<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 1999
REGISTRATION NO. 333-79629
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OPENSITE TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
DELAWARE 7389 56-1990869
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
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2800 MERIDIAN PARKWAY
DURHAM, NORTH CAROLINA 27713
(919) 544-1993
(Address, Including Zip Code and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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MR. KIP A. FREY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OPENSITE TECHNOLOGIES, INC.
2800 MERIDIAN PARKWAY
DURHAM, NORTH CAROLINA 27713
(919) 544-1993
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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COPIES TO:
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JOHN C. YATES, ESQ. FRED D. HUTCHISON, ESQ. JOHN B. TEHAN, ESQ.
GRANT W. COLLINGSWORTH, ESQ. J. ROBERT TYLER, III, ESQ. SIMPSON THACHER & BARTLETT
MORRIS, MANNING & MARTIN, L.L.P. HUTCHISON & MASON, PLLC 425 LEXINGTON AVENUE
1600 ATLANTA FINANCIAL CENTER 4011 WESTCHASE BOULEVARD NEW YORK, NEW YORK 10017
3343 PEACHTREE ROAD, N.E. SUITE 400
ATLANTA, GEORGIA 30326 RALEIGH, NORTH CAROLINA 27607
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
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Common Stock, $.01 par
value.................... 3,659,070 shares $12.00 $43,908,840 $12,510
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(1) Includes 477,270 shares subject to the underwriters' over-allotment option.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 12, 1999
PROSPECTUS
3,181,800 SHARES
[OPENSITE LOGO]
COMMON STOCK
This is an initial public offering of shares of common stock of OpenSite
Technologies, Inc. OpenSite expects that the public offering price will be
between $10.00 and $12.00 per share.
We intend to apply for admission for trading and quotation of our common
stock on the Nasdaq National Market under the symbol "OPNS."
OUR BUSINESS INVOLVES SIGNIFICANT RISKS. THESE RISKS ARE DESCRIBED UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to OpenSite...................... $ $
</TABLE>
The underwriters may also purchase up to an additional 477,270 shares of
common stock at the public offering price, less the underwriting discounts and
commissions, to cover over-allotments.
The underwriters expect to deliver the shares in New York, New York on
, 1999.
---------------------------
SG COWEN
THE ROBINSON-HUMPHREY COMPANY
SOUNDVIEW TECHNOLOGY GROUP
WACHOVIA SECURITIES, INC.
, 1999
<PAGE> 3
[ARTWORK DEPICTED IN PROSPECTUS]
1. Inside front page portrays the following:
The title bar at the top of the page reads as follows: "The Auction
Starts Here"
In the center of the page is the Company's logo.
On the left side of the page and centered vertically is the following
text:
"OpenSite Technologies is a leading provider of dynamic
pricing solutions for companies and individuals involved in all aspects
of electronic commerce.
Our family of software products and related consulting,
education, and technical support services enables merchants to set up
and conduct Web-based auctions and provides them with increasingly
sophisticated functionality as they grow.
In addition, our BidStream.com Web site aggregates the content
of OpenSite-powered auctions, providing Internet users with a central
location from which to access and search multiple Web auction sites.
Our mission is to provide software, services, and content that
set the standard for branded, Web auction sites."
At the bottom left corner of the page is the word "OpenSite" and below
it is the following text: "The auction starts here."
At the bottom right corner of the page are boxes that contain the
following text:
top box: "internet world" and beneath it is the text "Best of
Show Fall 1998"
second box from the top: at the top is "PCWEEKLABS" and
beneath it is the text "Analyst's Choice" with the word "Analyst"
covering the top portion of a star.
third box from the top: centered at the top of the box is the
text "The Internet Open." In the center of the box is an object
representing a trophy. At the bottom of the box is the word "ICE."
Beneath the word "ICE" is the text "Internet Commerce Expo."
The bottom box contains the word "E-Commerce" at the top.
Beneath the word E-Commerce are five stars going across the page.
Beneath the stars is the word "Guide" which is underlined. At the
bottom of the box is the word "internet.com."
2. At the top of the front gate fold is the following text: "OpenSite
Technologies: Enabling Dynamic Pricing for Online Merchants."
On the left side of the page and centered vertically are three
paragraphs including the following text: "The Internet enables online auctions
to offer more products to more people - all without geographic limitation and in
real time.
Our combination of applications, services, and site aggregation
provides a self-reinforcing, full spectrum of dynamic pricing solutions for Web
merchants of all sizes.
By bringing together buyers and sellers in a dynamic relationship, our
products help individuals and businesses create new sales channels, manage
inventory, attract new customers, introduce new products, and enhance customer
interaction."
In the left center section of the page is the screen shot of a web page
for BidStream.com. Beneath the web page is the following text: "BidStream.com
provides bidders with a central point for locating items for sale on
participating OpenSite-powered auction sites. By aggregating the content from
these sites, we provide a way for our customers to generate increased site
traffic without costly marketing campaigns."
In the center of the of the page are words formed in a circle which are
"Site Aggregation," "Applications" and "Services."
At the bottom right center section of the page is a screen shot of a
web page for Artist Auctions. To the left of the web page is the following text:
"Our Customer Services organization provides a broad range of services to assist
our customers in successfully implementing Web-based auctions using our
products."
At the top right corner of the page is the screen shot of a web page
for National Computers. Beneath the web page is the following text: "Our
products allow customers to control their auction sites rather than list their
products in a person-to-person Internet auction community. OpenSite Auction 4.0,
our core product, automates the process of implementing, running and maintaining
real-time auctions over the Internet."
At the bottom right corner of the page is the word "OpenSite" and
beneath it are the words "The auction starts here."
3. At the top of the back gatefold is the following text: "Driving Site
Success."
Beneath the heading is the following text: "OpenSite provides a wide
range of businesses with dynamic pricing solutions that address a variety of
business needs, from building an online community of buyers and sellers to
liquidating distressed inventory and streamlining procurement. OpenSite
customers benefit from solutions that offer speed to market and a scalable
growth path."
The center of the page contains screen shots of five web pages.
At the bottom right corner of the page is the word: "OpenSite" and
beneath it are the words "The auction starts here."
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Prospectus Summary..................... 1
Risk Factors........................... 4
Forward-Looking Statements............. 14
Use of Proceeds........................ 15
Dividend Policy........................ 15
Capitalization......................... 16
Dilution............................... 17
Selected Financial Data................ 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 20
Business............................... 31
</TABLE>
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<CAPTION>
PAGE
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Management............................. 48
Related Party Transactions............. 52
Principal Stockholders................. 53
Description of Capital Stock........... 55
Shares Eligible for Future Sale........ 58
Underwriting........................... 60
Legal Matters.......................... 61
Experts................................ 62
Change in Accountants.................. 62
Where You Can Find More Information.... 62
Index to Financial Statements.......... F-1
</TABLE>
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE
ARE OFFERING TO SELL AND SEEKING OFFERS TO BUY SHARES OF OUR COMMON STOCK ONLY
IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR
COMMON STOCK.
---------------------------
UNTIL , 1999, 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.
"OPENSITE" AND "AUCTIONWATCH" ARE REGISTERED TRADEMARKS OF OPENSITE, AND
AUCTIONNOW, AUCTIONRATE, BIDSTREAM.COM, CONCIERGE AND MAGICBID ARE TRADEMARKS OF
OPENSITE. THIS PROSPECTUS ALSO INCLUDES TRADEMARKS, SERVICE MARKS AND TRADE
NAMES OF OTHER COMPANIES.
<PAGE> 5
PROSPECTUS SUMMARY
The following is only a summary. You should carefully read the more
detailed information contained in this prospectus, including our financial
statements and accompanying notes appearing elsewhere in this prospectus. Our
business involves significant risks. You should carefully consider the
information under the heading "Risk Factors." Unless otherwise noted, all
information in this prospectus assumes: (1) the conversion of all outstanding
shares of our preferred stock into 9,639,847 shares of common stock upon the
closing of this offering and (2) no exercise by the underwriters of the
over-allotment option.
OpenSite is the market share leader in online auction software solutions
with the largest installed base of auction sites. Our solutions, which include a
variety of cost-effective software and services, enable small, medium and large
merchants to create branded, Internet-based auctions on their own Web sites. Our
solutions automate the process of installing, running and maintaining real-time
auctions over the Internet. By bringing together buyers and sellers, our
solutions help businesses create new sales channels, manage inventory, attract
new customers, introduce new products and strengthen customer and other business
relationships.
Dynamic pricing, in which prices are determined by buyers and sellers on a
transaction-by-transaction basis, is becoming more accepted as a form of
electronic commerce. The Internet enables market information to be disseminated
more quickly, in greater quantity and to a wider audience than has been possible
with traditional forms of media. Also, the interactive nature of the Internet
and its ability to transmit information on a real-time basis have caused
Internet users to become more comfortable with continuous market refinement of
pricing. Auctions are among the most well known forms of dynamic pricing.
Forrester Research projects that the value of goods sold through Internet
auctions will increase from $10.1 billion in 1998 to $64.9 billion in 2002, a
59% compound annual growth rate.
The OpenSite Auction family of software products, available in
Professional, Merchant and Corporate versions, enables merchants of all sizes to
set up and conduct auctions on the Internet and provides them with the ability
to gain more sophisticated functionality as they grow. We also provide related
consulting, education and technical support services. Our Concierge service
enables our customers to outsource completely to us the process of running
Internet auctions, including development, deployment, maintenance and hosting.
In addition, our BidStream.com Web site, which was launched in April 1999,
aggregates the content of OpenSite-powered auction Web sites and is designed to
generate increased traffic to these Web sites while providing Internet users
with a central location from which to access the items put up for auction.
Currently, participation in Bidstream.com is free to our customers. However, we
intend to charge a fee for participation in the future.
Our customers operate in a wide variety of industries and include Beverly
Hills Country Club, Cheapfares.com, CNET, Currans Select Auctions, The Sharper
Image, VerticalNet and Winebid.com. OpenSite Auction won a Best of Show Award
for e-commerce applications at Fall Internet World 1998 and a Best of Class
Award for Web-based selling at Fall Internet Commerce Expo 1998. OpenSite
Auction also earned an Analyst's Choice Award from PC Week magazine and received
a five-star rating from online magazine Internet.com. A description of the
criteria and other information regarding these awards can be found under
"Business -- Products and Services."
We commenced operations and introduced our first auction software product
in 1996. In 1998, we recognized total revenue of $1.3 million and incurred net
losses of $2.4 million. For the six months ended June 30, 1999, we recognized
total revenue of $2.6 million and incurred net losses of $4.2 million.
We are incorporated under the laws of the State of Delaware, and our
executive offices are located at 2800 Meridian Parkway, Durham, North Carolina
27713. Our telephone number is (919) 544-1993. Our World Wide Web address is
www.opensite.com.
<PAGE> 6
THE OFFERING
Common stock we are offering.............. 3,181,800 shares
Common stock to be outstanding after this
offering.................................. 16,368,511 shares
Underwriters' over-allotment option....... 477,270 shares
Use of proceeds........................... We intend to use the net proceeds
from the offering primarily for
expansion of our business,
including sales and marketing
activities, product development,
possible future acquisitions and
for general corporate purposes,
including working capital. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.... OPNS
The number of shares of our common stock to be outstanding immediately
after the offering is based on the number of shares outstanding at July 9, 1999.
This number does not take into account 778,333 shares of our common stock
subject to options outstanding under our stock option plan at July 9, 1999 and
93,455 shares of common stock subject to outstanding warrants.
2
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following financial data is a summary of the more complete financial
information provided in our financial statements and accompanying notes
appearing elsewhere in this prospectus. See Note 2 of Notes to Financial
Statements for an explanation of basic and diluted net income (loss) per common
share and the weighted average shares used in computing basic and diluted net
income (loss) per common share. The "pro forma as adjusted" balance sheet data
gives effect to the conversion of all outstanding shares of mandatorily
redeemable convertible preferred stock into common stock upon the closing of the
offering and is adjusted to give effect to our sale of 3,181,800 shares of
common stock offered at an assumed initial public offering price of $11.00 per
share and the receipt of the estimated net proceeds from the sale.
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<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- --------
(UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Total revenue....................... $ 12 $ 340 $ 1,281 $ 584 $ 2,586
Gross profit........................ 11 312 1,132 559 2,073
Operating income (loss)............. 0 128 (2,404) (68) (4,417)
Net income (loss)................... 0 130 (2,361) (59) (4,176)
------- ------- ------- ------- --------
Basic and diluted net income (loss)
per common share................. $ 0.00 $ 0.03 $ (0.66) $ (0.03) $ (13.31)
------- ------- ------- ------- --------
Weighted average shares used in
computing basic and diluted net
income (loss) per common share... 3,579 3,877 4,106 3,977 3,461
------- ------- ------- ------- --------
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<TABLE>
<CAPTION>
JUNE 30, 1999
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PRO FORMA
AS
ACTUAL ADJUSTED
-------- ---------
(UNAUDITED)
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BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 19,324 $ 50,984
Working capital........................................... 16,660 48,320
Total assets.............................................. 21,856 53,516
Mandatorily redeemable convertible preferred stock........ 69,204 --
Total stockholders' equity (deficit)...................... (51,244) 49,620
</TABLE>
3
<PAGE> 8
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. You should also refer to the other information in this
prospectus, including our financial statements and accompanying notes appearing
elsewhere in this prospectus. The risks and uncertainties described below are
those that we currently believe may materially affect our company.
This prospectus also contains forward looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
OUR EVOLVING BUSINESS MODEL AND MARKETS MAKE FORECASTING FUTURE PERFORMANCE
DIFFICULT.
We commenced operations and introduced our first auction software product
in 1996. Our business model has evolved considerably since that time. For
example, we introduced our indirect sales channel in 1998 and BidStream.com in
1999. We expect this evolution to continue in response to the rapidly changing
market for Internet products. Our revenue currently is generated primarily from
the sale of auction software products. In the future, we expect to generate
revenue from multiple sources, including BidStream.com and business services.
For us, this business model is unproven. We will be successful only if consumers
and merchants purchase our software products and actively use BidStream.com and
our other business services. It is impossible to predict the degree to which
consumers and merchants will purchase our software products or use these
services.
As a result of our limited operating history and the emerging nature of the
online auction software market, we are unable to accurately forecast our
revenue. Additionally, our current sales cycle, the time between when a sales
lead is generated and when the sale is completed, is relatively short. A shorter
sales cycle results in fewer pending sales at any given time, which makes
forecasting revenue more difficult and uncertain. Our expenses are to a large
extent fixed and based predominantly on our operating plans and estimates of
future revenue. We may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, a failure to meet
our revenue projections could have an immediate and negative impact on
profitability. We are aware that some media reports about us have included
revenue projections for 1999. We cannot be certain that any of these revenue
projections will be accurate.
WE ANTICIPATE INCURRING CONTINUED LOSSES FOR THE FORESEEABLE FUTURE.
We incurred net losses of $2.4 million in 1998, representing 184% of total
revenue. We incurred net losses of $4.2 million in the six months ended June 30,
1999, representing 161% of total revenue. As of June 30, 1999, we had incurred
cumulative net losses of $6.4 million. We expect our losses to increase
significantly. We cannot be certain that we will increase revenue sufficiently
to ever achieve profitability or generate a positive cash flow in the future. As
part of our strategy to achieve profitability, we intend to expend significant
financial and management resources on:
- developing our OpenSite and BidStream.com brands;
- developing new products and services;
- increasing marketing and promotional activities;
- establishing and expanding our direct and indirect sales channels;
- establishing business relationships; and
- acquiring complementary businesses and products.
As a result, we expect to incur substantial operating losses and continued
negative cash flow from operations for the foreseeable future. If our losses
continue for an extended period or are greater than projected, we may be forced
to raise additional capital in order to continue implementing our business
strategy. This could result in dilution to our stockholders. If we are unable to
raise additional capital, we may not have sufficient resources to carry out our
business strategy or achieve profitability.
4
<PAGE> 9
FLUCTUATIONS IN OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT OUR STOCK PRICE.
We expect that our quarterly operating results will fluctuate significantly
due to many factors, including:
- the level of demand for online auction software;
- the development of the electronic commerce market;
- increasing competition;
- performance of resellers;
- timely release of new products and product upgrades;
- management of our growth; and
- risks associated with potential acquisitions.
Many of these factors are beyond our control, such as the level of demand
for online auction software, the development of the electronic commerce market,
increasing competition and the performance of resellers. These factors may
impact our long-term results as well as our operating results in any particular
quarter. Our quarterly operating results have fluctuated in the past. For
example, our revenue fluctuated an average of 102% from quarter to quarter in
1998. Due to these historical trends, we believe that period-to-period
comparisons of our operating results are not meaningful. In addition, it is
likely that in one or more future quarters our operating results will fall below
the expectations of securities analysts and investors. If this happens, the
trading price of our common stock would almost certainly be materially and
adversely affected.
IF THE MARKET FOR ONLINE AUCTIONS DOES NOT CONTINUE TO GROW, OUR BUSINESS MAY
SUFFER.
Our success is highly dependent upon the widespread acceptance and use of
the Internet for electronic commerce. In particular, the continued adoption by
buyers and sellers of online auctions and other dynamic pricing models on the
Internet is critical to the continued growth in sales of our products. Use of
the Internet to conduct auctions is at an early stage of development. We cannot
be certain that acceptance of online auctions will continue to develop. Any
material reduction in the growth of acceptance and use of online auctions could
have a material adverse effect on our business. The continued growth of online
auctions is dependent upon a number of factors, including the following:
- continued growth in the number of buyers and sellers who use electronic
commerce services;
- continued market demand for dynamic pricing by buyers and sellers;
- continued growth in the number of merchants who desire online auction
capabilities;
- continued development of transaction security technology; and
- continued development of electronic commerce technology.
OUR BUSINESS MAY SUFFER IF OPENSITE AUCTION IS NOT ACCEPTED BY NEW CUSTOMERS.
We cannot be certain that OpenSite Auction will continue to achieve market
acceptance. We derive a majority of our revenue from sales of OpenSite Auction.
We expect this to continue for the foreseeable future. As a result, our future
operating results depend upon the continued market acceptance of OpenSite
Auction. Any material reduction in demand for OpenSite Auction could have a
material adverse effect on our business. Factors that could adversely affect
sales of OpenSite Auction include:
- failure of buyers and sellers to adopt online auctions as a method of
doing business;
- competitive products that obtain greater market acceptance;
- failure to adapt OpenSite Auction to new technologies and computing
platforms; and
- failure to adapt OpenSite Auction to address changing customer and
reseller needs.
5
<PAGE> 10
BIDSTREAM.COM IS A NEW BUSINESS MODEL THAT WE CANNOT BE CERTAIN WILL SUCCEED.
We launched the BidStream.com Web site in April 1999. The continued
development and market acceptance of BidStream.com is a key element of our
business strategy. Due to its recent introduction, we cannot be certain that
BidStream.com will be successful. The participation of OpenSite-powered auction
sites in BidStream.com is essential to its success. Currently, participation in
BidStream.com is free to our customers. However, we intend to charge a fee to
participating Web sites in the future. We cannot be certain that our customers
will be willing to pay a fee to participate in BidStream.com. Also, the value of
BidStream.com to our customers is the potential for directing additional traffic
to their auction sites. We cannot be certain that Internet users will be
attracted to BidStream.com. If BidStream.com fails to attract a sufficient
number of potential bidders, whether due to lack of content that is attractive
to bidders or for other reasons, BidStream.com will be less valuable to our
customers. We intend to expend considerable resources in developing, maintaining
and promoting BidStream.com. In addition, system interruptions could cause
BidStream.com to be unavailable for extended periods, which could reduce its
attractiveness to merchants and bidders. The failure of BidStream.com to be a
commercial success could have a material adverse effect on our business.
IF WE DO NOT SUCCESSFULLY MARKET THE OPENSITE BRAND, OUR BUSINESS MAY SUFFER.
We believe that maintaining and enhancing the OpenSite brand is critical to
increasing our product sales. There are a number of companies that offer
competing products, and we expect our competition to increase. We believe that
increased competition makes promoting the OpenSite brand more imperative as a
competitive advantage. Increased competition may make promoting our brand
significantly more expensive. Promotion of the OpenSite brand will depend
largely on expanding our sales and marketing capabilities and providing a
high-quality product. We intend to use a portion of the proceeds of this
offering to expand our sales and marketing activities and further our product
development efforts. We cannot be certain that we will be successful in
establishing the OpenSite brand. If we are unable to successfully promote our
brand, or if we incur substantial expenses in attempting to do so, our business
could be materially and adversely affected.
COMPETITION COULD REDUCE OUR MARKET SHARE AND ADVERSELY AFFECT OUR OPERATING
RESULTS.
The online auction software market is a new, rapidly evolving and intensely
competitive market. We expect this competition to intensify in the future.
Increased competition may result in increased pricing pressures, reduced sales
and reduced operating margins, as well as loss of market share and brand
recognition. Our competition includes the following:
- dynamic pricing software providing entry-level solutions that compete
with OpenSite Auction Professional, including Auction Broker, Beyond
Solutions and Emaze;
- enterprise-level auction software that competes with OpenSite Auction
Merchant and OpenSite Auction Corporate, including IBM's Net.commerce
product, Moai Technologies, Trading Dynamics and WebVision;
- Web sites that feature auction aggregation that compete with
BidStream.com, including Bidder Network, Bidder's Edge and BidFind;
- person-to-person online auction communities, including those operated by
Amazon.com, Auction Universe, eBay, ONSALE and uBid; and
- outsourced auction-hosting services that compete with our Concierge
service as well as our OpenSite Auction products, including Bidder
Network and FairMarket.
As the online auction software market grows, we expect other companies to
develop software that competes with our products. Many of our competitors and
potential competitors have longer operating histories, greater brand recognition
and greater financial, marketing and other resources than we do. Some
competitive products and services may be priced lower than ours. In addition,
new technologies and the expansion of existing technologies may increase
competitive pressures. We cannot be certain that we will be
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<PAGE> 11
able to compete successfully against current and future competitors. These
competitive pressures could have a material adverse effect on our business.
LARGER, BETTER KNOWN AND MORE ESTABLISHED COMPANIES MAY ENTER OUR MARKET, WHICH
COULD INCREASE COMPETITIVE PRESSURES.
In addition to our current competitors, our market may attract new
competition. For example, companies that operate person-to-person online auction
communities, such as eBay and Amazon.com, may expand to offer auction solutions
that compete with our products and services or acquire one of our existing or
future competitors. These companies have significant resources and brand
recognition in the online auction market. In addition, software developers, such
as Microsoft, may add auction functionality to, or expand the existing auction
functionality of, their existing products. The barriers to entry in the market
for online auction solutions are relatively low, particularly for companies that
currently offer a form of online auction functionality. Any of these events
could greatly increase our competitive pressures and have a material adverse
effect on our business.
ESTABLISHING INDIRECT SALES CHANNELS IS IMPORTANT TO INCREASING PRODUCT SALES.
We are making an effort to increase distribution of our products through
various indirect channels of distribution, including systems integrators, value
added resellers, distributors and Internet Service Providers. We have entered
into contractual arrangements with these resellers, which provide for
commission-based compensation. The failure to attract and retain a sufficient
number of these resellers could have a material adverse effect on our business.
In addition, we cannot predict the extent to which any of these resellers will
be successful in marketing, distributing or implementing our products. It may
also be more difficult for us to forecast revenues generated by these resellers.
Many of these resellers also market and sell competitive products and services.
We may not be able to effectively manage potential conflicts between our
resellers and us or prevent them from devoting greater resources to supporting
the products of other companies.
In addition, we rely on our resellers to inform us of opportunities to
develop new products that serve end user demands. If our resellers do not
present us with market opportunities early enough for us to develop products to
meet end user needs in a timely fashion or if resellers fail to anticipate end
user needs at all, we may fail to develop new products or modify our existing
products for our target markets. In addition, if our resellers fail to
accurately anticipate end user demands, we may spend resources on products that
are not commercially successful.
ESTABLISHING AND MAINTAINING BUSINESS RELATIONSHIPS IS IMPORTANT TO OUR
BUSINESS.
The establishment of business relationships is an element of our marketing
strategy. We intend to seek relationships with:
- providers of complementary technology for the purpose of ensuring product
compatibility;
- portal sites for the purpose of increasing the value of BidStream.com;
and
- ancillary service providers for the purpose of providing opportunities
for complementary services.
We may experience competition from other auction solution providers for
these relationships. We cannot be certain that we will be able to establish a
sufficient number of relationships to carry out our marketing strategy. In
addition, we intend to invest financial and management resources in developing
these relationships. If we do not generate additional revenue through these
relationships to offset our investment, our business could be materially and
adversely affected.
LONGER SALES CYCLES MAY ADVERSELY AFFECT OUR BUSINESS.
Increasing sales of higher-end auction solutions, particularly OpenSite
Auction Corporate, is an element of our business strategy. As we sell more
sophisticated solutions to larger organizations, we expect the time from initial
contact to sale completion to lengthen. Currently, our typical sales cycle is
approximately 30 days. We expect our typical sales cycle to expand to as many as
90 days. During this sales cycle, we may
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<PAGE> 12
expend substantial funds and management resources without any corresponding
revenue. If sales are delayed or do not occur, our operating results for a
particular period may be adversely affected. Our sales are subject to delays
over which we have little or no control, including the following:
- potential customers' budgetary constraints;
- potential customers' internal approval processes;
- seasonal and other timing effects; and
- cancellation or delay of auction projects by customers.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO ADAPT OUR PRODUCTS AND SERVICES TO
CHANGING MARKET CONDITIONS.
Changes in the electronic commerce industry generally, and the online
auction industry specifically, could render our products and services obsolete.
We must continually improve the performance, features and reliability of our
products and services, particularly in response to our competition. For example,
OpenSite Auction will need to be updated periodically to accommodate changes in
Internet technology as well as electronic commerce standards. A failure to
update OpenSite Auction to adapt to technological changes or competitive
pressures could adversely affect sales of this product. We must also introduce
new and expanded products and services in order to attract more buyers and
sellers to our online auction products and services. We cannot be certain that
we will be able to offer these products or services in a cost-effective or
timely manner or that markets will develop for our new or expanded products and
services. Our success will depend, in part, on our ability to:
- enhance our existing products and services;
- successfully anticipate changing market demand;
- integrate our products with our customers' existing IT systems;
- develop new services and technologies that address the increasingly
sophisticated and varied needs of our target markets; and
- respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
If we are unable to adapt to changing market conditions or buyer
requirements, our business could be materially and adversely affected.
PRODUCT PERFORMANCE FAILURES COULD RESULT IN LIABILITY TO OUR CUSTOMERS AND
OTHER ADVERSE IMPACTS.
Performance failures of our products could result in a loss of current and
potential customers, adverse publicity and damage to the OpenSite brand. Any of
these results could have a material adverse effect on our business. In addition,
our products typically are critical to generating revenue for our customers.
Performance failures of our products could impair our customers' revenues and
consequently could result in a claim for substantial damages against us. We
cannot be certain that the liability limitations included in our customer
agreements will be enforceable in all instances or will otherwise protect us
from liability for damages. We cannot be certain that our general liability
insurance coverage will be available in sufficient amounts to cover one or more
large claims or that our insurer will not disclaim coverage for any future
claim. Any successful claim against us that exceeds available insurance coverage
requirements could have a material adverse effect on our business.
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<PAGE> 13
WE MAY NOT BE SUCCESSFUL IN EXPANDING INTO INTERNATIONAL MARKETS.
We are expanding internationally. We began the international introduction
of our products through our United Kingdom office in March 1999. We intend to
accelerate our investment in international sales and to add new features and
functionality to our products to accommodate accounting, customs, currency and
tax requirements of foreign countries. In addition, we have retained Protege
Software, Ltd. to provide sales and marketing services for our European
expansion. As we continue to expand outside the United States, we are subject to
risks of doing business internationally, including the following:
- management and other resources spread over various countries;
- difficulties in staffing and managing foreign operations;
- longer payment cycles, different accounting practices and difficulties in
collecting accounts receivable;
- seasonal reductions in business activity;
- potentially adverse tax consequences;
- administrative burdens in collecting local taxes, including value-added
taxes;
- compliance with a variety of foreign laws and regulations;
- foreign currency exchange rate fluctuations; and
- regional economic conditions.
We may not be successful in expanding into international markets or in
generating revenues from foreign operations.
WE MUST EFFECTIVELY MANAGE THE GROWTH OF OUR BUSINESS TO BE SUCCESSFUL.
We are rapidly expanding our operations. In particular, we have
significantly expanded our sales and marketing departments since 1998 in an
effort to increase sales and revenue growth. We have also expanded our
management and administration to support this growth. We expect this expansion
to continue at an accelerated rate. This expansion has placed a significant
strain on our management and on our operational and financial resources, which
we expect will continue. If we are unable to manage our growth effectively, our
business could be materially and adversely affected. To successfully manage our
future growth, we will need to upgrade our resources and systems as well as
expand our employee base. Our future performance will depend, in part, on our
ability to integrate our newly hired executive officers effectively into our
management team. Our executive officers, who have worked together for only a
short time, may not be successful in carrying out their duties or running our
company. We cannot be certain that our management, operational and financial
resources will be adequate to support our future operations.
OUR SUCCESS DEPENDS UPON ATTRACTING AND RETAINING KEY EMPLOYEES.
A key factor to our success is the continued services and performance of
our executive officers and other key personnel. If we lose the services of any
of our executive officers, our business could be materially and adversely
affected. We also depend on our ability to identify, hire and retain other
highly skilled technical, managerial and marketing personnel. We cannot be
certain of our ability to identify, hire and retain sufficiently qualified
personnel. For example, we may encounter difficulties in attracting a sufficient
number of qualified software developers. Furthermore, we intend to transition
our product development office in Buffalo, New York to our Durham, North
Carolina headquarters by December 31, 1999. This office is primarily engaged in
developing product updates to OpenSite Auction and currently employs 16 people.
Although we have offered continued employment to these developers in our Durham,
North Carolina office, we cannot be certain that any of them will be willing to
relocate. In connection with this office closing, we will incur a related
charge. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview." Failure to identify, hire and retain
necessary technical, managerial and marketing personnel could have a material
adverse effect on our business.
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THE FAILURE TO INTEGRATE SUCCESSFULLY OTHER BUSINESSES THAT WE ACQUIRE COULD
ADVERSELY AFFECT OUR BUSINESS.
An element of our strategy is to broaden the scope and content of our
auction software products and services through the acquisition of existing
auction software products, technologies, services and businesses in the online
auction market. We have no current agreements or binding commitments regarding
any potential acquisitions. If we complete any acquisitions in the future, we
would be exposed to increased risks, including:
- the integration of new operations, products, services and personnel;
- the diversion of resources from our existing businesses, sites and
technologies;
- the inability to generate revenues from new products and services
sufficient to offset associated acquisition costs;
- the maintenance of uniform standards, controls, procedures and policies;
- accounting effects that adversely affect our financial results;
- the impairment of employee and customer relations as a result of any
integration of new management personnel; and
- dilution to existing stockholders from the issuance of equity securities.
In addition, liabilities or other problems associated with an acquired
business could have a material adverse effect on our business.
THE REGULATION OF ONLINE COMMERCE IS UNCERTAIN AND SUBJECT TO CHANGE.
There are currently few laws and regulations directly applicable to the
Internet and online auctions. The adoption of additional laws or regulations may
decrease the growth of online auctions, which could, in turn, decrease the
demand for our products and services. Additional regulation could also increase
our cost of doing business. We expect that additional regulation may be adopted
covering issues such as user privacy, pricing, content, copyrights, antitrust
and characteristics and quality of products and services. Taxation of Internet
use, or other charges imposed by government agencies or by private organizations
for accessing the Internet, may also be imposed. In addition, the growth and
development of electronic commerce may prompt calls for more stringent laws
applying to the solicitation, collection or processing of personal or consumer
information. Such laws may impose additional burdens on those companies
conducting business online.
WE HAVE A LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY.
We rely on a combination of trade secrets, copyright and trademark laws,
license agreements, nondisclosure and other contractual provisions and technical
measures to protect our proprietary rights. Currently, our most important
proprietary rights are those embodied in our OpenSite Auction product and
BidStream.com Web site. Our software technology is not patented and existing
copyright laws offer only limited practical protection. We cannot guarantee that
the legal protections that we rely on will be adequate to prevent
misappropriation of our intellectual property. Also, these protections may not
prevent independent third-party development of competitive products or services.
We cannot guarantee that third parties will not assert infringement claims
against us in the future or that any such assertion will not require us to enter
into a license agreement or royalty agreement or financial settlement with the
party asserting a claim. Even the successful defense of an infringement claim
could result in substantial costs and diversion of our management's efforts that
could have a material adverse effect on our business.
In addition, effective copyright and trademark protection may be
unenforceable or limited in certain countries, and the global nature of the
Internet makes it impossible to control all of the jurisdictions in which our
intellectual property is used. The laws of many countries do not honor the
protections of proprietary rights that are available in the United States.
Litigation to protect intellectual property rights outside the United States
could be very expensive and have uncertain results. Such litigation, whether or
not successful, is likely to be time-consuming and costly to prosecute, require
the use of substantial management attention and resources and could have a
material adverse effect on our business.
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<PAGE> 15
CONCERNS FOR PRIVACY ON THE INTERNET MAY ADVERSELY AFFECT OUR BUSINESS.
Increased regulation of privacy poses a potential risk to our business. The
information that we obtain from auction participants could make it easier to
target advertisements to users in specific demographic groups. Advocates of
privacy rights have voiced concern over the implications of this type of
technology. The resolution of privacy issues could adversely affect the growth
both of online auctions and of our business. The effectiveness of our products
and the success of our business model would be severely limited by any reduction
or limitation in the use of user information.
OUR BUSINESS MAY BE HARMED BY THE USE OF OUR PRODUCTS FOR ILLEGAL PURPOSES.
We do not attempt to limit or regulate the types of auction sites that are
established using our products. Some customers may use our products to auction
items that are subject to regulation by local, state or federal authorities,
such as firearms, alcohol and tobacco. We cannot be certain that unlawful goods
will not be sold using our products. The law relating to the liability of
software providers for the activities of their users is unclear. We could be
subject to civil or criminal claims for unlawful activities carried out by our
customers. Any successful claims could have a material adverse effect on our
business. Even the defense of a frivolous or other unsuccessful claim could
result in substantial costs and diversion of our management's efforts that could
have a material adverse effect on our business.
POTENTIAL YEAR 2000 PROBLEMS COULD ADVERSELY AFFECT OUR BUSINESS.
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These systems cannot
reliably distinguish dates beginning on January 1, 2000 from dates prior to the
Year 2000. Many companies' software and computer systems may need to be upgraded
or replaced in order to correctly recognize and process dates beginning in 2000.
Significant uncertainty exists in the software industry and in many other
industries concerning the potential effects of Year 2000 non-compliance.
Our internally developed software for sale has been designed to accept only
four digit entries in order to resolve Year 2000 ambiguities. However, our
products operate with third-party equipment and software that may not be Year
2000 compliant. In addition, we cannot guarantee that the systems of our
suppliers or service providers will be Year 2000 compliant.
The failure of our internal systems, the products or systems of third
parties upon which we rely or the hardware or software upon which our products
and services rely could result in:
- our inability to effectively manage sales leads, which in turn could
result in fewer sales and lower revenue;
- the failure of our products to function properly, which in turn could
result in our incurring significant costs, and diverting significant
human resources, in our efforts to comply with obligations under warranty
and/or service agreements;
- our inability to properly invoice and process payments from our customers
and others with whom we have business relationships; and
- errors or omissions in accounting and/or financial data;
any of which could have a material adverse effect on our business.
In addition, the computer systems necessary to maintain the viability of
the Internet or any of the Web sites that direct buyers to our Web sites may not
be Year 2000 compliant. We believe that the Year 2000 issue may adversely affect
buyers and potential buyers. The computers of potential buyers may not be Year
2000 compliant, thus preventing such buyers from accessing our customers' Web
sites or BidStream.com. In addition, many companies are expending significant
resources to address the Year 2000 issue in their current software systems that
may reduce the amount of funds available to purchase our products. To the extent
that
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<PAGE> 16
our potential customers experience Year 2000 difficulties, our business could be
materially and adversely affected.
WE MAY NOT BE ABLE TO PROTECT OUR DOMAIN NAMES.
We currently hold the Internet domain names "opensite.com" and
"bidstream.com," as well as various other related names. Domain names generally
are regulated by Internet regulatory bodies. The regulation of domain names in
the United States and in foreign countries is subject to change. Regulatory
bodies could establish additional top-level domains, appoint additional domain
name registrars or modify the requirements for holding domain names. As a
result, we may not be able to acquire or maintain all of the desired variations
of the "OpenSite" and "BidStream" names in all of the countries in which we
conduct business. The presence of similar domain names may create confusion
among potential customers and bidders and direct traffic away from our Web
sites.
The relationship between regulations governing domain names and laws
protecting trademarks and similar proprietary rights is unclear. Therefore, we
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our trademarks and other proprietary
rights.
OUR BUSINESS GOALS MAY NOT BE ACHIEVED IF THE PROCEEDS OF THIS OFFERING ARE NOT
USED EFFECTIVELY.
The net proceeds from the sale of our common stock will become part of our
general working capital upon completion of this offering. The failure of
management to apply these proceeds effectively could materially and adversely
affect our business. We may use these funds to expand our business, including
increasing our sales and marketing activities, increasing our product
development, possible future acquisitions and for general corporate purposes,
including working capital. We will have considerable discretion in the
application of the net proceeds of this offering to these uses. The net proceeds
may be used for corporate purposes that do not increase our profitability or
market value. Pending application of the proceeds, they may be placed in
investments that do not produce income or that lose value. The timing of our use
of the net proceeds will depend on a number of factors, including the amount and
timing of our future cash flows.
TRADING IN OUR COMMON STOCK MAY BE LIMITED.
We cannot predict the extent to which investor interest in OpenSite will
lead to the development of a trading market for our common stock or how liquid
that market might become. The initial public offering price for our common stock
has been determined by negotiations between the underwriters and us and may not
be indicative of prices that will prevail in the trading market. If you purchase
shares of common stock, you may not be able to resell those shares at or above
the initial public offering price.
SIGNIFICANT FLUCTUATION IN THE MARKET PRICE OF OUR COMMON STOCK COULD RESULT IN
SECURITIES CLASS ACTION CLAIMS AGAINST US.
Significant price and volume fluctuations have occurred with respect to the
securities of Internet-related companies. Our common stock price is likely to be
volatile in the future. In the past, following periods of downward volatility in
the market price of a company's securities, class action litigation has often
been pursued against companies. If such litigation were pursued against us, it
could result in substantial costs and a diversion of our management's attention
and resources.
SHARES ELIGIBLE FOR FUTURE SALE COULD ADVERSELY AFFECT STOCK PRICE IN THE
FUTURE.
Sales of substantial amounts of our common stock in the public market after
this offering, or the perception that such sales may occur, could materially
affect prevailing market prices of our common stock and our ability to raise
equity capital in the future. A substantial amount of our common stock will be
eligible for sale in the public market after this offering.
Upon completion of this offering, we will have outstanding an aggregate of
16,368,511 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of
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outstanding options. Of these shares, the 3,181,800 shares sold in this offering
will be freely tradable without restriction or registration under the Securities
Act, unless such shares are purchased by our affiliates. The remaining
13,186,711 shares of common stock are held by existing stockholders. Such
shares, as well as any shares sold in this offering that are purchased by one of
our affiliates, are restricted securities that may be sold in the public market
only if registered or if they qualify for an exemption from registration under
the Securities Act. Up to 5,714,285 shares of restricted securities may be
eligible for sale in the public market in accordance with the requirements of
Rule 144 under the Securities Act beginning on March 30, 2000, and up to 105,263
shares of restricted securities may be eligible for sale in the public market in
accordance with the requirements of Rule 144 under the Securities Act beginning
on April 23, 2000. Up to an additional 7,367,163 shares of restricted securities
may be eligible for sale in the public market in accordance with the
requirements of Rule 144. See "Description of Capital Stock -- Registration
Rights" and "Shares Eligible for Future Sale."
Upon completion of this offering, the holders of 9,639,847 shares of our
common stock, or their transferees, will be entitled to rights with respect to
the registration of such shares under the Securities Act. After such a
registration, these shares become freely tradable without restriction under the
Securities Act.
NEW INVESTORS IN OPENSITE WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price is expected to be substantially higher
than the net tangible book value of each outstanding share of common stock. If
you purchase common stock in this offering, you will incur immediate and
substantial dilution in net tangible book value per share in the amount of
$7.97. There are also a large number of outstanding stock options to purchase
our common stock with exercise prices significantly below the estimated initial
public offering price of the common stock. To the extent that these options are
exercised, there will be further dilution.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW COULD MAKE AN
ACQUISITION BY A THIRD PARTY MORE DIFFICULT.
Some provisions of our certificate of incorporation and bylaws and
provisions of Delaware law may deter or prevent a takeover attempt, including an
attempt that might result in a premium over the market price for our common
stock. Even in the absence of a takeover attempt, these could adversely affect
the market price of our common stock. These provisions include:
Stockholder Proposals. Our stockholders must follow an advance
notification procedure for stockholder nominations of candidates for our board
of directors and for other business to be conducted at any stockholders'
meeting. These requirements could inhibit a change of control.
Supermajority Voting. Our certificate of incorporation and bylaws provide
that a director may be removed from office only with cause by the affirmative
vote of at least 75% of all shares voting on the removal. In addition, the
provisions of our certificate of incorporation that relate to the election and
removal of directors and the prohibition on the calling of special meetings by
stockholders and actions by stockholders by written consent may only be amended
by a vote of 75% of our outstanding shares of voting stock. Our bylaws may only
be amended by our board of directors or by 75% of our outstanding shares of
voting stock.
Preferred Stock. Our certificate of incorporation authorizes our board of
directors to issue up to 10,000,000 shares of preferred stock having such rights
as may be designated by our board of directors, without stockholder approval. An
issuance of preferred stock could inhibit a change in control.
Delaware Antitakeover Statute. Delaware law restricts business
combinations with interested stockholders upon their acquiring 15% or more of
our common stock. This law may have the effect of inhibiting a non-negotiated
merger or other business combination.
OUR COMMON STOCK PRICE IS LIKELY TO BE VOLATILE.
The market for Internet-related and technology companies has been highly
volatile in the past. Accordingly, the market price of our common stock is
likely to be highly volatile. You may not be able to
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resell your shares of our common stock following periods of volatility because
of the market's adverse reaction to such volatility. We cannot assure you that
our stock will trade at the same levels as other Internet stocks or that
Internet stocks in general will sustain their current market prices.
Factors that could cause such volatility may include, among other things:
- actual or anticipated variations in quarterly operating results;
- announcements of technological innovations;
- introduction of competing products or services;
- changes in financial estimates by securities analysts or our failure to
meet analysts' performance expectations;
- conditions or trends in the Internet industry;
- changes in the market valuations of other Internet companies;
- announcements by us or our competitors of significant acquisitions or
joint ventures;
- capital commitments;
- additions or departures of key personnel; and
- sales of our common stock.
Many of these factors are beyond our control. These factors may materially
adversely affect the market price of our common stock, regardless of our
operating performance.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus contain forward-looking
information. These statements are found in the sections entitled "Prospectus
Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." They
include statements concerning:
- our business strategy;
- liquidity and capital expenditures;
- use of proceeds of the offering;
- future sources of revenues;
- future profitability;
- expansion of our products and services;
- trends in Internet activity generally and trends in online auctions in
particular;
- development of BidStream.com;
- development of indirect sales channels and strategic alliances;
- expansion of international operations;
- trends in acceptance of dynamic pricing methods;
- trends in government regulation; and
- payment of dividends.
You can identify these statements by forward-looking words such as
"expect," "believe," "goal," "plan," "intend," "estimate," "may" and "will" or
similar words. You should be aware that these statements are subject to known
and unknown risks, uncertainties and other factors, including those discussed in
the section entitled "Risk Factors," that could cause the actual results to
differ materially from those suggested by the forward-looking statements.
