provisions of this Purchase Agreement.
7.10. GOVERNING LAW
This Purchase Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Georgia (excluding
the choice of law rules thereof).
7.11. NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Purchase Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
telecopy addressed as follows:
(i) If to the Investor:
Bell Atlantic Investments, Inc.
1095 Avenue of the Americas
New York, NY 10036
Telecopy No: (212)-597-2818
Attention: Janet Garrity
in each case with a copy (which shall not constitute notice)
to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Telecopy No.: (212) 310-8007
Attention: Frederick S. Green, Esq.
(ii) If to the Company:
Interland, Inc.
101 Marietta Street, Suite 200
Atlanta, GA 30303
-21-
<PAGE> 27
Telecopy No.: (404) 720-3707
Attention: Ken Gavranovic
with a copy (which shall not constitute notice) to:
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309-4530
Telecopy No.: (404) 815-6555
Attention: David A. Stockton
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed or telecopied in the manner described above, shall be deemed
sufficiently given, served, sent, received or delivered for all purposes at such
time as it is delivered to the addressee (with the return receipt, the delivery
receipt, or (with respect to a telecopy) the answerback or confirmation being
deemed conclusive, but not exclusive, evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
7.12. HEADINGS
Section headings contained in this Purchase Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Purchase Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
7.13. EXECUTION IN COUNTERPARTS
To facilitate execution, this Purchase Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signatures of, or on behalf of, each party, or that the signatures of
all persons required to bind any party, appear on each counterpart; but it shall
be sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
Agreement. It shall not be necessary in making proof of this Purchase Agreement
to produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
7.14. LIMITATION ON BENEFITS
The covenants, undertakings and agreements set forth in this
Purchase Agreement shall be solely for the benefit of, and shall be enforceable
only by, the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns (including
specifically, without limitation, any third party transferees acquiring shares
purchased by the Investor pursuant hereto).
-22-
<PAGE> 28
7.15. BINDING EFFECT
Subject to any provisions hereof restricting assignment, this
Purchase Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
-23-
<PAGE> 29
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement, or have caused this Stock Purchase Agreement to be duly executed on
their behalf, as of the day and year first hereinabove set forth.
THE COMPANY:
INTERLAND, INC.
By: /s/ KEN GAVRANOVIC
----------------------------------------
Name: Ken Gavranovic
Title: President and Chief Executive Officer
THE INVESTOR
BELL ATLANTIC
INVESTMENTS, INC.
By: /s/ JANET GARRITY
-----------------------------------------
Name: Janet Garrity
Title:President and Treasurer
-24-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INTERLAND FOR THE THREE MONTH PERIOD ENDED MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 1,009
<TOTAL-REVENUES> 1,009
<CGS> 861
<TOTAL-COSTS> 861
<OTHER-EXPENSES> 1,573
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14)
<INCOME-PRETAX> (16,784)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,784)
<EPS-BASIC> (1.23)
<EPS-DILUTED> (1.23)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INTERLAND FOR THE THREE MONTH PERIOD ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 20,139
<SECURITIES> 0
<RECEIVABLES> 1,579
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,607
<PP&E> 16,117
<DEPRECIATION> 1,569
<TOTAL-ASSETS> 42,717
<CURRENT-LIABILITIES> 26,052
<BONDS> 0
0
40,630
<COMMON> 7,022
<OTHER-SE> (35,981)
<TOTAL-LIABILITY-AND-EQUITY> 42,717
<SALES> 6,268
<TOTAL-REVENUES> 6,268
<CGS> 6,685
<TOTAL-COSTS> 6,685
<OTHER-EXPENSES> 10,623
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 251
<INCOME-PRETAX> (10,789)
<INCOME-TAX> 0
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<CHANGES> 0
<NET-INCOME> (10,789)
<EPS-BASIC> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