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<PAGE> 19
USE OF PROCEEDS
Our proceeds from the sale of the 3,181,800 shares of common stock in this
offering are estimated to be approximately $31,660,000 ($36,542,000 if the
underwriters exercise their over-allotment option in full), assuming an initial
public offering price of $11.00 per share and after deducting estimated
underwriting discounts and commissions and estimated expenses payable by us in
connection with the offering.
We intend to use the net proceeds from the offering primarily for expansion
of our business, including sales and marketing activities, product development,
possible future acquisitions and for general corporate purposes, including
working capital. We have not yet determined the specific amount of proceeds to
be used for each purpose. The amounts we actually use for each purpose may vary
significantly and are subject to change at our discretion depending upon factors
such as economic or industry conditions, changes in the competitive environment
and strategic opportunities that may arise. In addition, we believe that it is
important to create a public market for our common stock to facilitate future
access to public market funds and provide the availability of a publicly traded
stock if we decide to issue common stock in connection with future acquisitions.
We have no specific agreements, commitments or understandings with respect to
any acquisitions. Pending application of the net proceeds as described above, we
intend to invest the net proceeds of the offering in short-term,
investment-grade, interest-bearing securities.
DIVIDEND POLICY
We do not anticipate declaring or paying any cash dividends for the
foreseeable future. We currently expect to retain all earnings, if any, for
investment in our business. Our board of directors has broad discretion as to
whether to pay dividends. Any determination whether to pay dividends will depend
on a number of factors, including our results of operations, financial position
and capital requirements, general business conditions, restrictions imposed by
financing arrangements, if any, legal and regulatory restrictions on the payment
of dividends and other factors that our board of directors deems relevant.
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<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of OpenSite as of June
30, 1999 (1) on an actual basis; (2) on a pro forma basis giving effect to the
conversion of all outstanding shares of mandatorily redeemable preferred stock
into common stock upon the closing of the offering; and (3) on a pro forma as
adjusted basis to reflect the sale of 3,181,800 shares of common stock offered
at an assumed initial public offering price of $11.00 per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us. This information should be read in conjunction
with our financial statements and accompanying notes appearing elsewhere in this
prospectus.
The amounts below exclude 1,314,285 shares of common stock presently
reserved for issuance upon exercise of options granted under our stock option
plan, of which options to purchase 778,333 shares were outstanding as of July 9,
1999 at a weighted average exercise price of $5.34 per share. The amounts below
also exclude 93,455 shares of common stock subject to warrants outstanding as of
July 9, 1999 at an exercise price of $0.44 per share.
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Capital lease obligations, net of current portion..... $ 30,359 $ 30,359 $ 30,359
------------ ------------ ------------
Mandatorily redeemable preferred stock, $.01 par
value, 21,175,439 shares authorized:
Series A -- 1,544,610 shares issued and outstanding
actual, none issued and outstanding pro forma and
pro forma as adjusted............................ 19,468,291 -- --
Series B -- 2,380,952 shares issued and outstanding
actual, none issued and outstanding pro forma and
pro forma as adjusted............................ 24,990,188 -- --
Series C -- 5,714,285 shares issued and outstanding
actual, none issued and outstanding pro forma and
pro forma as adjusted............................ 24,745,487 -- --
------------ ------------ ------------
Total mandatorily redeemable preferred
stock..................................... 69,203,966 -- --
------------ ------------ ------------
Stockholders' equity (deficit):
Common stock, $.01 par value, 75,000,000 shares
authorized, 4,434,250 shares issued and outstanding
actual; 14,074,098 shares issued and outstanding pro
forma; and 17,255,898 shares issued and outstanding
pro forma as adjusted............................... 44,342 140,740 172,558
Additional paid-in capital............................ -- 69,107,568 100,735,564
Deferred compensation................................. (108,079) (108,079) (108,079)
Treasury stock, cost (887,388 shares)................. (2,795,274) (2,795,274) (2,795,274)
Accumulated other comprehensive income................ 466 466 466
Accumulated deficit................................... (48,306,746) (48,306,746) (48,306,746)
Notes receivable from stockholders.................... (78,500) (78,500) (78,500)
------------ ------------ ------------
Total stockholders' equity (deficit)........ (51,243,791) 17,960,175 49,619,989
============ ============ ============
Total capitalization........................ $ 17,990,534 $ 17,990,534 $ 49,650,348
============ ============ ============
</TABLE>
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<PAGE> 21
DILUTION
As of June 30, 1999, the pro forma net tangible book value of OpenSite was
approximately $17,960,175, or $1.36 per share of common stock. Pro forma net
tangible book value per share represents the amount of our total tangible assets
less total liabilities, divided by the number of shares of common stock
outstanding, after giving effect to the conversion of all mandatorily redeemable
securities. After giving effect to the sale of 3,181,800 shares of common stock
in this offering at an assumed initial public offering price of $11.00 per share
and the receipt of the estimated net proceeds, the pro forma net tangible book
value of OpenSite at June 30, 1999, would have been approximately $49.6 million,
or $3.03 per share of common stock. This represents an immediate increase in net
tangible book value of $1.67 per share to existing stockholders and an immediate
decrease in net tangible book value of $7.97 per share to new investors. The
following table illustrates this unaudited per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $ 11.00
Pro forma net tangible book value per share at June 30,
1999................................................... $ 1.36
Increase attributable to the offering..................... $ 1.67
-------
Pro forma adjusted net tangible book value per share after the
offering........................................................... $ 3.03
-------
Net tangible book value dilution per share to new investors in the
offering........................................................... $ 7.97
=======
</TABLE>
The following table summarizes, as of June 30, 1999, on the pro forma basis
described above, the total number of shares sold by us, the consideration paid
to us for those shares and the average price per share paid by the existing
stockholders and by new investors purchasing shares of common stock in the
offering at an assumed initial public offering price of $11.00 per share (before
deducting the estimated underwriting discounts and commissions and offering
expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)............... 13,186,711 80.6 $ 24,383,578 41.1 $ 1.85
---------- ----- ------------ ----- ------
New investors........................... 3,181,800 19.4 34,999,800 58.9 11.00
---------- ----- ------------ ----- ------
Total......................... 16,368,511 100.0% $ 59,383,378 100.0% $ 3.63
========== ===== ============ ===== ======
</TABLE>
- ---------------
(1) The consideration received from existing stockholders excludes accretion on
mandatory redeemable convertible securities of $42,233,371.
Assuming full exercise of the underwriters' over-allotment option, the
percentage of shares held by existing stockholders would be 78.3% of the total
number of shares of common stock to be outstanding after the offering, and the
number of shares held by new stockholders would be increased to 3,659,070
shares, or 21.7% of the total number of shares of common stock to be outstanding
after the offering.
These computations are based on the number of shares of common stock
outstanding as of June 30, 1999 and exclude:
- 1,314,285 shares of common stock presently reserved for issuance
upon exercise of options granted under our stock option plan, of
which options to purchase 778,333 shares were outstanding as of July
9, 1999 at exercise prices ranging from $0.21 to $10.50 per share
and a weighted average exercise price of $5.34 per share; and
- 93,455 shares of common stock presently reserved for issuance upon
exercise of warrants outstanding as of July 9, 1999 at an exercise
price of $0.44 per share.
The exercise of these options and warrants will have the effect of
increasing the net tangible book value dilution of new investors in this
offering.
17
<PAGE> 22
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data set forth below should be read in conjunction
with our financial statements and accompanying notes appearing elsewhere in this
prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The statement of operations data for the period from
inception (July 24, 1996) to December 31, 1996 and the years ended December 31,
1997 and 1998, and the balance sheet data as of December 31, 1997 and 1998, are
derived from, and are qualified by reference to, our financial statements, which
have been audited by PricewaterhouseCoopers LLP and are included elsewhere in
this prospectus. The balance sheet data as of December 31, 1996 is derived from
audited financial statements not included in this prospectus. The statement of
operations data for the six months ended June 30, 1998 and 1999, and the balance
sheet data as of June 30, 1999 are derived from our unaudited financial
statements appearing elsewhere in this prospectus. In the opinion of our
management, the unaudited financial statements have been prepared on a basis
consistent with our audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of the financial position and results of operations for these unaudited periods.
Historical results are not necessarily indicative of results to be expected in
the future.
Pro forma as adjusted balance sheet data gives effect to the conversion of
all outstanding shares of mandatorily redeemable preferred stock into common
stock upon the closing of the offering and is adjusted to give effect to our
sale of 3,181,800 shares of common stock offered at an assumed initial public
offering price of $11.00 per share and the receipt of the estimated net proceeds
from the sale.
18
<PAGE> 23
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JULY 24, 1996) YEAR ENDED SIX MONTHS ENDED
THROUGH DECEMBER 31, JUNE 30,
DECEMBER 31, ----------------- -------------------
1996 1997 1998 1998 1999
--------------- ------ ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Software licenses................... $ 11 $ 177 $ 1,072 $ 499 $ 2,234
Services and other.................. 1 163 209 85 352
------ ------ ------- ------ -------
Total revenue............... 12 340 1,281 584 2,586
------ ------ ------- ------ -------
Cost of revenue:
Cost of software licenses........... -- 9 18 7 20
Cost of services and other.......... 1 19 131 18 493
------ ------ ------- ------ -------
Total cost of revenue....... 1 28 149 25 513
------ ------ ------- ------ -------
Gross profit.......................... 11 312 1,132 559 2,073
------ ------ ------- ------ -------
Operating expense:
Sales and marketing................. -- 43 1,918 210 3,429
Product development................. -- 105 695 172 1,310
General and administrative.......... 11 36 923 245 1,751
------ ------ ------- ------ -------
Total operating expense..... 11 184 3,536 627 6,490
------ ------ ------- ------ -------
Operating income (loss)............... 0 128 (2,404) (68) (4,417)
Interest, net......................... -- 2 43 9 241
------ ------ ------- ------ -------
Net income (loss)..................... $ 0 $ 130 $(2,361) $ (59) $(4,176)
====== ====== ======= ====== =======
Basic and diluted net income (loss)
per common share.................... $ 0.00 $ 0.03 $ (0.66) $(0.03) $(13.31)
------ ------ ------- ------ -------
Shares used in computing basic and
diluted net income (loss) per
share............................... 3,579 3,877 4,106 3,977 3,461
------ ------ ------- ------ -------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, ----------------------
-------------------- PRO FORMA
1996 1997 1998 ACTUAL AS ADJUSTED
---- ---- ------ -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 1 $151 $2,276 $ 19,324 $ 50,984
Working capital (deficit)............................ (1) 141 1,780 16,660 48,320
Total assets......................................... (2) 210 3,070 21,856 53,516
Long-term debt and capital lease obligations, net of
current portion.................................... -- 17 43 30 30
Mandatorily redeemable convertible preferred stock... -- -- 4,818 69,204 --
Total stockholders' equity (deficit)................. -- 159 (2,707) (51,244) 49,620
</TABLE>
19
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and accompanying notes which appear elsewhere in this prospectus. The
following discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
those discussed below and elsewhere in this prospectus, particularly under the
heading "Risk Factors."
OVERVIEW
OpenSite is the market share leader in online auction software solutions
with an installed base of over 300 auction sites. We commenced operation and
introduced our first auction software product in 1996. The OpenSite Auction
family of software products, available in Professional, Merchant and Corporate
versions, enables merchants of all sizes to set up and conduct auctions on the
Internet and provides them with the ability to gain more sophisticated
functionality as they grow. We have historically sold our software directly to
our customers, but are increasing the proportion that is sold through resellers.
We also provide related consulting, education and technical support services.
Our Concierge service enables our customers to outsource completely to us the
process of running Internet auctions, including development, deployment,
maintenance and hosting. In addition, BidStream.com is a Web site owned and
operated by OpenSite that aggregates the items for bid on participating
OpenSite-powered auction sites. While we have derived minimal revenue from
BidStream.com, we anticipate it to contribute a growing portion of revenue in
the future. As of June 30, 1999, we had 78 full-time employees.
OpenSite's revenue is currently derived primarily from software license
fees and support and maintenance fees. Historically, the predominant portion of
our software license revenue and support and maintenance revenue was generated
by our direct sales force. However, due to the initiation of sales through
resellers in late 1998, we expect that a sizeable portion of our revenue in 1999
will result from sales generated by our resellers. Our resellers do not maintain
an inventory of our software.
While software license revenue and support and maintenance revenue will
continue to be the majority of our revenue for the next several years, we expect
to generate an increasing portion of our revenue from BidStream.com and OpenSite
Concierge service in future years. Revenue from BidStream.com will consist of
advertising fees and fees charged to participating auction sites. We expect that
BidStream.com will begin to generate advertising fees by the end of 1999 and
participation fees in 2000. OpenSite Concierge service began generating fees in
the second quarter of 1999. These fees consist of monthly service fees for
auction site creation, hosting and administration services.
We intend to transition our product development efforts from our Buffalo,
New York office to our Durham, North Carolina headquarters by December 31, 1999.
In connection with this closing of the Buffalo, New York office, we expect to
incur a charge of approximately $450,000 in the third quarter of 1999 primarily
relating to severance and other compensation expense.
Software license revenue is generated through the licensing of our software
products to end users and resellers. We sell three levels of our OpenSite
Auction software product with increasingly sophisticated functionality. The
current prices for our auction software products range from $5,000 to $50,000
based on the level of the software. Software license revenue is recognized upon
shipment of the software product and fulfillment of the acceptance terms, if
any. In instances where the support and maintenance fee and the license fee are
included in the same sales arrangement, the support and maintenance revenue is
unbundled in an amount that equals the charge for support and maintenance when
support and maintenance services are sold separately from the software license.
The remaining portion of the revenue for the sale is recognized as software
license revenue as discussed above.
Services and other revenue include support and maintenance, consulting and
education services. Support and maintenance services are generally provided over
a twelve month period in accordance with our support and maintenance agreements.
The annual fees for support and maintenance services vary from $1,000 to
20
<PAGE> 25
$15,000 based on the level of the software product sold and the level of support
selected. Support and maintenance fees initially are deferred and recognized
ratably over the period of the support and maintenance agreement. Revenue from
consulting and education services is charged on a time and materials basis and
is recognized as the services are provided.
Cost of software license revenue consists primarily of personnel costs
related to downloading software to our customers' Web sites and costs of product
media and manuals. Cost of services and other revenue consists primarily of
costs of consulting and customer support and maintenance, including personnel,
travel and occupancy and maintenance of the BidStream.com web site.
Software development costs have been accounted for in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed." Under the
standard, capitalization of software development costs begins upon the
establishment of technological feasibility, subject to net realizable value
considerations. To date, the period between achieving technological feasibility
and the general availability of such software has substantially coincided.
Therefore, software development costs qualifying for capitalization have been
immaterial. Accordingly, we have not capitalized any software development costs
and charged all such costs to product development expense in the period
incurred.
RESULTS OF OPERATIONS
The following table sets forth our historical operating information as a
percentage of total revenue for the periods indicated.
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
INCEPTION YEAR ENDED ENDED
(JULY 24, 1996) DECEMBER 31, JUNE 30,
TO DECEMBER 31, -------------- --------------
1996 1997 1998 1998 1999
--------------- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Software licenses............................. 93.1% 52.2% 83.7% 85.5% 86.4%
Services and other............................ 6.9 47.8 16.3 14.5 13.6
-------- ----- ------ ----- ------
Total revenue......................... 100.0 100.0 100.0 100.0 100.0
-------- ----- ------ ----- ------
Cost of revenue:
Cost of software licenses..................... 0.0 2.6 1.4 1.2 0.8
Cost of services and other.................... 9.7 5.6 10.2 3.1 19.1
-------- ----- ------ ----- ------
Total cost of revenue................. 9.7 8.2 11.6 4.3 19.9
-------- ----- ------ ----- ------
Gross Profit.................................... 90.3 91.8 88.4 95.7 80.1
-------- ----- ------ ----- ------
Operating Expense:
Sales and marketing........................... 0.0 12.8 149.8 35.8 132.6
Product development........................... 0.0 30.9 54.3 29.5 50.6
General and administrative.................... 94.0 10.5 72.1 42.0 67.7
-------- ----- ------ ----- ------
Total operating expense............... 94.0 54.2 276.2 107.3 250.9
-------- ----- ------ ----- ------
Operating income (loss)......................... (3.7) 37.6 (187.8) (11.6) (170.8)
Interest, net................................... 0.0 0.6 3.4 1.5 9.3
-------- ----- ------ ----- ------
Net income (loss)............................... (3.7)% 38.2% (184.4)% (10.1)% (161.5)%
======== ===== ====== ===== ======
</TABLE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Revenue
Total revenue increased by 343% to $2,586,000 in the six months ended June
30, 1999 from $584,000 in the six months ended June 30, 1998.
21
<PAGE> 26
Software license revenue increased by 348% to $2,234,000 in the six months
ended June 30, 1999 from $499,000 in the six months ended June 30, 1998. The
number of software licenses sold increased to 184 in the six months ended June
30, 1999 from 47 in the six months ended June 30, 1998. As a percentage of total
revenue, software license revenue increased to 86.4% in the six months ended
June 30, 1999 from 85.5% in the six months ended June 30, 1998. These increases
were a result of our increased sales and marketing efforts combined with the
market acceptance and popularity of auctions on the Internet.
Services and other revenue increased by 316% to $353,000 in the six months
ended June 30, 1999 from $85,000 in the six months ended June 30, 1998. As a
percentage of total revenue, services and other revenue decreased to 13.6% in
the six months ended June 30, 1999 from 14.5% in the six months ended June 30,
1998. The dollar increase was a result of the licensed software customers
increasing to 384 at June 30, 1999 from 129 at June 30, 1998. The decrease as a
percentage of total revenue was due to the significant increase in software
license revenue.
Cost of Revenue
Cost of software license revenue increased by 182% to $20,000 in the six
months ended June 30, 1999 from $7,000 in the six months ended June 30, 1998. As
a percentage of software license revenue, cost of software license revenue
decreased to 0.8% in the six months ended June 30, 1999 from 1.2% in the six
months ended June 30, 1998. The dollar increase resulted primarily from the
increase in software licensing activity. The percentage decrease was a result of
the significant increase in software license revenue.
Cost of services and other revenue increased by 2,645% to $493,000 in the
six months ended June 30, 1999 from $18,000 in the six months ended June 30,
1998. As a percentage of services and other revenue, cost of services and other
revenue increased to 140.1% in the six months ended June 30, 1999 from 21.2% in
the six months ended June 30, 1998. These increases resulted primarily from the
increase in the number of employees providing support and maintenance to 16 at
June 30, 1999 from two at June 30, 1998. Cost of services and other revenue
increased at a greater rate than services and other revenue as we expanded the
infrastructure for our support and maintenance group in advance of recognizing
corresponding services and other revenue.
Sales and Marketing
Sales and marketing expense consists primarily of compensation for sales
and marketing personnel, advertising, trade shows and other promotional costs
and, to a lesser extent, fees for outside professional advisors and overhead
costs. Sales and marketing expense increased by 1,538% to $3,429,000 in the six
months ended June 30, 1999 from $210,000 in the six months ended June 30, 1998.
As a percentage of total revenue, sales and marketing expense increased to
132.6% in the six months ended June 30, 1999 from 35.8% in the six months ended
June 30, 1998. Sales and marketing expense increased by $607,000 as a result of
the number of sales and marketing employees increasing to 25 at June 30, 1999
from six at June 30, 1998, and by $2,612,000 due to expenditures for marketing
and advertising.
Product Development
Product development expense consists primarily of compensation for product
development staff and overhead costs. We expense product development costs as
they are incurred. Product development expense increased by 661% to $1,310,000
in the six months ended June 30, 1999 from $172,000 in the six months ended June
30, 1998. As a percentage of total revenue, product development expense
increased to 50.6% in the six months ended June 30, 1999 from 29.5% in the six
months ended June 30, 1998. Product development expense increased primarily as a
result of the number of employees in the product development group increasing to
25 at June 30, 1999 from eleven at June 30, 1998. The increase in the number of
product development employees was primarily the result of hiring additional
software engineers and quality assurance personnel to support our additional
product development and testing activities.
22
<PAGE> 27
General and Administrative
General and administrative expense consists primarily of compensation for
personnel and, to a lesser extent, fees for outside professional advisors and
overhead costs. General and administrative expense increased by 615% to
$1,751,000 in the six months ended June 30, 1999 from $245,000 in the six months
ended June 30, 1998. As a percentage of total revenue, general and
administrative expense increased to 67.7% in the six months ended June 30, 1999
from 42.0% in the six months ended June 30, 1998. General and administrative
expense increased as a result of the number of general and administrative
employees increasing to 12 at June 30, 1999 from three at June 30, 1998, and due
to expense of $269,000 related to a put feature of the redeemable common stock
warrant, as described in Note 10 to the accompanying Notes to Financial
Statements, in the six months ended June 30, 1999. The increase in the number of
general and administrative personnel was a result of the addition of new members
to the management team during the second half of 1998 and early 1999 as well as
development of an administrative infrastructure to support our growth.
Interest Income, Net
Interest income, net of interest expense, increased by 2,686% to $241,000
in the six months ended June 30, 1999 from $9,000 in the six months ended June
30, 1998. As a percentage of total revenue, interest income, net of interest
expense, increased to 9.3% in the six months ended June 30, 1999 from 1.5% in
the six months ended June 30, 1998. The increases were a result of the interest
income generated by our increased cash and cash equivalents resulting from the
sale of our mandatorily redeemable preferred stock during the fourth quarter of
1998 and the first and second quarters of 1999. Interest expense was
insignificant in both periods.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenue
Total revenue increased by 277% to $1,281,000 in the year ended December
31, 1998 from $340,000 in the year ended December 31, 1997.
Software license revenue increased by 505% to $1,072,000 in the year ended
December 31, 1998 from $177,000 in the year ended December 31, 1997. As a
percentage of total revenue, software license revenue increased to 83.7% in the
year ended December 31, 1998 from 52.2% in the year ended December 31, 1997. The
number of software licenses sold increased to 118 in the year ended December 31,
1998 from 82 in the year ended December 31, 1997. These increases were a result
of our increased sales and marketing efforts combined with the market acceptance
and popularity of Internet auctions.
Services and other revenue increased by 28% to $209,000 in the year ended
December 31, 1998 from $163,000 in the year ended December 31, 1997. As a
percentage of total revenue, services and other revenue decreased to 16.3% in
the year ended December 31, 1998 from 47.8% in the year ended December 31, 1997.
The dollar increase was a result of the licensed software customers increasing
to 200 at December 31, 1998 from 82 at December 31, 1997. The decrease as a
percentage of total revenue was a result of the significant increase in software
license revenue in the year ended December 31, 1998.
Cost of Revenue
Cost of software license revenue increased by 95% to $18,000 in the year
ended December 31, 1998 from $9,000 in the year ended December 31, 1997. As a
percentage of software license revenue, cost of software license revenue
decreased to 1.6% in the year ended December 31, 1998 from 5.1% in the year
ended December 31, 1997. The dollar increase resulted primarily from the
increase in software licensing activity. This decrease as a percentage of total
revenue resulted primarily from the significant increase in total revenue in the
year ended December 31, 1998.
Cost of services and other revenue increased by 589% to $131,000 in the
year ended December 31, 1998 from $19,000 in the year ended December 31, 1997.
As a percentage of services and other revenue, cost of
23
<PAGE> 28
services and other revenue increased to 62.8% in the year ended December 31,
1998 from 11.7% in the year ended December 31, 1997. These increases were
primarily a result of increasing the number of employees providing support and
maintenance to five at December 31, 1998 from two at December 31, 1997.
Sales and Marketing
Sales and marketing expense increased by 4,304% to $1,918,000 in the year
ended December 31, 1998 from $43,000 in the year ended December 31, 1997. As a
percentage of total revenue, sales and marketing expense increased to 150% in
the year ended December 31, 1998 from 12.8% in the year ended December 31, 1997.
These increases resulted primarily from the number of sales and marketing
employees increasing to 15 at December 31, 1998 from two at December 31, 1997,
as well as increased expenditures as part of our marketing and advertising
efforts.
Product Development
Product development expense increased by 562% to $695,000 in the year ended
December 31, 1998 from $105,000 in the year ended December 31, 1997. As a
percentage of total revenue, product development expense increased to 54.3% in
the year ended December 31, 1998 from 30.9% in the year ended December 31, 1997.
Product development expense increased primarily as a result of the number of
employees in the product development group increasing to 20 at December 31, 1998
from three at December 31, 1997. The increase in the number of product
development employees was primarily the result of hiring additional software
engineers and quality assurance personnel to support our additional product
development and testing activities.
General and Administrative
General and administrative expense increased by 2,491% to $923,000 in the
year ended December 31, 1998 from $36,000 in the year ended December 31, 1997.
As a percentage of total revenue, general and administrative expense increased
to 72.1% in the year ended December 31, 1998 from 10.5% in the year ended
December 31, 1997. General and administrative expense increased primarily as a
result of the number of general and administrative employees increasing to seven
at December 31, 1998 from two at December 31, 1997. This increase in the number
of administrative personnel is a result of the addition of new members to the
management team during the second half of 1998 as well as development of an
administrative infrastructure to support our growth.
Interest Income, Net
Interest income, net of interest expense, increased by 1,738% to $43,000 in
the year ended December 31, 1998 from $2,000 in the year ended December 31,
1997. As a percentage of total revenue, interest income, net of interest
expense, increased to 3.4% in the year ended December 31, 1998 from 0.6% in the
year ended December 31, 1997. This increase was a result of the interest income
generated by our increased cash and cash equivalents on hand resulting from the
sale of mandatorily redeemable preferred stock in the year ended December 31,
1998. Interest expense was immaterial during both periods.
PERIOD FROM INCEPTION (JULY 24, 1996) TO DECEMBER 31, 1996 COMPARED TO THE YEAR
ENDED DECEMBER 31, 1997
Revenue
Total revenue increased by 2,626% to $340,000 in the year ended December
31, 1997 from $12,000 in the year ended December 31, 1996.
Software license revenue increased by 1,428% to $177,000 in the year ended
December 31, 1997 from $12,000 in the year ended December 31, 1996. As a
percentage of total revenue, software license revenue decreased to 52.2% in the
year ended December 31, 1997 from 93.1% in the year ended December 31, 1996. The
increase in software license revenue was due to the introduction of our auction
software products in the year ended December 31, 1997. The decrease in software
license revenue as a percentage of total revenue was
24
<PAGE> 29
due primarily to revenue from customer support and maintenance fees in the year
ended December 31, 1997, which was not generated in the year ended December 31,
1996.
Services and other revenue increased by 18,726% to $163,000 in the year
ended December 31, 1997 from $1,000 in the year ended December 31, 1996. As a
percentage of total revenue, services and other revenue increased to 47.8% in
the year ended December 31, 1997 from 6.9% in the year ended December 31, 1996.
The increase in services and other revenue as a percentage of total revenue
resulted from our introduction of support and maintenance services in the year
ended December 31, 1997.
Cost of Revenue
Cost of software license revenue increased to $9,000 in the year ended
December 31, 1997 from $0 in the year ended December 31, 1996. As a percentage
of software license revenue, cost of software license revenue increased to 5.1%
in the year ended December 31, 1997 from 0.0% in the year ended December 31,
1996. These increases resulted from the significant increase in software license
revenue in the year ended December 31, 1997.
Cost of services and other revenue increased by 1,472% to $19,000 in the
year ended December 31, 1997 from $1,000 in the year ended December 31, 1996. As
a percentage of services and revenue, cost of services decreased to 11.7% in the
year ended December 31, 1997 from 140.1% in the year ended December 31, 1996.
The increase in cost of services and other revenue was due primarily to an
increase in the number of support and maintenance employees to two at December
31, 1997 from zero at December 31, 1996.
Sales and Marketing Expense
Sales and marketing expense increased to $44,000 in the year ended December
31, 1997 from $0 in the year ended December 31, 1996. As a percentage of total
revenue, sales and marketing expense increased to 12.8% in the year ended
December 31, 1997 from 0.0% in the year ended December 31, 1996. The increase in
sales and marketing expense was due primarily to an increase in the number of
sales and marketing employees to two at December 31, 1997 from zero at December
31, 1996.
Product Development Expense
Product development expense increased to $105,000 in the year ended
December 31, 1997 from $0 in the year ended December 31, 1996. As a percentage
of total revenue, product development expense increased to 30.9% in the year
ended December 31, 1997 from 0.0% in the year ended December 31, 1996. The
increase in product development expense was due primarily to an increase in the
number of product development employees to three at December 31, 1997 from zero
at December 31, 1996, due to the development of our auction software products,
which occurred primarily in the year ended December 31, 1997.
General and Administrative Expense
General and administrative expense increased by 204% to $36,000 in the year
ended December 31, 1997 from $12,000 in the year ended December 31, 1996. As a
percentage of total revenue, general and administrative expense decreased to
10.5% in the year ended December 31, 1997 from 94.0% in the year ended December
31, 1996. The increase in general and administrative expense resulted from the
addition of two general and administrative employee in the year ended December
31, 1997.
Interest Income, Net
Interest income, net of interest expense, increased to $2,000 in the year
ended December 31, 1997 from $0 in the year ended December 31, 1996. As a
percentage of total revenue, interest income, net of interest expense, increased
to 0.6% in the year ended December 31, 1997 from 0.0% in the year ended December
31, 1996.
25
<PAGE> 30
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth a summary of our unaudited quarterly
operating results for each of the ten quarters in the period ended June 30,
1999, as well as results expressed as a percentage of total revenue for the
periods indicated. This information has been derived from unaudited interim
financial statements that, in the opinion of management, have been prepared on a
basis consistent with the financial statements contained elsewhere in this
prospectus and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such information when read in
conjunction with financial statements and accompanying notes appearing elsewhere
in this prospectus. The operating results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Software licenses........ $ 3 $ 50 $ 56 $ 68 $ 179 $ 321 $ 177 $ 396
Services and other....... 8 25 65 64 38 46 48 76
------ ------ ------ ------ ------ ------ ------- -------
Total revenue... 11 75 121 132 217 367 225 472
------ ------ ------ ------ ------ ------ ------- -------
Cost of revenue:
Cost of software
licenses............... -- 3 3 3 3 4 3 8
Cost of services and
other.................. -- -- 2 16 5 14 36 77
------ ------ ------ ------ ------ ------ ------- -------
Total cost of
revenue....... -- 3 5 19 8 18 39 85
------ ------ ------ ------ ------ ------ ------- -------
Gross profit............. 11 72 116 113 209 349 186 387
------ ------ ------ ------ ------ ------ ------- -------
Operating expense:
Sales and marketing...... 2 5 14 24 62 147 679 1,029
Product development...... -- 3 35 66 56 116 223 300
General and
administrative......... 4 8 2 21 97 148 158 520
------ ------ ------ ------ ------ ------ ------- -------
Total operating
expense....... 6 16 51 111 215 411 1,060 1,849
------ ------ ------ ------ ------ ------ ------- -------
Operating income
(loss)................. 5 56 65 2 (6) (62) (874) (1,462)
Interest, net............ -- -- 1 1 5 4 1 33
------ ------ ------ ------ ------ ------ ------- -------
Net income (loss)........ $ 5 $ 56 $ 66 $ 3 $ (1) $ (58) $ (873) $(1,429)
====== ====== ====== ====== ====== ====== ======= =======
<CAPTION>
THREE MONTHS ENDED
-------------------
MAR. 31, JUNE 30,
1999 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Software licenses........ $ 921 $ 1,313
Services and other....... 129 223
------- -------
Total revenue... 1,050 1,536
------- -------
Cost of revenue:
Cost of software
licenses............... 8 12
Cost of services and
other.................. 158 336
------- -------
Total cost of
revenue....... 166 348
------- -------
Gross profit............. 884 1,188
------- -------
Operating expense:
Sales and marketing...... 1,052 2,376
Product development...... 534 776
General and
administrative......... 810 941
------- -------
Total operating
expense....... 2,396 4,093
------- -------
Operating income
(loss)................. (1,512) (2,905)
Interest, net............ 18 223
------- -------
Net income (loss)........ $(1,494) $(2,682)
======= =======
</TABLE>
26
<PAGE> 31
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
Software licenses.... 25.5% 67.3% 46.1% 51.5% 82.3% 87.4% 78.7% 83.9%
Services and other... 74.5 32.7 53.9 48.5 17.7 12.6 21.3 16.1
----- ----- ----- ----- ----- ----- ------ ------
Total revenue........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ------ ------
Cost of revenue:
Cost of software
license............ 0.0 3.4 2.7 2.4 1.3 1.1 1.3 1.6
Cost of services and
other.............. 3.1 0.4 1.8 12.2 2.1 3.7 15.9 16.4
----- ----- ----- ----- ----- ----- ------ ------
Total cost of
revenue............ 3.1 3.8 4.5 14.6 3.4 4.8 17.2 18.0
----- ----- ----- ----- ----- ----- ------ ------
Gross profit......... 96.9 96.2 95.5 85.4 96.6 95.2 82.8 82.0
----- ----- ----- ----- ----- ----- ------ ------
Operating expense:
Sales and
marketing.......... 14.3 6.3 11.3 17.8 28.9 40.0 302.4 218.0
Product
development........ 2.9 4.5 28.8 50.2 25.8 31.7 99.5 63.4
General and
administrative..... 37.2 10.9 1.8 15.9 44.6 40.3 70.3 110.1
----- ----- ----- ----- ----- ----- ------ ------
Total operating
expense............ 54.4 21.7 41.9 83.9 99.3 112.0 472.2 391.5
----- ----- ----- ----- ----- ----- ------ ------
Operating income
(loss)............. 42.5 74.5 53.6 1.5 (2.7) (16.8) (389.4) (309.5)
Interest income,
net................ 0.0 0.6 0.4 1.0 2.2 1.0 0.5 7.0
----- ----- ----- ----- ----- ----- ------ ------
Net income (loss).... 42.5% 75.1% 54.0% 2.5% (0.5)% (15.8)% (388.9)% (302.5)%
===== ===== ===== ===== ===== ===== ====== ======
<CAPTION>
THREE MONTHS ENDED
-------------------
MAR. 31, JUNE 30,
1999 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
Software licenses.... 87.7% 85.5%
Services and other... 12.3 14.5
------ -------
Total revenue........ 100.0 100.0
------ -------
Cost of revenue:
Cost of software
license............ 0.8 0.8
Cost of services and
other.............. 15.0 21.8
------ -------
Total cost of
revenue............ 15.8 22.6
------ -------
Gross profit......... 84.2 77.4
------ -------
Operating expense:
Sales and
marketing.......... 100.3 154.6
Product
development........ 50.8 50.5
General and
administrative..... 77.1 61.3
------ -------
Total operating
expense............ 228.2 266.4
------ -------
Operating income
(loss)............. (144.0) (189.0)
Interest income,
net................ 1.8 14.4
------ -------
Net income (loss).... (142.2)% (174.6)%
====== =======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations using proceeds from the
issuance of preferred stock to private equity investors. To date, we have
received $28,368,000 in proceeds, net of issuance costs, from issuances of
preferred stock. At June 30, 1999, our primary source of liquidity was
$19,324,000 in cash and cash equivalents.
Net cash used in operating activities was $2,003,000 in the six months
ended June 30, 1999. Net cash used in operating activities was $1,774,000 in the
year ended December 31, 1998. Net cash provided by operating activities was
$160,000 in the year ended December 31, 1997. Net cash provided by operating
activities was $2,000 in the period from inception (July 24, 1996) to December
31, 1996.
Net cash used in investing activities was $329,000 in the six months ended
June 30, 1999. Net cash used in investing activities was $388,000 in the year
ended December 31, 1998. Net cash used in investing activities was $39,000 for
the year ended December 31, 1997. Net cash used in investing activities was less
than $1,000 in the period from inception (July 24, 1996) to December 31, 1996.
The cash used in investing activities was primarily for purchases of software
for customer call support, computer equipment and office furniture.
Net cash provided by financing activities in the six months ended June 30,
1999 was $19,380,000. Net cash provided by financing activities was $4,286,000
in the year ended December 31, 1998. Net cash provided by financing activities
was $30,000 in the year ended December 31, 1997. No net cash was provided by
financing activities in the period from inception (July 24, 1996) to December
31, 1996. The 1998 financing activities consisted primarily of issuances of
preferred stock. In January 1998, we completed a private placement of Series A
preferred stock, totaling 1,544,610 shares, resulting in gross proceeds of
$600,000. In August and September 1998, we completed a private placement of
2,380,952 shares of Series B preferred stock, resulting in gross proceeds of
$4,000,000. In March and April 1999, we completed a private placement of
5,714,285 shares of Series C preferred stock, resulting in gross proceeds of
$24,000,000. The Series A preferred stock, Series B preferred stock and Series C
preferred stock will be converted into shares of common stock automatically upon
completion of this offering.
We have experienced a substantial increase in our capital expenditures,
which is consistent with our growth in operations and staffing. We anticipate
that capital expenditures will continue to increase for the foreseeable future.
Additionally, we will evaluate possible investments in our business, technology
and
27
<PAGE> 32
products. We believe our existing liquidity and capital resources, and the
proceeds resulting from the sale of common stock in this offering, will be
sufficient to satisfy our cash requirements for the next 24 months. These cash
requirements are expected to consist primarily of the costs of developing and
expanding our European operations, expanding our sales and marketing departments
in the United States and increasing advertising expenses. If adequate funds are
not available or are not available on acceptable terms, our ability to fund our
expansion, take advantage of unanticipated opportunities or otherwise respond to
competitive pressure would be significantly limited. There can be no assurance
that we will be able to raise such funds on favorable terms or at all.
The primary objective of our investment strategy is to preserve principal
while maximizing the income we receive from investments without significantly
increasing risk. To minimize this risk, to date we have maintained our portfolio
of cash equivalents in short-term and overnight investments that are not subject
to market risk as the interest paid on such investments fluctuates with the
prevailing interest rates. All of our cash equivalents mature in less than one
year. Our exposure to foreign currency exchange rate fluctuations is minimal as
we do not have any revenues denominated in foreign currencies. Additionally, we
have not engaged in any derivative or hedging transactions to date.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). This statement requires
companies to report information about operating segments in annual financial
statements. It also requires segment disclosures about products and services,
geographic areas and major customers. The disclosures prescribed by SFAS No. 131
are effective for fiscal years beginning after December 15, 1997. Management has
determined that OpenSite does not have any separately reportable operating
segments as of December 31, 1998 or June 30, 1999.
In March 1998, the AICPA issued Statement of Position No. 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use,"
("SOP No. 98-1") which provides guidance regarding when software developed or
obtained for internal use should be capitalized. SOP No. 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998. The
adoption of SOP No. 98-1 did not have a material impact on our financial
condition or results of operations.
In December 1998, the AICPA issued SOP No. 98-9, "Modification of SOP No.
97-2, Software Revenue Recognition, With Respect to Certain Transactions," ("SOP
No. 98-9"). SOP No. 98-9 amended SOP No. 97-2 to require recognition of revenue
using the "residual method" in circumstances outlined in SOP No. 97-2. Under the
residual method, revenue is recognized as follows: (1) the total fair value of
undelivered elements, as indicated by Vendor Specific Objective Evidence
("VSOE"), is deferred and subsequently recognized in accordance with the
relevant sections of SOP No. 97-2 and (2) the difference between the total
arrangement fee and the amount deferred for the undelivered elements is
recognized as revenue related to the delivered elements.
SOP No. 98-9 is effective for fiscal years beginning after March 15, 1999.
Also, the provisions of SOP No. 97-2 that were deferred by Statement of Position
98-4, "Deferral of the Effective Date of a Provision of SOP 97-2, Software
Revenue Recognition," ("SOP No. 98-4") will continue to be deferred until the
date SOP No. 98-9 becomes effective. We do not expect that the adoption of SOP
No. 98-9 will have a material impact on our financial condition or results of
operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS No. 133
is effective for financial statements for all fiscal quarters of all fiscal
years beginning after June 15, 1999. We intend to adopt SFAS No. 133 when
required; however, SFAS No. 133 is not expected to have a material impact on our
financial position or results of operations.
28
<PAGE> 33
IMPACT OF YEAR 2000 COMPUTER ISSUES
The Year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year without specifying the century.
As a result, date-sensitive software may recognize a date of "00" as the year
1900 rather than the Year 2000. Year 2000 issues impact OpenSite both on an
external basis in connection with the products and services we offer to end
users, as well as on an internal basis as to our own operations and information
technology systems. We also face risks relating to the potential Year 2000
non-compliance with vendors that provide products and services to us.
Year 2000 Project Team. We have assembled a Year 2000 Project Team
composed of OpenSite employees from our management. This team consults with
employees from our product management, product development, technical support,
internal information technology, accounting and facilities management working
groups. We have recently hired a Director of Corporate Technology, in part to
ensure Year 2000 readiness. Our Year 2000 Project Team has identified software,
equipment and systems supplied to us by third party vendors that are material to
our business and have verified all internal systems to be Year 2000 compliant.
We are in the process of reviewing and testing our products to determine their
ability to correctly process date changes from 1999 through 2000. The goals of
the Project Team are to minimize any Year 2000-related impact to our customers
and their customers; maintain Year 2000 readiness as a top business priority;
and work closely with our internal and external business partners to achieve
Year 2000 readiness. To date, we have not become aware of any material Year 2000
compliance problems resulting from our internal or external software, equipment
or systems. We will continue to test and evaluate our internal and external
software, equipment or systems through 1999 and into the year 2000. Management
believes the costs related to Year 2000 compliance have not been material to
date and will not grow to have a material adverse effect on our business.
OpenSite Products. We designed the most recent versions of our products to
be Year 2000 compliant. To date, Year 2000 remediation efforts to our products
were minor due to our awareness of Year 2000 issues when our products were
developed. We have begun the process of testing our products in test
environments intended to emulate a Year 2000 environment. To date, no
significant problems have been detected as a result of this testing. Actual
costs to date for testing existing OpenSite software products have been less
than $5,000. We do not expect any additional costs for testing Year 2000
compliance of our products. We anticipate testing to be completed by August 31,
1999.
Year 2000 External Efforts and Issues. We have substantially completed the
replacement, modification or retirement of hardware or software components for
our products and services that were identified by the Year 2000 Project Team to
be vital to our core business processes and at risk for Year 2000 failures. In
addition, we have requested that our customers, vendors and other third parties
participate in our readiness efforts and update us on their Year 2000 progress.
Many of our computer systems and business operations are provided and/or
maintained by outside suppliers. Our key vendors and suppliers have been asked
to demonstrate sufficient Year 2000 readiness. Where feasible, we have tested
vendor supplied products that are critical to our operations. Approximately 70%
of our significant vendors and suppliers have provided us with written
assurances that they are Year 2000 compliant, and the rest of our significant
vendors and suppliers have provided us with written assurances that they are
continuing to test for Year 2000 compliance. All of our significant vendors and
suppliers have provided us with written assurances that they will be Year 2000
compliant in advance of December 31, 1999.
Year 2000 Internal Efforts and Issues. Our Year 2000 Project Team has
completed corporate-wide inventory of our internal application and system
software and of our computers and other equipment to determine if this equipment
uses embedded computer chips that may be date sensitive. Based on this analysis,
we have, where required, upgraded hardware and software deemed vital to our
on-going business by the Year 2000 Project Team to versions or releases
identified by our vendors as Year 2000 ready or compliant, implemented computer
code changes for non-critical issues not affecting Year 2000 compliance and
substantially completed remediation of identified Year 2000 issues in "mission
critical" systems or systems that are vital to the successful continuance of
core business activities. Actual costs of Year 2000 compliance
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<PAGE> 34
for our internal systems to date have been approximately $2,500. Total costs of
Year 2000 compliance for our internal systems are not expected to exceed $7,500
for testing, compliance and monitoring.
Contingency Planning. To date, we have not developed any formalized
contingency plans to address the risk that our products, systems, customers,
vendors or other business partners may fail to be or become Year 2000 compliant.
To the extent that we identify third party or other Year 2000 compliance issues
that may not be capable of remediation on a timely basis, we will rapidly seek
to develop contingency plans in order to minimize our risks.
Reasonably likely worst case scenario. The failure of our internal
systems, the products or systems of third parties upon which we rely or the
hardware or software upon which our products and services rely could result in:
- our inability to effectively manage sales leads, which in turn could
result in fewer sales and lower revenue;
- the failure of our products to function properly, which in turn could
result in our incurring significant costs and diverting significant human
resources in our efforts to comply with obligations under warranty and/or
service agreements;
- our inability to properly invoice and process payments from our customers
and others with whom we have business relationships; and
- errors or omissions in accounting and/or financial data;
any of which could have a material adverse effect on our business.
30
<PAGE> 35
BUSINESS
OVERVIEW
OpenSite is the market share leader in online auction software solutions
with an installed base of over 300 auction sites. Our solutions, which include a
variety of cost-effective software products and services, enable small, medium
and large merchants to create branded, Internet-based auctions on their own Web
sites. Our solutions automate the process of installing, running and maintaining
real-time auctions over the Internet. By bringing together buyers and sellers,
our products and services help individuals and businesses create new sales
channels, manage inventory, attract new customers, introduce new products and
strengthen relationships with existing partners and customers. Our customers
operate in a wide variety of industries and include Beverly Hills Country Club,
Cheapfares.com, CNET, Currans Select Auctions, The Sharper Image, VerticalNet
and WineBid.com. OpenSite Auction won a Best of Show Award for e-commerce
applications at Fall Internet World 1998 and a Best of Class Award for Web-based
selling at Fall Internet Commerce Expo 1998. OpenSite Auction also earned an
Analyst's Choice Award from PC Week magazine and received a five-star rating
from online magazine Internet.com.
To date, we have derived substantially all of our revenue from the sale of
software products and related services. However, our business as a software
developer has evolved since our inception in 1996. For example, we introduced
our indirect sales channel in 1998 and BidStream.com in 1999. As of June 30,
1999, we had 78 full-time employees.
INDUSTRY BACKGROUND
Growth of the Internet and the Rise of Electronic Commerce
The Internet has rapidly emerged as an important medium for communicating,
obtaining information and conducting commerce. International Data Corporation
estimates that the number of Internet users making online purchases will grow
from 31 million in 1998 to approximately 183 million in 2003. The Internet
possesses unique and commercially powerful characteristics that differentiate it
from traditional forms of media, including freedom from geographical or temporal
limitations, real-time access to dynamic interactive content and instantaneous
connections between merchants and consumers. International Data Corporation
estimates that worldwide commerce over the Internet will exceed approximately $1
trillion by 2003.
Emergence of Dynamic Pricing
Dynamic pricing, in which prices are determined by buyers and sellers on a
transaction-by-transaction basis, is becoming more accepted as a form of
electronic commerce. Certain characteristics of traditional commerce, such as
multi-tiered distribution, costly product delivery requirements and limited
ability to collect and process real-time pricing information, have led to fixed
pricing as the dominant transactional format. The Internet, however, has enabled
market information to be disseminated more quickly, in greater quantity and to a
wider audience than was historically possible. It has also streamlined the
process of production and distribution of goods. These factors have reduced the
need to adhere to fixed pricing of goods and services. Additionally, consumers
and merchants are increasingly utilizing the Internet to buy and sell goods and
services. The interactive nature of the Internet, especially as embodied by
real-time updates of information, has also given Internet users an increasing
sense of confidence about continuous market refinement of pricing.
Internet Facilitation of Auctions
Auctions are among the most well known forms of dynamic pricing. Prior to
the Internet, auctions faced critical shortcomings, including location and time
constraints, which limited the degree to which buyers and sellers could
interact. When information is more difficult to obtain, pricing is a less
efficient process. Even in cases where intermediaries such as auction houses
become involved to mitigate some of these problems, their fees often reduce the
practicality and attractiveness of an auction marketplace. The Internet
alleviates many of these problems. It has no geographic or time boundaries and
allows large quantities of information to be
31
<PAGE> 36
transmitted instantaneously. Accordingly, online auctions can offer more
products to more people over a wider geographic area, providing a better pricing
mechanism for both buyers and sellers. Forrester Research projects that the
value of goods sold through Internet auctions will increase from $10.1 billion
in 1998 to $64.9 billion in 2002, a 59% compound annual growth rate.
Benefits of Online Auctions
The needs of both merchants and consumers are served by online auctions.
Merchants benefit from the following:
- alternative transaction models;
- cost-effective methods for liquidating overstock, outdated or
perishable inventory;
- efficient price discovery mechanisms for new products;
- the ability to collect marketing data on existing and potential
buyers; and
- the ability to attract additional traffic to merchant Web sites.
Benefits to online bidders include the following:
- greater flexibility in the timing and pricing of purchases;
- access to a broader range of items for bid without geographical
limitations;
- the ability to capitalize on real time market conditions which may
produce temporary price advantages;
- the ability to find rare or collectible items to which they might
not otherwise be exposed; and
- the formation of enthusiast communities, chat rooms and newsletters
which make online auctions a participatory and enjoyable interactive
experience.
The Current Landscape for Online Auctions
As a result of these benefits, a growing number of merchants are seeking
Internet auction capabilities. Online auction solutions currently can be divided
into two categories. The first category consists of person-to-person Internet
auction communities. These communities provide a convenient and popular
destination for individuals who wish to trade with each other or for merchants
seeking a simple way to auction a limited number of items. These communities,
however, generally preclude merchants from maintaining their own brands on the
Internet, controlling the online experience of bidders or retaining data on the
activity of their bidders. The second category is comprised of applications that
allow merchants to control and maintain their own branded online auction sites.
These merchants have choices ranging from developing their own online auction
capabilities to purchasing online auction applications from third party vendors.
Custom built applications are typically expensive and time consuming. Many
applications from third party software vendors are difficult to customize, are
burdensome to implement and often lack a wide range of features. In addition,
these vendors typically do not provide a complete package of ancillary services.
We believe that a large and growing number of online merchants will seek
auction solutions that enable them to create and maintain their own brand
images, control their customers' online experience and collect bidder activity
data, all in a manner that is simple to implement, quickly operational and
facilitates targeted interaction with visitors to their sites. Since Internet
auctions are both a relatively new phenomenon and an increasingly critical
capability, many companies require a full range of related services to ensure
the rapid and effective implementation of an online auction solution. Finally,
since traffic is such an important element of successful electronic commerce,
merchants are likely to gravitate towards a solution which possesses the ability
to attract more bidders to their own auction sites.
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<PAGE> 37
THE OPENSITE SOLUTION
We are the market share leader in online auction software solutions, with
an installed base of over 300 auction sites. Our solutions, which include a
variety of cost-effective software products and services, enable small, medium
and large merchants to create branded, Internet-based auctions on their own Web
sites. Our solutions automate the process of installing, running and maintaining
real-time auctions over the Internet. By bringing together buyers and sellers,
our solutions help businesses create new sales channels, manage inventory,
attract new customers, introduce new products and strengthen customer and other
business relationships.
The OpenSite Auction family of products is designed to provide a full range
of dynamic pricing functionality and to allow our customers a flexible solution
based on their changing needs. Additionally, we provide a range of related
services including consulting, implementation and hosting to enable any merchant
to launch Internet auctions quickly and easily. We also provide ancillary
products to enable auction participants to track and monitor their activity,
facilitate proxy bidding and notify them of new items being put up for bid.
Launched in April 1999, BidStream.com is a Web site owned and operated by
OpenSite that aggregates the items for bid on participating OpenSite-powered
auction sites. We intend to establish BidStream.com as the central point for
locating items for bid at participating OpenSite-powered auction sites. Our
proprietary search engine indexes all items for sale at these sites.
BidStream.com is designed to provide the general Internet user an effective and
time-efficient way to find auction items on which to bid and provides our
customers with additional visitors to their Web sites.
Our solutions have the following benefits:
Increased Revenue Opportunities Through Dynamic Pricing. Our products and
services facilitate new online revenue opportunities for our customers by easily
and efficiently enabling branded Internet auctions. Through our online auction
technology, merchants can
- manage inventory levels more effectively by quickly liquidating
overstocks;
- achieve improved product prices by stimulating demand;
- conduct price discovery by offering new products for bid;
- manage perishable inventory by finding buyers in real-time; and
- build communities of collectors and enthusiasts.
Control of Brand Equity. Our products allow customers to control their
auction sites rather than list their products in a person-to-person Internet
auction community. This enables them to control and expand the presence of their
brand equity on the Internet while increasing sales.
Increased Site Traffic; Aggregation of Marketing Data. BidStream.com
provides bidders with a central point for locating items for sale on
participating OpenSite-powered auction sites. By aggregating the content from
these sites, we provide a way for our customers to generate increased site
traffic without costly marketing campaigns. Additionally, BidStream.com collects
data about visitors to auction sites, which our customers may use to reach more
qualified customers and more effectively market products to targeted customers.
Ease of Use and Rapid Deployment. Our solutions are designed to enable
customers to quickly and easily create sophisticated online auctions, in some
cases in as little as two days. Our solutions include pre-designed Web page
templates to speed site development. These templates can be easily customized,
edited and branded using our template and style editors. Our Concierge service
lets businesses establish an online auction almost immediately without an
up-front investment in software or hardware.
Flexible and Scalable Solutions. Unlike some other Internet auction
software providers, which offer a single product solution, we provide a flexible
and scalable growth path for merchants wishing to expand their auction
capabilities over time. Our software is offered as a three-tiered product
family -- Professional,
33
<PAGE> 38
Merchant and Corporate -- created to meet a wide array of needs. Thus, customers
new to online auctions may start with an entry-level product which requires a
modest initial investment in time and resources, while customers who are more
experienced, or have more complex needs, have the option of a more advanced
level of our software. Our products are designed so that the growth path from
one level to the next is a relatively seamless and simple process.
Bidder Empowerment. Our solutions provide information, tools and services
designed to increase bidders' success at online auctions. For example,
AuctionWatch Desktop is an application that allows users to manage their bidding
activity more effectively, including multiple bids on multiple sites, from a
single screen.
STRATEGY
Our goal is to maintain and strengthen OpenSite's position as a leader in
online auction solutions. Our strategies to achieve this goal include the
following:
Use Our Market Leadership to Build Brand Awareness. We are the market
share leader in online auction software solutions, with an installed base of
over 300 auction sites. We believe that OpenSite is the first significant vendor
of a complete Internet auction solution and the first to enhance the value
proposition to customers through aggregation of auction content from disparate
customer sites. We expect to aggressively increase the market impact of the
OpenSite brand by expanding our sales and marketing organization and investing
significantly in both online and offline advertising. The development and
promotion of BidStream.com as a tool for bidders to locate items for bid on our
customers' auction sites is a key component of this strategy.
Continue to Enhance Our Solutions. Our family of products and services is
designed to provide a full range of auction functionality. As the market for
online auctions matures, we believe that the demands of merchants and bidders
will grow and become more sophisticated. We intend to continue to invest in our
product development resources and to develop new auction solutions to meet these
growing demands. We believe that our market share leadership, reflected in an
installed base of over 300 auction sites, provides us with a unique advantage in
understanding the needs of online auctioneers. We have recently introduced
BidStream.com as service to increase traffic to our customers' auction sites. We
also intend to release three new products in 1999 that are designed for the
needs of specific target markets.
Aggregate Content Through Development of BidStream.com. Through
BidStream.com, we aggregate the content from participating OpenSite-powered
auction sites into a single Web site. BidStream.com enables a user to search
multiple OpenSite-powered auction locations for specific items. BidStream.com is
designed to increase traffic to our customers' auction sites, thus increasing
the value we provide to our customers. BidStream.com also allows us to obtain
information regarding auction participants and their bidding patterns. We
believe that our significant market share gives us an advantage in aggregating
substantial quantities of auction content as compared to our competitors with
less market share. Although only recently launched, BidStream.com has initially
experienced positive customer acceptance and currently aggregates over 90
auction sites containing over 90,000 items for bid. We expect the number of
participants to increase as we further promote and educate our customers about
the benefits of BidStream.com.
Increase Sales of High-End Solutions. As the market for auction technology
matures, we intend to target our sales and marketing efforts increasingly
towards larger merchants requiring enterprise-level auction solutions. We
believe that OpenSite Auction Corporate and other products under development
will be attractive as the need for more sophisticated solutions increases. In
addition, by increasing our sales of high-end solutions to larger merchants, we
expect to sustain revenue growth and increase the quantity of content aggregated
on BidStream.com. To support this effort, we intend to accelerate our
development of scalable, dynamic pricing solutions capable of integration into
widely used IT systems, such as enterprise resource planning and supply-chain
management. We also believe that our indirect sales channels will provide us
with greater access to this target market.
Develop Indirect Sales Channels. We have developed an indirect sales
channel comprised of resellers, systems integrators, Internet Service Providers
and others. These channels are designed to reach new and
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larger target markets, particularly larger merchants, more efficiently than our
direct sales force. Established in 1998, our indirect sales channel now consists
of 63 resellers. To support these sales efforts, we are developing OpenSite
AuctionNow, which is targeted to Internet Service Providers and e-commerce
software providers to enable them to embed auction functionality into their
product and service offerings. We expect to introduce OpenSite AuctionNow by the
end of 1999.
Expand Internationally. Online auctions have the ability to reach
potential buyers throughout the world. We believe that a considerable market for
our products exists outside the United States. We intend to accelerate our
investment in international sales and to add new features and functionality to
our products to accommodate accounting, customs, currency and tax requirements
of foreign countries. We intend to use our indirect sales channel to accelerate
our international marketing efforts. In addition, we have retained Protege
Software Ltd. to provide sales and marketing services for our European
expansion.
PRODUCTS AND SERVICES
OpenSite Auction 4.0. OpenSite Auction 4.0, our core product, automates
the process of implementing, running and maintaining real-time auctions over the
Internet. OpenSite Auction 4.0 is designed to simplify for merchants the process
of installing and maintaining an auction site with features such as:
- remote installation to permit rapid deployment;
- various predesigned Web page styles and templates with editors to
facilitate easy editing to create a customized look and feel;
- security features such as digital certification, automatic database
encryption and multi-level administration authentication;
- statistic generation tools and log file viewers to view and analyze
auction data; and
- Web browser interfaces, configuration and invoice menus, automated winner
calculations, email notification and database archiving designed to
simplify the auction management process and monitor auction activity.
OpenSite Auction 4.0 offers the following features to enhance the auction
experience for bidders:
- monitoring of bidding;
- notification of new items;
- facilitation of proxy bidding; and
- enabling simultaneous bidding on multiple items.
We offer the following three levels of OpenSite Auction 4.0. Each level is
designed to address the unique needs of specific types of customers. Our family
of software products is also designed to allow our customers to grow with easy
migration paths to increasing levels of functionality.
- OpenSite Auction Professional, our entry-level version, allows customers
to build and operate their own online auctions and to begin operation
quickly and economically with modest initial financial and time
investment.
- OpenSite Auction Merchant, our mid-level version, enables our customers
to allow outside sellers to post items on their auction sites. Customers
are also able to place an online store, banner advertisements and
classified advertisements on their auction sites. The Merchant level also
includes consignment auctions as an additional option for customers and
AuctionRate, a participant rating system of bidders and sellers.
- OpenSite Auction Corporate, our premium version, is designed for
enterprise level merchants who desire an auction solution that provides
more system flexibility and an open database architecture for integration
into third party applications. Version 4.0 of the Corporate level enables
customers to integrate their online auctions with Oracle databases. The
Corporate level offers a wider variety of auction types, including
reverse, sealed bid and modified English auctions.
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OpenSite Auction 4.0 was released in the first quarter of 1999.
Enhancements include the ability to integrate with Oracle databases, additional
auction types, private auctions, notification of new items for bid and enhanced
user and administrator interfaces. We continue to develop our products to meet
the growing needs of the marketplace. Development plans for the remainder of
1999 include releases relating to automated transaction processing, Oracle
support on UNIX platforms and multiple database support.
OpenSite Auction won a Best of Show Award for e-commerce applications at
Fall Internet World 1998. Judging guidelines for this award placed a priority on
a product's ability to work with existing standards and the degree to which it
contributes to the development of future Internet products and services.
OpenSite Auction also won a Best of Class Award for Web-based selling at Fall
Internet Commerce Expo 1998. Over 65 companies participated in this program. The
criteria for this award included technical/business innovation,
user-friendliness, user-efficiency, security attributes and platform
flexibility. OpenSite Auction also earned an Analyst's Choice Award from PC Week
magazine and received a five-star rating from online magazine Internet.com, in
addition to several other positive product reviews from a variety of industry
publications.
AuctionWatch Desktop. AuctionWatch Desktop is an application that allows
bidders to use one central interface to simultaneously track and bid on multiple
items from any auction site on the Internet. AuctionWatch Desktop is currently
available as a free download to registered users of BidStream.com. From the
central interface the user can bid on items, monitor those bids throughout the
auction, or just watch items of interest. Sellers can use the application to
track the items they are selling. Using the MagicBid feature, participants can
bid on items at preset times while away from their computers. The program
includes numerous tools for bidders to track information about items of interest
both during and after an auction such as closing price, payment status and
shipping status. An address book keeps track of names and addresses, email
addresses, identification numbers and passwords.
BidStream.com. Launched in April 1999, BidStream.com is a Web site owned
and operated by OpenSite that aggregates the items for bid on participating
OpenSite-powered auction sites. Although only recently launched, BidStream.com
has initially experienced positive customer acceptance and currently aggregates
over 90 auction sites containing over 90,000 items for bid. We expect the number
of participants to increase as we further promote and educate our customers
about the benefits of BidStream.com. BidStream.com is intended to be the central
point for locating items for bid at participating OpenSite-powered auction sites
and indexes all items for auction at these sites. BidStream.com provides the
general Internet user an effective and time-efficient way to find auction items
on which to bid and provides our customers with additional visitors to their Web
sites.
We intend to generate additional site traffic to BidStream.com through a
marketing campaign that will include Internet, print and radio advertising as
well as affiliate programs and relationships with other Web publishers. For
example, BidStream.com will be co-branded with other shopping sites such as CNET
to provide links between BidStream.com searches, OpenSite-powered auction sites
and focused content sites. We believe these affiliates will direct traffic to
BidStream.com, while also providing a category-specific auction page with
relevant content and context.
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BidStream.com, as illustrated by the homepage shown below, contains the
following features:
1. Central searching of OpenSite Auction customer sites;
2. Highlighting of key auction categories such as Art & Antiques,
Travel, Collectibles and Technology;
3. Registration as a member of BidStream.com, for site personalization
and special offers;
4. Site categorization and browsing by site type; and
5. Download of AuctionWatch Desktop.
(GRAPH)
[ARTWORK IN TEXT]
A screen shot of the homepage for BidStream.com. Beneath the word
"BidStream.com" is the following text "One click. Unlimited auctions." Centered
on the left side of the web page is the following text "[w]elcome to the
ultimate auction search engine!" At the bottom left section of the page is the
following text: "Now that you've found us, you never have to worry about missing
an item that's up for bid!"
The remainder of the web page contains text and various features that
are described through the use of five pointers, which cross-reference to the
numbered references below the web page.
OpenSite Concierge. Our Concierge service includes set-up, software
rental, hosting, site design and auction maintenance (adding items, maintaining
auctions and creating winners lists). The customer simply provides us with item
data and then bills winners and ships products. Once a Concierge site is up and
running, the customer can move the site to its own server at any time and
administer auctions itself.
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The following table summarizes our current products and services.
<TABLE>
<CAPTION>
PRODUCTS DESCRIPTION
<S> <C>
OpenSite Auction Professional - An entry level auction solution
- Rapid deployment through remote installation
- Quick installation through a full set of Web page
templates
- Simplified editing through template, style and variable
editors
- Automatic database encryption and multi-level
administration authentication security features
- Monitors auction data through statistic generation tools
and log file viewer
- Auction administration tools include automated winner
calculations and email notification and database archiving
- Provides hardware and operating system flexibility
- Monitors bidding/selling activity
- Notifies users of new items
- Facilitates proxy bidding
- Allows simultaneous bidding on multiple items at a time
OpenSite Auction Merchant - Includes all Professional level features
- Allows auction host to include third party auctions
- Includes a participant rating system of bidders and
sellers
- Allows auction host to include an online store, banner
advertisements and classified advertisements
- Allows consignment auctions
OpenSite Auction Corporate - Includes all Professional and Merchant level features
- Adds security and flexibility through dynamic pages option
and access privileges
- Enables auction host to integrate their online auctions
with Oracle databases
- Include reverse, sealed bid and modified English auctions
AuctionWatch Desktop - Enables auction participants to use one central interface
to monitor and manage all bidding activity
- Can be downloaded from BidStream.com
</TABLE>
<TABLE>
<CAPTION>
SERVICES DESCRIPTION
<S> <C>
BidStream.com - Web site owned and operated by OpenSite that aggregates
items for bid on participating OpenSite-powered auction
sites
- Central point for locating items for bid at participating
OpenSite-powered auction sites and indexes all items for
auction at these sites
- Provides general Internet users an effective and
time-efficient way to find auction items on which to bid and
provides our customers with additional visitors to their
Web sites
- Enables auction participants to monitor multiple auction
sites through AuctionWatch Desktop
OpenSite Concierge - Offers the auction functionality of OpenSite Auction
Corporate
- Includes set-up, software, rental, hosting, site design
and auction maintenance by OpenSite
- Permits auction implementation without developing internal
infrastructure
- Enables sellers to test the auction solution within their
business model
- Natural upgrade path to OpenSite Auction products
</TABLE>
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Customer Services and Support
Our Customer Services organization of 16 people provides a broad range of
services to assist customers in successfully implementing Web-based auctions
using our products. These include Professional Services, Technical Support and
Education Services.
Professional Services. Our Professional Services group provides complete
product installation and configuration, template customization and technical
assistance with integrating our products with third party applications.
Professional Services consulting is generally offered on a time and materials
basis. This group also includes the Concierge auction site creation and hosting
service. Concierge customers are generally billed a one-time setup fee and a
monthly maintenance fee based on the volume of business on the site.
Technical Support. Our Technical Support group provides basic product
support to our licensees. Subscribers use email to ask questions and request
assistance of the support staff. Issues are then resolved via email or telephone
as appropriate. Technical Support services are generally paid for in advance
through annual fixed-fee maintenance fees.
Education Services. Our Education Services group designs the curricula and
develops the materials for training customers to install, administer and
maintain auction sites based on our products. Educational materials are designed
for use in both self-paced online and instructor-led learning. Our Education
Services will be made available during the third quarter of 1999. Pricing for
Education Services offerings is still under consideration at this time.
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<PAGE> 44
CUSTOMERS
We have an installed base of over 300 auction sites in a wide variety of
categories. The following table lists some of our customers. Those customers
marked with an asterisk participate in BidStream.com.
TECHNOLOGY
AuctionComp*
CNET*
Graham Dorian, Inc.*
NextBid.com*
PCAuctioneer*
Upost
RETAIL/CATALOG
Daddy's Junky Music*
The Sharper Image*
BUSINESS SERVICES
Better Agricultural Goals Corporation*
Buildscape*
BusinessHere.Com LLC*
Dexpo Inc.*
Ecsale Inc.*
Holbrook Incorporated*
Norman Levy Associates Inc.
Private Business, Inc.
SciQuest.com*
Telecom Auction*
Tucker Electronics Company*
VerticalNet
COLLECTIBLES
The BOTB Company*
The Bradford Exchange
Carlisle Productions*
Click and Bid*
CollectEx*
CollectibleMarkets.com*
Colonial Management Ltd.*
Cyber City Auctions*
Express Auction Services, Inc.*
Funtime Auction Classifieds*
Heartland America
Krause Publications*
Market Perceptions Inc.*
Rarex Holdings LLC*
Royal Auctions*
Stein Auction*
Up4Auction.com*
Web Technologies*
Weston/Sachs*
Williams Gallery*
SPORTING GOODS/MEMORABILIA
Basketball Bonanza*
Cannondale Corporation*
Currans Select Auctions*
The Mountain Zone*
Sporting Auction*
SportsCards Center*
ART AND ANTIQUES
American Fine Arts Online Inc.*
Art Auction 1*
ArtNet Worldwide*
Asian Collectibles*
Biddingtons*
Dargate Auction Galleries*
Export Tyre Holding Co.*
The Globe Gallery
The Home Page Factory*
Retro Galleries*
COINS AND STAMPS
AwardMasters Philatelics*
Glen Johnson U.S. Currency*
Gregory Deeter Philatelic Services
BOOKS AND MOVIES
American Booksellers Foundation for Free
Expression
BooksbyBid*
Mole-Richardson
Pacific Book Auctions Galleries Inc.*
JEWELRY AND GEMSTONES
Galaxy Gold (Sugal Manufacturing)*
Gem Auction G. Inc.*
Gem Shopping Network*
CHARITIES
Afundraiser.com*
Beverly Hills Country Auction*
Cape Cod Auction
FOOD AND BEVERAGE
Brentwood Wine Co.*
Winebid.com*
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MISCELLANEOUS
American Society of Association Executives*
Arizona Internet Auctions*
Auctions Online, LLC*
Cyberhorse.com*
Fastalk*
OAC LLC*
PushKart Global Internet Marketing*
RH Communications*
The Sale Barn.com, Inc.
The Shopping Channel
ThinkAuction Inc.*
Vitalogy Soft*
TRAVEL AND VACATION
Cheapfares.com
Holiday Resale Homes*
Magical Holiday*
Wholesalebid.com*
AUTOMOBILES AND MOTORCYCLES
Austweb*
British Only Motorcycle and Parts*
David A. Enterprises
Mobilia Magazine*
Salvage Direct*
TECHNOLOGY
Our technology is designed to operate on a variety of hardware and software
platforms and to meet the business needs of our customers. We followed an
efficient cross-platform development strategy to allow for broad platform
support from a single code base. In addition, the software provides the
necessary interface capabilities to enable content aggregation by BidStream.com.
Broad Platform Support. OpenSite Auction 4.0 is supported on a variety of
the most common hardware and software platforms used for e-commerce. NT Server
4.0, BSD 3.1, BSD 4.0, Linux RedHat 5.x, Linux Debian and Linux Slackware 3.6
are all supported on Intel hardware. Solaris 2.6 is supported on SPARC hardware.
The software is designed to run in conjunction with the Internet Information
Server (IIS) on NT 4.0, and in conjunction with the Netscape Enterprise Server
on all other operating systems.
Cross-platform Architecture. OpenSite Auction 4.0 is built as a collection
of Common Gateway Interface routines to avoid the necessity of development for
Web server-dependent interfaces. The user interface components are constructed
with Hypertext Markup Language (HTML) and JavaScript based templates for ease of
customization.
Standard Programming Languages. OpenSite Auction 4.0 was developed using
the ANSI Standard C and C++ programming languages to provide maximum
cross-platform portability across operating systems.
Compatibility with Database Management Systems. We offer two options for
back-end database management. Our proprietary database provides an efficient
database solution with reporting and management enabled through the
administrative interface at no additional cost. OpenSite Auction 4.0 Corporate
features Oracle database support designed to allow a more robust database and
more scalable system solution for larger customers. This solution also allows
reporting and analysis via third party tools.
Adherence to Industry Standards. We have invested considerable resources
in creating a product architecture that conforms to the standards that are
broadly accepted for Internet commerce applications. The products use the Common
Gateway Interface (CGI) and Hypertext Transfer Protocol (HTTP) for Internet
access, the Secure Socket Layer (SSL) for secure network transmissions, the
Information Server Application Programming Interface (ISAPI) for access to
Microsoft's Internet servers and HTML and JavaScript templates for representing
user interface content.
Integration with BidStream.com. OpenSite Auction 4.0 incorporates design
features which allow for the extraction and transmission of auction item data to
provide BidStream.com with timely updates on the status of all of the items on
participating auction sites. The aggregated content base represented by
BidStream.com has the potential of attracting more bidders and sellers to our
customers' auctions. This increased bidder and seller base in turn makes the
deployment of an auction with our products even more attractive. As more
OpenSite licenses are sold, the content aggregated by BidStream.com increases,
repeating the cycle on a larger scale.
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Object-Oriented Paradigm. We are developing the Enterprise Auction Toolkit
on which the AuctionNow products will be constructed, as an object-oriented
interface. The implementation is being done in ANSI standard C++.
N-tier Architecture. With the Enterprise Auction Toolkit and the
AuctionNow products, we will provide auction system components that are tailored
for use in enterprise N-tier systems, which minimally provide for a user
interface tier (typically a Web server), a business rules tier (the auction
engine) and a database tier. The auction engine is built with a distributed
object interface, employing CORBA on Solaris or DCOM on NT. The interface to the
user interface tier is constructed as an in-process server, using the Web
Application Interface (WAI) to the Netscape Enterprise Server (NES) and the
ISAPI to Microsoft's IIS. The interface to the database tier is via OCI for the
Oracle database, or via the ODBC abstraction for other select database products.
Automatic email notifications are accomplished via the Simple Mail Transfer
Protocol (SMTP).
PRODUCT DEVELOPMENT
Our product development organization of 27 people is responsible for
developing the architecture, designing, implementing and testing the software
and tools, and developing the end user documentation for our products. Our
product development organization efforts reflect the combined experience of
interacting with and solving problems for over 300 customers.
Most of our development efforts are directed toward producing a more
scalable auction solution for large enterprises, whether they deploy the auction
on their own behalf or do so for their customers as an auction service bureau.
Our product development organization consists of three product groups, a
documentation group and a quality assurance group. Each of the development
groups follows a process of product requirement definition, resource planning
and scheduling, design, implementation, test, final acceptance testing, release
and maintenance. Appropriate documents are generated and reviewed at each phase
of the product development process, including product specification, design
specification, development plan, schedule, test plan and quality assurance plan
documents. Industry accepted third party tools and systems are used in all
phases of development for document creation and control, source and object code
creation, source code maintenance and control, project tracking, test automation
and defect resolution.
Our product development expenses were approximately $0 in 1996, $105,000 in
1997, $695,000 in 1998 and $1,310,000 in the six months ended June 30, 1999.
Future Products
We expect to introduce the following products by the end of 1999. These
products are currently being tested at selected customer sites. Further
development of these products is expected to be required prior to their release.
OpenSite Auction 4.1 will contain enhancements such as Oracle database
support on Solaris/Netscape, integrated via WAI for scalability. The target
market will be merchants that desire a premium auction solution with the
flexibility to connect to many different business applications.
OpenSite AuctionNow ISP will (1) enable Internet Service Providers to offer
auction functionality to their customers through a virtual hosting environment,
(2) enable management of multiple auctions from a single database and (3) allow
easy installation and configuration with simplified Web browser menus.
OpenSite AuctionNow TX is a version of OpenSite AuctionNow ISP that is
designed to address the specific needs of Internet Service Providers that have
adopted Open Market as their electronic commerce standard. This solution will be
sold through the Open Market sales force.
OpenSite Enterprise Auction Toolkit is a software developer's kit that will
provide an Application Programming Interface (API) on which customers can build
highly custom extensible auction applications. This will offer (1) system
flexibility with a variety of database options and auction types, including
private auctions, and (2) integration capabilities enabled through an open
object-oriented architecture. The target
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market will be large enterprises which want to integrate auction functionality
within their current infrastructure.
SALES & MARKETING
Sales
Our sales philosophy is to combine direct selling and indirect channel
sales in order to maximize our sales efforts. The sales organization currently
has a staff of 13 people, which we expect to expand significantly.
We initially marketed our products exclusively through a direct sales
organization. This direct sales group achieved its results by pursuing inquiries
generated from online banner advertising, trade show attendance and contact
requests from our Web site. The sales organization is located primarily at our
corporate headquarters in Durham, North Carolina. We also maintain a sales
office in the United Kingdom.
At the end of 1998, we modified our sales strategy to move toward a
combination of direct sales and indirect sales through resellers. At that time,
we began recruiting a reseller channel to optimize market coverage. Our
resellers, most of which are value-added resellers providing systems integration
and Web site design services, allow us to obtain incremental sales opportunities
and provide a natural service extension to our customers. Worldwide channel
recruitment efforts have yielded 63 resellers to date. The median period that
these resellers have been with us is just over one month, and we have added over
49 new customers through these resellers. We currently have three sales
professionals dedicated to establishing and developing reseller relationships.
We plan to continue the expansion of this group.
We are currently creating a sales group that will concentrate on specific
national accounts within targeted industry segments, the first of which will be
technology, travel/hospitality, media and retail. These sales representatives
are expected to be located in the San Francisco, New York, Chicago and Boston
areas.
The sales support staff includes a sales engineer, a pre-sales group, an
account management group and a sales coordinator. The sales engineer helps in
the more technical sales opportunities. The pre-sales group is responsible for
screening all inquiries and introducing those prospects to the proper sales
person as expediently as possible. Account managers are assigned to customers to
provide continuity and enhance customer satisfaction. Our sales coordinator
helps coordinate the knowledge and information flow throughout the organization.
Marketing
Our marketing effort is focused on product positioning, brand awareness and
lead generation. Our marketing group consists of 12 people and is divided into
the following areas:
Product Management. Product managers are responsible for developing and
positioning market driven products and services. Their duties include providing
direction for product development as well as new product concept planning.
Product managers are also responsible for segmenting the marketplace and
refining the target customer base for our products.
Market Research. The Director of Market Research is responsible for
monitoring industry analyst reports, fielding primary research studies and
managing our beta testing program and customer panels. We emphasize the
importance of listening to customers and resellers, monitoring our competition
and using this information in our product management process.
Marketing Programs. The Marketing Programs group is responsible for
building brand awareness, generating leads, channel marketing and maintaining
consistency in the look and feel of the OpenSite brand image. This group's
responsibilities include management of participation in targeted trade shows and
conferences, print advertising and online marketing, targeted direct mail
efforts and daily updating of the corporate Web site. This group also develops
sales tools such as our corporate brochure and product sheets, white papers and
case studies as well as our industry guides -- The Web Auction Guide and The Web
Auction Security Guide. Every program has measurement tools in place to measure
the return on investment
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and determine which activities are the most effective and efficient, allowing us
to constantly work toward optimizing our marketing program mix.
Public Relations. Our Public Relations group is supplemented by an outside
public relations firm. We communicate with industry analysts and targeted trade,
channel, vertical and business press on a regular basis through a combination of
phone briefings, in-person tours and trade show appointments.
Business Relationships
We believe that a key to the successful execution of our marketing strategy
is to establish strategic application, aggregation and service relationships.
These relationships can help us achieve brand awareness and revenue goal
attainment, as well as assist us in developing customer solutions and optimizing
product compatibility.
Relationships with Application Providers. To ensure compatibility of our
products with the infrastructure of customers' IT assets, we plan to proactively
establish relationships with companies that have complementary technology. These
include: (1) e-commerce applications, (2) infrastructure applications and (3)
platform vendors.
Relationships with Content Aggregators. To maximize the value of
BidStream.com, we will attempt to match open auction categories with portal
sites. The initial list of categories that we are actively pursuing includes
computer/technology, travel/hospitality, collectibles and sporting items/sports
memorabilia. Currently, we have secured a relationship with CNET for the
computer and technology category and are in discussions concerning other
potential relationships.
Relationships with Providers of Ancillary Services. To enhance bidders'
auction experience, increase consumer confidence and simplify on-line
transactions, we intend to establish relationships with companies that provide
ancillary services that would allow us to augment our existing revenue stream,
foster goodwill with our customers and their customers and strengthen our market
position.
INTERNATIONAL OPERATIONS
We believe that markets outside the United States will provide an
increasing portion of our revenues in the future. In April 1999 we opened our
first international office in London. We entered into an agreement with Protege
Software Ltd., a United Kingdom-based company that provides outsourced support
for Internet companies wishing to establish a European business presence.
Our agreement requires Protege to provide a General Manager to our European
operation and to equip and staff an office of sales and marketing professionals
as business needs demand. Other than the General Manager, all European hires
will be employees of OpenSite's European subsidiary and will be supported by
back-office employees of Protege.
COMPETITION
We face competition in a number of areas, including application,
aggregation, auction hosting and other services.
Application. Our direct competitors include other software providers,
application service providers and system integrators who create unique solutions
suited to a specific customer as well as solutions developed in-house at
individual organizations.
The number of dynamic pricing software providers is increasing every
quarter. These providers can be segmented into entry and enterprise level. The
entry-level providers tend to offer solutions for companies who desire easy
entry into the auction market without a large financial investment. Most
software is relatively inexpensive (less than $10,000), and price and ease of
use are often the deciding factor in this target market. Competitors in this
arena include Auction Broker, Beyond Solutions and Emaze.
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Another category of application competitors focuses on enterprise-level
solutions. The target market for these competitors is larger businesses that
desire system flexibility and integration into back-end ERP and supply-chain
systems. Functionality and a desire for an open architecture are key decision
criteria for this target market. Competitors in the enterprise-level market
include IBM's Net.commerce product, Moai Technologies, Trading Dynamics and
Webvision.
Aggregation. A number of aggregation sites exist today, including the
Bidder Network, Bidder's Edge and BidFind. In addition to these aggregation
sites, there are other person-to-person online auction community sites that
contain a large number of auction items, including Amazon.com, Auction Universe,
eBay, OnSale and uBid. These large content sites have significant brand
recognition and large amounts of site traffic.
Auction Hosting. We believe that the outsourced Internet technology model
will become increasingly popular in the auction space. Currently, only two
competitors offer outsourced auction-hosting services similar to our Concierge
product. They are the Bidder Network and FairMarket.
Services. We also believe that some business consultants currently provide
auction-related services and solutions in the course of their work. As the
acceptance of online auctions grows, we believe that more consultants will
develop expertise in the area of online auctions. These competitors include
Andersen Consulting and iXL.
LICENSING, INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
Protection of our technology and other proprietary assets and respect for
the intellectual property rights of others are among our highest priorities. We
rely heavily on various types of intellectual property for our success and
competitive positioning. We use trademarks, copyrights, trade secrets and the
laws pertaining to them as well as contractual provisions to protect our
intellectual property. Currently, our most important proprietary rights are
those embodied in our OpenSite Auction product and BidStream.com Web site.
However, no combination of intellectual property protections can provide
complete assurance of the value of intellectual property or a guarantee of its
continued availability. We believe that our knowledge of the marketplace, new
product development, enhancements to existing products and the technical and
creative abilities of our employees are equally important to the establishment
and maintenance of our strong market position in a rapidly changing and evolving
competitive and technological landscape.
Creation and/or implementation of our technology, business model, marketing
research and plans, lead generation activities, customer lists, alliance plans
and similar proprietary assets are all protected at their inception and
throughout their economic lifetimes by confidentiality and proprietary rights
agreements which each of our employees is required to execute contemporaneously
with commencement of employment. We also rely on confidentiality agreements
entered into with contractors and vendors.
All proprietary aspects of our licensed software are protected principally
by the contractual provisions found in our standard confidentiality agreement.
Each prospective customer is required to execute a confidentiality agreement
before access to our products is granted, whether via a demonstration or
directly. We also require execution of a standard comprehensive license
agreement before unsupervised access to our products is granted. These licenses
typically grant nonexclusive, nontransferable and perpetual access to the
software at a single designated location on a single central processing unit by
trained users. Misuse of the software or violation of a contractual provision is
grounds for revocation of the license.
We also protect the source code for our proprietary software as a trade
secret and a copyrighted work. We maintain a source code escrow arrangement with
an independent third party. Some of our customers have limited access to the
source code through this escrow under certain conditions, principally where we
fail to support or maintain the software pursuant to our contractual obligations
or where we cease doing business. This limited accessibility of our source code
may increase the possibility of its misappropriation by third parties.
There can be no assurance that we will be successful in protecting our
proprietary technologies or that our competitors will not develop similar
technology independently. Any failure to protect our intellectual property
assets sufficiently could have a material adverse effect on our business.
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<PAGE> 50
We own the registered trademarks "OpenSite," "AuctionWatch" and two other
marks and have applications pending with the US Patent and Trademark Office for
registration of seven additional trademarks and service marks. We also claim
rights in other unregistered marks. We also rely on these marks to protect our
principal domain names. We police unauthorized use of our trademarks and service
marks and take such action as may be necessary and advisable to protect them.
Litigation may be required in the future to enforce our trademark rights.
We do not presently integrate proprietary third party software into our
products. Certain products currently under development are, however, likely to
have embedded software. We expect that such software would be acquired pursuant
to license agreements and would be supported by annual maintenance and support
agreements with the software vendor. If we cannot obtain licenses to these
technologies or obtain continued support from the providers, development and
delivery of our planned software releases could be delayed until functionally
equivalent software could be obtained or developed and integrated into our
products. Such a possibility could have a material adverse effect on our
business.
We are actively seeking to expand our market reach to include a number of
countries outside North America. The laws of many countries do not honor the
protections of proprietary rights that are available in the United States.
Litigation to protect intellectual property rights outside the United States
could be very expensive and have uncertain results. Such litigation, whether or
not successful is likely to be time-consuming and costly to prosecute, require
the use of substantial management attention and resources and could have a
material adverse effect on our business.
Over the past few years, several software patents have been issued to
companies providing various products and services related to auctions and
dynamic pricing applications. In addition, many patent applications have
reportedly been filed. Some of those patents issued are currently the subject of
litigation in the federal courts. To date, we are not aware of any judicial
pronouncements that would establish precedent in this area. We have not been
notified that our products infringe on the proprietary rights of any third
party. With the growth in the number of Web-based software products and services
available from new and existing companies striving for a competitive advantage,
claims of infringement of the intellectual property rights within this and
related industry segments are expected to rise. Such claims, whether or not they
have merit, are likely to be time-consuming and costly to defend, require the
use of substantial management attention and resources and could result in the
need to enter into royalty or licensing arrangements, which may not be available
on acceptable terms. Our inability to successfully defend a claim of product
infringement coupled with an inability to license the subject technology or to
develop non-infringing technology could have a material adverse effect on our
business.
LAW AND GOVERNMENTAL REGULATION
We are subject to various laws and regulations affecting our business.
While there are relatively few laws that actually exist to regulate
Internet-related companies and electronic commerce in general, the sizeable
growth of Internet usage and electronic commerce transactions has prompted many
governmental bodies to commence consideration of legislation in such areas as
pricing, content, data protection, privacy protection, intellectual property
protection, taxation and consumer protection. Enactment of laws or regulations
in these areas could place burdens on us, either directly or as a burden to
electronic commerce in general.
Laws applicable to electronic commerce and Internet communications are
becoming more common. Congress has recently passed legislation concerning
on-line copyright protection and Congress continues to consider laws relating to
Internet taxation. The European Union has recently enacted regulations relating
to on-line privacy protections. These laws and regulations are very recent and
their impact on us and our industry is yet to be determined. This could include
litigation which, whether or not successful, would be likely to be
time-consuming and costly and require the use of substantial management
attention and resources. The application of these laws and regulations and
others that may be enacted affecting the Internet and electronic commerce, could
have a material adverse effect on our business.
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<PAGE> 51
EMPLOYEES
As of June 30, 1999, we had 78 full-time employees, of which 41 were in
product development and customer services, 25 in sales and marketing and 12 in
administration and other departments. None of our employees are covered by a
collective bargaining agreement. We consider our relations with our employees to
be good.
FACILITIES
Our principal administrative, sales, marketing, support and research and
development facility is located in approximately 25,000 square feet in Durham,
North Carolina. We also maintain a product development and quality assurance
office located in Buffalo, New York, which will be consolidated with our Durham,
North Carolina facilities by December 31, 1999, and a sales office in the United
Kingdom. We believe our facilities are adequate for our current requirements and
will meet future growth needs.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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<PAGE> 52
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers and their ages as of the date of this
prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Kip A. Frey.................................. 40 President, Chief Executive Officer and Director
Douglas B. Kubel............................. 41 Senior Vice President, Technology
Timothy K. Oakley............................ 37 Senior Vice President and Chief Financial Officer
Roger R. Edgar............................... 35 Vice President, Corporate Development and
Strategy
James R. Ford................................ 45 Vice President, Finance and Operations
Thomas F. Hanlon, III........................ 35 Vice President, Sales and Business Development
Grace Ueng Trombetta......................... 33 Vice President, Marketing
Richard E. Widin............................. 43 Vice President, Business and Legal Affairs
Justin Hall-Tipping (1)...................... 42 Director
Roger Hurwitz (2)............................ 34 Director
Mark Jauquet................................. 32 Director
Ross B. Kenzie (1)........................... 67 Director
Mitchell M. Mumma (2)........................ 39 Director
Alan J. Taetle (1)........................... 35 Director
</TABLE>
- ------------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Kip A. Frey has served as our President and a director of OpenSite since
August 1998 and Chief Executive Officer since March 1999. From January 1998 to
June 1998, Mr. Frey served as President of Accipiter, Inc., an Internet software
company, which was acquired by CMGI in April 1998. From June 1994 to December
1997, Mr. Frey was Executive Vice President of Ventana Communications Group, a
division of International Thomson Publishing, a multimedia and software
publisher. Prior to that, Mr. Frey held various executive and legal positions at
Turner Broadcasting System and practiced law with Parker, Poe, Adams &
Bernstein. Mr. Frey is a Visiting Lecturer at Duke University's Sanford
Institute for Public Policy Studies and received a J.D. from Duke University and
an A.B. from the University of Southern California. Mr. Frey's employment
agreement provides that Mr. Frey will serve as a member of our board of
directors.
Douglas B. Kubel has served as our Senior Vice President, Technology since
April 1999. From October 1994 to March 1999, Mr. Kubel served as Vice President,
Engineering and Technology at Interactive Magic, an entertainment software
company. From September 1987 to September 1994, Mr. Kubel served as a Senior
Manager for Sun Microsystems, a computer workstation and software vendor. Mr.
Kubel has completed the Program for Technology Managers at the University of
North Carolina at Chapel Hill's Kenan-Flagler School of Business and received a
B.S. in Electrical Engineering from North Carolina State University.
Timothy K. Oakley has served as our Senior Vice President and Chief
Financial Officer since July 1999. From April 1998 to July 1999, Mr. Oakley
served as Vice President, Chief Financial Officer, Secretary and Treasurer for
Strategic Technologies, Inc., a systems integration company. From April 1996 to
March 1998, Mr. Oakley was Vice President, Chief Financial Officer, Secretary
and Treasurer for Broadband Technologies, Inc., a publicly-held provider of
telecommunications software and equipment. From October 1990 to March 1996, Mr.
Oakley held various executive positions at MCI Communications, a
telecommunications service provider, with his last position being Controller of
the Consumer and Small Business Operating Unit and Director. Mr. Oakley is a CPA
and received an M.B.A. from Emory University and a B.S.B.A. from East Carolina
University.
Roger R. Edgar has served as our Vice President, Corporate Development and
Strategy since March 1999 and as our Director of Business Development from
September 1998 to March 1999. From January 1998 to September 1998, Mr. Edgar
served as Director of Business Development at Accipiter, Inc. From December
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<PAGE> 53
1995 to December 1997, Mr. Edgar was Product Manager and Business Development
Manager at HAHT Software, Inc., an Internet development tools company. From July
1994 to December 1995, Mr. Edgar was a director at Jumpstart Development
Corporation, a consulting firm. Mr. Edgar received an M.B.A. from Duke
University and a B.S. in Finance from Babson College.
James R. Ford has served as our Vice President, Finance and Operations
since October 1998. From January 1998 to October 1998, Mr. Ford served as the
Controller for Research and Development of the Mobile Phones and Terminals
division at Ericsson, a telecommunications products company. From December 1993
to January 1998, Mr. Ford served as Controller for Ventana Communications, an
Internet software developer and publisher. Mr. Ford received an M.B.A. from
Florida State University and a B.S. in Accounting and Finance from Gardner-Webb
College.
Thomas F. Hanlon, III has served as our Vice President, Sales and Business
Development since March 1999 and as our Director of Sales from May 1998 to March
1999. From January 1995 to April 1998, Mr. Hanlon served as Regional District
Manager at Ultimate Software Group, a human resource and payroll software
company. From November 1989 to December 1994, Mr. Hanlon served as Regional
Sales Manager for ADP, Inc., a payroll and administrative services company. Mr.
Hanlon received a B.S. in Business Management with a concentration in Finance at
the State University of New York at Buffalo.
Grace Ueng Trombetta has served as our Vice President, Marketing since
March 1999. From October 1998 to March 1999, Ms. Trombetta served as our
Director of Marketing. From October 1996 to September 1998, Ms. Trombetta served
as Director of Business Development for Interactive Magic. From September 1994
to September 1996, Ms. Trombetta served as Product Line Manager for The Learning
Company, a children's educational software company. Ms. Trombetta received an
M.B.A. from Harvard Business School and a B.S. in Management Science from
Massachusetts Institute of Technology.
Richard E. Widin has served as our Vice President, Business and Legal
Affairs since March 1999. From March 1997 to March 1999, Mr. Widin served as
Vice President and Director at A.M. Pappas & Associates, a venture capital and
transaction services firm. From May 1995 to October 1996, Mr. Widin served as
Senior Vice President, Planning and Administration for Imonics, a software and
systems integration company. From 1991 to May 1995, Mr. Widin served as Vice
President and General Counsel for Encompass, G.P., a logistics software company.
Prior to that, Mr. Widin held various positions with CSX, General Electric and
White & Case. Mr. Widin received a Master of Laws in Taxation from Georgetown
University and both a J.D. and a B.S. in Accounting from Villanova University.
Justin Hall-Tipping has served as a director of OpenSite since March 1999.
Mr. Hall-Tipping is Managing Director of SG Capital Partners LLC. From 1995 to
1997, Mr. Hall-Tipping served as Director of the Data Intelligence Group for
Reuters plc. From 1992 to 1995, Mr. Hall-Tipping founded and served as CEO of
Heartbeat Corp. Mr. Hall-Tipping received an M.B.A. from Harvard Business School
and a B.Sc. in International Finance and Banking from City University, London.
Roger Hurwitz has served as a director of OpenSite since March 1999. Mr.
Hurwitz is currently a Vice President of GE Capital Equity Capital Group, Inc.,
the private equity division of General Electric Capital Corporation, and has
been with GE Capital since March 1996. From July 1995 to March 1996, Mr. Hurwitz
worked in Corporate Finance at Chase Manhattan Bank. From 1993 to 1995, Mr.
Hurwitz attended the Wharton School at the University of Pennsylvania where he
received an M.B.A. Mr. Hurwitz received a B.S. in Accounting from Syracuse
University.
Mark Jauquet, co-founder of OpenSite, has served as a director of OpenSite
from our inception until March 1999 and from May 1999 to the present. Mr.
Jauquet has served as our Chief Scientist since May 1999 and as our Vice
President, Technology from May 1997 to April 1999. From October 1996 to May
1997, Mr. Jauquet served as an analyst for Health Care Plan, an HMO. From August
1994 to June 1996, Mr. Jauquet served as an analyst for Fonorola, a Canadian
telecommunications company. Mr. Jauquet received an M.B.A. from the University
of Buffalo and a B.S. from Lafayette College.
Ross B. Kenzie has served as a director of OpenSite since January 1998.
Prior to his retirement in 1989, Mr. Kenzie served as the Chairman of the Board
and Chief Executive Officer of Goldome, a publicly-held
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<PAGE> 54
banking corporation. Prior to joining Goldome in 1957, Mr. Kenzie served as
Executive Vice President and Director of Merrill Lynch & Co. and Merrill, Lynch,
Pierce, Fenner & Smith. Mr. Kenzie currently serves as a director of Rand
Capital Corporation, a publicly-held venture capital company and as a Manager of
Auction Ventures, LLC, a venture capital investor. Mr. Kenzie received a degree
from the United States Military Academy at West Point, New York.
Mitchell M. Mumma has served as a director of OpenSite since August 1998.
Mr. Mumma has served as a General Partner of Intersouth Partners, a venture
capital firm, since August 1989 and as a director for numerous other companies.
Prior to that, Mr. Mumma held various management positions with technology
companies. Mr. Mumma received a B.S. in Management Science from Duke University.
Alan J. Taetle has served as a director of OpenSite since August 1998. Mr.
Taetle has been a General Partner with Noro-Moseley Partners, a venture capital
firm, since May 1998. From March 1995 to April 1998, Mr. Taetle was Executive
Vice President of Marketing and Business Development for MindSpring Enterprises,
an Internet Service Provider. From November 1992 to March 1995, Mr. Taetle
served as Director of Operations and Product Management at CogniTech
Corporation, a developer of retail management software. Mr. Taetle received an
M.B.A. from Harvard Business School and a B.A. in Economics from the University
of Michigan.
Our Board of Directors consists of a single class of directors. Each of our
directors serves for a term of one year. There are no family relationships
between any of the directors or executive officers of OpenSite.
COMMITTEES OF THE BOARD OF DIRECTORS
The members of the Audit Committee are Messrs. Hurwitz and Mumma. The Audit
Committee reviews the scope and timing of our audit services, the auditor's
report on our financial statements following completion of its audit and its
policies and procedures with respect to internal accounting and financial
control and any other services our independent auditor is asked to perform. In
addition, the Audit Committee makes annual recommendations to the board of
directors for the appointment of independent auditors for the following year.
The members of the Compensation Committee are Messrs. Kenzie (Chairman),
Hall-Tipping, and Taetle. The Compensation Committee reviews and evaluates the
compensation and benefits of all our officers, reviews general policy matters
relating to compensation and benefits of our employees and makes recommendations
concerning these matters to the board of directors. The Compensation Committee
also administers our stock option plans.
COMPENSATION OF DIRECTORS
Our directors currently do not receive any compensation for services
performed in their capacity as directors. We reimburse each director for
reasonable out-of-pocket expenses incurred in attending meetings of the board of
directors and any of its committees.
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EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid by OpenSite
during 1998 for our Chief Executive Officer. No executive officer was paid total
annual salary and bonuses determined in excess of $100,000 during 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
--------------------------- ------- ------- ------------
<S> <C> <C> <C>
Michael Brader-Araje (1).................................... $69,308 $10,000 $2,379(2)
</TABLE>
- ------------------------------
(1) Mr. Brader-Araje, OpenSite's founder, served as our Chief Executive Officer
until March 1999.
(2) Consists of matching contributions to a retirement savings plan.
Stock Option Plan. Our stock option plan became effective as of July 10,
1998. The aggregate number of shares reserved for issuance under the Stock
Option Plan is 1,666,666 shares. The purpose of the stock option plan is to
provide incentives for key employees, officers, consultants and directors to
promote our success and to enhance our ability to attract and retain the
services of such persons. Options granted under the stock option plan may be
either options intended to qualify as "incentive stock options" under Section
422 of the Code or nonqualified stock options.
As of July 9, 1999, 352,380 shares of common stock had been issued under
the stock option plan and options to purchase 778,333 shares of common stock
were outstanding under the stock option plan at a weighted average exercise
price of $5.34 per share.
401(k) Profit Sharing Plan. OpenSite maintains a 401(k) Profit Sharing
Plan which is intended to be a tax-qualified defined contribution plan under
Section 401(k) of the Code. In general, all employees of OpenSite are eligible
to participate. The 401(k) Plan includes a salary deferral arrangement pursuant
to which participants may contribute, subject to certain Code limitations, a
maximum of 15% of their first $66,666 in salary on a pre-tax basis. Subject to
certain Code limitations, OpenSite may make a matching contribution at a rate of
100% of the participant's contributions, up to 3% of the participant's salary. A
separate account is maintained for each participant in the 401(k) Plan. The
portion of a participant's account attributable to his or her own contributions
is 100% vested. The portion of the account attributable to OpenSite
contributions is 100% vested. Distributions from the 401(k) Plan may be made in
the form of a lump-sum cash payment or in installment payments.
EMPLOYMENT AGREEMENTS
In August 1998, OpenSite and Kip A. Frey entered into an Executive
Employment Agreement. Subsequently, effective as of July 8, 1999, OpenSite and
Mr. Frey entered into an Amended and Restated Executive Employment Agreement
pursuant to which Mr. Frey serves as the President, Chief Executive Officer, and
as a member of the board of directors of OpenSite. The agreement provides for an
annual salary of $150,000 through and including May 31, 1999, with an increase
in annual salary to $200,000 beginning as of June 1, 1999. The agreement also
provides for a bonus plan with a targeted bonus of up to 50% of the annual
salary based upon performance standards determined by the board of directors.
The initial term of this agreement expires on December 31, 2002 and, unless
terminated, the agreement will renew on an annual basis thereafter. If we
terminate Mr. Frey's employment without cause or as a result of a change of
control of OpenSite, Mr. Frey will be entitled to receive his then current base
salary, benefits and pro rata bonus for twelve months after termination. The
agreement contains provisions restricting Mr. Frey from competing with our
business or soliciting our customers during his employment and for a period of
one year thereafter.
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RELATED PARTY TRANSACTIONS
In August 1998, OpenSite loaned Mr. Frey $65,000, which he used to purchase
shares of our common stock. These shares are subject to an Amended and Restated
Restricted Stock Agreement dated as of July 8, 1999, pursuant to which the
agreement states that the August 1998 note was cancelled and re-issued and
re-executed as of October 1998. This loan bears interest at a rate of 6% per
annum and is repayable on December 31, 2002. As of July 9, 1999, the total
principal and accrued interest under this loan was approximately $69,000.
In March 1999, OpenSite loaned Mr. Frey $300,000. This loan bears interest
at the rate of 6% per annum and is repayable upon the earlier of the termination
of Mr. Frey's employment with OpenSite or December 31, 2002. As of July 9, 1999,
the total principal and accrued interest under this loan was approximately
$303,000. Mr. Frey pledged his shares of common stock of OpenSite to secure this
loan.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of the date of this prospectus and as adjusted
to reflect the sale by OpenSite of common stock in this offering by: (1) each
director of OpenSite; (2) all executive officers and directors of OpenSite as a
group; and (3) all those known by OpenSite to be beneficial owners of more than
five percent of the outstanding shares of common stock. Unless otherwise set
forth herein, the street address of the named beneficial owner is 2800 Meridian
Parkway, Durham, North Carolina 27713.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY
PRIOR TO OFFERING(1) OWNED AFTER OFFERING
------------------------- ---------------------
NAME SHARES PERCENT SHARES PERCENT
---- ----------- --------- ---------- --------
<S> <C> <C> <C> <C>
Noro-Moseley Partners IV, L.P........................ 1,904,761(2) 14.4% 1,904,761 11.6%
9 North Parkway Square
4200 Northside Parkway, NW
Atlanta, Georgia 30327
Auction Ventures, LLC................................ 1,544,610 11.7 1,544,610 9.4
369 Franklin Street
Buffalo, New York 14202
SGC Partners I LLC................................... 1,488,095(3) 11.3 1,488,095 9.1
1221 Avenue of the Americas
New York, New York 10020
Michael Brader-Araje................................. 1,352,053 10.3 1,352,053 8.3
Mark Jauquet......................................... 1,352,053 10.3 1,352,053 8.3
GE Capital Equity Investments, Inc................... 1,190,476(4) 9.0 1,190,476 7.3
120 Long Ridge Road
Stamford, Connecticut 06927
Intersouth Partners IV, L.L.C........................ 1,160,714 8.8 1,160,714 7.1
One Copley Parkway, Suite 102
Morrisville, North Carolina 27713
Southeast Interactive Technology Fund II, LLC........ 892,857 6.8 892,857 5.5
2525 Meridian Parkway, Suite 300
Durham, North Carolina 27713
Wakefield Group, II, LLC............................. 744,047 5.6 744,047 4.5
1110 East Morehead Street
Charlotte, North Carolina 28204
CNET, Inc............................................ 714,285 5.4 714,285 4.4
150 Chestnut Street
San Francisco, California 94111
Kip A. Frey.......................................... 309,523 2.3 309,523 1.9
Justin Hall-Tipping.................................. -- -- -- --
Roger Hurwitz........................................ -- -- -- --
Ross B. Kenzie....................................... 1,544,610(5) 11.7 1,544,610 9.4
</TABLE>
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<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED OWNED AFTER
PRIOR TO OFFERING(1) OFFERING
------------------------- --------------------
NAME SHARES PERCENT SHARES PERCENT
---- ----------- --------- -------- ---------
<S> <C> <C> <C> <C>
Mitchell M. Mumma....................................... 1,160,714(6) 8.8 1,160,714 7.1
Alan J. Taetle.......................................... 1,904,761(7) 14.4 1,904,761 11.6
All directors and executive officers as a group (13
persons)(2)(3)(4)(5)(6)(7)............................ 6,314,518 47.9 6,314,518 38.6
</TABLE>
- ------------------------------
(1) For purposes of calculating the percentage beneficially owned, the number of
shares of common stock deemed outstanding prior to this offering consists of
13,186,711 shares outstanding as of June 30, 1999. The number of shares of
common stock deemed outstanding after this offering includes an additional
3,181,800 shares that are being offered for sale by OpenSite in this
offering. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission that deem shares to be beneficially
owned by any person or group who has or shares voting or investment power
with respect to such shares.
(2) Includes shares owned by Noro-Moseley Partners IV-B, L.P., a related entity.
(3) SGC Partners I LLC is a wholly owned subsidiary of SG Merchant Banking Fund
L.P. The general partner of SG Merchant Banking Fund L.P. is SG Capital
Partners L.L.C. SG Cowen Securities Corporation, a wholly owned subsidiary
of Societe Generale, is the managing member of SG Capital Partners L.L.C. As
a result of these relationships, SG Merchant Banking Fund L.P., SG Capital
Partners L.L.C., SG Cowen Securities Corporation and Societe Generale may
each be deemed to share beneficial ownership of these shares. Each of these
entities disclaims such beneficial ownership.
(4) GE Capital Equity Investments, Inc. ("GE Equity"), a wholly-owned subsidiary
of General Electric Capital Corporation ("GECC"), shares beneficial
ownership with GECC with respect to all of such shares held of record by GE
Equity.
(5) Consists of shares owned by Auction Ventures, LLC, of which Mr. Kenzie
serves as Manager. Mr. Kenzie disclaims beneficial ownership of such shares.
(6) Consists of shares owned by Intersouth Partners IV, L.L.C., of which Mr.
Mumma is a General Partner. Mr. Mumma disclaims beneficial ownership of such
shares.
(7) Consists of shares owned by Noro-Moseley Partners IV, L.P., of which Mr.
Taetle is a General Partner. Mr. Taetle disclaims beneficial ownership of
such shares.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of (1) 75,000,000 shares of common
stock, $.01 par value per share, and (2) 10,000,000 shares of preferred stock,
$.01 par value per share. As of July 9, 1999, we had issued and outstanding
13,186,711 shares of common stock. The following description of our capital
stock is a summary and is qualified in its entirety by the provisions of our
certificate of incorporation and bylaws, copies of which have been filed as
exhibits to the registration statement of which this prospectus is a part.
COMMON STOCK
Holders of shares of our common stock are entitled to one vote per share
for the election of directors and all matters to be submitted to a vote of our
stockholders. Holders of shares of our common stock may not cumulate votes in
the election of directors. Subject to the rights of any holders of preferred
stock which may be issued in the future, the holders of shares of our common
stock are entitled to share ratably in such dividends as may be declared and
paid out of legally available funds. In the event of dissolution, liquidation or
winding up of OpenSite, holders of our shares of common stock are entitled to
share ratably in all assets remaining after payment of all liabilities and
liquidation preferences, if any. Holders of shares of our common stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of our common stock are, and the shares of common stock to be issued in
this offering will be, duly authorized, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
Our board of directors is authorized, subject to limitations prescribed by
law, without further stockholder approval, to issue from time to time up to an
aggregate of 10,000,000 shares of preferred stock in one or more series and to
fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions on the shares of each such series, including the
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares constituting any series or
designations of such series. The issuance of our preferred stock may have the
effect of delaying, deferring or preventing a change of control of OpenSite.
There are no outstanding shares of preferred stock and no series have been
designated.
ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION AND BYLAWS
Under Delaware law, all stockholder actions must be effected at a duly
called annual or special meeting. Our bylaws provide that, except as otherwise
required by law, special meetings of the stockholders can only be called by the
board of directors or our Chief Executive Officer. In addition, our bylaws
establish an advance notice procedure for stockholder proposals to be brought
before an annual meeting of stockholders, including proposed nominations of
persons for election to the board. Stockholders at an annual meeting may only
consider proposals or nominations specified in the notice of meeting or brought
before the meeting by or at the direction of the board of directors or by a
stockholder who was a stockholder of record on the record date for the meeting,
who is entitled to vote at the meeting and who has delivered timely written
notice in proper form to our Secretary of the stockholder's intention to bring
such business before the meeting. The holders of a majority of our outstanding
shares will constitute a quorum for the transaction of business. Each
stockholder has one vote per share of stock. Except as explained below or
provided by Delaware law, approval of a majority of those stockholders who are
present is required to take any action.
Our certificate of incorporation and bylaws provide that a director may be
removed from office only with cause by the affirmative vote of at least 75% of
all shares voting on the removal. Cause is defined as incompetence, mental or
physical incapacity, breach of fiduciary duty involving dishonesty, personal
profit, a failure to perform stated duties or a violation of law. In addition,
the provisions of our certificate of incorporation that relate to the election
and removal of directors and the prohibition on the calling of special meetings
by stockholders and actions by stockholders by written consent may only be
amended by a vote of
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<PAGE> 60
75% of our outstanding shares of voting stock. Our bylaws may only be amended by
our board of directors or by a vote of 75% of our outstanding shares of voting
stock.
These provisions of our certificate of incorporation and bylaws are
intended to discourage types of transactions that may involve an actual or
threatened change of control of OpenSite. Such provisions are designed to reduce
the vulnerability of OpenSite to an unsolicited acquisition proposal and,
accordingly, could discourage potential acquisition proposals and could delay or
prevent a change in control of OpenSite. Such provisions are also intended to
discourage tactics that may be used in proxy fights but could, however, have the
effect of discouraging others from making tender offers for our shares and,
consequently, may also inhibit fluctuations in the market price of our shares
that could result from actual or rumored takeover attempts. These provisions may
also have the effect of preventing changes in the management of OpenSite.
EFFECT OF DELAWARE ANTITAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law, or
the Antitakeover Law, which regulates corporate acquisitions. The Antitakeover
Law prevents certain Delaware corporations, including those whose securities are
listed for trading on the Nasdaq National Market, from engaging under certain
circumstances in a "business combination" with any "interested stockholder" for
three years following the date that such stockholder became an interested
stockholder. For purposes of the Antitakeover Law, a "business combination"
includes, among other things, a merger or consolidation involving OpenSite and
the interested stockholder and the sale of more than 10% of OpenSite's assets.
In general, the Antitakeover Law defines an "interested stockholder" as any
entity or person beneficially owning 15% or more of the outstanding voting stock
of OpenSite and any entity or person affiliated with or controlling or
controlled by such entity or person. A Delaware corporation may opt out of the
Antitakeover Law with an express provision in its original certificate of
incorporation or an express provision in its certificate of incorporation or
bylaws resulting from amendments approved by the holders of at least a majority
of the corporation's outstanding voting shares. We have not opted out of the
provisions of the Antitakeover Law.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our bylaws and Section 145 of the Delaware General Corporation Law require
us to indemnify:
- a director who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which such director was a party because such
director was a director of OpenSite against reasonable expenses incurred
by the director in connection with the proceeding; and
- an individual who is made a party to a proceeding because such individual
is or was a director or officer of OpenSite against liability incurred by
such individual in the proceeding if the individual acted in a manner
believed in good faith to be in or not opposed to the best interests of
OpenSite and, in the case of any criminal proceeding, such individual had
no reasonable cause to believe such individual's conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers or other persons
controlling us pursuant to the foregoing provisions, we recognize 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.
LIMITATIONS OF DIRECTOR LIABILITY
Our certificate of incorporation limits personal liability for breach of
the fiduciary duty of our directors to the fullest extent provided by the
Delaware General Corporation Law. Such provisions provide that no OpenSite
director shall have personal liability to OpenSite or to its stockholders for
monetary damages for
56
<PAGE> 61
breach of fiduciary duty of care or other duty as a director. However, such
provisions shall not eliminate or limit the liability of a director:
- for any breach of the director's duty of loyalty to OpenSite or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for voting or assenting to unlawful distributions; or
- for any transaction from which the director derived an improper personal
benefit.
Any amendment, modification or repeal of such provisions will not eliminate
or reduce the effect of such provisions in respect of any act or failure to act,
or any cause of action, suit or claim that would accrue or arise prior to any
amendment, repeal or adoption of such an inconsistent provision. If the Delaware
General Corporation Law is subsequently amended to provide for further
limitations on the personal liability of directors of corporations for breach of
duty of care or other duty as a director, then the personal liability of the
directors of OpenSite will be so further limited to the greatest extent
permitted by the Delaware General Corporation Law.
REGISTRATION RIGHTS
We have granted registration rights to some of our existing stockholders
covering 9,639,847 shares of our common stock and 93,455 shares of common stock
subject to an outstanding warrant. Subject to specified limitations,
approximately six months after the date of this prospectus, holders of these
securities may require that we register all or part of these securities for sale
under the Securities Act as long as the offering value of the securities to be
registered on any occasion is in excess of $20,000,000. Until we are entitled to
register our shares on Form S-3 (a short form registration statement), these
holders may only make four such demands. Once we are entitled to use Form S-3,
which may be as early as August 2000, these holders may make such demands on an
unlimited number of occasions.
If we register any of our common stock, either for our own account or for
the account of other security holders, and the registration form to be used may
be used for the registration of the securities of the holders described above,
the holders are entitled to include their shares of common stock in the
registration. All of these holders have waived their rights to register
securities in connection with this offering.
In all cases, a holder's right to include shares in a registration is
subject: (1) to a registration priority arrangement and (2) in an underwritten
registration, to the ability of the underwriters to limit the number of shares
included in the offering. All fees, costs and expenses of all of the
registrations will be paid by us, and all selling expenses (e.g., underwriting
discounts, selling commissions and stock transfer taxes) will be paid by the
holders of the securities being registered.
LISTING
We have applied for trading and quotation of our common stock on the Nasdaq
National Market under the trading symbol "OPNS."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is BankBoston, N.A.
57
<PAGE> 62
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market after
this offering, or the perception that such shares may occur, could materially
and adversely affect prevailing market prices of our common stock and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
16,368,511 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
the 3,181,800 shares sold in this offering will be freely tradable without
restriction or registration under the Securities Act, unless such shares are
purchased by our affiliates. The remaining 13,186,711 shares of our common stock
are held by existing stockholders. Such shares, as well as any shares sold in
this offering that are purchased by one of our affiliates, are restricted
securities that may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rule 144 or 701 promulgated
under the Securities Act, which rules are summarized below.
As a result of the lock-up agreements described below and the provisions of
Rules 144 and 701, the restricted securities will be available for sale in the
public market as follows:
- 7,367,163 shares may be eligible for sale in accordance with the
requirements of Rule 144 upon expiration of the lock-up agreements; and
- 5,714,285 shares may be eligible for sale in accordance with the
requirements of Rule 144 beginning on March 30, 2000, and 105,263 shares
may be eligible for sale in accordance with the requirements of Rule 144
on April 23, 2000.
LOCK-UP AGREEMENTS. All of our officers, directors and stockholders and
holders of most of our outstanding options have signed lock-up agreements under
which they have agreed that for a period 180 days following the date of this
prospectus, without the prior written consent of SG Cowen Securities
Corporation, they will not:
- directly or indirectly, offer, sell, assign, transfer, encumber, pledge,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to
purchase, lend or otherwise dispose of, other than by operation of law,
any shares of our common stock or any securities convertible into or
exercisable or exchangeable for our common stock (including, without
limitation, common stock which may be deemed to be beneficially owned in
accordance with the rules and regulations promulgated under the
Securities Act); or
- enter into any swap or other arrangement that transfers to another
person, in whole or in part, any of the economic consequences of
ownership of our common stock whether any such transaction described
above is to be settled by delivery of common stock or such other
securities, in cash or otherwise.
RULE 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus, a person (including an affiliate of
ours) who has beneficially owned shares of our common stock for at least one
year would be entitled to sell within any three-month period a number of
restricted securities that does not exceed the greater of:
- 1% of the number of shares of our common stock then outstanding, which
will equal approximately 164,000 shares immediately after this offering;
or
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding such sale.
Such sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than one of our
affiliates, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
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<PAGE> 63
RULE 701. In general, under Rule 701 of the Securities Act as currently in
effect, any of our employees, consultants or advisors who purchases shares from
us in connection with a compensatory stock or option plan or other written
agreement is eligible to resell such shares 90 days after the date of this
prospectus in reliance on Rule 144, but without compliance with restrictions.
Specifically, shares acquired pursuant to Rule 701 may be sold by nonaffiliates
without regard to the holding period, volume limitations or information or
notice requirements of Rule 144, and by our affiliates without regard to the
holding period requirement.
REGISTRATION RIGHTS. Upon completion of this offering, the holders of
9,639,847 shares of our common stock and the holder of 93,455 shares of our
common stock issuable upon the exercise of warrants outstanding as of July 9,
1999, or their transferees, will be entitled to rights with respect to the
registration of such shares under the Securities Act. See "Description of
Capital Stock -- Registration Rights." After such a registration, these shares
become freely tradable without restriction under the Securities Act.
STOCK OPTIONS AND WARRANTS. Options to purchase an aggregate of 33,273
shares of our common stock will be fully vested as of July 9, 1999. Of the total
shares issuable pursuant to these vested options, 10,615 are subject to the
180-day lock-up agreements described above. As of July 9, 1999, options to
purchase an additional 778,333 shares of common stock were outstanding but
subject to future vesting and an additional 535,952 shares of common stock were
available for future grants under our stock option plan. In addition, 93,455
shares of common stock are issuable upon the exercise of warrants outstanding as
of July 9, 1999.
Following this offering, we intend to file one or more registration
statements on Form S-8 under the Securities Act to register all shares of common
stock subject to outstanding stock options and options issuable pursuant to our
stock option plan. Subject to the lock-up agreements, shares covered by these
registration statements will be eligible for sale in the public markets, other
than shares owned by our affiliates, which may be sold in the public market if
they qualify for an exemption from registration under Rule 144 or 701.
59
<PAGE> 64
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, dated
, 1999, each of the underwriters named below, through their
representatives, SG Cowen Securities Corporation, The Robinson-Humphrey Company,
LLC, SoundView Technology Group, Inc. and Wachovia Securities, Inc., has agreed
to purchase from us the number of shares of common stock set forth opposite
their names at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus. Generally, no
underwriter is responsible for the obligations of any other underwriter.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ ---------
<S> <C>
SG Cowen Securities Corporation.............................
The Robinson-Humphrey Company, LLC..........................
SoundView Technology Group, Inc.............................
Wachovia Securities, Inc....................................
---------
Total............................................. 3,181,800
=========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are conditional and may be terminated at their discretion based on
the occurrence of events specified in the underwriting agreement. The
underwriters are severally committed to purchasing all of the common stock being
offered by us if any shares are purchased (other than those covered by the
over-allotment option described below).
The underwriters propose to offer the common stock directly to the public
at the public offering price set forth on the cover page of this prospectus. The
underwriters may offer the common stock to securities dealers at that price less
a concession not in excess of $ per share. Securities dealers may reallow a
concession not in excess of $ per share to certain other dealers. After the
shares of the common stock are released for sale to the public, the underwriters
may vary the offering price and other selling terms from time to time.
We have granted to the underwriters an option, exercisable for up to 30
days after the date of this prospectus, to purchase up to 477,270 additional
shares of common stock at the public offering price set forth on the cover of
this prospectus to cover over-allotments, if any. If the underwriters exercise
their over-allotment option, the underwriters have severally agreed, subject to
certain conditions, to purchase shares in approximately the same proportion of
shares in the table above.
The following summarizes the underwriting discounts and commissions payable
to the underwriters:
<TABLE>
<CAPTION>
TOTAL
-------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions........... $ $ $
</TABLE>
We have agreed to indemnify the underwriters against liabilities under the
securities laws arising out of or based upon untrue statements of material facts
or material omissions contained in the registration statement or the prospectus.
We have also agreed to contribute to payments that the underwriters may be
required to make in respect of these liabilities.
OpenSite, all of our directors, officers and existing stockholders, who
hold an aggregate of 16,368,571 shares, together with the holders of options to
purchase 561,904 shares of our common stock, have agreed with the underwriters
that for a period of 180 days following the date of this prospectus, without the
prior written consent of SG Cowen Securities Corporation, they will not: (1)
directly or indirectly, offer, sell, assign, transfer, encumber, pledge,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend or
otherwise dispose of, other than by operation of law, any shares of common stock
or any securities convertible into or exercisable or exchangeable for common
stock (including, without limitation, common stock which may be deemed to be
beneficially owned in accordance with the rules and regulations promulgated
under the Securities Act); or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the
60
<PAGE> 65
economic consequences of ownership of common stock whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.
Of the 3,181,800 shares of common stock offered by us, 159,090 shares will
be reserved for sale to persons designated by us. Total shares reserved for sale
to persons designated by us will not exceed 5% of the total shares offered.
Shares not sold to these persons will be reoffered immediately by the
underwriters to the public at the public offering price.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making in
accordance with Regulation M under the Securities Exchange Act of 1934.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
common stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
representatives to reclaim a selling concession from a syndicate member when the
common stock originally sold by such syndicate member is purchased in a
syndicate covering transaction to cover syndicate short positions. In passive
market making, market makers in the common stock who are underwriters or
prospective underwriters may, subject to certain limitations, make bids for or
purchases of the common stock until the time, if any, at which a stabilizing bid
is made. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
The underwriters have advised us that they do not intend to confirm sales
in excess of 5% of the common stock offered hereby to any account over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price was determined by
negotiations between us and the underwriters. Among the factors considered in
these negotiations were prevailing market conditions, the market capitalization
and the stages of development of other companies that we and the underwriters
believe to be comparable to us, estimates of our business potential, our results
of operation in recent periods, the present state of our development and other
factors deemed relevant.
SG Cowen Securities Corporation is an underwriter in this offering. It is
also an affiliate of SGC Partners I LLC which currently owns 11.2% of our common
stock. SG Cowen Securities Corporation has rights to require us to have its
securities registered under the Securities Act of 1933. The terms of these
rights are described under the caption "Description of Capital
Stock -- Registration Rights." In addition, Justin Hall-Tipping, a director of
OpenSite, is a Managing Director of SG Cowen Securities Corporation. As a result
of the foregoing, this offering is subject to the provisions of Rule 2720 of the
Conduct Rules of the National Association of Securities Dealers, Inc.
Accordingly, the underwriting terms for this offering conform to the
requirements set forth in Rule 2720. In particular, the price at which our
common stock is to be distributed to the public must be at a price no higher
than that recommended by a "qualified independent underwriter" who has also
participated in the preparation of this prospectus and the registration
statement of which this prospectus is a part and who meets certain standards. In
accordance with this requirement, SoundView Technology Group, Inc. will serve in
such role and will recommend the public offering price in compliance with the
requirements of Rule 2720. SoundView Technology Group, Inc., in its role as
qualified independent underwriter, has performed due diligence investigations
and reviewed and participated in the preparation of this prospectus and the
registration statement of which this prospectus is a part.
We estimate that our out-of-pocket expenses for this offering will be
approximately $890,000.
LEGAL MATTERS
The validity of the issuance of the shares of the common stock to be sold
in this offering will be passed upon for OpenSite by Morris, Manning & Martin,
L.L.P., Atlanta, Georgia, and Hutchison & Mason, PLLC, Raleigh, North Carolina.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Simpson Thacher & Bartlett, New York, New York.
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<PAGE> 66
EXPERTS
The financial statements of OpenSite as of December 31, 1997 and 1998 and
for the period from inception (July 24, 1996) to December 31, 1996 and the years
ended December 31, 1997 and 1998 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
CHANGE IN ACCOUNTANTS
On May 10, 1999, we dismissed KPMG LLP and engaged PricewaterhouseCoopers
LLP as our independent accountants. Our board of directors participated in and
approved the decision to change independent accountants. The report of KPMG LLP
on our financial statements for the two years in the period ended December 31,
1998 did not contain any adverse opinion or disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with its audit for the two years in the period ended December 31,
1998 and through May 10, 1999, there were no disagreements with KPMG LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of KPMG LLP, would have caused them to make reference thereto in
their report on the financial statements for such years.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act, and the rules and regulations promulgated thereunder, with
respect to the shares of common stock offered by this prospectus. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement and the
exhibits thereto. Statements contained in this prospectus as to the contents of
any contract or other document that is filed as an exhibit to the registration
statement are not necessarily complete and each such statement is qualified in
all respects by reference to the full text of such contract or document.
You may read and copy all or any portion of the registration statement and
the exhibits at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request
copies of these documents, upon payment of a duplication fee, by writing to the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the SEC's public reference rooms. Also, the SEC maintains a World
Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC.
As a result of this offering, we will become subject to the information and
periodic reporting requirements of the Exchange Act and, in accordance
therewith, will file periodic reports, proxy and information statements and
other information with the SEC. These periodic reports, proxy and information
statements and other information will be available for inspection and copying at
the public reference facilities, regional offices and SEC's Web site referred to
above.
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<PAGE> 67
OPENSITE TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets as of December 31, 1997 and 1998, and June
30, 1999.................................................. F-3
Statements of Operations for the period from inception (July
24, 1996) to December 31, 1996, the years ended December
31, 1997 and 1998, and the six months ended June 30, 1998
and 1999.................................................. F-4
Statements of Stockholders' Equity (Deficit) for the period
from inception (July 24, 1996) to December 31, 1996, the
years ended December 31, 1997 and 1998, and the six months
ended June 30, 1999....................................... F-5
Statements of Cash Flows for the period from inception (July
24, 1996) to December 31, 1996, the years ended December
31, 1997 and 1998, and the six months ended June 30, 1998
and 1999.................................................. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 68
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
OpenSite Technologies, Inc.
The reverse stock split described in Note 2 to the financial statements has not
been consummated at July 9, 1999. When it has been consummated, we will be in a
position to furnish the following report:
"In our opinion, the accompanying balance sheets and the related
statements of operations, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial
position of OpenSite Technologies, Inc. at December 31, 1997 and 1998,
and the results of its operations and its cash flows for the period
from inception (July 24, 1996) to December 31, 1996 and the years
ended December 31, 1997 and 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above."
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
May 25, 1999
F-2
<PAGE> 69
OPENSITE TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
--------------------------- JUNE 30, JUNE 30,
1997 1998 1999 1999
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $151,345 $ 2,276,031 $ 19,324,090 $ 19,324,090
Accounts receivable, net..................... 23,713 303,312 1,033,250 1,033,250
Prepaid expenses............................. -- 61,591 168,018 168,018
-------- ----------- ------------ ------------
Total current assets.................. 175,058 2,640,934 20,525,358 20,525,358
-------- ----------- ------------ ------------
Property and equipment, net.................... 33,538 417,723 802,573 802,573
Note receivable from officer................... -- -- 300,000 300,000
Other assets................................... 1,838 11,032 227,867 227,867
-------- ----------- ------------ ------------
Total assets.......................... $210,434 $ 3,069,689 $ 21,855,798 $ 21,855,798
======== =========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................. $ 19,502 $ 75,542 $ 148,581 $ 148,581
Accrued expenses............................. 14,571 408,839 2,471,486 2,471,486
Deferred revenue............................. -- 354,802 1,221,289 1,221,289
Capital lease obligations -- current
portion.................................... -- 22,155 23,908 23,908
-------- ----------- ------------ ------------
Total current liabilities............. 34,073 861,338 3,865,264 3,865,264
Note payable................................... 17,000 -- -- --
Capital lease obligations -- noncurrent
portion...................................... -- 42,765 30,359 30,359
Redeemable common stock warrants............... -- 54,221 -- --
Mandatorily redeemable convertible preferred
stock........................................ -- 4,817,892 69,203,966 --
Commitments and contingencies (Note 11)
Stockholders' equity (deficit):
Common stock, $.01 par value, 40,000,000
shares authorized: 3,976,607, 4,328,987 and
4,434,250 shares issued and outstanding at
December 31, 1997 and 1998, and June 30,
1999, respectively; 14,074,097 shares pro
forma...................................... 39,765 43,289 44,342 140,740
Additional paid-in capital................... 26,024 -- -- 69,107,568
Deferred compensation........................ -- -- (108,079) (108,079)
Treasury stock, at cost, 887,388 shares...... -- -- (2,795,274) (2,795,274)
Accumulated other comprehensive income....... -- -- 466 466
Retained earnings (accumulated deficit)...... 93,572 (2,671,316) (48,306,746) (48,306,746)
Notes receivable from stockholders........... -- (78,500) (78,500) (78,500)
-------- ----------- ------------ ------------
Total stockholders' equity
(deficit)........................... 159,361 (2,706,527) (51,243,791) 17,960,175
-------- ----------- ------------ ------------
Total liabilities and stockholders'
equity (deficit).................... $210,434 $ 3,069,689 $ 21,855,798 $ 21,855,798
======== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 70
OPENSITE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM INCEPTION
(JULY 24,
1996) TO YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
DECEMBER 31, --------------------------- -------------------------
1996 1997 1998 1998 1999
-------------- ------------ ------------ ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Software licenses............ $ 11,600 $177,234 $ 1,072,152 $ 499,030 $ 2,233,537
Services and other........... 863 162,469 208,393 84,686 352,582
---------- -------- ----------- ---------- ------------
Total revenue......... 12,463 339,703 1,280,545 583,716 2,586,119
---------- -------- ----------- ---------- ------------
Cost and operating expense:
Cost of software licenses.... -- 9,000 17,550 7,050 19,894
Cost of services and other... 1,209 19,010 130,939 17,978 493,496
Sales and marketing.......... -- 43,541 1,917,745 209,306 3,428,470
Product development.......... -- 105,054 695,282 172,088 1,309,826
General and administrative... 11,714 35,607 922,689 244,934 1,751,002
---------- -------- ----------- ---------- ------------
Total operating
expense............. 12,923 212,212 3,684,205 651,356 7,002,688
---------- -------- ----------- ---------- ------------
Operating income
(loss).............. (460) 127,491 (2,403,660) (67,640) (4,416,569)
---------- -------- ----------- ---------- ------------
Interest income (expense):
Interest income.............. 2 2,336 48,362 8,644 245,509
Interest expense............. (8) -- (5,419) -- (4,636)
---------- -------- ----------- ---------- ------------
Interest income
(expense), net........ (6) 2,336 42,943 8,644 240,873
---------- -------- ----------- ---------- ------------
Net income (loss)..... (466) 129,827 (2,360,717) (58,996) (4,175,696)
Distributions to preferred
stockholders................. -- -- (39,457) -- --
Accretion of preferred stock... -- -- (324,661) (54,076) (41,908,710)
---------- -------- ----------- ---------- ------------
Net income (loss)
available to common
stockholders........ $ (466) $129,827 $(2,724,835) $ (113,072) $(46,084,406)
========== ======== =========== ========== ============
Net income (loss) per common
share-basic and diluted...... $ 0.00 $ 0.03 $ (0.66) $ (0.03) $ (13.31)
========== ======== =========== ========== ============
Weighted average shares used in
basic and diluted net income
(loss) per common share
calculation.................. 3,578,947 3,877,465 4,106,066 3,976,608 3,461,142
========== ======== =========== ========== ============
Pro forma per common share data
(unaudited):
Pro forma net loss per common
share-basic and diluted.... $ (0.34) $ (0.38)
----------- ------------
Pro forma weighted average
basic and diluted shares
outstanding................ 6,885,824 10,863,771
----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 71
OPENSITE TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
NOTES ACCUMULATED
COMMON STOCK ADDITIONAL RECEIVABLE OTHER
------------------- PAID-IN DEFERRED FROM COMPREHENSIVE TREASURY
SHARES AMOUNT CAPITAL COMPENSATION STOCKHOLDERS INCOME STOCK
--------- ------- ---------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at inception (July
24, 1996)................. 3,578,946 $35,789 $ $ -- $ -- $ -- $ --
Net loss for the period
from inception (July 24,
1996) to December 31,
1996.................... -- -- -- -- -- -- --
--------- ------- --------- --------- -------- ---- -----------
Balance at December 31,
1996...................... 3,578,946 35,789 -- -- -- --
Issuance of common
stock................... 397,661 3,976 26,024 -- -- -- --
Net income................ -- -- -- -- -- -- --
--------- ------- --------- --------- -------- ---- -----------
Balance at December 31,
1997...................... 3,976,607 39,765 26,024 -- -- -- --
Dividends paid to S
corporation
stockholders............ -- -- -- -- -- -- --
Change from S-Corporation
to C-Corporation........ -- -- 93,572 -- -- -- --
Distribution to Series A
preferred
stockholders............ -- -- -- -- -- -- --
Issuance of common
stock................... 352,380 3,524 74,976 -- (78,500) -- --
Accretion of mandatorily
redeemable convertible
preferred stock......... -- -- (194,572) -- -- -- --
Net loss.................. -- -- -- -- -- -- --
--------- ------- --------- --------- -------- ---- -----------
Balance at December 31,
1998...................... 4,328,987 43,289 -- -- (78,500) -- --
Deferred compensation
related to grant of
stock options
(unaudited)............. -- -- 118,450 (118,450) -- -- --
Amortization of deferred
compensation
(unaudited)............. -- -- -- 10,371 -- -- --
Repurchase of common stock
(unaudited)............. -- -- -- -- (2,795,274)
Termination of put
provision of redeemable
common stock warrants
(unaudited)............. -- -- 322,737 -- -- -- --
Exercise of warrants to
purchase common stock
(unaudited)............. 105,263 1,053 7,789 -- -- -- --
Accretion of mandatorily
redeemable convertible
preferred stock
(unaudited)............. -- -- (448,976) -- -- -- --
Net loss (unaudited)...... -- -- -- -- -- -- --
Other comprehensive
income -- foreign
currency translation
adjustment
(unaudited)............. -- -- -- -- -- 466 --
--------- ------- --------- --------- -------- ---- -----------
Balance at June 30, 1999
(unaudited)............... 4,434,250 $44,342 $ -- $(108,079) $(78,500) $466 $(2,795,274)
========= ======= ========= ========= ======== ==== ===========
<CAPTION>
RETAINED TOTAL
EARNINGS STOCKHOLDERS'
(ACCUMULATED EQUITY
DEFICIT) (DEFICIT)
------------ -------------
<S> <C> <C>
Balance at inception (July
24, 1996)................. $ (35,789) $ --
Net loss for the period
from inception (July 24,
1996) to December 31,
1996.................... (466) (466)
------------ ------------
Balance at December 31,
1996...................... (36,255) (466)
Issuance of common
stock................... -- 30,000
Net income................ 129,827 129,827
------------ ------------
Balance at December 31,
1997...................... 93,572 159,361
Dividends paid to S
corporation
stockholders............ (141,053) (141,053)
Change from S-Corporation
to C-Corporation........ (93,572) --
Distribution to Series A
preferred
stockholders............ (39,457) (39,457)
Issuance of common
stock................... -- --
Accretion of mandatorily
redeemable convertible
preferred stock......... (130,089) (324,661)
Net loss.................. (2,360,717) (2,360,717)
------------ ------------
Balance at December 31,
1998...................... (2,671,316) (2,706,527)
Deferred compensation
related to grant of
stock options
(unaudited)............. -- --
Amortization of deferred
compensation
(unaudited)............. -- 10,371
Repurchase of common stock
(unaudited)............. (2,795,274)
Termination of put
provision of redeemable
common stock warrants
(unaudited)............. -- 322,737
Exercise of warrants to
purchase common stock
(unaudited)............. -- 8,842
Accretion of mandatorily
redeemable convertible
preferred stock
(unaudited)............. (41,459,734) (41,908,710)
Net loss (unaudited)...... (4,175,696) (4,175,696)
Other comprehensive
income -- foreign
currency translation
adjustment
(unaudited)............. -- 466
------------ ------------
Balance at June 30, 1999
(unaudited)............... $(48,306,746) $(51,243,791)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 72
OPENSITE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION SIX MONTHS ENDED
(JULY 24, 1996) YEAR ENDED DECEMBER 31, JUNE 30,
TO DECEMBER 31, ----------------------- -------------------------
1996 1997 1998 1998 1999
--------------- -------- ----------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................. $ (466) $129,827 $(2,360,717) $ (58,995) $ (4,175,696)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Bad debt expense................ -- 5,099 164,092 164,092 193,422
Depreciation expense............ 80 6,519 78,220 11,530 144,487
Deferred revenue................ -- -- 354,802 64,346 866,487
Non-cash consulting expense..... -- 17,000 54,221 -- 268,516
Amortization of deferred
compensation.................. -- -- -- -- 10,371
Changes in operating assets and
liabilities:
Increase in accounts
receivable................. (863) (27,949) (443,691) (252,226) (923,360)
Increase (decrease) in prepaid
expenses and other
assets..................... -- (1,838) (70,785) (25,224) (323,262)
Increase (decrease) in
accounts payable........... 2,949 16,553 56,040 53,889 73,039
Increase in accrued expenses
and taxes other than
income..................... -- 14,571 394,268 18,073 1,862,647
------ -------- ----------- --------- ------------
Net cash provided by (used in)
operating activities.......... 1,700 159,782 (1,773,550) (24,515) (2,003,349)
------ -------- ----------- --------- ------------
Cash flows from investing
activities:
Purchases of property and
equipment....................... (715) (39,422) (387,610) (145,098) (329,337)
------ -------- ----------- --------- ------------
Net cash used in investing
activities.................... (715) (39,422) (387,610) (145,098) (329,337)
------ -------- ----------- --------- ------------
Cash flows from financing
activities:
Repayment of note payable......... -- -- (17,000) (17,000) --
Principal payment on capital lease
obligation...................... -- -- (9,875) -- (10,653)
Repurchase of common stock........ -- -- -- -- (2,795,274)
Repurchase of mandatorily
redeemable convertible preferred
stock........................... -- -- -- -- (1,397,636)
Loan to officer................... -- -- -- -- (300,000)
Dividends paid.................... -- -- (180,510) (141,053) --
Proceeds from issuance of
mandatorily redeemable
convertible preferred stock,
net............................. -- -- 4,493,231 555,171 23,875,000
Proceeds from issuance of common
stock........................... -- 30,000 -- -- --
Exercise of warrant to purchase
common stock.................... 8,842
------ -------- ----------- --------- ------------
Net cash provided by financing
activities.................... -- 30,000 4,285,846 397,118 19,380,279
------ -------- ----------- --------- ------------
Effect of changes in foreign
exchange currency on cash and
cash equivalents.............. 466
------ -------- ----------- --------- ------------
Net increase in cash and cash
equivalents................... 985 150,360 2,124,686 227,505 17,048,059
Cash and cash equivalents at
beginning of period............... -- 985 151,345 151,345 2,276,031
------ -------- ----------- --------- ------------
Cash and cash equivalents at end of
period............................ $ 985 $151,345 $ 2,276,031 $ 378,850 $ 19,324,090
====== ======== =========== ========= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 73
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND PRESENTATION
OpenSite Technologies, Inc. (the "Company") develops and markets Internet
auction technology that enables organizations to create branded, interactive,
real-time Internet auctions. The Company offers a range of products and services
including its OpenSite Auction software as well as its BidStream.com Web site.
The Company's predecessor was incorporated on July 24, 1996 in North Carolina
and was merged into OpenSite Technologies, Inc., a Delaware corporation, in
January 1998. All of the outstanding stock of the Company and its predecessor
were owned by the same group of stockholders at the date of the merger. These
stockholders owned the same percentage interest in the Company before and after
the merger. At the time of the merger, the Company was non-operating and had no
operating assets or liabilities. Accordingly, this merger was accounted for in a
manner similar to a pooling of interests as the transaction represented a
transfer of assets and liabilities between entities under common control.
All of the Company's software licensing and services and other revenue
during the period from inception (July 24, 1996) through December 31, 1998 are
from sales transactions originating in the United States. Revenue from
international sales is insignificant for the six month period ended June 30,
1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM FINANCIAL INFORMATION
The financial statements as of June 30, 1998 and 1999 and for the six month
periods then ended are unaudited and reflect all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of the Company's
management, necessary for a fair presentation of financial position, results of
operations and cash flows. All financial statement disclosures related to the
six month periods ended June 30, 1998 and 1999 are unaudited.
UNAUDITED PRO FORMA BALANCE SHEET
The board of directors has authorized the Company to file a registration
statement with the Securities and Exchange Commission permitting the Company to
sell shares of common stock in an initial public offering ("IPO"). If the IPO is
consummated as presently anticipated, all shares of the Series A, Series B, and
Series C convertible preferred stock will automatically convert into an equal
number of shares of common stock. The unaudited pro forma balance sheet reflects
the subsequent conversion of Series A, Series B, and Series C convertible
preferred stock into common stock as if such conversion had occurred as of June
30, 1999.
STOCK SPLIT
In August 1998, the Company declared a 6,959 for 1 stock split for all
common and preferred stockholders.
In July 1999, the Company approved a 1 for 2.1 reverse stock split which
will be effective upon the effective date of the Company's IPO. The financial
statements for all periods presented have been restated to reflect these
transactions.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE> 74
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
BASIS OF CONSOLIDATION
The consolidated financial statements at June 30, 1999 include the accounts
of OpenSite Technologies, Inc. and its wholly-owned subsidiary, OpenSite Europe,
Ltd. All significant intercompany accounts and transactions have been
eliminated. Prior to April 1999, the Company had no subsidiaries.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less at date of purchase to be cash equivalents.
CASH FLOW
The Company had the following non-cash investing and financing activities
during 1998:
<TABLE>
<S> <C>
Non-cash investing and financing activities:
Capital lease obligations................................. $74,795
Issuance of common stock for notes receivable............. $78,500
</TABLE>
There were no non-cash financing and investing activities during the period
from inception (July 24, 1996) to December 31, 1996 or the year ended December
31, 1997.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, which are comprised of cash in demand
deposit accounts, accounts receivable, investments in short term commercial
paper and accounts payable, are carried at cost which approximates their fair
market value at December 31, 1997 and 1998.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Expenditures for maintenance and repairs are charged to
operations. Major expenditures for renewals and betterments are capitalized and
depreciated. Property and equipment under capital leases are initially recorded
at the present value of minimum lease payments at the inception of the lease.
Depreciation is recorded using the straight-line method over the estimated
useful lives of the assets. Property and equipment held under capital leases and
leasehold improvements are amortized using the straight-line method over the
shorter of the estimated useful life of the asset or the lease term.
Depreciation periods for property and equipment are as follows:
<TABLE>
<S> <C>
Computer equipment.......................................... 2-3 years
Furniture and fixtures...................................... 5 years
Leasehold improvements...................................... 1-3 years
Assets under capital leases................................. 1-3 years
</TABLE>
OTHER ASSETS
The costs of trademarks are capitalized and are amortized using the
straight-line method over the remaining lives of the trademarks from the date
the trademarks are purchased, which are up to ten years.
F-8
<PAGE> 75
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of its property and equipment and
other assets in accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of,"
("SFAS No. 121"). SFAS No. 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the estimated
future undiscounted cash flows attributable to such assets or the business to
which such intangible assets relate. No impairments were required to be
recognized during the period from inception (July 24, 1996) to December 31, 1996
and the years ended December 31, 1997 and 1998 or the six month period ended
June 30, 1999.
INCOME TAXES
The Company accounts for income taxes using the liability method which
requires the recognition of deferred tax assets or liabilities for the temporary
differences between financial reporting and tax bases of the Company's assets
and liabilities and for tax carryforwards. A valuation allowance is recorded, if
necessary, to reduce net deferred tax assets to their realizable values if
management does not believe it is more likely than not that the net deferred tax
assets will be realized.
Prior to January 1, 1998, the Company had elected subchapter S status for
Federal income tax purposes and, accordingly, no income tax provision is
presented for periods prior to 1998 as income was taxable personally to the
stockholders.
REVENUE RECOGNITION
The Company's revenue is derived from software licenses as well as support
and maintenance, training and consulting services. The Company adopted American
Institute of Certified Public Accountants ("AICPA") Statement of Position
("SOP") No. 97-2, "Software Revenue Recognition," as amended by SOP No. 98-4
effective January 1, 1998. The adoption did not have a material effect on the
timing of the Company's revenue recognition or cause changes to its revenue
recognition policies.
Revenue from software licenses is recognized when there is evidence of an
arrangement, the product has been shipped, fees are fixed and determinable and
collection of the related receivable is probable. Support and maintenance
revenue, which is included in services and other revenue, is deferred and
recognized ratably over the service period. When software and services are sold
under one contract, revenue is allocated to each element based on their
respective fair values, with these fair values being determined using the price
charged when that element is sold separately. Partner fees, another component of
services and other revenue, are deferred and recognized ratably over a period of
twelve months, which represents the period of membership in the partnership
program. At the end of each partner's initial twelve months of membership, the
Company has the ability to unilaterally terminate a partner's participation in
the program. Consulting and training service revenue, which is also included in
services and other revenue, is deferred and recognized as the services are
performed.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist of costs, including salaries and sales
commissions, of all personnel involved in the sales process. Sales and marketing
expenses also include costs of advertising, trade shows and certain indirect
costs.
SOFTWARE DEVELOPMENT COSTS
Software development costs have been accounted for in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed." Under the standard,
capitalization of software development costs begins upon the
F-9
<PAGE> 76
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
establishment of technological feasibility, subject to net realizable value
considerations. To date, the period between achieving technological feasibility
and the general availability of such software has substantially coincided;
therefore, software development costs qualifying for capitalization have been
immaterial. Accordingly, the Company has not capitalized any software
development costs and has charged all such costs to product development expense.
ADVERTISING COSTS
All costs of advertising the services and products offered by the Company
are expensed as incurred. Advertising expense totaled $0, $16,475 and $200,713
for the period from inception (July 24, 1996) to December 31, 1996 and the years
ended December 31, 1997 and 1998, respectively.
STOCK-BASED COMPENSATION
The Company accounts for stock based compensation based on the provisions
of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," ("APB No. 25") which states that no compensation expense is recorded
for stock options or other stock-based awards to employees that are granted with
an exercise price equal to or above the estimated fair value per share of the
Company's common stock on the grant date. The Company has adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," ("SFAS No. 123") which requires compensation
expense to be recognized for disclosure purposes, based on the fair value of the
options granted at the date of the grant.
TRANSLATION OF FOREIGN FINANCIAL STATEMENTS
Assets and liabilities of foreign operations, where the functional currency
is the local currency, are translated into U.S. dollars at the rate of exchange
at each reporting date. Revenues and expenses are translated using the weighted
average exchange rate for the month in which the transactions occur. Gains and
losses from translating foreign currency financial statements are accumulated in
other comprehensive income.
SIGNIFICANT CUSTOMERS AND CREDIT RISK
The Company performs ongoing credit evaluations to reduce credit risk and
requires no collateral from its customers. Management estimates the allowance
for uncollectible accounts based on their credit evaluation.
NET LOSS PER COMMON SHARE
Historical
The Company computes net income (loss) per common share in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
("SFAS No. 128") and SEC Staff Accounting Bulletin No. 98 ("SAB No. 98"). Under
the provisions of SFAS No. 128 and SAB No. 98, basic net income (loss) per
common share ("Basic EPS") is computed by dividing net income (loss) by the
weighted average number of common shares outstanding. Diluted net income (loss)
available to common stockholders per common share ("Diluted EPS") is computed by
dividing net income (loss) by the weighted average number of common shares and
dilutive common share equivalents then outstanding.
Pro forma (unaudited)
Pro forma net loss per common share is calculated assuming conversion of
all mandatorily redeemable convertible preferred stock which converts
automatically upon the completion of the initial public offering (see Note 9).
Therefore, accretion of mandatorily redeemable preferred stock of $324,661 and
$41,908,710 for the year ended December 31, 1998 and the six months ended June
30, 1999, respectively, and the
F-10
<PAGE> 77
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
distribution to preferred stockholders of $39,457 during the year ended December
31, 1998 are excluded from the calculation of pro forma net loss per common
share. The calculations of pro forma net loss per common share for the year
ended December 31, 1998 and the six months ended June 30, 1999 do not include
38,858 and 392,267 equivalent shares, respectively, of common stock as their
impact would be anti-dilutive.
COMPREHENSIVE INCOME (LOSS)
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," ("SFAS No. 130") effective January 1, 1998.
SFAS No. 130 requires the Company to display an amount representing
comprehensive income for the year in a financial statement which is displayed
with the same prominence as other financial statements. The Company had no items
of other comprehensive income (loss) during the years ended December 31, 1998
and 1997 and the period from inception (July 24, 1996) to December 31, 1996. The
only item of other comprehensive income during the six months ended June 30,
1999 is a foreign currency translation adjustment.
SEGMENT DISCLOSURES
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). This statement requires
companies to report information about operating segments in annual financial
statements. It also requires segment disclosures about products and services,
geographic areas and major customers. The disclosures prescribed by SFAS No. 131
are effective for fiscal years beginning after December 15, 1997. Management has
determined that the Company does not have any separately reportable operating
segments as of December 31, 1998 or June 30, 1999.
SOFTWARE OBTAINED OR DEVELOPED FOR INTERNAL USE
In March 1998, the AICPA issued Statement of Position No. 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use,"
("SOP No. 98-1") which provides guidance regarding when software developed or
obtained for internal use should be capitalized. SOP No. 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998.
Management expects that the adoption of SOP No. 98-1 will not have a material
impact on the Company's financial position or results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1998, the AICPA issued SOP No. 98-9, "Modification of SOP No.
97-2, Software Revenue Recognition, With Respect to Certain Transactions," ("SOP
No. 98-9"). SOP No. 98-9 amended SOP No. 97-2 to require recognition of revenue
using the "residual method" in circumstances outlined in SOP No. 97-2. Under the
residual method, revenue is recognized as follows: (1) the total fair value of
undelivered elements, as indicated by Vendor Specific Objective Evidence
("VSOE") is deferred and subsequently recognized in accordance with the relevant
sections of SOP No. 97-2 and (2) the difference between the total arrangement
fee and the amount deferred for the undelivered elements is recognized as
revenue related to the delivered elements.
SOP No. 98-9 is effective for fiscal years beginning after March 15, 1999.
Also, the provisions of SOP No. 97-2 that were deferred by Statement of Position
98-4, "Deferral of the Effective Date of a Provision of SOP 97-2, Software
Revenue Recognition," ("SOP No. 98-4") will continue to be deferred until the
date SOP No. 98-9 becomes effective. The Company does not expect that the
adoption of SOP No. 98-9 will have a material impact on the Company's financial
position or results of operations.
F-11
<PAGE> 78
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS No. 133
is effective for financial statements for all fiscal quarters of all fiscal
years beginning after June 15, 1999. The Company intends to adopt SFAS No. 133
when required; however, SFAS No. 133 is not expected to have a material impact
on the Company's financial position or results of operations.
3. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of an allowance for doubtful accounts
of $3,500, $108,500 and $276,182 at December 31, 1997 and 1998 and June 30,
1999, respectively.
Changes in the allowance for doubtful accounts consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, SIX MONTHS
------------------- ENDED
1997 1998 JUNE 30, 1999
------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Allowance for doubtful accounts at beginning of period.... $ -- $ 3,500 $108,500
Additions charged to costs and expenses................... 5,099 164,092 193,422
Deductions................................................ (1,599) (59,092) (25,740)
------- -------- --------
Allowance for doubtful accounts at end of period.......... $ 3,500 $108,500 $276,182
======= ======== ========
</TABLE>
The Company had no allowance for doubtful accounts during 1996.
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and 1998 and June 30, 1999
consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1997 1998 1999
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment........................................ $34,139 $377,354 $ 650,885
Office furniture and equipment............................ 5,998 87,944 133,624
Leasehold improvements.................................... -- 37,244 247,370
------- -------- ----------
40,137 502,542 1,031,879
Less accumulated depreciation............................. (6,599) (84,819) (229,306)
------- -------- ----------
$33,538 $417,723 $ 802,573
======= ======== ==========
</TABLE>
F-12
<PAGE> 79
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1997 1998 1999
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued compensation........................................ $ -- $154,694 $ 318,280
Professional services....................................... 3,000 96,532 623,502
Stock issuance costs........................................ -- -- 43,061
New facility costs.......................................... -- -- 280,000
Marketing................................................... -- 116,264 1,131,385
Other....................................................... 11,571 41,348 75,258
------- -------- ----------
$14,571 $408,838 $2,471,486
======= ======== ==========
</TABLE>
6. INCOME TAXES
There is no current income tax provision or benefit for the year ended
December 31, 1998 or the six months ended June 30, 1999 because the Company has
generated a net operating loss for which there is no carryback potential. There
is no deferred income tax provision or benefit recorded for the year ended
December 31, 1997 or the period from inception (July 24, 1996) to December 31,
1996 because prior to 1998, the Company had elected subchapter S status for
Federal income tax purposes. Therefore, the Company was not liable for income
taxes and all profit and loss was taxable to the shareholders.
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1998 consist of the following:
<TABLE>
<S> <C>
Deferred tax assets:
Domestic net operating loss carryforwards................. $709,084
Accounts receivable....................................... 42,261
Research and development credit........................... 37,783
Deferred revenue.......................................... 49,077
Compensation related items................................ 21,119
Other..................................................... 839
--------
Gross deferred tax assets.............................. 860,163
Less: Valuation allowance.............................. (859,698)
--------
Net deferred tax assets................................ 465
--------
Deferred tax liabilities:
Fixed and intangible assets............................... 465
--------
Total deferred tax liabilities.................... 465
--------
Net deferred tax asset (liability)..................... $ --
========
</TABLE>
For 1998, the Company has provided a full valuation allowance against its
net deferred tax assets since realization of these benefits could not be
reasonably assured. The increase in valuation allowance of $859,698 resulted
primarily from the generation of net operating loss carryforwards. There were no
deferred tax assets
F-13
<PAGE> 80
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
or liabilities for the year ended December 31, 1997 or the period ended December
31, 1996 because the Company had elected subchapter S status prior to 1998.
As of December 31, 1998, the Company had Federal and state net operating
loss carryforwards of approximately $1,900,000. The net operating loss
carryforwards expire in various amounts starting in 2018 and 2013 for Federal
and state tax purposes, respectively. The utilization of the Federal net
operating loss carryforward may be subject to limitation under the rules
regarding a change in stock ownership as determined by the Internal Revenue
Code. If the Company's utilization of its net operating loss carryforwards is
limited, and the Company has taxable income which exceeds the permissible yearly
net operating loss carryforward, the Company would incur a Federal income tax
liability even though its net operating loss carryforwards exceed its taxable
income.
Taxes computed at the statutory Federal income tax rate of 34% are
reconciled to the provision for income taxes for the year ended December 31,
1998 as follows:
<TABLE>
<CAPTION>
% OF
PRETAX
AMOUNT LOSS
--------- ------
<S> <C> <C>
United States Federal tax at statutory rate................. $(753,344) (34)%
State taxes (net of federal benefit)........................ (62,301) (5)
Research and development credit............................. (37,783) (2)
Other, net.................................................. (6,270) (0)
Change in valuation allowance............................... 859,698 41
--------- ---
Provision for income taxes.................................. $ -- 0%
========= ===
</TABLE>
7. NOTE PAYABLE
During December 1997, the Company recorded a note payable to one of its
common stockholders for $17,000, related to the cost of terminating a consulting
agreement. This note accrued interest at 10% and was repaid in 1998.
8. CAPITAL STOCK
During the year ended December 31, 1998, the Company's Articles of
Incorporation were amended and restated to authorize 20,000,000 shares of common
stock with a par value of $0.01 and 9,175,439 shares of preferred stock with a
par value of $0.01, of which 4,175,439 were designated as Series A preferred
stock and 5,000,000 were designated as Series B preferred stock. In March 1999,
the Company's Articles of Incorporation were again amended and restated to
increase the number of authorized shares of common stock to 40,000,000, and to
authorize 12,000,000 shares of Series C preferred stock with a par value of
$0.01. At all times, the Company shall reserve a number of shares of unissued
common stock for the purpose of effecting the conversion of its issued and
outstanding shares of all series of preferred stock and the exercise of all
outstanding warrants and options to purchase the Company's common stock.
In August 1998, the Company issued 309,523 restricted shares of the
Company's common stock at a price of $0.21 per share to an employee of the
Company in exchange for a note payable to the Company of $65,000. In October
1998, the Company entered into an agreement with another employee, whereby the
employee was issued 42,857 restricted shares of common stock at a price of $0.32
per share in exchange for a note payable to the Company of $13,500. If the
employees are terminated for "cause," as defined in their respective employment
agreements, the Company has the option to repurchase the shares at the original
purchase price. If the employees are terminated for "good reason," as defined in
their respective employment agreements, the Company has the option to repurchase
the shares at the greater of the original purchase price, or the fair value of
the common stock, according to the terms of the agreement. If the employees are
terminated "without cause," as defined in their respective employment
agreements, the employees have the
F-14
<PAGE> 81
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
right to sell the shares back to the Company at the greater of the original
purchase price or the fair market value of the stock, according to the terms of
the agreement.
At inception, the Company issued 3,578,946 shares of common stock to the
Company's founders. In April 1997, the Company sold 397,661 shares of common
stock in exchange for proceeds of $30,000.
9. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
In January 1998, the Company sold 1,988,304 shares of Series A preferred
stock in a private placement transaction in exchange for proceeds of $555,171,
net of issuance costs of $44,829. In August and September 1998, the Company sold
2,380,952 shares of Series B preferred stock in a private placement transaction
in exchange for proceeds of $3,938,060, net of issuance costs of $61,940.
In March 1999, the Company sold 5,119,047 shares of Series C preferred
stock in a private placement transaction for proceeds of $21,375,000, net of
issuance costs of $125,000. In April 1999, the Company sold an additional
595,238 shares of Series C preferred stock in a private placement transaction,
receiving proceeds of $2,500,000. Total proceeds from these transactions were
$23,875,000, net of issuance costs of $125,000.
In conjunction with the sale of the Series C preferred stock, the Company
repurchased, in March 1999, 887,388 shares of common stock at a purchase price
of $3.15 per share, 443,694 shares of Series A preferred stock at a purchase
price of $3.15 per share, and 26,845 warrants at a price of $3.15 per warrant,
less the exercise price of the warrant, for an aggregate purchase price of
$4,265,635.
As of December 31, 1998 and June 30, 1999, the Series A preferred stock had
an aggregate liquidation preference of $600,000 and the Series B preferred stock
had an aggregate liquidation preference of $4,000,000. As of June 30, 1999, the
Series C preferred stock had an aggregate liquidation preference of $32,250,000.
Rights, Preferences and Terms of Preferred Stock
The following is a summary of the rights, preferences, and terms of the
Company's outstanding series of preferred stock:
Dividends
The holders of the Series A, Series B, and Series C preferred stock shall
be entitled to receive dividends in any fiscal year in an amount determined by
the board of directors, when, and if declared by the board of directors in
accordance with Company's bylaws, as amended. No dividends may be paid to any of
the holders of shares of common stock or any of the individual series or holders
of the Company's Series A, Series B, or Series C preferred stock unless an
equivalent dividend has been declared and paid on all outstanding shares of the
Series A, Series B, and Series C preferred stock.
Liquidation
In the event of any liquidation, dissolution, or winding up of the Company,
holders of Series C preferred stock are entitled to receive an amount equal to
$6.30 per share if such event were to occur prior to December 31, 1999, or an
amount equal to $8.40 per share if such event were to occur subsequent to
December 31, 1999. After payment has been made to the holders of Series C
preferred stock, the holders of Series A and Series B preferred stock are
entitled to receive an amount equal to $0.3018 and $1.68 per share,
respectively. In the event that assets of the Company are not sufficient to
provide payments to the holders of Series A and Series B preferred stock, any
remaining assets shall be distributed to holders of the Series A and Series B
preferred stock on a pro rata basis, based on their respective liquidation
preferences. After
F-15
<PAGE> 82
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
payments have been made to the holders of Series A, Series B, and Series C
preferred stock, the remaining assets of the Company will be distributed to the
holders of common stock.
Conversion
Each share of Series A, Series B, and Series C preferred stock is
convertible at the option of the holder into common shares of the Company at a
one to one conversion ratio, subject to certain adjustments as defined.
Conversion is automatic for holders of Series A, Series B, and Series C
preferred stock upon the closing of a firm commitment for an underwritten public
offering with net proceeds to the Company of at least $25,000,000. Conversion is
also automatic for any class of Series A, Series B, or Series C preferred stock
upon the election of holders of at least 75% of the total number of shares in
any class to convert their preferred shares into common shares.
Voting
Holders of Series A, Series B, and Series C preferred shares have voting
rights on an as if converted basis.
Redemption
In the event that the Series A, Series B, and Series C preferred stock has
not been converted into common stock prior to the fifth anniversary of the
issuance date of the Series C preferred stock, the Series A preferred shares or
the Series B preferred shares are redeemable at the option of at least a
two-thirds vote of the holders of the respective series, and the Series C
preferred stock shall be redeemable upon the written request of any holder of
Series C preferred stock. The redemption price for the Series A and Series B
preferred stock shall be an amount equal to the greater of the appraised per
share value of the Company's common stock, or an amount equal to the original
purchase price plus an amount equal to 12.5% per annum, less the aggregate
amount of all dividends actually paid since the issuance date. The redemption
price for the Series C preferred stock shall be two times the original purchase
price.
As the redemption price of the Series A and Series B preferred stock is
variable in amount, its carrying value is adjusted to the redemption amount at
each balance sheet date. The Company recorded a charge to stockholders' equity
of $324,661 for the year ended December 31, 1998 and $41,908,710 for the six
months ended June 30, 1999 to reflect the Series A and Series B preferred stock
at its fair value.
10. STOCK OPTIONS AND WARRANTS
Stock Options
In July 1998, the Company adopted a stock option plan (the "Plan") which
provided for the grant of up to 952,380 stock options. In May 1999, the Company
increased the number of options authorized under the Plan to 1,666,666. Stock
options granted under the Plan have exercise periods not to exceed ten years.
Options granted under the Plan during the year ended December 31, 1998 vest over
a period of four years.
The Company continues to apply APB No. 25 and related interpretations in
accounting for the Plan. Had compensation costs for the Plan been determined
based on the fair value at the grant dates for awards under the Plan consistent
with the methods of SFAS No. 123, the Company's net loss for the year ended
December 31, 1998 would have increased from $2,360,717 to $2,375,472. The
Company's net loss per share for the year ended December 31, 1998 would be the
same as reported under APB No. 25.
The fair value of each option is estimated on the grant date using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants during the year ended December 31,
F-16
<PAGE> 83
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1998: risk free interest of 5.5%, expected life of four years, dividend yield of
0%, and a volatility factor of 0%.
A summary of the status of the Plan as of December 31, 1998 and June 30,
1999 and changes during the year ended December 31, 1998 and the six months
ended June 30, 1999 is presented below:
<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE
UNDERLYING EXERCISE
OPTIONS PRICE
---------- --------
<S> <C> <C>
Outstanding at December 31, 1997............................ -- $ --
Granted..................................................... 276,427 0.25
------- -----
Outstanding at December 31, 1998............................ 276,427 0.25
Granted (unaudited)......................................... 342,381 6.82
Forfeited (unaudited)....................................... (7,141) .32
------- -----
Outstanding at June 30, 1999 (unaudited).................... 611,667 $3.93
======= =====
</TABLE>
The Company did not grant any stock options during the year ended December
31, 1997 or the period from inception (July 24, 1996) to December 31, 1996.
All options granted during the year ended December 31, 1998 were granted
with an exercise price equal to the fair value of the underlying common stock on
the grant date, as determined by the board of directors. During the six months
ended June 30, 1999, the Company recognized $118,450 in deferred compensation
related to options granted at an exercise price less than fair values. The
weighted average fair value of options granted during the year ended December
31, 1998 was $0.03. The following table summarizes information about the
Company's stock options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
AT DECEMBER 31, 1998
------------------------- OPTIONS EXERCISABLE
REMAINING --------------------------
NUMBER CONTRACTUAL DECEMBER 31, JUNE 30,
EXERCISE PRICE OUTSTANDING LIFE 1998 1999
- -------------- ----------- ----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
$0.17.......................................... 126,666 9.5 years 9,365 29,265
$0.32.......................................... 149,761 10 years -- --
------- ----- ------
276,427 9,365 29,265
======= ===== ======
</TABLE>
Warrants
In August 1998, the Company entered into a consulting agreement with a
director of the Company. Pursuant to this agreement, the Company issued warrants
to purchase 120,300 shares of common stock at an exercise price of $0.44 per
share. These warrants expire on December 31, 2002. The Company also issued
warrants to this director to purchase 105,263 shares of common stock at an
exercise price of $0.10. The $0.10 warrants were subsequently exercised in April
1999. In the event that the holders of Series A preferred stock request the
redemption of their shares pursuant to the terms described in Note 9, this
director can elect to put any outstanding warrants back to the Company at the
per share redemption value of the Series A preferred stock, less the exercise
price of the warrants.
During the year ended December 31, 1998 and the six months ended June 30,
1999, the Company recognized consulting expense of $54,221 and $268,516,
respectively, to reflect the increase in value of the put feature of these
warrants. In conjunction with the issuance of the Series C preferred stock and
the directors resignation from the board of directors in March 1999, the
warrants were amended such that the
F-17
<PAGE> 84
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
redemption provision expired on March 31, 1999. Accordingly, the carrying amount
of the remaining outstanding warrants was transferred to additional paid in
capital as of that date.
11. COMMITMENTS
The Company entered into a capital lease for furniture and equipment that
expires in 2001. The gross amount of furniture and equipment and related
accumulated depreciation recorded under capital leases and included in property
and equipment was as follows at December 31, 1998:
<TABLE>
<S> <C>
Furniture and equipment..................................... $74,795
Less accumulated depreciation............................... (6,402)
-------
$68,393
=======
</TABLE>
There were no capital leases at December 31, 1997.
The Company also has several non-cancelable operating leases, primarily for
office space and office equipment, that extend through August 2001. Rental
expense, including maintenance charges, for operating leases during 1998 and
1997 was $72,295 and $7,227, respectively.
The future minimum lease payments under the non-cancelable lease agreements
are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
Year ending December 31:
1999...................................................... $ 30,588 $ 90,244
2000...................................................... 30,588 61,644
2001...................................................... 17,843 30,802
-------- --------
Total future minimum lease payments......................... 79,019 $182,690
========
Less amount representing interest........................... (14,099)
--------
Present value of future minimum lease payments.............. 64,920
Less current portion........................................ (22,155)
--------
Obligations under capital leases, excluding current
portion................................................... $ 42,765
========
</TABLE>
In March 1999, the Company entered into an agreement with Protege Software
Limited ("Protege"), whereby Protege will provide a general manager for the
Company's European subsidiary, Opensite Europe Ltd., and will provide certain
back office and administrative functions. The initial term of the agreement is
an 18 month period beginning April 1, 1999. However, the agreement will be
automatically extended for a subsequent 12 month period unless the agreement is
terminated by either Protege or the Company.
The Company will pay Protege a fee of approximately $23,000 per month, plus
out-of-pocket costs, for these services. In addition, Protege can earn an
additional fee based on 7.5% of net revenue from support and maintenance
services and 15% of net revenue from software licensing related to sales within
Protege's territory, as defined in the agreement.
12. RELATED PARTY TRANSACTION
In March 1999, an officer of the Company borrowed $300,000 from the Company
in exchange for a promissory note due upon the earlier of the termination of the
officer's employment with the Company or December 31, 2002 with an interest rate
of 6% per annum. The promissory note is collateralized by 309,523 shares of
restricted stock owned by the officer.
F-18
<PAGE> 85
OPENSITE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
13. SUBSEQUENT EVENT (UNAUDITED)
In July 1999, the Company determined that it would discontinue its product
development office in Buffalo, New York by December 31, 1999. In connection with
this office closing, the Company expects to incur a charge of approximately
$450,000 primarily related to severance and other compensation expense.
F-19
<PAGE> 86
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[OPENSITE LOGO]
COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
SG COWEN
THE ROBINSON-HUMPHREY COMPANY
SOUNDVIEW TECHNOLOGY GROUP
WACHOVIA SECURITIES, INC.
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 87
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 12,510
National Association of Securities Dealers, Inc. fee........ 5,000
Nasdaq National Market listing fee.......................... 90,000
Accountants' fees and expenses.............................. 300,000*
Legal fees and expenses..................................... 250,000*
Blue Sky fees and expenses.................................. 5,000*
Transfer Agent's fees and expenses.......................... 20,000*
Printing and engraving expenses............................. 200,000*
Miscellaneous............................................... 7,490*
--------
Total Expenses.................................... $890,000*
========
</TABLE>
- ------------------------------
* Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Restated Certificate of Incorporation limits personal liability for
breach of the fiduciary duty of its directors to the fullest extent provided by
the General Corporation Law of the State of Delaware. Such provisions provide
that no director of OpenSite shall have personal liability to us or to our
stockholders for monetary damages for breach of fiduciary duty of care or other
duty as a director. However, such provisions shall not eliminate or limit the
liability of a director
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for voting or assenting to unlawful distributions; or
- for any transaction from which the director derived an improper personal
benefit.
Any amendment, modification or repeal of such provisions will not eliminate
or reduce the effect of such provisions in respect of any act or failure to act,
or any cause of action, suit or claim that would accrue or arise prior to any
amendment, repeal or adoption of such an inconsistent provision. If the General
Corporation Law of the State of Delaware is subsequently amended to provide for
further limitations on the personal liability of directors of corporations for
breach of duty of care or other duty as a director, then the personal liability
of the directors of OpenSite will be so further limited to the greatest extent
permitted by the General Corporation Law of the State of Delaware.
Section 7 of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of the Company may be entitled to be indemnified by the
underwriters named therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The share numbers presented below are provided with respect to our shares
of common stock and Series A preferred stock, Series B preferred stock and
Series C preferred stock and reflect (1) various stock splits and (2) the
recapitalization of the Series A preferred stock, Series B preferred stock and
Series C preferred stock into common stock, which will occur immediately prior
to completion of this offering.
In January 1998, we sold an aggregate 1,544,610 shares of Series A
preferred stock to Auction Ventures, LLC for an aggregate offering price of
$600,000. This issuance of securities was deemed to be exempt from registration
under the Securities Act of 1933, as amended, in reliance on Section 4(2)
thereof.
II-1
<PAGE> 88
In August 1998, we sold 309,523 shares of restricted common stock to Kip A.
Frey for an aggregate offering price of $65,000. This issuance of securities was
deemed to be exempt from registration under the Securities Act of 1933, as
amended, in reliance on Rule 701 promulgated hereunder.
In August 1998, we issued warrants to purchase an aggregate 198,719 shares
of common stock to Bandrowski Enterprises LLC in exchange for services. This
issuance of securities was deemed to be exempt from registration under the
Securities Act of 1933, as amended, in reliance on Section 4(2) thereof.
In August and September 1998, we sold an aggregate 2,380,952 shares of
Series B preferred stock to Intersouth Partners IV, L.P., Noro-Moseley Partners,
L.P., Southeast Interactive Technology Fund II, LLC, and Wakefield Group II, LLC
for an aggregate offering price of $4,000,000. This issuance of securities was
deemed to be exempt from registration under the Securities Act of 1933, as
amended, in reliance on Section 4(2) thereof.
In October 1998, we sold 42,857 shares of restricted common stock to James
R. Ford for an aggregate offering price of $13,500. This issuance of securities
was deemed to be exempt from registration under the Securities Act of 1933, as
amended, in reliance on Rule 701 promulgated hereunder.
In March and April 1999, we sold an aggregate 5,714,285 shares of Series C
preferred stock to CNET, Inc., GE Capital Equity Investments, Inc., Intersouth
Partners IV, L.P., Noro-Moseley Partners, IV, L.P., Noro-Moseley Partners IV B,
L.P., Societe Generale Capital Corporation, Southeast Interactive Technology
Fund II, LLC, and Wakefield Group II, LLC for an aggregate offering price of
$24,000,000. This issuance of securities was deemed to be exempt from
registration under the Securities Act of 1933, as amended, in reliance on
Section 4(2) thereof.
Recipients of securities in these transactions represented their intention
to acquire the securities for investment purposes only and not with a view to or
for the sale in connection with any distribution of those securities, and we
affixed appropriate legends to the share certificates issued in those
transactions. All recipients of these securities had adequate access, through
their relationships with us or otherwise, to information about us.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1.1+ -- Form of Underwriting Agreement.
3.1+ -- Amended and Restated Certificate of Incorporation of the
Registrant.
3.3+ -- Amended and Restated Bylaws of the Registrant.
4.1+ -- See Exhibits 3.1 and 3.3 for provisions of the Amended and
Restated Certificate of Incorporation and Amended and
Restated Bylaws of the Registrant defining rights of the
holders of Common Stock of the Registrant.
4.2+ -- Specimen Stock Certificate.
5.1+ -- Opinion of Morris, Manning & Martin, L.L.P., Counsel to the
Registrant, as to the legality of the shares being
registered.
10.1* -- Office Space Lease dated May 15, 1998 by Ticon, Inc. and
OpenSite.
10.2* -- Office Space Lease dated August 31, 1998 by Ticon
Properties, LLC and OpenSite.
10.3* -- Commercial Lease (Office) dated October 26, 1998 by and
between K.K.G.R.H. Assoc. L.P. and OpenSite.
10.4* -- Office Space Lease dated February 16, 1999 by Ticon
Properties, LLC and OpenSite.
10.5* -- OpenSite Stock Option Plan.
10.6* -- Amendment No. 1 to OpenSite Stock Option Plan.
10.7+ -- Amended and Restated Executive Employment Agreement dated as
of July 8, 1999 by and between OpenSite and Kip A. Frey.
</TABLE>
II-2
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
10.8+ -- Amended and Restated Restricted Stock Agreement dated as of
July 8, 1999 by and between OpenSite and Kip A. Frey.
10.9* -- Registration Rights Agreement dated as of March 30, 1999.
10.10* -- Agreement dated as of March 30, 1999, by and between
OpenSite and Kip A. Frey
10.11* -- Pledge Agreement, dated as of March 30, 1999, by and among
OpenSite, Kip A. Frey and Gross, Shuman, Brizdle &
Gilgillan, P.C.
10.12+ -- Form of Indemnity Agreement.
10.13+ -- Form of OpenSite Business Partner Agreement.
10.14+ -- Form of OpenSite Concierge Auction Hosting and Services
Agreement.
10.15+ -- Form of License Agreement.
10.16+ -- Office Space Lease commencement date July 1, 1999 by CMD
Properties, Inc. and OpenSite.
16.1** -- Letter from KPMG LLP, dated July , 1999.
21.1* -- List of Subsidiaries.
23.1+ -- Consent of PricewaterhouseCoopers LLP.
23.2+ -- Consent of Morris, Manning & Martin, L.L.P. (included in
Exhibit 5.1).
24.1 -- Powers of Attorney (included on signature page).
27.1+ -- Financial Data Schedule (for SEC use only).
</TABLE>
- ------------------------------
+ Filed herewith.
* Previously filed.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The Registrant hereby undertakes that:
(i) 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 the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(ii) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Raleigh, State of North
Carolina on the 12th day of July, 1999.
OPENSITE TECHNOLOGIES, INC.
By: /s/ KIP A. FREY
------------------------------------
Kip A. Frey
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kip A. Frey and Richard E. Widin and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any subsequent registration
statements pursuant to Rule 462 of the Securities Act and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorney-in-fact
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KIP A. FREY President, Chief Executive Officer July 12, 1999
- --------------------------------------- (Principal Executive Officer) and
Kip A. Frey Director
/s/ TIMOTHY K. OAKLEY Vice President and Chief Financial July 12, 1999
- --------------------------------------- Officer (Principal Financial and
Timothy K. Oakley Accounting Officer)
* Director July 12, 1999
- ---------------------------------------
Justin Hall-Tipping
* Director July 12, 1999
- ---------------------------------------
Roger Hurwitz
* Director July 12, 1999
- ---------------------------------------
Mark Jauquet
* Director July 12, 1999
- ---------------------------------------
Ross B. Kenzie
Director
- ---------------------------------------
Mitchell Mumma
</TABLE>
II-4
<PAGE> 91
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director July 12, 1999
- ---------------------------------------
Alan J. Taetle
*By: /s/ KIP A. FREY
- ---------------------------------------
Kip A. Frey,
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 92
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1.1+ -- Form of Underwriting Agreement.
3.1+ -- Amended and Restated Certificate of Incorporation of the
Registrant.
3.3+ -- Amended and Restated Bylaws of the Registrant.
4.1+ -- See Exhibits 3.1 and 3.3 for provisions of the Amended and
Restated Certificate of Incorporation and Amended and
Restated Bylaws of the Registrant defining rights of the
holders of Common Stock of the Registrant.
4.2+ -- Specimen Stock Certificate.
5.1+ -- Opinion of Morris, Manning & Martin, L.L.P., Counsel to the
Registrant, as to the legality of the shares being
registered.
10.1* -- Office Space Lease dated May 15, 1998 by Ticon, Inc. and
OpenSite.
10.2* -- Office Space Lease dated August 31, 1998 by Ticon
Properties, LLC and OpenSite.
10.3* -- Commercial Lease (Office) dated October 26, 1998 by and
between K.K.G.R.H. Assoc. L.P. and OpenSite.
10.4* -- Office Space Lease dated February 16, 1999 by Ticon
Properties, LLC and OpenSite.
10.5* -- OpenSite Stock Option Plan.
10.6* -- Amendment No. 1 to OpenSite Stock Option Plan.
10.7+ -- Amended and Restated Executive Employment Agreement dated as
of July 8, 1999 by and between OpenSite and Kip A. Frey.
10.8+ -- Amended and Restated Restricted Stock Agreement dated as of
July 8, 1999 by and between OpenSite and Kip A. Frey.
10.9* -- Registration Rights Agreement dated as of March 30, 1999.
10.10* -- Agreement dated as of March 30, 1999, by and between
OpenSite and Kip A. Frey
10.11* -- Pledge Agreement, dated as of March 30, 1999, by and among
OpenSite, Kip A. Frey and Gross, Shuman, Brizdle &
Gilgillan, P.C.
10.12+ -- Form of Indemnity Agreement.
10.13+ -- Form of OpenSite Business Partner Agreement.
10.14+ -- Form of OpenSite Concierge Auction Hosting and Services
Agreement.
10.15+ -- Form of License Agreement.
10.16+ -- Office Space Lease commencement date July 1, 1999 by CMD
Properties, Inc. and OpenSite.
16.1** -- Letter from KPMG LLP, dated July , 1999.
21.1* -- List of Subsidiaries.
23.1+ -- Consent of PricewaterhouseCoopers LLP.
23.2+ -- Consent of Morris, Manning & Martin, L.L.P. (included in
Exhibit 5.1).
24.1 -- Powers of Attorney (included on signature page).
27.1+ -- Financial Data Schedule (for SEC use only).
</TABLE>
- ------------------------------
+ Filed herewith.
* Previously filed.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
[NUMBER OF SHARES]
OPENSITE TECHNOLOGIES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
, 1999
SG COWEN SECURITIES CORPORATION
SOUNDVIEW TECHNOLOGY GROUP, INC.
WACHOVIA SECURITIES, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
As Representatives of the several Underwriters
c/o SG Cowen Securities Corporation
One Financial Square
New York, New York 10005
Dear Sirs:
1. INTRODUCTORY. OpenSite Technologies, Inc., a Delaware corporation
(the "Company"), proposes to sell, pursuant to the terms of this Agreement, to
the several underwriters named in Schedule A hereto (the "Underwriters," or,
each, an "Underwriter"), an aggregate of ____ shares of common stock, par value
$0.01 per share (the "Common Stock"), of the Company. The aggregate of ____
shares so proposed to be sold is hereinafter referred to as the "Firm Stock."
The Company also proposes to sell to the Underwriters, upon the terms and
conditions set forth in Section 3 hereof, up to an additional ______ shares of
the Common Stock (the "Optional Stock"). The Firm Stock and the Optional Stock
that the Underwriters elect to purchase pursuant to Section 3 hereof are
hereinafter collectively referred to as the "Stock." SG Cowen Securities
Corporation ("SG Cowen"), SoundView Technology Group, Inc.,Wachovia Securities,
Inc. and The Robinson-Humphrey Company, LLC are acting as representatives of the
several Underwriters and in such capacity are hereinafter referred to as the
"Representatives."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-79629)
in respect of the Stock has been filed with the Securities and Exchange
Commission (the "Commission"); such registration statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; no other document with respect to such registration statement has
heretofore been filed with the Commission; and no stop order suspending
the effectiveness of such registration statement has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission; a second registration statement on Form S-1 with respect to
the stock (i) may also be prepared by the Company in conformity with
the requirements of the Securities Act and the rules and regulations of
the Commission thereunder and (ii) if to be so prepared, will be filed
with the Commission under the Securities Act pursuant to Rule 462(b) of
the
<PAGE> 2
2
rules and regulations on [the date hereof] (each prospectus included in
any such registration statement, or amendments thereof, before it
became effective under the Securities Act and any prospectus filed with
the Commission pursuant to Rule 424(a) of the rules and regulations of
the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), is hereinafter called a "Preliminary Prospectus";
the first registration statement referred to in this Section 2(a), as
amended at its Effective Time (as defined below) is hereinafter called
the "Primary Registration Statement"; the second registration
statement, if any, referred to in this Section 2(a), as filed with the
Commission is hereinafter called the "Rule 462(b) Registration
Statement", and "Registration Statements" means both the Primary
Registration Statement and any Rule 462(b) Registration Statement,
including in each case all exhibits thereto and including in each case
the information contained in the form of final prospectus filed with
the Commission pursuant to Rule 424(b) under the Securities Act in
accordance with Section 4(a) hereof and deemed by virtue of Rule 430A
under the Securities Act to be part of the Registration Statements, as
of the Effective Time of the Primary Registration Statement pursuant to
paragraph (b) of Rule 430A under the Securities Act; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Securities Act, is hereinafter called the "Prospectus." "Effective
Time" means (i) with respect to the Primary Registration Statement, the
date and the time it or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission and (ii) with
respect to the Rule 462(b) Registration Statement, the date and time as
of which it is filed with the Commission. "Effective Date" means with
respect to both the Primary Registration Statement and the Rule 462(b)
Registration Statement, the date of each of their respective Effective
Times). No document has been or will be prepared or distributed in
reliance on Rule 434 under the Securities Act. No order preventing or
suspending the use of any Preliminary Prospectus has been issued by the
Commission, and each Preliminary Prospectus, at the time of filing
thereof, conformed in all material respects to the requirements of the
Securities Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the foregoing representation and warranty shall not apply
to information contained in or omitted from any Preliminary Prospectus
in reliance upon, and in conformity with, written information furnished
to the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein.
(b) The Primary Registration Statement conforms (and the Rule
462(b) Registration Statement, if any, the Prospectus and any further
amendments or supplements to the Registration Statements or the
Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform) in all material respects
to the requirements of the Securities Act and the rules and regulations
of the Commission thereunder and do not and will not, as of the
applicable effective date (as to the Registration Statements and any
amendment thereto) and as of the applicable filing date (as to the
Prospectus and any amendment or supplement thereto) contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the foregoing
representation and warranty shall not apply to information contained in
or omitted from the Registration Statements or the Prospectus or any
such amendment or supplement thereto in reliance
<PAGE> 3
3
upon, and in conformity with, written information furnished to the
Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein.
(c) Each of the Company and its subsidiaries (as defined in
Section 15) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which its ownership or
lease of property or the conduct of its business requires such
qualification and has all power and authority necessary to own or hold
its properties and to conduct its business as described in the
Prospectus, except where the failure to so qualify or have such power
or authority would not have, singularly or in the aggregate, a material
adverse effect on the condition (financial or otherwise), results of
operations, business or prospects of the Company and its subsidiaries,
taken as a whole, or prevent or adversely affect in any material
respect the ability of the Company to perform its obligations under
this Agreement (a "Material Adverse Effect"). Except for Open Site
Europe Limited ("OpenSite Europe"), the Company does not own or
control, directly or indirectly, any interest or investment in any
corporation, partnership, association or other form of business entity.
(d) This Agreement has been duly authorized executed and
delivered by the Company.
(e) The Stock to be issued and sold by the Company to the
Underwriters hereunder has been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued, fully paid and non-assessable and free of
any preemptive or similar rights and will conform, in all material
respects, to the description thereof contained in the Prospectus.
(f) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform, in all material respects, to the
description thereof contained in the Prospectus.
(g) All the issued shares of capital stock of each subsidiary
of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and, except to the extent set forth in
the Prospectus, are owned by the Company directly or indirectly through
one or more wholly-owned subsidiaries, free and clear of any claim,
lien, encumbrance, security interest, restriction upon voting or any
other claim of any third party.
(h) The execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated
hereby will not conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject and which is, singularly or in the aggregate,
material to the Company and its subsidiaries, taken as a whole, nor
will such actions result in any violation of the provisions of the
charter or by-laws of the Company
<PAGE> 4
4
or any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties or assets (except for statutes, rules, orders or
regulations the violation of which would not, singularly or in the
aggregate, have a Material Adverse Effect; except for (i) the
registration of the Stock under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and (ii) such
consents, approvals, authorizations, registrations or qualifications as
may be required under applicable state securities laws in connection
with the purchase and distribution of the Stock by the Underwriters, no
consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement by the Company
and the consummation of the transactions contemplated hereby, except
for any such consents, approvals, authorizations, orders, filings or
registrations the lack of which would not, singularly or in the
aggregate, have a Material Adverse Effect.
(i) PriceWaterhouseCoopers LLP, who have expressed their
opinions on the audited financial statements included in the
Registration Statements and the Prospectus are independent public
accountants with respect to the Company and its subsidiaries as
required by the Securities Act and the rules and regulations of the
Commission thereunder.
(j) The financial statements, together with the related notes,
included in the Registration Statements and the Prospectus fairly
present in all material respects the financial position and results of
operations and changes in financial position of the Company and its
consolidated subsidiaries at the respective dates and for the
respective periods therein specified. Such statements and related notes
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis except as may be set forth in
the Prospectus.
(k) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included in the Prospectus, any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since such date, neither the
Company nor any of its subsidiaries has incurred any liabilities or
obligations, direct or contingent, or entered into any transaction, not
in the ordinary course of business, which are material to the Company
and its subsidiaries taken as a whole, and there has not been any
change in the capital stock or short- or long-term debt of the Company
or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the business, general affairs, management, financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Prospectus.
(l) Except as set forth in the Prospectus, there is no legal
or governmental proceeding pending to which the Company or any of its
subsidiaries is a party or to which any property or assets of the
Company or any of its subsidiaries is subject which, singularly or in
the aggregate, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to
<PAGE> 5
5
have a Material Adverse Effect; and to the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others.
(m) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter or by-laws, (ii) is in default in any respect,
and no event has occurred which, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance
of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which
any of its property or assets is subject or (iii) is in violation in
any respect of any law, ordinance, governmental rule, regulation or
court decree to which it or its property or assets may be subject,
except in the case of clauses (ii) and (iii) for any defaults or
violations which, singularly or in the aggregate, would not have a
Material Adverse Effect.
(n) Each of the Company and its subsidiaries possesses all
licenses, certificates, authorizations and permits issued by, and has
made all declarations and filings with, the appropriate state, federal
and foreign regulatory agencies and bodies which are necessary for the
ownership of its properties and the conduct of its business as
described in the Prospectus, except where any failures to possess or
make the same, singularly or in the aggregate, would not have a
Material Adverse Effect; and the Company has not received notification
of any revocation or modification of any such license, authorization or
permit and has no reason to believe that any such license, certificate,
authorization or permit will not be renewed.
(o) Neither the Company nor any of its subsidiaries is and,
after giving effect to the offering of the Stock and the application of
the proceeds thereof as described in the Prospectus will become, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended, and the rules and regulations of the Commission
thereunder.
(p) None of the Company nor any of its subsidiaries, nor any
of their respective officers, directors or affiliates has taken or will
take, directly or indirectly, any action designed or intended to
stabilize or manipulate the price of any security of the Company, or
which caused or resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the
price of any security of the Company.
(q) Each of the Company and its subsidiaries owns or possesses
the right to use all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets and rights described in the
Prospectus as being owned or used by it for the conduct of its
business; and neither the Company nor any of its subsidiaries is aware
of any claim to the contrary or any challenge by any other person to
the rights of the Company or any of its subsidiaries with respect to
the foregoing; to the Company's knowledge, neither the business of the
Company nor any of its subsidiaries as now conducted and as proposed to
be conducted (as described in the Registration Statement) does and will
infringe or conflict with any patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses or other intellectual
property or franchise right of any person; and no claim has been made
against the Company or any of its subsidiaries alleging the
infringement by the Company or any of its
<PAGE> 6
6
subsidiaries of any patent, trademark, service mark, trade name,
copyright, trade secret, license, other intellectual property right or
franchise right of any person.
(r) Each of the Company and its subsidiaries has good and
marketable title in fee simple to, or has valid rights to lease or
otherwise use, all items of real or personal property which are
material to the business of the Company and its subsidiaries, taken as
a whole, in each case free and clear of all liens, encumbrances, claims
and defects that could reasonably be expected to result in a Material
Adverse Effect.
(s) No labor disturbance by the employees of each of the
Company and its subsidiaries exists or, to the Company's knowledge, is
imminent which could reasonably be expected to have a Material Adverse
Effect. The Chief Executive Officer of the Company is not aware that
any key employee plans or significant group of employees of the Company
or any of its subsidiaries plan, to terminate employment with the
Company or any of its subsidiaries.
(t) Each employee benefit plan, agreement, policy or other
arrangement, under which any current or former employee or director of
the Company or any of its subsidiaries has any present or future right
to benefits or under which the Company or any of its subsidiaries has
any present or future liability (the "Company Plans") has been
established and administered in all material respects in accordance
with its terms and in compliance in all material respects with the
applicable provisions of Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as
amended (the "Code") and other applicable laws, rules and regulations;
each Company Plan which is intended to be qualified within the meaning
of Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and nothing has occurred,
whether by action or failure to act, that could reasonably be expected
to cause the loss of such qualification; no "reportable event" (as such
term is defined in ERISA section 4043) or "prohibited transaction" (as
such term is defined in ERISA section 406 and Code section 4975) or
"accumulated funding deficiency" (as such term is defined in ERISA
section 302 and Code section 412 (whether or not waived)) has occurred
with respect to any Company Plan, which in the aggregate could
reasonably be expected to have a Material Adverse Effect; the Company
has not incurred and does not expect to incur any liability under Title
IV of ERISA (other than for contributions or premium payments in the
ordinary course), which liability in the aggregate could reasonably be
expected to have a Material Adverse Effect.
(u) There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission or other release of
any kind of toxic or other wastes or other hazardous substances by, due
to, or caused by the Company or any of its subsidiaries (or, to the
Company's knowledge, any other entity for whose acts or omissions the
Company or any of its subsidiaries is or may be liable) upon any of the
property now or previously owned or leased by the Company or any of its
subsidiaries, or upon any other property, in violation of any statute
or any ordinance, rule, regulation, order, judgment, decree or permit
or which would, under any statute or any ordinance, rule (including
rule of common law), regulation, order, judgment, decree or permit,
give rise to any liability, except for any violation or liability which
would not have, singularly or in the aggregate with all such violations
and liabilities, a Material Adverse Effect; there has been no disposal,
<PAGE> 7
7
discharge, emission or other release of any kind onto such property or
into the environment surrounding such property of any toxic or other
wastes or other hazardous substances with respect to which the Company
or any of its subsidiaries have knowledge, except for any such
disposal, discharge, emission, or other release of any kind which would
not have, singularly or in the aggregate with all such discharges and
other releases, a Material Adverse Effect.
(v) Each of the Company and its subsidiaries (i) has filed all
necessary federal, state and foreign income and franchise tax returns,
(ii) has paid all federal, state, local and foreign taxes due and
payable for which it is liable and (iii) does not have any tax
deficiency or claims outstanding or assessed or, to the Company's
knowledge, proposed against it which could reasonably be expected to
have a Material Adverse Effect.
(w) Each of the Company and its subsidiaries carries, or is
covered by, insurance in such amounts and covering such risks that the
Company reasonably believes is adequate for the conduct of its business
and the value of its properties and as is customary for companies
engaged in similar businesses in similar industries.
(x) Each of the Company and its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(y) The minute books of each of the Company and its
subsidiaries (or duplicates thereof) have been made available to the
Underwriters and counsel for the Underwriters, and such books (or
duplicates) (i) contain a complete summary in all material respects of
all meetings and actions of the directors and shareholders of each of
the Company and its subsidiaries since the time of its incorporation
through the date of the latest meeting and action and (ii) accurately
reflect in all material respects all actions referred to in such
minutes.
(z) There is no franchise, lease, contract, agreement or
document required by the Securities Act or by the rules and regulations
of the Commission thereunder to be described in the Prospectus or to be
filed as an exhibit to either of the Registration Statements which has
not been so described or filed as required; and all descriptions of any
such franchises, leases, contracts, agreements or documents contained
in the Prospectus are fair and accurate summary descriptions of such
documents in all material respects.
(aa) No relationship, direct or indirect, exists between or
among the Company or any of its subsidiaries on the one hand, and the
directors, officers, stockholders, customers or suppliers of the
Company or any of its subsidiaries on the other hand, which is required
to be described in the Prospectus and which is not so described.
<PAGE> 8
8
(bb) No person or entity has the right to require that shares
of Common Stock or other securities of the Company be registered as
part of the Registration Statements because of the filing or
effectiveness of the Registration Statements or otherwise, except for
persons and entities who have expressly waived such right or who have
been given proper notice and have failed to exercise such right within
the time or times required under the terms and conditions of such
right.
(cc) Neither the Company nor any of its subsidiaries is a
party to any contract, agreement or understanding with any person that
would give rise to a valid claim against the Company or any of its
subsidiaries or the Underwriters for a brokerage commission, finder's
fee or like payment in connection with the offering and sale of the
Stock.
(dd) No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act)
contained in the Prospectus has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.
(ee) Each of the Company and its subsidiaries has reviewed its
operations and that of any third parties with which each of the Company
and its subsidiaries has a material relationship to evaluate the extent
to which the business or operations of each of the Company and its
subsidiaries will be affected by the Year 2000 Problem. As a result of
such review, each of the Company and its subsidiaries has no reason to
believe, and does not believe, that the Year 2000 Problem will have a
Material Adverse Effect. The "Year 2000 Problem" as used herein means
any significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000.
(ff) The Stock has been approved for listing subject to notice
of issuance on the Nasdaq National Market.
3. PURCHASE SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to each
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Company, that number of shares of Firm Stock set forth opposite the
name of such Underwriter in Schedule A hereto.
The purchase price per share to be paid by the Underwriters to the
Company for the Stock will be $_____ per share (the "Purchase Price").
The Company hereby confirms its engagement of Soundview Technology
Group, Inc. as, and Soundview Technology Group, Inc. hereby confirms its
agreement with the Company to render services as, a "qualified independent
underwriter" within the meaning of Rule 2720 of the Conduct Rules of the
National Association of Securities Dealers, Inc. with respect to the offering
and sale of the Stock. SoundView
<PAGE> 9
9
Technology Group, Inc., in its capacity as qualified independent underwriter and
not otherwise, is referred to herein as the "QIU". The Company and SoundView
Technology Group, Inc. hereby agree that $10,000 of the underwriting discounts
to be received by SoundView Technology Group, Inc. pursuant to this Section 3
will be compensation for its services as QIU hereunder.
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York City time, on the second full business day preceding the
First Closing Date (as defined below) against payment of the aggregate Purchase
Price therefor by wire transfer to an account at a bank acceptable to SG Cowen,
payable to the order of the Company, at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York City, New York. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement
is a further condition of the obligations of each Underwriter hereunder. The
time and date of the delivery and closing shall be at 10:00 A.M., New York City
time, on , 1999, in accordance with Rule 15c6-1 of the Exchange Act. The time
and date of such payment and delivery are herein referred to as the "First
Closing Date." The First Closing Date and the location of delivery of, and the
form of payment for, the Firm Stock may be varied by agreement between the
Company and SG Cowen.
The Company shall make the certificates for the Firm Stock available to
the Representatives for examination on behalf of the Underwriters in New York
City, New York not later than 10:00 A.M., New York City time, on the business
day preceding the First Closing Date.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Underwriters may purchase all or less than all of the Optional Stock. The price
per share to be paid for the Optional Stock shall be the Purchase Price. Such
shares of Optional Stock shall be purchased from the Company for the account of
each Underwriter in the same proportion as the number of shares of Firm Stock
set forth opposite such Underwriter's name bears to the total number of shares
of Firm Stock (subject to adjustment by SG Cowen to eliminate fractions). The
option granted hereby may be exercised as to all or any part of the Optional
Stock at any time, and from time to time, not more than thirty (30) days
subsequent to the date of this Agreement. No Optional Stock shall be sold and
delivered unless the Firm Stock previously has been, or simultaneously is, sold
and delivered. The right to purchase the Optional Stock or any portion thereof
may be surrendered and terminated at any time upon notice by SG Cowen to the
Company.
The option granted hereby may be exercised by written notice being
given to the Company by SG Cowen setting forth the number of shares of the
Optional Stock to be purchased by the Underwriters and the date and time for
delivery of and payment for the Optional Stock. Each date and time for delivery
of and payment for the Optional Stock (which may be the First Closing Date, but
not earlier) is herein called an "Option Closing Date" and shall in no event be
earlier than two (2) business days nor later than five (5) business days after
written notice is given. The Option Closing Date(s) and the First Closing Date
are herein called the "Closing Dates."
<PAGE> 10
10
The Company will deliver the Optional Stock to the Representatives for
the respective accounts of the several Underwriters in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York City time, on the second full business day preceding the
applicable Option Closing Date against payment of the aggregate Purchase Price
therefor in federal (same day) funds by certified or official bank check or
checks or wire transfer to an account at a bank acceptable to SG Cowen, payable
to the order of the Company, at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York City, New York. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of each Underwriter hereunder. The Option Closing
Date and the location of delivery of, and the form of payment for, the Optional
Stock may be varied by agreement among the Company and SG Cowen.
The Company shall make the certificates for the Optional Stock
available to the Representatives for examination on behalf of the Underwriters
in New York City, New York not later than 10:00 A.M., New York City time, on the
business day preceding the applicable Option Closing Date.
The several Underwriters propose to offer the Stock for sale upon the
terms and conditions set forth in the Prospectus; provided, however, that no
Stock registered pursuant to the Rule 462(b) Registration Statement, if any,
shall be offered prior to the Effective Time thereof.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) The Company will prepare the Rule 462(b) Registration
Statement, if necessary, in a form approved by the Representatives and
to file such Rule 462(b) Registration Statement with the Commission on
[the date hereof]; prepare the Prospectus in a form approved by the
Representatives and file such Prospectus pursuant to Rule 424(b) under
the Securities Act not later than the second business day following the
execution and delivery of this Agreement, or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Securities
Act; make no further amendment or any supplement to the Registration
Statements or to the Prospectus to which the Representatives shall
reasonably object by notice to the Company after a reasonable period to
review; advise the Representatives, promptly after it receives notice
thereof, of the time when any amendment to either Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish the
Representatives with copies thereof; advise the Representatives,
promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus, of the
suspension of the qualification of the Stock for offering or sale in
any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statements or the
Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus or suspending any
such qualification, use promptly its reasonable best efforts to obtain
its withdrawal.
<PAGE> 11
11
(b) If at any time prior to the expiration of nine months
after the Effective Time of the Primary Registration Statement when a
prospectus relating to the Stock is required to be delivered any event
occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact, or
omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Securities Act, the Company will promptly notify the
Representatives thereof and upon their request will prepare an amended
or supplemented Prospectus which will correct such statement or
omission or effect such compliance. The Company will furnish without
charge to each Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably request
of such amended or supplemented Prospectus; and in case any Underwriter
is required to deliver a prospectus relating to the Stock nine months
or more after the Effective Time of the Primary Registration Statement,
the Company upon the request of the Representatives and at the expense
of such Underwriter will prepare promptly an amended or supplemented
Prospectus as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Securities Act.
(c) The Company will furnish promptly to each of the
Representatives and to counsel for the Underwriters a signed copy of
each of the Registration Statements as originally filed with the
Commission, and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith.
(d) The Company will deliver promptly to the Representatives
in New York City such number of the following documents as the
Representatives shall reasonably request: (i) conformed copies of each
of the Registration Statements as originally filed with the Commission
and each amendment thereto, (ii) each Preliminary Prospectus and (iii)
the Prospectus (not later than 10:00 A.M., New York City time, of the
business day following the execution and delivery of this Agreement)
and any amended or supplemented Prospectus (not later than 10:00 A.M.,
New York City time, on the business day following the date of such
amendment or supplement).
(e) The Company will make generally available to its
shareholders as soon as practicable, but in any event not later than
eighteen months after the Effective Date of the Primary Registration
Statement (as defined in Rule 158(c) under the Securities Act), an
earnings statement of the Company and its subsidiaries (which need not
be audited), complying with Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158).
(f) The Company will promptly take from time to time such
actions as the Representatives may reasonably request to qualify the
Stock for offering and sale under the securities or Blue Sky laws of
such jurisdictions as the Representatives may designate and to continue
such qualifications in effect for so long as required for the
distribution of the Stock; provided that the Company and its
subsidiaries shall not be obligated to qualify as foreign corporations
in any jurisdiction in which they are not so qualified or to file a
general consent to service of process in any jurisdiction.
<PAGE> 12
12
(g) During the period of five years from the Effective Date of
the Primary Registration Statement, the Company will deliver to the
Representatives and, upon request, to each of the other Underwriters,
(i) as soon as they are available, copies of all reports or other
communications furnished to shareholders and (ii) as soon as they are
available, copies of any reports and financial statements furnished or
filed with the Commission pursuant to the Exchange Act or any national
securities exchange or automatic quotation system on which the Stock is
listed or quoted.
(h) The Company will not: (1) directly or indirectly, offer,
sell, assign, transfer, encumber, pledge, contract to sell, sell any
option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend or otherwise
dispose of, other than by operation of law, any shares of Common Stock
or any securities convertible into or exercisable or exchangeable for
Common Stock (including without limitation, Common Stock which may be
deemed to be beneficially owned in accordance with the rules and
regulations promulgated under the Securities Act); or (2) enter into
any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of Common Stock
whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in
cash or otherwise, for a period of 180 days following the date of the
Prospectus without the prior written consent of SG Cowen, other than
(i) the Company's sale of the Stock hereunder, (ii) the grant of
options or the issuance of shares pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans
existing on the date hereof or pursuant to currently outstanding
options, warrants or rights, (iii) the Company's issuance of shares of
Common Stock upon the conversion of the outstanding shares of the
Company's Preferred Stock in connection with the consummation of the
transactions contemplated hereby and by the Prospectus, or (iv) the
Company's issuance of shares of Common Stock in connection with the
acquisition of, or joint venture or similar transaction with, another
business or entity, provided that the terms of such acquisition or
joint venture prohibit the resale or other disposition of such shares
for the period ending 180 days after the date hereof; the Company will
cause each officer, director, shareholder and optionholder listed in
Schedule B hereto to furnish to the Representatives, prior to the First
Closing Date, a letter, substantially in the form of Exhibit I hereto,
pursuant to which each such person shall agree not to engage in the
activities set forth in (1) and (2) above for a period of 180 days
following the date of the Prospectus, without the prior written consent
of SG Cowen.
(i) The Company promptly will supply the Representatives with
copies of all correspondence to and from, and all documents issued to
and by, the Commission in connection with the registration of the Stock
under the Securities Act.
(j) Prior to each of the Closing Dates, the Company will
furnish to the Representatives, as soon as they have been prepared,
copies of any unaudited interim consolidated financial statements of
the Company for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statements and the
Prospectus.
(k) Prior to the last possible date which could be an Option
Closing Date, the Company will not issue any press release or other
communication, directly or indirectly, or hold any press conference
with respect to the Company, its condition, financial or otherwise, or
earnings, business
<PAGE> 13
13
affairs or business prospects (except for routine oral marketing
communications in the ordinary course of business and consistent with
the past practices of the Company and of which the Representatives are
notified), without the prior written consent of the Representatives,
unless in the judgment of the Company and its counsel, and after
notification to the Representatives, such press release or
communication is required by law.
(l) In connection with the offering of the Stock, until SG
Cowen shall have notified the Company of the completion of the resale
of the Stock, the Company will not, and will cause its affiliated
purchasers (as defined in Regulation M under the Exchange Act) not to,
either alone or with one or more other persons, bid for or purchase,
for any account in which it or any of its affiliated purchasers has a
beneficial interest, any Stock, or attempt to induce any person to
purchase any Stock; and not to, and to cause its affiliated purchasers
not to, make bids or purchase for the purpose of creating actual, or
apparent, active trading in or of raising the price of the Stock.
(m) [The Company will not take any action prior to the last
possible date which could be an Option Closing Date which would require
the Prospectus to be amended or supplemented pursuant to Section 4(b).]
(n) The Company will apply the net proceeds from the sale of
the Stock as set forth in the Prospectus under the heading "Use of
Proceeds."
5. PAYMENT OF EXPENSES. The Company agrees with each Underwriter to pay
(i) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Stock and any taxes payable in that connection; (ii) the costs
incident to the registration of the Stock under the Securities Act and the
Exchange Act; (iii) the costs incident to the preparation, printing and
distribution of the Registration Statements, Preliminary Prospectus, Prospectus
and any amendments, supplements and exhibits thereto; (iv) the costs of
printing, reproducing and distributing by mail, telex or other means of
communications the Agreement Among Underwriters among the Representatives and
the Underwriters, the Master Selected Dealers' Agreement, the Underwriters'
Questionnaire and this Agreement; (v) the fees and expenses (including related
fees and expenses of counsel for the Underwriters) incurred in connection with
filings made with the National Association of Securities Dealers, Inc.; (vi) any
applicable listing or other fees; (vii) the fees and expenses of qualifying the
Stock under the securities laws of the several jurisdictions as provided in
Section 4(f) and of preparing, printing and distributing Blue Sky Memoranda and
Legal Investment Surveys (including related fees and expenses of counsel to the
Underwriters); (viii) all fees and expenses of the registrar and transfer agent
of the Stock; and (ix) all other costs and expenses incident to the performance
of the obligations of the Company under this Agreement (including, without
limitation, the fees and expenses of the Company's counsel and the Company's
independent accountants); provided that, except as otherwise provided in this
Section 5 and in Section 10, the Underwriters shall pay their own costs and
expenses, including the fees and expenses of their counsel, any transfer taxes
on the Stock which they may sell and the expenses of advertising any offering of
the Stock made by the Underwriters.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations
of the several Underwriters hereunder, as to the shares of Stock to be delivered
at each Closing Date, are subject to the accuracy, when made and at and as of
such Closing Date, of the representations and warranties of the
<PAGE> 14
14
Company contained herein, to the accuracy of the statements of the Company made
in any certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to each of the following additional
terms and conditions:
(a) The Rule 462(b) Registration Statement, if any, and the
Prospectus shall have been filed with the Commission pursuant to Rule
424(b) within the applicable time period prescribed for such filing by
the rules and regulations of the Commission under the Securities Act
and in accordance with Section 4(a) hereof; no stop order suspending
the effectiveness of either of the Registration Statements or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission, and all requests
for additional information on the part of the Commission (to be
included in either of the Registration Statements or the Prospectus or
otherwise) shall have been complied with to the reasonable satisfaction
of the Representatives.
(b) None of the Underwriters shall have discovered and
disclosed to the Company on or prior to such Closing Date that either
of the Registration Statements or the Prospectus or any amendment or
supplement thereto contains an untrue statement of a fact which, in the
opinion of counsel for the Underwriters, is material or omits to state
any fact which, in the opinion of such counsel, is material and is
required to be stated therein or is necessary to make the statements
therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of each of this Agreement, the
Stock, the Registration Statements and the Prospectus, and all other
legal matters relating to this Agreement and the transactions
contemplated hereby shall be reasonably satisfactory in all material
respects to counsel for the Underwriters and the Company shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(d) Morris, Manning & Martin, L.L.P. and Hutchison & Mason,
PLLC shall have furnished to the Representatives such counsels' written
opinion, as counsel to the Company, addressed to the Underwriters and
dated such Closing Date, in form and substance reasonably satisfactory
to the Representatives, to the effect that:
(i) Each of the Company and its subsidiaries (as defined
in Section 15) has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation
and has all power and authority necessary to own and
hold its properties and to conduct its business as
described in the Prospectus, except where the failure
to so qualify or have such power or authority would
not have, singularly or in the aggregate, a Material
Adverse Effect.
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares
of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof
contained in the Prospectus. The Stock to be issued
and sold by the Company to the Underwriters hereunder
has been duly and validly authorized
<PAGE> 15
15
and, when issued and delivered against payment
therefor as provided herein, will be duly and validly
issued, fully paid and non-assessable and free of any
preemptive rights pursuant to the Company's
Certificate of Incorporation or Bylaws or the
Delaware General Corporation Law or, to our
knowledge, similar contractual rights and will
conform in all material respects to the description
thereof contained in the Prospectus.
(iii) There are no preemptive rights pursuant to the
Company's Certificate of Incorporation or Bylaws or
the Delaware General Corporation Law or, to the
knowledge of such counsel, other similar contractual
rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any
shares of the Stock.
(iv) All the issued shares of capital stock of each
subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and
non-assessable and, except to the extent set forth in
the Prospectus, are owned by the Company directly or
indirectly through one or more wholly-owned
subsidiaries, free and clear of any claim, lien,
encumbrance, security interest, restriction upon
voting or any other claim of any third party.
(v) This Agreement has been duly authorized, executed and
delivered by the Company.
(vi) The execution, delivery and performance of this
Agreement by the Company and the consummation of the
transactions contemplated hereby will not conflict
with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under
any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument that is
filed as an exhibit to the Registration Statement,
nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company
or of any of its subsidiaries or any statute or any
order, rule or regulation of any court or
governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of
their properties or assets (except for statutes,
rules, orders or regulations the violation of which
would not, singularly or in the aggregate, have a
Material Adverse Effect); except for (i) the
registration of the Stock under the Securities Act
and the Exchange Act and (ii) such consents,
approvals, authorizations, registrations or
qualifications as may be required under applicable
state securities laws in connection with the purchase
and distribution of the Stock by the Underwriters, no
consent, approval, authorization or order of, or
filing or registration with, any such court or
governmental agency or body is required for the
execution, delivery and performance of this Agreement
by the Company and the consummation of the
transactions contemplated hereby.
(vii) The statements made in the Prospectus under the
caption "Description of Capital Stock," insofar as
they purport to constitute summaries of the terms of
the Common Stock (including the Stock), constitute
accurate summaries of the terms of the Common Stock
in all material respects.
<PAGE> 16
16
(viii) The descriptions in the Prospectus under the captions
"Risk Factors--Shares Eligible for Future Sale Could
Adversely Affect Stock Price in the Future,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and
Capital Resources; Recent Accounting Pronouncements,"
"Business--Customers; Licensing, Intellectual
Property and Proprietary Rights,"
"Management--Employment Agreements," "Description of
Capital Stock," and "Shares Eligible for Future Sale"
of statutes, legal or governmental proceedings and
contracts and other documents are accurate in all
material respects; and to the best of such counsel's
knowledge, there are no statutes, legal or
governmental proceedings, contracts or other
documents of a character required to be described in
the Prospectus or to be filed as exhibits to the
Registration Statements which are not described or
filed as required.
(ix) To such counsel's knowledge, each of the Company and
its subsidiaries possesses all licenses,
certificates, authorizations and permits issued by,
and has made all declarations and filings with, the
appropriate state, federal and foreign regulatory
agencies and bodies which are necessary or desirable
for the ownership of its properties and the conduct
of its business as described in the Prospectus,
except where any failures to possess or make the
same, singularly or in the aggregate, would not have
a Material Adverse Effect; and to such counsel's
knowledge, the Company has not received notification
of any revocation or modification of any such
license, authorization or permit.
(x) To such counsel's knowledge and except as set forth
in the Prospectus, there is no legal or governmental
proceeding pending to which the Company or any of its
subsidiaries is a party or to which any property or
assets of the Company or any of its subsidiaries is
subject which, singularly or in the aggregate, if
determined adversely to the Company or any of its
subsidiaries, could have a Material Adverse Effect;
and, to such counsel's knowledge, no such proceedings
are threatened or contemplated by governmental
authorities or threatened by others.
(xi) The Primary Registration Statement was declared
effective under the Securities Act as of the date and
time specified in such opinion; the Rule 462(b)
Registration Statement, if any, was filed with the
Commission on the date specified therein, the
Prospectus was timely filed with the Commission
pursuant to the subparagraph of Rule 424(b) of the
rules and regulations of the Commission specified in
such opinion on the date specified therein and no
stop order suspending the effectiveness of either of
the Registration Statements has been issued and, to
such counsel's knowledge, no proceeding for that
purpose has been initiated or threatened by the
Commission.
(xii) The Registration Statements (or, if applicable, the
Registration Statements as amended by any
post-effective amendment prior to such Closing Date),
as of their respective Effective Dates, and the
Prospectus (or, if applicable, the Prospectus as
<PAGE> 17
17
amended or supplemented prior to such Closing Date),
as of its date (other than the financial statements
and other financial data contained therein, as to
which such counsel need express no opinion) complied
as to form in all material respects with the
requirements of the Securities Act and the rules and
regulations of the Commission thereunder.
(xiii) To such counsel's knowledge, no person or entity has
the right to require shares of Common Stock or other
securities of the Company to be registered as part of
the Registration Statements because of the filing or
effectiveness of the Registration Statements or
otherwise, except for persons and entities who have
expressly waived such right or who have been given
proper notice and have failed to exercise such right
within the time or times required under the terms and
conditions of such right.
(xiv) Neither the Company nor any of its subsidiaries is
and, immediately after giving effect to the offering
of the Stock to be sold by the Company to the
Underwriters and the application of the proceeds
thereof as described in the Prospectus will become,
an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the
rules and regulations of the Commission thereunder.
Such counsel shall also have furnished to the
Representatives a written statement, addressed to the
Underwriters and dated such Closing Date, in form and
substance satisfactory to the Representatives, to the
effect that (x) such counsel has acted as counsel to
the Company in connection with the preparation of the
Registration Statements and the Prospectus (or, if
applicable, the Registration Statements as amended by
any post-effective amendment prior to such Closing
Date and, if applicable, the Prospectus as amended or
supplemented prior to such Closing Date), (y) based
on such counsel's examination of the Registration
Statements and the Prospectus (or, if applicable, the
Registration Statements as amended by any
post-effective amendment prior to such Closing Date
and, if applicable, the Prospectus as amended or
supplemented prior to such Closing Date) and such
counsel's investigations made in connection with the
preparation of the Registration Statements and the
Prospectus (or, if applicable, the Registration
Statements as amended by any post-effective amendment
prior to such Closing Date and, if applicable, the
Prospectus as amended or supplemented prior to such
Closing Date) and conferences with certain officers
and employees of and with auditors for and counsel to
the Company, nothing has come to such counsel's
attention that has caused them to believe that the
Registration Statements (or, if applicable, the
Registration Statements as amended by any
post-effective amendment prior to such Closing Date),
as of their respective Effective Dates, contained any
untrue statement of a material fact or omitted to
state any material fact required to be stated therein
or necessary in order to make the statements therein
not misleading, or that the Prospectus (or, if
applicable, the Prospectus as amended or supplemented
prior to such Closing Date) contains any untrue
statement of a material fact or omits to state any
material fact required to be stated therein or
necessary in order to make the
<PAGE> 18
18
statements therein, in light of the circumstances
under which they were made, not misleading; it being
understood that such counsel need express no opinion
as to the financial statements or other financial
data contained in the Registration Statements or the
Prospectus.
The foregoing statement may be qualified by a statement to the
effect that such counsel has not independently verified the accuracy,
completeness or fairness of the statements contained in the
Registration Statements or the Prospectus and takes no responsibility
therefor except to the extent set forth in the opinion described in
clauses (vii) and (viii) above.
(e) The Representatives shall have received from Simpson
Thacher & Bartlett, counsel for the Underwriters, such opinion or
opinions, dated such Closing Date, with respect to such matters as the
Underwriters may reasonably require, and the Company shall have
furnished to such counsel such documents as they may request to enable
them to pass upon such matters.
(f) At the time of the execution of this Agreement, the
Representatives shall have received from PriceWaterhouseCoopers LLP a
letter, addressed to the Underwriters and dated such date, in form and
substance satisfactory to the Representatives (i) confirming that they
are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Securities Act
and the rules and regulations of the Commission thereunder and (ii)
stating the conclusions and findings of such firm with respect to the
financial statements and certain financial information contained in the
Prospectus.
(g) On the effective date of any post-effective amendment to
either of the Registration Statements filed subsequent to the date of
this Agreement and also on such Closing Date, the Representatives shall
have received a letter (the "bring-down letter") from
PriceWaterhouseCoopers LLP, addressed to the Underwriters and dated
such Closing Date, confirming, as of the date of the bring-down letter
(or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is
given in the Prospectus as of a date not more than three business days
prior to the date of the bring-down letter), the conclusions and
findings of such firm with respect to the financial information and
other matters covered by its letter delivered to the Representatives
concurrently with the execution of this Agreement pursuant to Section
6(f).
(h) The Company shall have furnished to the Representatives a
certificate, dated such Closing Date, of its Chief Executive Officer
and its Chief Financial Officer stating that (i) such officers have
carefully examined the Registration Statements and the Prospectus (or,
if applicable, the Registration Statements as amended by any
post-effective amendment prior to such Closing Date and, if applicable,
the Prospectus as amended or supplemented prior to such Closing Date)
and, in their opinion, the Registration Statements (or, if applicable,
the Registration Statements as amended by any post-effective amendment
prior to such Closing Date), as of their respective Effective Dates,
and the Prospectus (or, if applicable, the Prospectus, as amended or
supplemented prior to such Closing Date), as of the date of such
certificate, did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) since the
Effective Date of the Primary Registration Statement no event
<PAGE> 19
19
has occurred which should have been set forth in a supplement or
amendment to either of the Registration Statements or the Prospectus,
(iii) to the best of their knowledge after reasonable investigation, as
of such Closing Date, the representations and warranties of the Company
in this Agreement are true and correct and the Company has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to such Closing Date and
(iv) subsequent to the date of the most recent financial statements
included in the Prospectus, there has been no material adverse change
in the financial position or results of operation of the Company or any
of its subsidiaries, or any material change, or any material
development including a prospective change, in or affecting the
condition (financial or otherwise), results of operations, business or
prospects of the Company and its subsidiaries, taken as a whole, except
as set forth in the Prospectus.
(i) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus and (ii) since such date, neither the
Company nor any of its subsidiaries shall have incurred any liabilities
or obligations, direct or contingent, or entered into any transaction,
not in the ordinary course of business, which are material to the
Company and its subsidiaries taken as a whole, and there shall not have
been any change in the capital stock or short- or long-term debt of the
Company or any of its subsidiaries or any material change, or any
material development involving a prospective change, in or affecting
the business, general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is, in the judgment of the
Representatives, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or delivery of the Stock on the
terms and in the manner contemplated in the Prospectus.
(j) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of such Closing Date,
prevent the issuance or sale of the Stock; and no injunction,
restraining order or order of any other nature by any federal or state
court of competent jurisdiction shall have been issued as of such
Closing Date which would prevent the issuance or sale of the Stock.
(k) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter
market, shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental authority
having jurisdiction, (ii) a banking moratorium shall have been declared
by Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv)
there shall have occurred such a material adverse change in general
economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United
<PAGE> 20
20
States shall be such) as to make it, in the judgment of the
Representatives, impracticable or inadvisable to proceed with the sale
or delivery of the Stock on the terms and in the manner contemplated in
the Prospectus.
(l) The Nasdaq National Market shall have approved the Stock
for listing, subject only to official notice of issuance and evidence
of satisfactory distribution.
(m) SG Cowen shall have received the written agreements,
substantially in the form of Exhibit I hereto, of the officers,
directors and shareholders of the Company listed in Schedule B to this
Agreement.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
7. UNDERWRITER INDEMNIFICATION AND CONTRIBUTION. (a) The Company shall
indemnify and hold harmless each Underwriter, its officers, employees,
representatives and agents, each of its directors and each person, if any, who
controls any Underwriter within the meaning of the Securities Act (collectively
the "Underwriter Indemnified Parties" and each an "Underwriter Indemnified
Party"), against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which that Underwriter Indemnified Party may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Prospectus, either of the Registration Statements or the Prospectus
or in any amendment or supplement thereto, (ii) the omission or alleged omission
to state in any Preliminary Prospectus, either of the Registration Statements or
the Prospectus or in any amendment or supplement thereto a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (iii) any act or failure to act, or any alleged act or failure to
act, by any Underwriter Indemnified Party in connection with, or relating in any
manner to, the Stock or the offering contemplated hereby, and which is included
as part of or referred to in any loss, claim, damage, liability or action
arising out of or based upon matters covered by clause (i) or (ii) above,
(provided that the Company shall not be liable in the case of any matter covered
by this clause (iii) to the extent that it is determined in a final judgement by
a court of competent jurisdiction that such loss, claim, damage, liability or
action resulted from any such act or failure to act undertaken or omitted to be
taken by such Underwriter through its gross negligence or wilful misconduct) and
shall reimburse each Underwriter Indemnified Party promptly upon demand for any
legal or other expenses reasonably incurred by that Underwriter Indemnified
Party in connection with investigating or preparing to defend or defending
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon (i) an untrue statement or alleged untrue statement in or omission or
alleged omission from the Preliminary Prospectus, either of the Registration
Statements or the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company through
the Representatives by or on behalf of any Underwriter specifically for use
therein, which information the parties hereto agree is limited to the
Underwriters' Information (as defined in Section 17). This indemnity agreement
is not exclusive and
<PAGE> 21
21
will be in addition to any liability which the Company might otherwise have and
shall not limit any rights or remedies which may otherwise be available at law
or in equity to each Underwriter Indemnified Party.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company its officers, employees, representatives and agents,
each of its directors and each person, if any, who controls the Company within
the meaning of the Securities Act (collectively the "Company Indemnified
Parties" and each a "Company Indemnified Party"), against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which that Company Indemnified Party may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Prospectus, either of
the Registration Statements or the Prospectus or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state in any Preliminary
Prospectus, either of the Registration Statements or the Prospectus or in any
amendment or supplement thereto a material fact required to be stated therein or
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through the Representatives by or on behalf
of that Underwriter specifically for use therein, and shall reimburse each
Company Indemnified Party promptly upon demand for any legal or other expenses
reasonably incurred by such parties in connection with investigating or
preparing to defend or defending against or appearing as third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the parties hereto hereby agree
that such written information provided by the Underwriters consists solely of
the Underwriters' Information. This indemnity agreement is not exclusive and
will be in addition to any liability which the Underwriters might otherwise have
and shall not limit any rights or remedies which may otherwise be available at
law or in equity to each Company Indemnified Party.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 7, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent it has been materially
prejudiced by such failure; and, provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under this Section 7. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
any indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to
<PAGE> 22
22
the indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (other
than local counsel) at any time for all such indemnified parties, which firm
shall be designated in writing by SG Cowen, if the indemnified parties under
this Section 7 consist of any Underwriter Indemnified Party, or by the Company,
if the indemnified parties under this Section 7 consist of any Company
Indemnified Party. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 7(a) and 7(b), shall use all reasonable efforts
to cooperate with the indemnifying party in the defense of any such action or
claim. Subject to the provisions of Section 7(d) below, no indemnifying party
shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If at any time an indemnified party shall have requested that an
indemnifying party reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by this Section 7 effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the request for reimbursement, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under Sections
7(a) and 7(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Stock or if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Underwriters on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Stock purchased under this Agreement (before deducting
expenses other than underwriting discounts and commissions) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters with respect to the Stock purchased under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged
<PAGE> 23
23
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission; provided that the parties hereto agree that the
written information furnished to the Company through the Representatives by or
on behalf of the Underwriters for use in any Preliminary Prospectus, either of
the Registration Statements or the Prospectus consists solely of the
Underwriters' Information. The Company and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this Section 7(e) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this Section
7(e) shall be deemed to include, for purposes of this Section 7(e), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(e), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Stock
underwritten by it and distributed to the public were offered to the public less
the amount of any damages which such Underwriter has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The Underwriters' obligations to contribute as provided in this Section
7(e) are several in proportion to their respective underwriting obligations and
not joint.
8. QIU INDEMNIFICATION AND CONTRIBUTION. (a) The Company shall
indemnify and hold harmless SoundView Technology Group, Inc., in its capacity as
QIU, its officers, employees, representatives and agents, each of its directors
and each person, if any, who controls the QIU within the meaning of the
Securities Act (collectively the "QIU Indemnified Parties" and each a "QIU
Indemnified Party"), against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which that QIU Indemnified Party
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage or liability or action arises out of or is based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, either of the Registration Statements or the Prospectus
or in any amendment or supplement thereto; (ii) the omission or alleged omission
to state in any Preliminary Prospectus, either of the Registration Statements or
the Prospectus or in any amendment or supplement thereto a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or (iii) any act or failure to act, or any alleged act or failure to
act, by any QIU Indemnified Party in connection with, or relating in any manner
to, the Stock or the offering contemplated hereby, and which is included as part
of or referred to in any loss, claim, damage, liability or action arising out of
or based upon matters covered by clause (i) or (ii) above, (provided that the
Company shall not be liable in the case of any matter covered by this clause
(iii) to the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim, damage, liability or action
resulted from any such act or failure to act undertaken or omitted to be taken
by such QIU through its gross negligence or wilful misconduct) and shall
reimburse the QIU promptly upon demand for any legal or other expenses
reasonably incurred by the QIU in connection with investigating or preparing to
defend or defending against or appearing as a third party witness in connection
with any such loss, claim, damage, liability or action as such expenses are
incurred. This indemnity agreement is not
<PAGE> 24
24
exclusive and will be in addition to any liability which the Company might
otherwise have and shall not limit any rights or remedies which may otherwise be
available at law or in equity to each QIU Indemnified Party.
(b) Promptly after receipt by an indemnified party under subsection (a)
above of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of claim or the commencement of that action; provided, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under such subsection except to the extent it has been
materially prejudiced by such failure; and, provided, further, that the failure
to notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party otherwise than under such subsection. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under such subsection for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
any indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of the indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party and in the reasonable
judgment of such counsel it is advisable for the indemnified party to employ
separate counsel or (iii) the indemnifying party has failed to assume the
defense of such action and employ counsel reasonably satisfactory to the
indemnified party, in which case, if the indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (other than local counsel) at any time
for all such indemnified parties, which firm shall be designated in writing by
the indemnified party. Each indemnified party, as a condition of the indemnity
agreements contained in this Section 8, shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. Subject to the provisions of Section 8(c) below, no indemnifying party
shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(c) If at any time an indemnified party shall have requested that an
indemnifying party reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by this Section 8 effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the request for
<PAGE> 25
25
reimbursement, (ii) such indemnifying party shall have received notice of the
terms of such settlement at least 30 days prior to such settlement being entered
into and (iii) such indemnifying party shall not have reimbursed the indemnified
party in accordance with such request prior to the date of such settlement.
(d) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an indemnified party under Section
8(a), then each indemnifying party shall, in lieu of indemnifying the
indemnified party, contribute to the amount paid or payable by the indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and the QIU on the other from
the offering of the Stock or if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the QIU on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or any action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the QIU on the other with respect to the offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Stock purchased under this Agreement (before deducting expenses) received
by the Company bear to the fee payable to the QIU pursuant to Section 3 hereof.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the QIU on the other, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the QIU agree
that it would not be just and equitable if contributions pursuant to this
Section 8(d) were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or any action in respect
thereof, referred to above in this Section 8(d) shall be deemed to include, for
purposes of this Section 8(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
9. TERMINATION. The obligations of the Underwriters hereunder may be
terminated by SG Cowen, in its absolute discretion by notice given to and
received by the Company prior to delivery of and payment for the Firm Stock if,
prior to that time, any of the events described in Sections 6(i), 6(j), 6(k) or
6(l) have occurred or if the Underwriters shall decline to purchase the Stock
for any reason permitted under this Agreement.
10. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) this Agreement
shall have been terminated pursuant to Section 9 or 11, (b) the Company shall
fail to tender the Stock for delivery to the Underwriters for any reason
permitted under this Agreement or (c) the Underwriters shall decline to purchase
the Stock for any reason permitted under this Agreement, the Company shall
reimburse the Underwriters for the fees and expenses of their counsel and for
such other out-of-pocket expenses as shall have been reasonably incurred by them
in connection with this Agreement and the proposed purchase of the Stock, and
upon demand the Company shall pay the full amount thereof to the SG Cowen. If
this Agreement is terminated pursuant to
<PAGE> 26
26
Section 11 by reason of the default of one or more Underwriters, the Company
shall not be obligated to reimburse any defaulting Underwriter on account of
those expenses.
11. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall default in its or their obligations to purchase shares of Stock hereunder
and the aggregate number of shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed ten percent (10%) of
the total number of shares underwritten, the other Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters shall so default and the
aggregate number of shares with respect to which such default or defaults occur
is more than ten percent (10%) of the total number of shares underwritten and
arrangements satisfactory to the Representatives and the Company for the
purchase of such shares by other persons are not made within forty-eight (48)
hours after such default, this Agreement shall terminate.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a defaulting
Underwriter or Underwriters as provided in this Section 11, (i) the Company
shall have the right to postpone the Closing Dates for a period of not more than
five (5) full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Registration Statements or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statements or supplements to
the Prospectus which may thereby be made necessary and (ii) the respective
numbers of shares to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken as the basis of their underwriting obligation for
all purposes of this Agreement. Nothing herein contained shall relieve any
defaulting Underwriter of its liability to the Company or the other Underwriters
for damages occasioned by its default hereunder. Any termination of this
Agreement pursuant to this Section 11 shall be without liability on the part of
any non-defaulting Underwriter or the Company, except expenses to be paid or
reimbursed pursuant to Sections 5 and 10 and except the provisions of Section 7
and 8 shall not terminate and shall remain in effect.
12. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This
Agreement shall inure to the benefit of and be binding upon the several
Underwriters, the QIU and the Company and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person other than the persons mentioned in the preceding sentence any
legal or equitable right, remedy or claim under or in respect of this Agreement,
or any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person; except that the
representations, warranties, covenants, agreements and indemnities of the
Company contained in this Agreement shall also be for the benefit of the
Underwriter Indemnified Parties and the QIU Indemnified Parties, and the
indemnities of the several Underwriters shall also be for the benefit of the
Company Indemnified Parties.
13. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company, the QIU and the several Underwriters, as set
forth in this Agreement or made by them respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter,
<PAGE> 27
27
the QIU, the Company or any person controlling any of them and shall survive
delivery of and payment for the Stock.
14. NOTICES. All statements, requests, notices and agreements hereunder
shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by
mail, overnight courier (guaranteed delivery) or facsimile transmission
to SG Cowen Securities Corporation, One Financial Square, New York, New
York 10005, Attention: _________ (Fax: 212- _________);
(b) if to the QIU, shall be delivered or sent by mail,
overnight courier (guaranteed delivery) or facsimile transmission to
SoundView Technology Group, Inc., Attention: __________________ (Fax:
______________); or
(c) if to the Company, shall be delivered or sent by mail,
overnight courier (guaranteed delivery) or facsimile transmission to
OpenSite Technologies, Inc., 5315 Highgate Drive, Suite 102, Durham,
North Carolina 27713, Attention: Kip A. Frey (Fax: 919-544-9367);
provided, however, that any notice to an Underwriter pursuant to Section 7 shall
be delivered or sent by mail, overnight courier (guaranteed delivery) or
facsimile transmission to such Underwriter at its address set forth in its
acceptance telex to the Representatives, which address will be supplied to any
other party hereto by the Representatives upon request. Any such statements,
requests, notices or agreements shall take effect at the time of receipt
thereof.
15. DEFINITION OF CERTAIN TERMS. For purposes of this Agreement (a)
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the
rules and regulations of the Commission.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
17. UNDERWRITERS' INFORMATION. The parties hereto acknowledge and agree
that, for all purposes of this Agreement, the Underwriters' Information consists
solely of the following information in the Prospectus: (i) the table and the
penultimate paragraph on the front cover page concerning the terms of the
offering by the Underwriters and (ii) the statements concerning the Underwriters
contained in the ________ paragraphs under the heading "Underwriting."
18. AUTHORITY OF THE REPRESENTATIVES. In connection with this
Agreement, you will act for and on behalf of the several Underwriters, and any
action taken under this Agreement by the Representatives will be binding on all
the Underwriters.
19. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any
Section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to
<PAGE> 28
28
be invalid or unenforceable, there shall be deemed to be made such minor changes
(and only such minor changes) as are necessary to make it valid and enforceable.
20. GENERAL. This Agreement constitutes the entire agreement of the
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. In this Agreement, the masculine, feminine and neuter
genders and the singular and the plural include one another. The section
headings in this Agreement are for the convenience of the parties only and will
not affect the construction or interpretation of this Agreement. This Agreement
may be amended or modified, and the observance of any term of this Agreement may
be waived, only by a writing signed by the Company and the Representatives.
21. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which when taken together shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
<PAGE> 29
29
If the foregoing is in accordance with your understanding of the
agreement between the Company and the several Underwriters, kindly indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
OPENSITE TECHNOLOGIES, INC.
By:________________________
Name:
Title:
<PAGE> 30
30
Accepted as of the date first above written:
SG COWEN SECURITIES CORPORATION
SOUNDVIEW TECHNOLOGY GROUP, INC.
WACHOVIA SECURITIES, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
Acting on their own behalf
and as Representatives of several
Underwriters referred to in the
foregoing Agreement
SG COWEN SECURITIES CORPORATION
By:______________________________
Name:
Title:
SOUNDVIEW TECHNOLOGY GROUP, INC.
By:______________________________
Name:
Title:
WACHOVIA SECURITIES, INC.
By:______________________________
Name:
Title:
THE ROBINSON-HUMPHREY COMPANY, LLC.
By:______________________________
Name:
Title:
<PAGE> 31
SCHEDULE A
<TABLE>
<CAPTION>
Number Number of
of Firm Optional
Shares Shares
to be to be
Name Purchased Purchased
- ---- --------- ---------
<S> <C> <C>
SG Cowen Securities Corporation................
--------- ---------
SoundView Technology Group, Inc................
--------- ---------
Wachovia Securities, Inc.......................
--------- ---------
The Robinson-Humphrey Company, LLC.............
--------- ---------
Total ========= =========
</TABLE>
<PAGE> 32
SCHEDULE B
[list of officers, directors and shareholders subject to Section 4(h)]
<PAGE> 33
Exhibit I
Form of Lock-Up Agreement
, 1999
SG Cowen Securities Corporation
Soundview Technology Group, Inc.
Wachovia Securities, Inc.
The Robinson-Humphrey Company, LLC
As representatives of the
several Underwriters
c/o SG Cowen Securities Corporation
One Financial Square
New York, New York 10005
Re: OpenSite Technologies, Inc. -- ____ Shares of Common Stock
Dear Sirs:
In order to induce SG Cowen Securities Corporation ("SG
Cowen"), SoundView Technology Group, Inc., Wachovia Securities, Inc. and The
Robinson-Humphrey Company, LLC (together with SG Cowen, SoundView Technology
Group, Inc. and Wachovia Securities, Inc., the "Representatives"), to enter in
to a certain underwriting agreement with OpenSite Technologies, Inc., a Delaware
corporation (the "Company"), with respect to the public offering of shares of
the Company's Common Stock, par value $__ per share (the "Common Stock"), the
undersigned hereby agrees that it will not: (1) directly or indirectly, offer,
sell, assign, transfer, encumber, pledge, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise dispose of, other than by
operation of law, any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock (including without limitation,
Common Stock which may be deemed to be beneficially owned in accordance with the
rules and regulations promulgated under the Securities Act); or (2) enter into
any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of Common Stock whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise, without the prior
written consent of SG Cowen, for a period of 180 days following the date of the
Prospectus (as defined in the underwriting agreement referred to above), other
than (i) the sale of the Stock pursuant to such public offering, (ii) as a bona
fide gift or gifts, provided the donee or donees thereof agree in writing to be
bound by this restriction, or (iii) as a distribution to partners or
stockholders of the undersigned, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction.
Anything contained herein to the contrary notwithstanding, any
person to whom shares of Common Stock are transferred from the undersigned shall
be bound by the terms of this Agreement.
In addition, the undersigned hereby waives, from the date
hereof until the expiration of the 180-day period following the date of the
Prospectus, any and all rights, if any, to request or demand
<PAGE> 34
2
registration pursuant to the Securities Act of any shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock that
are registered in the name of the undersigned. In order to enable the aforesaid
covenants to be enforced, the undersigned hereby consents to the placing of
appropriate legends and/or stop-transfer orders with the transfer agent of the
Common Stock or any other such securities.
[Signatory]
By:__________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
OPENSITE TECHNOLOGIES, INC.
PURSUANT TO SECTIONS 242 AND 245
OF THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
OPENSITE TECHNOLOGIES, INC. (the "Corporation"), a corporation duly
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, does hereby certify as follows:
1. The name of the Corporation is OPENSITE TECHNOLOGIES, INC.
2. The Corporation's original Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on December 16, 1997.
3. This Amended and Restated Certificate of Incorporation restates,
integrates and further amends the Certificate of Incorporation of the
Corporation, as amended, was duly adopted in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of Delaware,
and was approved by written consent of the holders of a majority of the issued
and outstanding shares of the capital stock of the Corporation in accordance
with the provisions of Section 228 of the General Corporation Law of the State
of Delaware with prompt written notice thereof having been given to those
stockholders of the Corporation not signing such written consent pursuant to
Section 228(d) of the General Corporation Law of the State of Delaware. The
resolution setting forth the Amended and Restated Certificate of Incorporation
is as follows:
"RESOLVED, that the Amended and Restated Certificate of
Incorporation of the Corporation, as heretofore amended, supplemented or
restated, be amended and restated in its entirety to read as follows:
* * * * * *
FIRST. The name of the Corporation is OPENSITE TECHNOLOGIES, INC.
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, Wilmington, New Castle County,
Delaware 19805 and the name of the registered agent is Corporation Service
Company.
<PAGE> 2
THIRD. The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporations may be organized under
the General Corporation Law of the State of Delaware.
FOURTH. The Corporation shall have the authority to issue 85,000,000
shares of capital stock, of which 75,000,000 shares shall be Common Stock
having a par value of $0.01 per share ("Common Stock"), and of which
10,000,000 shares shall be Preferred Stock having a par value of $0.01 per
share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights and the qualifications, limitations or restrictions
thereof in respect to each class of capital stock of the Corporation.
A. Common Stock.
1. General. The voting, dividend and liquidation rights of the
holders of the Common Stock are subject to and qualified by the rights of
the holders of the Preferred Stock or any series as may be designated by
the Board of Directors upon any issuance of the Preferred Stock or any
series.
2. Voting. The holders of the Common Stock are entitled to one vote
for each share held. There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares then outstanding) by the
affirmative vote of the holders of a majority of the shares of the capital
stock of the Corporation entitled to vote, irrespective of the provisions
of Section 242(b)(2) of the General Corporation Law of the State of
Delaware.
3. Dividends. Dividends may be declared and paid on the shares of
Common Stock from funds lawfully available therefor as and when determined
by the Board of Directors and subject to any preferential dividend rights
of any then outstanding shares of Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of the shares of
Common Stock shall be entitled to receive all of the assets of the
Corporation available for distribution to its stockholders, subject to any
preferential rights of any then outstanding shares of Preferred Stock.
B. Preferred Stock.
Preferred Stock may be issued from time to time in one or more
series, each of such series to have such terms as stated or expressed
herein and in the resolution or resolutions providing for the designation
of such series adopted by the Board of Directors
2
<PAGE> 3
of the Corporation as hereinafter provided. Any shares of Preferred Stock
which may be redeemed, purchased or acquired by the Corporation may be
reissued except as otherwise provided by law or this Amended and Restated
Certificate of Incorporation. Different series of Preferred Stock shall
not be construed to constitute different classes of shares for the
purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to designate the Preferred Stock in one or more series, and
in connection with the designation of any such series, by resolution
providing for the issue of the shares thereof, to determine and fix such
voting powers, full or limited, or no voting powers, and such
designations, preferences and relative participating, optional or other
special rights, and qualifications, limitations or restrictions thereof,
including without limitation thereof, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be stated and
expressed in such resolutions, all to the full extent now or hereafter
permitted by the General Corporation Law of the State of Delaware. Without
limiting the generality of the foregoing, the resolutions providing for
designation of any series of Preferred Stock may provide that such series
shall be superior or rank equally or be junior to the Preferred Stock of
any other series to the extent permitted by law and this Amended and
Restated Certificate of Incorporation. Except as otherwise provided in
this Amended and Restated Certificate of Incorporation, no vote of the
holders of the shares of Preferred Stock or the shares of Common Stock
shall be a prerequisite to the designation or issuance of any shares of
any series of the Preferred Stock authorized by and complying with the
conditions of this Amended and Restated Certificate of Incorporation, the
right to have such vote being expressly waived by all present and future
holders of shares of the capital stock of the Corporation.
FIFTH. The Corporation shall have perpetual existence.
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors of the Corporation shall have the power
to adopt, amend or repeal the Bylaws of the Corporation.
SEVENTH. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof, or on the application of any receiver or receivers
appointed for this Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation
under the provisions of Section 279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors, and/or of the
3
<PAGE> 4
stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this Corporation as a consequence of such
compromise of arrangement and the said reorganization shall, if sanctioned
by the court to which the said application has been made, be binding on
all the creditors or class of creditors, and/or on all the stockholders or
class of stockholders, of this Corporation, as the case may be, and also
on this Corporation.
EIGHTH. No Director of the Corporation shall have personal liability
arising out of an action whether by or in the right of the Corporation or
otherwise for monetary damages for breach of fiduciary duty as a Director;
provided, however, that the foregoing shall not eliminate or limit the
personal liability of a Director: (a) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders; (b) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (c) under Section 174 of the General Corporation
Law of the State of Delaware or any successor provision; (d) for any
transaction from which such Director derived an improper personal benefit;
or (e) for acts or omissions occurring prior to the date of the
effectiveness of this provision.
Furthermore, notwithstanding the foregoing provision, in the event
that the General Corporation Law of the State of Delaware is amended or
enacted to permit further elimination or limitation of the personal
liability of a Director, the personal liability for the Directors of the
Corporation shall be limited or eliminated to the fullest extent permitted
by the applicable law.
This provision shall not affect any provision permitted under the
General Corporation Law of the State of Delaware, in the Certificate of
Incorporation, Bylaws or contract or resolution of the Corporation
indemnifying or agreeing to indemnify a Director of the Corporation
against personal liability. Any repeal or modification of this provision
shall not adversely affect any limitation hereunder on the personal
liability of a Director of the Corporation with respect to acts or
omissions occurring prior to such repeal or modification.
NINTH. The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it
shall have the power to indemnify under said Section from and against any
and all of the expenses, liabilities or other matters referred to in or
covered by said Section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may
be entitled under any Bylaw, agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee, or agent and shall inure to the benefit of the heirs,
4
<PAGE> 5
executors, and administrators of such a person. The Corporation shall
advance expenses for the defense of any Director, officer, employee or
agent prior to a final disposition of a claim provided such party executes
an undertaking to repay advances from the Corporation if it is ultimately
determined that such party is not entitled to indemnification. Any repeal
or modification of this Article shall not adversely affect any right or
protection existing hereunder immediately prior to such repeal or
modification.
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and
all rights conferred upon stockholders are herein granted subject to this
reservation.
ELEVENTH. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors of the Corporation, who
may exercise all of the powers of the Corporation, except as otherwise
provided by law, this Amended and Restated Certificate of Incorporation,
or the Bylaws of the Corporation.
A. Number of Directors. The number of Directors of the Corporation
shall not be less than three (3) nor more than fifteen (15). The exact
number of Directors within the limitations specified in the preceding
sentence shall be fixed from time to time by, or in the manner provided
in, the Bylaws of the Corporation.
B. Quorum; Action at Meeting. A majority of the Directors at any
time in office shall constitute a quorum for the transaction of business.
In the event one or more of the Directors shall be disqualified to vote at
any meeting, then the required quorum shall be reduced by one for each
Director so disqualified, provided that in no case shall less than
one-third of the number of Directors fixed pursuant to Section A of this
Article Eleventh constitute a quorum. If at any meeting of the Board of
Directors there shall be less than such a quorum, a majority of the
Directors present may adjourn the meeting from time to time. Every act or
decision done or made by a majority of the Directors present shall be
regarded as the act of the Board of Directors unless a greater number is
required by law, by the Bylaws of the Corporation or by this Amended and
Restated Certificate of Incorporation.
C. Removal. A Director may be removed from office only with cause by
the affirmative vote of at least seventy-five percent (75%) of all
eligible votes present in person or by proxy at a meeting of stockholders
at which a quorum is present. If a Director is elected by a separate
voting group, only the members of that voting group may participate in the
vote to remove him. The entire Board of Directors may not be removed
except pursuant to the removal of individual Directors in accordance with
the foregoing provisions.
For purposes of this Section, "cause" is defined as incompetence,
mental or physical incapacity, breach of fiduciary duty involving
dishonesty, personal profit, a
5
<PAGE> 6
failure to perform stated duties, or a violation of any law, rule or
regulation (other than a traffic violation or similar routine offense).
D. Vacancies. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the Board
of Directors, shall be filled only by a vote of a majority of the
Directors then in office, although less than a quorum, or by a sole
remaining Director. A Director elected to fill a vacancy shall be elected
to hold office until the next election of the class for which such
Director shall have been chosen, subject to the election and
qualifications of his successor and to his earlier death, resignation or
removal.
E. Stockholder Nominations and Introduction of Business, Etc.
Advance notice of stockholder nominations for election of Directors and
other business to be brought by stockholders before a meeting of
stockholders shall be given in the manner provided by the Bylaws of the
Corporation.
F. Amendments to Article. Notwithstanding any other provisions of
law, this Amended and Restated Certificate of Incorporation or the Bylaws
of the Corporation, each as amended, and notwithstanding the fact that a
lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of capital
stock of the Corporation issued and outstanding and entitled to vote shall
be required to amend or repeal, or to adopt any provision inconsistent
with, this Article Eleventh; provided, however, the provisions of this
Section F of Article Eleventh shall not apply, and the provisions of
General Corporation Law of the State of Delaware that are otherwise
applicable shall apply, to an amendment or repeal approved by the Board of
Directors by resolution adopted by a two-thirds vote of all disinterested
Directors then in office.
TWELFTH. The stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Notwithstanding any other provisions
of law, this Amended and Restated Certificate of Incorporation or the
Bylaws of the Corporation, each as amended, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of
the holders of at least seventy-five percent (75%) of the issued and
outstanding shares of capital stock of the Corporation that are and
entitled to vote shall be required to amend or repeal, or to adopt any
provision inconsistent with, this Article Twelfth; provided, however, the
provisions of this Article Twelfth shall not apply, and the provisions of
the General Corporation Law of the State of Delaware that are otherwise
applicable shall apply, to an amendment or repeal approved by the Board of
Directors by resolution adopted by a two-thirds vote of all disinterested
Directors then in office.
THIRTEENTH. Special meetings of the stockholders may be called at any time
by the Chief Executive Officer or the Board of Directors. The business
transacted at any special meeting of stockholders shall be limited to
matters relating to the purpose or purposes stated in the notice of such
meeting. Notwithstanding any other provision of law, this Amended and
Restated Certificate of Incorporation or the Bylaws of the
6
<PAGE> 7
Corporation, each as amended, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of
at least seventy-five percent (75%) of the issued and outstanding shares
of capital stock of the Corporation that are entitled to vote shall be
required to amend or repeal, or to adopt any provision inconsistent with,
this Article Thirteenth; provided, however, the provisions of this Article
Thirteenth shall not apply, and the provisions of the General Corporation
Law of the State of Delaware that are otherwise applicable shall apply, to
an amendment or repeal approved by the Board of Directors by resolution
adopted by a two-thirds vote of all disinterested Directors then in
office.
FOURTEENTH. The Board of Directors, when considering a tender offer or
merger or acquisition proposal, may take into account factors in addition
to potential short-term economic benefits to stockholders of the
Corporation, including without limitation (a) comparison of the proposed
consideration to be received by stockholders in relation to the then
current market price of shares of the Corporation's capital stock, the
estimated current value of the Corporation in a freely negotiated
transaction, and the estimated future value of the Corporation as an
independent entity and (b) the impact of such a transaction on the
employees, suppliers, and customers of the Corporation and its effect in
the communities in which the Corporation operates. Notwithstanding the
foregoing, this Article Fourteenth shall not be deemed to provide any of
the foregoing constituencies any right to be considered in any such
discharging of duties or determination by the Board of Directors.
FIFTEENTH This Amended and Restated Certificate of Incorporation shall be
effective _______________, 1999.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this certificate to be signed by Kip A. Frey, its
President, who hereby acknowledges under penalties of perjury that the facts
herein stated are true and that this certificate is his act and deed, and
attested by James R. Ford, its Assistant Secretary, this ______ day of
________________, 1999.
OPENSITE TECHNOLOGIES, INC.
[CORPORATE SEAL]
By: ____________________________________
Kip A. Frey
President
ATTEST:
By: ____________________________________
James R. Ford
Assistant Secretary
7
<PAGE> 1
'
EXHIBIT 3.3
AMENDED AND RESTATED BYLAWS
OF
OPENSITE TECHNOLOGIES, INC.
ARTICLE 1 - STOCKHOLDERS
Section 1.1 Place of Meeting. All meetings of the stockholders shall be
held at such place within or without the State of Delaware as may be designated
from time to time by the Board of Directors or the Chief Executive Officer or,
if not so designated, at the registered office of the corporation.
Section 1.2 Annual Meeting. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held within six months after the
end of each fiscal year of the corporation on a date to be fixed by the Board of
Directors or the Chief Executive Officer (which date shall not be a legal
holiday in the place where the meeting is to be held) at the time and place to
be fixed by the Board of Directors or the Chief Executive Officer and stated in
the notice of the meeting. If no annual meeting of the stockholders is held in
accordance with the foregoing provisions, the Board of Directors shall cause the
meeting to be held as soon as thereafter as convenient. If no annual meeting of
the stockholders is held in accordance with the foregoing provisions, a special
meeting of the stockholders may be held in lieu of the annual meeting of the
stockholders, and any action taken at that special meeting of the stockholders
shall have the same effect as if it had been taken at the annual meeting of the
stockholders, and in such case all references in these Bylaws to the annual
meeting of the stockholders shall be deemed to refer to such special meeting of
the stockholders.
Section 1.3 Special Meetings. Special meetings of the stockholders may be
called at any time by the Chief Executive Officer or the Board of Directors. The
business transacted at any special meeting of the stockholders shall be limited
to matters relating to the purpose or purposes stated in the notice of the
meeting.
Section 1.4 Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of the stockholders, whether annual or special,
shall be given not less then 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meetings. The notices of
all meetings shall state the place, date and hour of the meeting. The notice of
a special meeting shall state, in addition, the purpose or purposes for which
the meeting is called. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the corporation.
<PAGE> 2
Section 1.5 Voting List. The officer who has charge of the stock ledger of
the corporation shall prepare, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the date on which the meeting, at a place within the city where
the meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time of the meeting, and may be
inspected by any stockholder who is present.
Section 1.6 Quorum. Except as otherwise provided by law, the Certificate
of Incorporation or these Bylaws, the holders of the majority of the issued and
outstanding shares of the capital stock of the corporation that are entitled to
vote at the meeting, present in person or represented by proxy, shall constitute
a quorum for the transaction of business.
Section 1.7 Adjournments. Any meeting of the stockholders may be adjourned
to any other time and to any other place at which a meeting of the stockholders
present or represented at the meeting and entitled to vote, although less than a
quorum, or, if no stockholder is present, by any officer entitled to preside at
or to act as Secretary of such meeting. It shall not be necessary to notify any
stockholder of any adjournment of less than 30 days if the time and place of the
adjourned meeting are announced at the meeting at which adjournment is taken,
unless after the adjournment a new record date is fixed for the adjourned
meeting. At the adjourned meeting, the corporation may transact any business
that might have been transacted at the original meeting.
Section 1.8 Voting and Proxies. Each stockholder shall have one vote for
each share of stock entitled to vote held of record by such stockholder and
proportionate vote for each fractional share held, unless otherwise provided by
the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these Bylaws. Each stockholder of record entitled to vote at a
meeting of the stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote to express such consent or dissent
in person or may authorize another person or persons to vote or to act for him
by written proxy executed by the stockholder or his authorized agent and
delivered to the Secretary of the corporation. No such proxy shall be voted or
acted upon after three years from the date of its execution, unless the proxy
expressly provides for a longer period.
Section 1.9 Action at Meeting. When a quorum is present at any meeting,
the holders of a majority of the shares of the capital stock of the corporation
present or represented and voting on a matter (or if there are two or more
classes of stock entitled to vote as separate classes, then in the case of each
such class, the holders of the majority of the shares of the capital stock of
the class present or represented and voting on a matter) shall decide any matter
to be voted upon by the stockholders at such meeting, except
2
<PAGE> 3
when a different vote is required by express provision of the law, the
Certificate of Incorporation or these Bylaws. Any election by the stockholders
shall be determined by a plurality of the votes cast by the stockholders
entitled to vote at the election.
Section 1.10 Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
Directors. Nominations for election to the Board of Directors of the corporation
at a meeting of the stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of the
directors at such meeting who compiles with the notice procedures set forth in
this Section 1.10. Such nominations, other than those made by or on behalf of
the Board of Directors, shall be made by notice in writing delivered or mailed
by first class United States mail, postage prepaid, to the Secretary, and
received not less than 60 days nor more than 70 days prior to such meeting;
provided, however, that if less than 70 days' notice or prior public disclosure
of the date of the meeting is given to the stockholders, such nomination shall
have been mailed or delivered to the Secretary not later than the close of
business on the 10th day following the date on which the notice of the meeting
was mailed or such public disclosure was made, whichever occurs first. Such
notice shall be set forth: (a) as to each proposed nominee: (i) the name, age,
business address and, if known, residence address of each such nominee, (ii) the
principal occupation or employment of each such nominee, (iii) the number of
shares of the capital stock of the corporation that are beneficially owned by
each such nominee, and (iv) any other information concerning the nominee that
must be disclosed as to such nominees in proxy solicitations pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to be named as a nominee and to serve as a
director if elected) and (b) as to the stockholder giving the notice: (i) the
name and address, as they appear on the corporation's books, of such stockholder
and (ii) the class and number of the shares of the capital stock of the
corporation that are beneficially owned by such stockholder. The corporation may
require any proposed nominee to furnish such other information as may reasonably
be required by the corporation to determine the eligibility of such proposed
nominee to serve as a director of the corporation.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 1.11 Notice of Business at Annual Meeting. At any annual meeting
of the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting of the stockholders, the business must be: (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before an
annual meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, if such business relates to
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<PAGE> 4
the election of directors of the corporation, the procedures in Section 1.10
must be compiled with. If any such business relates to any other matter, the
stockholders must have given timely notice thereof in writing to the Secretary.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the date on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever occurs first. A stockholder's notice
to the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting: (a) a brief description of the business desired
to be brought before the annual meeting of the stockholders and the reasons for
conducting such business at the annual meeting of the stockholders, (b) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (c) the class and number of shares of the capital stock
of the corporation that are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in these Bylaws to the contrary, no business shall be conducted at any annual
meeting of the stockholders except in accordance with the procedures set forth
in this Section 1.11; provided, however, that any stockholder proposal which
complies with Rule 14a-8 of the proxy rules (or any successor provision)
promulgated under the Securities Exchange Act of 1934, as amended, and is to be
included in the corporation's proxy statement for an annual meeting of
stockholders shall be deemed to comply with the requirements of this Section
1.11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 1.11, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.
Section 1.12 Action without Meeting. Stockholders may not take any action
by written consent in lieu of a meeting.
Section 1.13 Organization. The Chairman of the Board, or in his absence
the Vice Chairman of the Board designated by the Chairman of the Board, or the
President, in the order named, shall call meetings of the stockholders to order,
and shall act as chairman of such meeting; provided, however that the Board of
Directors may appoint any stockholder to act as chairman of any meeting in the
absence of the Chairman of the Board. The Secretary of the corporation shall act
as secretary at all meetings of the stockholders; but in the absence of the
Secretary at any meeting of the stockholders, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
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<PAGE> 5
ARTICLE 2 - DIRECTORS
Section 2.1 General Powers. The business and affairs of the corporation
shall be managed by or under the direction of a Board of Directors, who may
exercise all of the powers of the corporation, except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws. In the event of a vacancy
in the Board of Directors, the remaining Directors, except as otherwise provided
by law or by the Certificate of Incorporation of the corporation, may exercise
the powers of the full Board of Directors until the vacancy is filled.
Section 2.2 Number; Election and Qualification. The number of Directors
which shall constitute the whole Board of Directors shall be determined by
resolution of the Board of Directors, but in no event shall be less than three
(3) nor more than fifteen (15). The number of Directors may be decreased at any
time and from time to time by a majority of the Directors then in office, but
only to eliminate vacancies existing by reason of the death, resignation,
removal or expiration of the term of one or more Directors. The Directors shall
be elected at the annual meeting of the stockholders by such stockholders as
have the right to vote on such election. Directors need not be stockholders of
the corporation.
Section 2.3 Vacancies. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the Board, shall
be filled only by vote of a majority of the Directors then in office, although
less than a quorum, or by a sole remaining Director. A Director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office,
and a Director chosen to fill a position resulting from an increase in the
number of Directors shall hold office until the next election of the class for
which such Director shall have been chosen, subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
Section 2.4 Resignation. Any Director may resign by delivering his written
resignation to the corporation at its principal office or to the Chief Executive
Officeror Secretary. Such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the happening of some
other event.
Section 2.5 Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided that any Director who is absent when such a determination is
made shall be given notice of the determination. A regular meeting of the Board
of Directors may be held without notice immediately after and at the same place
as the annual meeting of the stockholders.
Section 2.6 Special Meetings. Special meetings of the Board of Directors
may be held at any time and place, within or without the State of Delaware,
designated in a
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<PAGE> 6
call by the Chairman of the Board, President, two or more Directors, or by one
Director in the event that there is only a single Director in office.
Section 2.7 Notice of Special Meetings. Notice of any special meeting of
Directors shall be given to each director by the Secretary or by the officer or
one of the Directors calling the meeting. Notice shall be duly given to each
Director: (i) by giving notice to such Director in person or by telephone at
least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy,
or telex, or delivering written notice by hand, to his last known business or
home address at least 24 hours in advance of the meeting, or (iii) by mailing
written notice to his last known business or home address at least 72 hours in
advance of the meeting. A notice or waiver of notice of a meeting of the Board
of Directors need not specify the purposes of the meeting.
Section 2.8 Meetings by Telephone Conference Calls. Directors or any
members of any committee designated by the Directors may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall constitute presence in person at such meeting.
Section 2.9 Quorum. A majority of the Directors at any time in office
shall constitute a quorum for the transaction of business. In the event one or
more of the Directors shall be disqualified to vote at any meeting, then the
required quorum shall be reduced by one for each such Director so disqualified;
provided, however, that in no case shall less than one-third (1/3) of the number
so fixed constitute a quorum. In the absence of a quorum at any such meeting, a
majority of the Directors present may adjourn the meeting from time to time
without further notice other than announcement at the meeting, until a quorum
shall be present.
Section 2.10 Action at Meeting. At any meeting of the Board of Directors
at which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these Bylaws.
Section 2.11 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee of the Board
of Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
Section 2.12 Removal. A Director may be removed from office only with
cause by the affirmative vote of at least seventy-five percent (75%) of all
eligible votes present in person or by proxy at a meeting of stockholders at
which a quorum is present. If a Director is elected by a separate voting group,
only the members of that voting group may participate in the vote to remove him.
The entire Board of Directors may not be removed
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except pursuant to the removal of individual Directors in accordance with the
foregoing provisions.
For purposes of this Section, "cause" is defined as incompetence, mental
or physical incapacity, breach of fiduciary duty involving dishonesty, personal
profit, a failure to perform stated duties, or a violation of any law, rule or
regulation (other than a traffic violation or similar routine offense).
Section 2.13 Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members of the committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it. Each
such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the Directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these Bylaws for the Board of Directors.
Section 2.14 Compensation of Directors. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any Director from serving the
corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE 3 - OFFICERS
Section 3.1 Enumeration. The officers of the corporation shall consist of
a President, a Secretary, and such other officers with such other titles as the
Board of Directors shall determine, including a Chairman of the Board, a
Vice-Chairman of the Board, and one or more Vice Presidents, a Treasurer,
Assistant Treasurers, and Assistant Secretaries. The Board of Directors may
appoint such other officers as it may deem appropriate.
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Section 3.2 Election. The President, Treasurer and Secretary shall be
elected annually by the Board of Directors at its first meeting following the
annual meeting of the stockholders. Other officers may be appointed by the Board
of Directors at the meeting of the stockholders or at any other meeting.
Section 3.3 Qualification. No officer need be a stockholder of the
corporation. Any two or more offices may be held by the same person.
Section 3.4 Tenure. Except as otherwise provided by law, by the
Certificate of Incorporation or by these Bylaws, each officer shall hold office
until his successor is elected and qualified unless a different term is
specified in the vote choosing or appointing him, or until his earlier death,
resignation or removal.
Section 3.5 Resignation and Removal. Any officer may resign by delivering
his written resignation to the corporation at its principal office or to the
Chief Executive Officeror Secretary. Such resignation shall be effective upon
receipt unless it is specified to be effective at some other time or upon the
happening of some other event.
Any officer may be removed at any time, with or without cause, by vote of
a majority of the entire number of Directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
Section 3.6 Vacancies. The Board of Directors may fill any vacancy
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Secretary. Each such successor shall hold office for
the unexpired term of his predecessor and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
Section 3.7 Chairman of the Board and Vice Chairman of the Board. The
Board of Directors may appoint a Chairman of the Board. If the Board of
Directors appoints a Chairman of the Board, he shall perform such duties and
possess such powers as are assigned to him by the Board of Directors. If the
Board of Directors appoints a Vice Chairman of the Board, he shall, in the
absence or disability of the Chairman of the Board, perform the duties and
exercise the powers of the Chairman of the Board and shall perform such other
duties and possess such other powers as may from time to time be vested in him
by the Board of Directors.
Section 3.8 President. The President shall, subject to the direction of
the Board of Directors, have general charge and supervision of the business of
the corporation.
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Unless otherwise provided by the Board of Directors, he shall preside at all
meetings of the stockholders and if he is a Director, at all meetings of the
Board of Directors. Unless the Board of Directors has designated the Chairman of
the Board or another officer as Chief Executive Officer, the President shall be
the Chief Executive Officer of the corporation. The President shall perform such
other duties and shall have such other powers as the Board of Directors may from
time to time prescribe.
Section 3.9 Vice President. Any Vice President shall perform such duties
and possess such powers as the Board of Directors or the Chief Executive
Officer may from time to time prescribe. In the event of the absence, inability
or refusal to act of the President, the Vice President (of if there shall be
more than one, the Vice Presidents in the order determined by the Board of
Directors) shall perform the duties of the President and when so performing
shall have all the powers of and be subject to all the restrictions upon the
President. The Board of Directors may assign to any Vice President the title of
Executive Vice President, Senior Vice President or any other title selected by
the Board of Directors.
Section 3.10 Secretary and Assistant Secretaries. The Secretary shall
perform such duties and shall have such powers as the Board of Directors or the
Chief Executive Officer may from time to time prescribe. In addition, the
Secretary shall perform such duties and have such powers as are incident to the
office of the Secretary, including without limitation the duty and power to give
notices of all meetings of the stockholders and special meetings of the Board of
Directors, to attend all meetings of the stockholders and the Board of Directors
and keep a record of the proceedings, to maintain a stock ledger and prepare
lists of stockholders and their addresses as required, to be custodian of
corporate records and the corporate seal and to affix and attest to the same on
documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officeror the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Secretary, the Assistant Secretary (or if there shall be more than one,
the Assistant Secretaries in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
Section 3.11 Treasurer and Assistant Treasurers. The Treasurer shall
perform such duties and shall have such powers as may from time to time be
assigned to him by the Board of Directors or the President. In addition, the
Treasurer shall perform such duties and have such powers as are incident to the
office of Treasurer, including without limitation the duty and power to keep and
be responsible for all funds and securities of the corporation, to deposit funds
of the corporation in depositories selected in accordance with these Bylaws, to
disburse such funds as ordered by the Board of Directors, to make
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proper accounts of such funds, and to render as required by the Board of
Directors statements of all such transactions and of the financial condition of
the corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officeror the Treasurer may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Treasurer, the Assistant Treasurers (or if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Treasurer.
Section 3.12 Salaries. Officers of the corporation shall be
entitled to such salaries, compensation or reimbursement as shall be fixed or
allowed from time to time by the Board of Directors.
ARTICLE 4 - CAPITAL STOCK
Section 4.1 Issuance of Stock. Unless otherwise voted by the stockholders
and subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
corporation or the whole or any part of any unissued balance of the authorized
capital stock of the corporation held in its treasury may be issued, sold,
transferred or otherwise disposed of by vote of the Board of Directors in such
manner, for such consideration and on such terms as the Board of Directors may
determine.
Section 4.2 Certificates of Stock. Every stockholder of the corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him in the corporation. Each such certificate shall be signed by, or in
the name of the corporation by, the Chairman or Vice Chairman, if any, of the
Board of Directors, or the Chief Executive Officeror a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the Bylaws, applicable
securities laws or any agreement among any number of stockholders or among such
holders and the corporation shall have conspicuously noted on the face or back
of the certificate either the full text of the restriction or a statement of the
existence of such restriction.
Section 4.3 Transfers. Except as otherwise established by rules and
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the corporation by the
surrender to the corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with
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such proof of authority or the authenticity of signature as the corporation or
its transfer agent may reasonably require. Except as may be otherwise required
by law, by the Certificate of Incorporation or by these Bylaws, the corporation
shall be entitled to treat the record holder of stock as shown on its books as
the owner of such stock for all purposes, including the payment of dividends and
the right to vote with respect to such stock, regardless of any transfer, pledge
or other disposition of such stock until the shares have been transferred on the
books of the corporation in accordance with the requirements of these Bylaws.
Section 4.4 Lost, Stolen or Destroyed Certificates. The corporation may
issue a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen, or destroyed, upon such terms and conditions
as the Board of Directors may prescribe, including the presentation of
reasonable evidence of such loss, theft or destruction and the giving of such
indemnity as the Board of Directors may require for the protection of the
corporation or any transfer agent or registrar.
Section 4.5 Record Date. The Board of Directors may fix in advance a date
as a record date for the determination of the stockholders entitled to notice of
or to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - GENERAL PROVISIONS
Section 5.1 Fiscal Year. Except as from time to time otherwise designated
by the Board of Directors, the fiscal year of the corporation shall begin on the
first day of January in each year and end on the last day of December in each
year.
Section 5.2 Corporate Seal. The corporate seal shall be in such form
as shall be approved by the Board of Directors.
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Section 5.3 Waiver of Notice. Whenever any notice whatsoever is required
to be given by law, by the Certificate of Incorporation or by these Bylaws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or any
other available method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such meeting in person or
by proxy, shall be deemed equivalent to such notice.
Section 5.4 Voting of Securities. Except as the Directors may otherwise
designate, the Chief Executive Officer or Treasurer may waive notice of, and act
as, or appoint any person or persons to act as, proxy or attorney-in-fact for
this corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
Section 5.5 Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, Directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
Section 5.6 Certificate of Incorporation. All references in these Bylaws
to the Certificate of Incorporation shall be deemed to refer to the Certificate
of Incorporation of the corporation, as amended and in effect from time to time.
Section 5.7 Transactions with Interested Parties. No contract or
transaction between the corporation and one or more of the Directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of the Directors or
officers are Directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the Director or officer is
present at or participates in the meeting of the Board of Directors or a
committee of the Board of Directors which authorizes the contract or transaction
or solely because his or their votes are counted for such purpose, if:
(A) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested Directors, even though the disinterested
Directors be less than a quorum;
(B) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
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(C) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested Directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorized the contract or transaction.
Section 5.8 Severability. Any determination that any provision of these
Bylaws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these Bylaws.
Section 5.9 Pronouns. All pronouns used in these Bylaws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 6 - AMENDMENTS
Section 6.1 By the Board of Directors. These Bylaws may be altered,
amended or repealed or new Bylaws may be adopted by the affirmative vote of a
majority of the directors present at any regular or special meeting of the Board
of Directors at which a quorum is present.
Section 6.2 By the Stockholders. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by the affirmative vote of the holders of
at least seventy-five percent (75%) the issued and outstanding shares of the
capital stock of the corporation that are entitled to vote at any regular or
special meeting of the stockholders, provided notice of such alteration,
amendment, repeal or adoption of new Bylaws shall have been stated in the notice
of such regular or special meeting.
THIS IS TO CERTIFY that the above Amended and Restated Bylaws were duly
adopted by the Board Directors of the Corporation at a meeting held on
_________________, 1999, conditioned upon the happening of, and effective as of
the closing of, the Initial Public Offering of the Corporation's stock on
____________, 1999.
__________________________________
James R. Ford
Assistant Secretary
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EXHIBIT 4.2
[BLUE BORDER DESIGN]
[FRONT OF CERTIFICATE]
NUMBER [OPENSITE LOGO] SHARES
OPNS OPENSITE TECHNOLOGIES, INC.
COMMON STOCK SEE REVERSE FOR
$0.01 PAR VALUE CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 68371Q 10 1
THIS CERTIFIES THAT [SPECIMEN]
------------------------------------------------------------
IS THE OWNER OF
-----------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
OPENSITE TECHNOLOGIES, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney, upon the surrender of this certificate properly endorsed. This
certificate is not valid unless countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and facsimile signatures of
its duly authorized officers.
Dated:
/s/ James R. Ford [OPENSITE /s/ Kip A. Frey
- ------------------------ TECHNOLOGIES, INC. -----------------
Vice President, Finance CORPORATE SEAL President and
DELAWARE] Chief Executive
Officer
COUNTERSIGNED AND REGISTERED:
BANCBOSTON, N.A.
TRANSFER AGENT AND REGISTRAR
BY
-----------------------------
AUTHORIZED SIGNATURE
<PAGE> 2
[BACK OF CERTIFICATE]
OPENSITE TECHNOLOGIES, INC.
The Corporation will furnish without charge to each shareholder who so
requests a statement or summary or summary of the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof which the Corporation is authorized to
issue and of the qualifications, limitations or restrictions of such preferences
and/or rights. Such request may be made to the office of the Secretary of the
Corporation or the Transfer Agent named on the face of this Certificate.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _________ Custodian___________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the under the Uniform Gifts to
right of survivorship and Minors Act ___________________
not as tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, _____________________________ hereby sell, assign and
transfer unto ________________________ [PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE]
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________________________________
Attorney to transfer the said stock on the books of the within named
Corporation with the full power of substitution in the premises.
Dated _____________________ __________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERNATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED: _________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
-2-
<PAGE> 1
EXHIBIT 5.1
July 12, 1999
OpenSite Technologies, Inc.
5315 Highgate Drive
Suite 102
Durham, North Carolina 27713
Re: Registration Statement on Form S-1
Gentlemen:
We have acted as counsel for OpenSite Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, pursuant to a Registration Statement on Form
S-1 (the "Registration Statement"), of a proposed offering of an aggregate of
3,181,800 shares of the Company's common stock, $.01 par value per share (the
"Common Stock"), consisting of 13,186,711 shares of the Common Stock (the
"Company Shares"). In addition, the Company has granted to the underwriters an
option to purchase 477,270 shares of Common Stock to cover over-allotments, if
any (the "Over-Allotment Shares").
We have examined such documents, corporate records, and other instruments
as we have considered necessary and advisable for purposes of rendering this
opinion.
In making the foregoing examinations, we have assumed the genuineness of
all signatures and the authenticity of all documents submitted to us as
originals, and the conformity to original documents of all documents submitted
to us as certified or photostatic copies. As to various questions of fact
material to this opinion, we have relied, to the extent we deem reasonably
appropriate, upon representations or certificates of officers or directors of
the Company and upon documents, records and instruments furnished to us by the
Company, without independent check or verification of their accuracy.
Based upon and subject to the foregoing, we are of the opinion that the
Company Shares and any Over-Allotment Shares being sold by the Company, when
issued, sold and delivered as contemplated in the Registration Statement, will
be duly authorized and validly issued and fully paid and nonassessable.
We hereby consent to the filing of this Opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
Very truly yours,
MORRIS, MANNING & MARTIN
a Limited Liability Partnership
By: /s/ Grant W. Collingsworth
-------------------------------------
Grant W. Collingsworth, Partner
<PAGE> 1
Exhibit 10.7
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (the
"Agreement"), is entered into as of July 8, 1999 (the "Effective Date"), by and
between OpenSite Technologies, Inc., a Delaware corporation (the "Corporation"),
and Kip A. Frey (the "Executive"), an individual residing in Orange County,
North Carolina.
W I T N E S S E T H:
WHEREAS, the parties hereto entered into an Executive Employment Agreement
dated as of August 10, 1998 and wish to amend and restate such Executive
Employment Agreement; and
WHEREAS, the Corporation is engaged in the development and sale of auction
software for the Internet; and
WHEREAS, the Corporation wishes to employ Executive, and Executive desires
to accept employment with the Corporation, all upon the terms and conditions
enumerated below; and
WHEREAS, as a part of said employment by the Corporation, Executive is
expected to make new contributions of value to the Corporation and Executive
will otherwise have access to confidential and proprietary information of the
Corporation; and
WHEREAS, the Corporation desires to receive from Executive a covenant not
to disclose certain information relating to the Corporation's business and
certain other covenants.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
contained herein, and of other good and valuable consideration, including the
employment of Executive by the Corporation and the compensation received by
Executive from the Corporation from time to time, and specifically the
compensation to be received by the Executive pursuant to paragraphs 5(a), (b)
and (d) herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending legally to be bound, hereby agree as follows:
1. EMPLOYMENT. The Corporation hereby employs Executive and Executive
hereby accepts employment by the Corporation upon the terms and conditions set
forth herein. Upon the termination of this Agreement as provided herein,
Executive's employment with the Corporation shall immediately terminate subject
to the terms and conditions of this Agreement. Executive agrees to serve as the
President of the Corporation and as a member of the Board of Directors of the
Corporation (the "Board of Directors"). Executive further agrees to serve as the
Chief Executive Officer of the Corporation beginning as of March 1, 1999.
Executive's principal responsibilities are set forth on Exhibit A attached
hereto.
<PAGE> 2
2. TERM. Subject to the provisions for termination that are provided
herein, the term of this Agreement shall be deemed to have commenced on the
Effective Date and shall continue until December 31, 2002 (the "Initial Term"),
and thereafter shall automatically be renewed on a year-to-year basis on the
same terms and conditions set forth herein unless terminated as provided herein
or unless amended or modified by mutual agreement of the parties hereto. (As
used throughout this Agreement, "Term" shall include the Initial Term and any
renewals thereof in accordance with the terms and conditions of this Agreement).
3. DUTIES. Executive shall faithfully perform all duties set forth on
Exhibit A attached hereto and in the Bylaws of the Corporation related to the
position held and those additional duties that are prescribed from time to time
by the Board of Directors.
4. EXCLUSIVE SERVICE. Executive agrees to devote his full time and
attention to the performance of his duties and responsibilities on behalf of the
Corporation and in furtherance of only its best interests; provided, however,
that Executive shall be permitted to engage in the following outside activities:
(a) teaching evening classes at Duke University; and (b) serving as the
shareholder representative of certain present and former employees of Accipiter,
Inc. who were shareholders of Accipiter, Inc. All conflicts between the
Executive's duties under this Agreement and the foregoing outside activities
shall be resolved in favor of the Corporation, and the Board of Directors may
reasonably revoke its consent to the Executive engaging in any such outside
activities if such a conflict arises. Executive agrees to comply with all
policies, standards and regulations of the Corporation now existing or hereafter
promulgated.
5. COMPENSATION. During the Term of this Agreement, Executive's
compensation shall be determined and paid as follows (all payments are subject
to required withholding):
(a) BASE SALARY. Executive shall receive as compensation an annual
salary of One Hundred and Fifty Thousand Dollars ($150,000) through and
including May 31, 1999 and of Two Hundred Thousand Dollars ($200,000)
beginning as of June 1, 1999, to be paid consistent with the payroll
payment schedule of the Corporation.
(b) BONUSES. As soon as reasonably practicable after the
consummation of the sale of the Series B Convertible Preferred Stock of
the Corporation, the Compensation Committee of the Board of Directors and
Executive shall agree upon an annual bonus plan to be applicable to
Executive for the Company's 1998 fiscal year, with the anticipated or
targeted amount of such bonus being Fifty Thousand Dollars ($50,000),
subject to increase or a decrease based upon extraordinary performance as
determined by the Board of Directors. For each fiscal year of the
Corporation beginning as of the 1999 fiscal year, Executive shall be paid
a target bonus of fifty percent (50%) of his annual base salary based upon
the achievement of goals that have been agreed to by Executive and by the
Compensation Committee of the Board of Directors of the Corporation and
subject to increase or decrease based upon extraordinary performance as
determined by the Compensation Committee of the Board of Directors. Prior
to the beginning of each fiscal year thereafter, the Board of Directors
and Executive shall agree on an annual bonus plan to be applicable to
Executive for such fiscal year. All such bonuses shall be paid
semi-annually. Nothing in this paragraph shall obligate the Corporation to
pay Executive any
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amount as a bonus until such amount has been determined and declared by
the Board of Directors; but the Corporation and Executive currently
contemplate that Executive shall be eligible to receive bonuses.
(c) BENEFITS. In addition to Executive's salary, Executive shall
receive those benefits provided from time to time by the Corporation to
other executive employees of the Corporation. All such benefits are
subject to change from time to time by the Corporation without the consent
of Executive or any other employee of the Corporation.
(d) PERFORMANCE BASED STOCK OPTION. If the Corporation institutes a
performance based stock option program for its senior management in
addition to the Corporation's existing Stock Option Plan, Executive shall
be entitled to participate in such program on a basis commensurate with
Executive's duties and compensation as compared to other employees of the
Corporation. Any stock option program instituted by the Corporation shall
be subject to modification by the Corporation at any time or from time to
time without the consent of Executive, except that any modification that
would adversely affect the options previously awarded to Executive shall
not be made without the prior written consent of Executive. Nothing in the
paragraph shall obligate the Corporation to institute a stock option
program or award options to Executive; however, the Corporation and
Executive currently contemplate that Executive shall be entitled to
receive such options.
(e) VACATION. Executive shall be entitled to four (4) weeks of paid
vacation per fiscal year (with the vacation for any partial year being
prorated). Any vacation not used in any fiscal year may not be carried
forward to any subsequent fiscal year.
(f) BUSINESS EXPENSES. If Executive complies with the policies for
reimbursement or advance of business expenses established from time to
time by the Board of Directors, the Corporation shall pay all reasonable
expenses incurred by Executive directly related to conduct of the business
of the Corporation including, without limitation, the cost of Executive's
monthly cellular phone expenses; the cost of Executive's monthly fee for
Internet access from his home computer; and the cost of any additional
products or services that will be used by Executive for his home office
and approved in advance by the Board of Directors of the Corporation.
6. TERMINATION. This Agreement shall or may be terminated, as the case may
be, upon the terms and conditions hereinafter provided:
(a) VOLUNTARY TERMINATION. This Agreement shall be considered
voluntarily terminated by the parties if Executive or the Corporation
shall have given written notice to the other of their intention not to
renew this Agreement for any subsequent year after the Initial Term, such
notice to be delivered at least ninety (90) days prior to the last day of
the Initial Term or any renewal Term.
(b) INVOLUNTARY TERMINATION. The Corporation may terminate this
Agreement upon notice in writing to Executive (or his personal
representative) in any of the following events:
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(i) Upon the death of Executive, in which case this Agreement
immediately shall be terminated; provided such termination shall not
prejudice any benefits payable to Executive's spouse or
beneficiaries which are fully vested as of the date of Executive's
death.
(ii) If Executive becomes "permanently disabled," as
hereinafter defined, in which case this Agreement immediately shall
be terminated; provided such termination shall not prejudice any
benefits payable to Executive or Executive's spouse or beneficiaries
which are fully vested as of the date that Executive becomes
permanently disabled.
(1) For purposes of this Agreement, Executive shall be
considered "permanently disabled" when a qualified medical
doctor mutually acceptable to the Corporation and Executive or
his personal representative shall have certified in writing
that: (i) he is unable because of a medically determinable
physical or mental disability to perform substantially all of
his duties hereunder for more than one hundred eighty (180)
calendar days measured from the last full day of work or (ii)
by reason of mental or physical disability, it is unlikely
that he will be able, within one hundred eighty (180) calendar
days, to resume substantially all business duties and
responsibilities in which he was previously engaged and
otherwise discharge his duties under this Agreement.
(iii) In the event of the liquidation, dissolution or
discontinuance of business by the Corporation in any manner or the
filing of any petition by or against the Corporation under any
federal or state bankruptcy or insolvency laws, which petition shall
not be dismissed within sixty (60) days after filing; provided such
termination shall not prejudice Executive's rights as a shareholder
or a creditor of the Corporation.
(iv) Executive's employment with the Corporation shall be
deemed to be "constructively terminated" if, after a Change in
Control (as defined below) (1) Executive's principal place of
business as an employee of the Corporation has been moved more
than twenty-five (25) miles from Chapel Hill, North Carolina;
or (2) any part of Executive's total annual compensation
package has been decreased without his consent; or (3)
Executive is notified by the Corporation that he will not be
retained upon the same terms and conditions as provided in
this Agreement; or (4) Executive has been demoted to a lesser
position than provided in Section 1 of this Agreement;
provided however, that Executive's employment with the
Corporation shall not be deemed to be "constructively
terminated" unless, within a reasonable time after learning of
the action described herein as the basis for a constructive
termination, Executive shall advise the Corporation in writing
that he considers his employment with the Corporation to have
been constructively terminated pursuant to this
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<PAGE> 5
Section 6(b)(iv) and the Corporation shall not have cured such
action within fifteen (15) days of such notice.
(1) For purposes of this Agreement, a "Change in
Control" of the Corporation shall be deemed to have occurred
if (i) any "person," or persons acting as a "group" (as such
terms are used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended), but excluding
any person that was a stockholder of the Corporation on the
date of the Agreement (a) becomes the beneficial owner,
directly or indirectly, of securities of the Corporation
representing 50% or more of the combined voting power of the
Corporation's then outstanding securities, or (b) acquires or
obtains the power, whether through share ownership, contract,
proxy, voting agreement or otherwise to vote more than 50% of
the combined voting power of the Corporation's outstanding
securities, or (ii) the Corporation or its stockholders
dispose of all or substantially all of the assets of the
Corporation. In no event shall an initial public offering of
the securities of the Corporation be deemed a "Change in
Control."
(v) At the election of the Corporation for "cause," as
hereinafter defined, immediately upon written notice to Executive.
"Cause" shall be determined by the Board of Directors and shall
mean:
(1) Any action that is illegal or not in good faith
which is materially detrimental to the interest and well-being
of the Corporation; or
(2) Any failure by Executive to fully disclose any
material conflict of interest he may have with the Corporation
in a transaction between the Corporation and any third party
which is materially detrimental to the interest and well-being
of the Corporation; or
(3) Any adverse act or omission by Executive (a) which
would be required to be disclosed pursuant to public
securities laws and (b) which would preclude the Corporation
or any entity affiliated with the Corporation from selling
securities under any Federal or state law or which would
disqualify the Corporation or any affiliated entity from any
exemption otherwise available to it, all of which are
materially detrimental to the interest and well-being of the
Corporation; or
(4) Any material breach of the terms of this Agreement
by Executive, or the failure of Executive to diligently and
properly perform his duties for the Corporation, such breach
or failure to be determined in the reasonable judgment of the
Board of Directors and which breach or failure is not
corrected within sixty (60) days after written notice of such
breach or failure by the Board of Directors; or
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<PAGE> 6
(5) Any material failure by Executive to comply with the
reasonable policies and/or directives of the Board of
Directors, to the best of his abilities, which failure is not
corrected within sixty (60) days after written notice of such
failure has been given to Executive.
(vi) At the election of the Corporation "without cause" upon
ninety (90) days written notice to Executive. At any time during
such ninety (90) day period, the Corporation may terminate
Executive's services to the Corporation subject to the payment by
the Corporation of Executive's salary and benefits for the remainder
of such ninety (90) day period and the severance pursuant to Section
7 hereof.
7. SALARY UPON TERMINATION; SEVERANCE. Except as specified below, upon
termination of Executive's employment with the Corporation, Executive shall be
paid all salary accrued and owing to Executive upon the termination date. Upon
termination of Executive's employment by the Corporation (other than termination
by the Corporation permitted by Section 6(b)(i), 6(b)(ii), 6(b)(iii), or
6(b)(v)), then Executive shall be entitled to receive, from the date of
termination, (a) his then-current base salary for a period of twelve (12) months
commencing on the date of termination, which will be payable in accordance with
the then-current payroll policies at such times as such salary would have been
paid had such termination not occurred; (b) all benefits payable in accordance
with this Agreement for a period of twelve (12) months commencing on the date of
termination; and (c) his pro-rata portion of the amount of any bonuses
established by the Board of Directors; provided that the targets or goals for
earning such bonuses are achieved on a pro-rata basis; and furthermore all
unexercisable stock options held by Executive shall fully accelerate and become
fully exercisable as of the date of termination.
8. Stock Purchase. Executive hereby subscribes for and purchases 650,000
shares of the common stock of the Corporation, par value $0.01 per share, at the
price of $0.10 per share. The purchase price for such shares shall be evidenced
by a Demand Promissory Note made and delivered by Executive to the Corporation
in the form attached hereto as Exhibit B.
9. CONFIDENTIALITY AND COVENANT NOT TO COMPETE.
(a) Confidentiality. Executive acknowledges that, in and as a result
of his employment by the Corporation, he has been and will be making use
of, acquiring and/or adding to confidential information of a special and
unique nature and value, including, without limitation, the Corporation's
trade secrets, products, services, systems, programs, procedures, manuals,
guides (as periodically updated or supplemented), confidential reports and
communications (including, without limitation, customer information,
technical information on the performance and reliability of the
Corporation's products or services and the development or acquisition of
future products or services) and lists of customers, as well as the nature
and type of the service rendered by the Corporation and the fees paid by
the Corporation's customers. Executive further acknowledges that any
information and materials received by the Corporation or Executive from
third parties in confidence (or subject to non-disclosure covenants) shall
be deemed to be and shall be confidential information within the meaning
of this Section 9(a). As a material inducement to the
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<PAGE> 7
Corporation to continue to employ Executive and to pay to Executive
compensation as set forth herein for such services to be rendered to the
Corporation by Executive (it being understood and agreed by the parties
hereto that such compensation shall also be paid and received in
consideration hereof), Executive covenants and agrees that he shall not,
except with the prior written consent of the Board of Directors, at any
time during or following the termination of his employment with the
Corporation, directly or indirectly, divulge, use, reveal, report,
publish, transfer or disclose, for any purpose whatsoever, any of such
confidential information which has been obtained by or disclosed to him as
a result of his employment with the Corporation, including, without
limitation, any "Proprietary Information," as hereinafter defined. The
aforementioned obligation of confidentiality and non-disclosure shall not
apply when:
(i) Public Domain. The Proprietary Information disclosed to
Executive was in the public domain at the time of disclosure, or at
any time after disclosure has become a part of the public domain by
publication or otherwise through sources other than Executive,
directly or indirectly, and without fault on the part of Executive
in failing to keep such information confidential; or
(ii) Requirement of Law or Order. Disclosure is required by
law or court order, provided Executive gives the Corporation prior
written notice promptly upon learning that such disclosure is sought
so that the Corporation may intervene; or
(iii) Agreement. Disclosure is made with the prior written
agreement of an authorized officer of the Corporation or the Board
of Directors; or
(iv) Prior Information. The information was in Executive's
possession prior to the Effective Date, as shown by written records
in existence prior to the Effective Date; or
(v) Third Party Disclosure. The Proprietary Information is
lawfully disclosed to Executive after the termination of his
employment by a third party who is under no obligation of
confidentiality to the Corporation with respect to such information;
or
(vi) Independently Developed. Such information is
independently developed by Executive subsequent to the termination
of his employment with the Corporation, as demonstrated by written
records of Executive which are contemporarily maintained.
(b) COVENANT NOT TO COMPETE. It is recognized and understood by the
parties hereto that Executive, through his association with the
Corporation as an employee, has and shall acquire a considerable amount of
knowledge and goodwill with respect to the business of the Corporation,
which knowledge and goodwill are extremely valuable to the Corporation and
which would be extremely detrimental to the Corporation if used by
Executive to compete with the Corporation. It is, therefore, understood
and agreed by the parties hereto that, because of the nature of the
business of the Corporation, it is necessary
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<PAGE> 8
to afford fair protection to the Corporation from such unfair
competition by Executive. Consequently, as material inducement to
employ Executive in the aforementioned position, Executive covenants
and agrees to the following:
(i) that at any time while engaged as an employee of the
Corporation and for a period of one (1) year following his
termination, he will not, directly or indirectly, with or through
any family member or former director, officer or employee of the
Corporation, or acting alone or as a director, employee, agent,
consultant, member of a partnership, firm, corporation or other
entity or as a holder of more than 5% of any security of any class
of any corporation or other business entity:
(1) engage anywhere in the world (the "Noncompetition
Area") in any business related to (i) the development and
marketing of software for conducting auctions and other
similar interactive sales methods and (ii) maintenance,
integration, customization, and other services related to such
products or (iii) such other business then being actively
pursued or reasonably anticipated to be pursued by the
Corporation at the time of such termination; or
(2) interfere with, or seek to interfere with, the
relationship between the Corporation and any affiliate of the
Corporation with the following: (a) any of the employees of
such entities; (b) any of the customers of such entities then
existing or existing at any time within three years prior to
termination of Executive's employment with the Corporation; or
(c) any of the suppliers of such entities then existing or
existing at any time within five (5) years prior to
termination of Executive's employment with the Corporation; or
(3) directly or indirectly recruit or hire any person
who is or had been in the prior three (3) months an employee
of the Corporation or any affiliate of the Corporation or
induce or attempt to induce any employee of the Corporation or
any affiliate of the Corporation to terminate his or her
employment with, or otherwise cease his or her relationship
with, the Corporation or any affiliate of the Corporation.
(ii) In the event that paragraph 9(b)(i)(1) shall be
determined by a court of competent jurisdiction to define too broad
a territory to be enforceable , then the Noncompetition Area shall
be the continents of Europe, Asia, North America and South America.
(iii) In the event that paragraphs 9(b)(i)(1) and 9(b)(ii)
shall be determined by a court of competent jurisdiction to define
too broad a territory to be enforceable, then the Noncompetition
Area shall be the continents of North America and South America.
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(iv) In the event that paragraphs 9(b)(i)(1), 9(b)(ii) and
9(b)(iii) shall be determined by a court of competent jurisdiction
to define too broad a territory to be enforceable, then the
Noncompetition Area shall be the United States of America.
(v) In the event that paragraphs 9(b)(i)(1), 9(b)(ii),
9(b)(iii) and 9(b)(iv) shall be determined by a court of competent
jurisdiction to define too broad a territory to be enforceable, the
Noncompetition Area shall be each state in which the Corporation has
sold any products to any customer;
(vi) In the event that paragraphs 9(b)(i)(1), 9(b)(ii),
9(b)(iii), 9(b)(iv) and 9(b)(v) shall be determined by a court of
competent jurisdiction to define too broad a territory to be
enforceable, the Noncompetition Area shall be the states of
California, Florida, Georgia, New York, North Carolina, South
Carolina, Texas and Virginia;
(vii) In the event that paragraphs 9(b)(i)(1), 9(b)(ii),
9(b)(iii), 9(b)(iv), 9(b)(v) and 9(b)(vi) shall be determined by a
court of competent jurisdiction to define too broad a territory to
be enforceable, the Noncompetition Area shall be the state of North
Carolina.
10. DEFINITION OF PROPRIETARY INFORMATION. For purposes of this Agreement,
the term "Proprietary Information" shall mean all of the following materials and
information (whether or not reduced to writing and whether or not patentable or
protectable by copyright) which Executive receives, receives access to,
conceives of or develops, in whole or in part, as a direct or indirect result of
his employment with the Corporation, in the course of his employment with the
Corporation (in any capacity, whether executive, managerial, planning,
technical, sales, research, development or otherwise) or through the use of any
of the Corporation's facilities or resources:
(a) Products and any related goods and any and all future products
derived therefrom;
(b) With respect to the items described in Section 9(a) above, all
hardware and software relating thereto; all source and object codes to
such hardware and software; all specifications, design concepts, documents
and manuals; all security systems relating to the services or procedures,
including, without limitation, software security systems;
(c) Trade secrets, processes, marketing techniques, software
programs, marketing plans, formulae, data, mailing lists, purchasing
information, price lists, pricing policies, quoting procedures, financial
information, customer and prospect names and requirements, customer data,
customer site information, pricing strategies and other materials or
information relating to the manner in which the Corporation does business;
(d) Discoveries, concepts and ideas, whether or not patentable or
protectable by copyright, including, without limitation, the nature and
results of research and development
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activities, technical information on product or program performance and
reliability, processes, formulas, techniques, "know-how," source codes,
object codes, designs, drawings and specifications;
(e) Any other materials or information related to the business or
activities of the Corporation which are not generally known to others
engaged in similar businesses or activities;
(f) Any other materials or information that has been created,
discovered or developed, or otherwise become known to the Corporation
which has commercial value in the business in which the Corporation is
engaged; and
(g) All ideas which are derived from or relate to Executive's access
to or knowledge of any of the above-enumerated materials and information.
Failure to mark any of the Proprietary Information as confidential shall
not affect its status as Proprietary Information under the terms of this
Agreement.
11. OWNERSHIP OF INFORMATION.
(a) Executive hereby assigns to the Corporation all of Executive's
right, title and interest in any idea (whether or not patentable or
protectable by copyright), invention, computer software program or other
computer-related equipment or technology, conceived or developed in whole
or in part, or in which Executive may have aided development, while
employed by the Corporation, including, without limitation, any
Proprietary Information. If any one or more of the aforementioned are
deemed in any way to fall within the definition of "work made by hire," as
such term is defined in 17 U.S.C. Section 101, such work shall be
considered "work made for hire," copyright of which shall be owned solely
by, or assigned or transferred completely and exclusively to the
Corporation. Executive agrees to execute all documents, agreements, and
all other instruments and to do all other things reasonably requested by
the Corporation (both during and after Executive's employment with the
Corporation) in order to more fully vest in the Corporation all ownership
rights in those items thereby transferred by Executive to the Corporation.
Executive further agrees to disclose immediately to the Corporation all
Proprietary Information conceived of or developed in whole or in part by
him during the term of his employment with the Corporation and to assign
to the Corporation any right, title or interest he may have in such
Proprietary Information.
(b) Notwithstanding anything in this Agreement to the contrary, the
obligation of Executive to assign or offer to assign his rights in an
invention to the Corporation shall not extend or apply to an invention
that Executive developed entirely on his own time without using the
Corporation's equipment, supplies, facility or trade secret information
unless such invention (i) relates to the Corporation's business or actual
or demonstrably anticipated research or development, or (ii) results from
any work performed by Executive for the Corporation. Executive shall bear
the burden of proof in establishing that his invention qualifies for
exclusion under this Section 11(b). With respect to Section 11(b), it
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is agreed and acknowledged that during Executive's employment, the
Corporation, with the concurrence of its Board of Directors and consistent
with the Corporation's mission, may enter other lines of business, which
are related or unrelated to its current lines of business, in which case
this Agreement would be expanded to cover such new lines of business.
12. INDEMNIFICATION.
(a) Executive agrees to indemnify and hold harmless the Corporation,
its directors, officers, agents and employees against any liabilities and
expenses, including amounts paid in settlement, incurred by any of them in
connection with any claim by any of Executive's prior employers that the
termination of Executive's employment with such employer, Executive's
employment by the Corporation, or use of any of Executive's skills and
knowledge by the Corporation is a violation of contract or law.
(b) The Corporation shall defend, indemnify, hold harmless, and pay
defense costs, liabilities, and expenses, including amounts paid in
settlement for Executive resulting from his actions as an officer,
director or employee of the Corporation to the fullest extent permitted by
law; provided that, such actions were not taken by Executive in bad faith.
13. EXECUTIVE REPRESENTATIONS.
(a) Executive represents that his performance of all of the terms of
this Agreement and as an employee does not and will not breach any
agreement to keep in confidence proprietary information acquired by
Executive in confidence or in trust prior to Executive's employment by the
Corporation. Executive represents that he has not entered into, and agrees
not to enter into, any agreement either oral or written in conflict
herewith.
(b) Executive understands as part of the consideration for this
Agreement and for Executive's employment or continued employment by the
Corporation, that Executive has not brought and will not bring with
Executive to the Corporation, or use in the performance of Executive's
responsibilities for the Corporation, any materials or documents of a
former employer which are not generally available to the public or which
did not belong to Executive prior to his employment with the Corporation,
unless Executive has obtained written authorization from the former
employer or other owner for their possession and use and provided the
Corporation with a copy thereof.
(c) Executive understands that during his employment for the
Corporation he is not to breach any obligation of confidentiality that
Executive has to a former employer or any other person or entity.
14. RECORDS. All notes, data, tapes, reference materials, sketches,
drawings, memoranda, models and records in any way relating to any of the
information referred to in Sections 9(a) (excluding (i) through (vi) thereof),
10 and 11(a) hereof (including without limitation, any Proprietary Information)
or to the Corporation's business shall belong exclusively to the Corporation and
Executive agrees to turn over to the Corporation all such materials and all
copies
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of such materials in his possession or then under his control at the request of
the Corporation or, in the absence of such request, upon the termination of
Executive's employment with the Corporation.
15. REASONABLENESS OF RESTRICTIONS.
(a) Executive has carefully read and considered the provisions of
Sections 9, 10, and 11 hereof and, having done so, agrees that the
restrictions set forth therein are fair and reasonable and are reasonably
required for the protection of the interests of the Corporation, its
officers, directors, stockholders and employees. Executive further
acknowledges that the nature of the Corporation's services are such that
its natural market is the entire world. Accordingly, Executive agrees that
the length of time, geographic area and any other restrictions contained
in this Agreement are reasonable to protect the legitimate interests of
the Corporation and do not unfairly restrict or penalize Executive.
(b) In the event that, notwithstanding the foregoing, any part of
the covenants set forth in Sections 9 through 14 hereof shall be held to
be invalid and unenforceable, the court so deciding may reduce or limit
the terms of such provision to allow such provision to be enforced.
16. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such
terms, covenants or conditions, nor shall any waiver or relinquishment of any
right or power granted hereunder at any particular time be deemed a waiver or
relinquishment of such rights or power at any time or times. Each party agrees
and acknowledges that nothing herein shall be construed to prohibit the other
party from pursuing any remedies available to it for breach or threatened breach
of this Agreement, including the recovery of money damages.
17. REMEDY. Executive understands and agrees that the Corporation may
suffer irreparable harm in the event that Executive breaches any of his
obligations under this Agreement and that monetary damages may be inadequate to
compensate the Corporation for such breach. Accordingly, Executive agrees that,
in the event of a breach or threatened breach by Executive of any of the
provisions of this Agreement, the Corporation, in addition to and not in
limitation of any other rights, remedies or damages available to the Corporation
at law or in equity, shall be entitled to seek a permanent injunction in order
to prevent or to restrain any such breach by Executive, or by Executive's
partners, agents, representatives, servants, employers, employees and/or any and
all persons directly or indirectly acting for or with him; provided such
injunction shall not affect Executive's ownership rights in the Corporation or
compensation earned or due Executive.
18. ATTORNEYS' FEES. In the event that it shall become necessary for
either party to retain the services of an attorney to enforce any terms under
this Agreement, the prevailing party, in addition to all other rights and
remedies hereunder or as provided by law, shall be entitled to reasonable
attorneys' fees and costs of suit.
19. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision (or part
thereof) of this Agreement shall in no way affect the validity or enforceability
of any other provision (or remaining part thereof).
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<PAGE> 13
20. GOVERNING LAW. This Agreement shall be governed by and construed
according to the laws of the State of North Carolina, without reference to the
choice of law provisions of such laws.
21. NOTICES. Any notice required to be given hereunder shall be sufficient
if in writing and sent by certified or registered mail, return receipt
requested, first-class postage prepaid, in the case of Executive, to his address
as shown on the Corporation's records, and in the case of the Corporation, to
its principal office in the State of North Carolina.
22. BENEFIT. This Agreement shall be binding upon and shall inure to the
benefit of each of the parties hereto, and to their respective heirs,
representatives, successors and permitted assigns. This Agreement shall be
binding upon the Corporation and upon any successor corporation. Executive may
not assign any of his rights or delegate any of his duties under this Agreement
without the prior written consent of the Board of Directors of the Corporation.
23. ENTIRE AGREEMENT. This Agreement and the several Exhibits hereto
contains the entire agreement and understandings by and between the Corporation
and Executive with respect to the covenants herein described, and no
representations, promises, agreements or understandings, written or oral, not
herein contained shall be of any force or effect. No change or modification
hereof shall be valid or binding unless the same is in writing and signed by the
parties hereto. No waiver of any provision of this Agreement shall be valid
unless the same is in writing and signed by the party against whom such waiver
is sought to be enforced; moreover, no valid waiver of any other provision of
this Agreement at any time shall be deemed a waiver of any other provision of
this Agreement at such time nor will it be deemed a valid waiver of such
provision at any other time.
24. CAPTIONS. The captions in this Agreement are for convenience only and
in no way define, bind or describe the scope or intent of this Agreement.
25. SURVIVAL OF COVENANTS. The provisions set forth in Sections 7 through
13 hereof shall survive the termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Executive
Employment Agreement and affixed their seals as of the Effective Date.
OPENSITE TECHNOLOGIES, INC.
By: /s/
______________________________
Name:
Title:
EXECUTIVE:
/s/ Kip A. Frey
_________________________________
Kip A. Frey
14
<PAGE> 15
EXHIBIT A
Executive's principal responsibilities are as follows: responsible for
day-to-day operations and as the Chief Executive Officer of the Corporation;
responsible, in consultation with the Board of Directors, for hiring the
management team; responsible, in consultation with the Board of Directors, for
overall profitability of the Corporation; reports to the Board of Directors of
the Corporation.
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<PAGE> 1
Exhibit 10.8
AMENDED AND RESTATED
RESTRICTED STOCK AGREEMENT
THIS AMENDED AND RESTATED RESTRICTED STOCK AGREEMENT (the "Agreement") is
entered into as of July 8, 1999, by and between OPENSITE TECHNOLOGIES, INC., a
Delaware corporation (the "Corporation"), and Kip A. Frey (the "Stockholder").
W I T N E S S E T H:
WHEREAS, the parties hereto entered into a Restricted Stock Agreement
effective as of October 15, 1998 and wish to amend and restate such Restricted
Stock Agreement; and
WHEREAS, pursuant to the terms of the "Employment Agreement," as defined
herein, the Stockholder has subscribed for and purchased shares of the common
stock of the Corporation; and
WHEREAS, the Corporation and the Stockholder desire to impose certain
restrictions on the transfer by the Stockholder of such shares.
NOW, THEREFORE, for the valuable consideration set forth below, the
parties hereto hereby agree as follows:
1. Purchase of Shares and Imposition of Restrictions. The Stockholder has
previously subscribed for and purchased from the Corporation, six hundred fifty
thousand (650,000) shares (the "Shares") of the common stock, par value $0.01
per share of the Corporation (the "Common Stock") at a purchase price of $0.10
per share. As consideration for the Shares, the Stockholder made and delivered
to the Corporation a Demand Promissory Note, dated August 10, 1998, in the
principal amount of Sixty Five Thousand Dollars ($65,000). As consideration for
the imposition of the restrictions on the transfer of the Shares as set forth
herein, the Corporation and the Stockholder shall cancel such Demand Promissory
Note and, in substitution thereof, the Stockholder shall make and deliver to the
Corporation a Promissory Note in the form attached hereto as Exhibit A.
2. Purchase and Sale Options.
(b) Purchase Option. If Stockholder's employment with the
Corporation is terminated, then the Corporation shall have right and option to
purchase such number of Shares as determined in accordance with the formula set
forth in the next sentence at a purchase price equal to (i) $0.10 per share if
termination by the Corporation for "cause" as such term is defined in Section
6(b)(v) of that certain Executive Employment Agreement, entered into as of
August 10, 1998, and amended and restated on July 8, 1999 by and between
Stockholder and the Corporation (the "Employment Agreement") or (ii) if such
termination is voluntary by the Stockholder, the greater of $0.10 per share or
the Value Per Share determined pursuant to Section
<PAGE> 2
4(c) hereof with the initial determination of the Value Per Share to be given by
the Corporation with its notice of the exercise of such purchase Option. If such
termination occurs during the "Term," as such term is defined in the Employment
Agreement, the Corporation shall have the right and option to purchase all of
the Shares less 2.08% of such Shares for each month or fraction thereof that
Stockholder is employed by the Corporation so that at the end of Forty-Eight
(48) months of employment by the Corporation the Corporation shall not have the
right to repurchase any of the Shares. During the term of this Agreement, the
Stockholder shall not sell, assign, transfer or pledge that number of the Shares
hereunder for which the right to repurchase by the Corporation remains in effect
hereunder. All repurchase rights under the Agreement shall terminate if the
Stockholder's employment is terminated by the Corporation (other than
termination by the Corporation pursuant to Section 6(b)(i), 6(b)(ii), 6(b)(iii),
or 6(b)(v) of the Employment Agreement).
(c) Sale Option. If Stockholder's employment with the Corporation is
terminated by the Corporation "without cause," as such term is defined in
Section 6(b)(v) of the Employment Agreement, then the Stockholder shall have the
right and option to sell, and the Corporation shall be obligated to buy, any or
all of the Shares to the Corporation at a purchase price equal to the greater of
$0.10 per share or the Value Per Share determined pursuant to Section 4(c)
hereof with the initial determination of the Value Per Share to be given by the
Corporation to the Stockholder within thirty (30) days after the receipt by the
Corporation of notice from the Stockholder that he is exercising his right to
sell. This Section 2(c) shall terminate upon the closing of the sale of capital
stock of the Corporation in an offering registered under the Securities Act of
1933, as amended.
(d) For purposes of this Agreement, employment by the Corporation
shall include employment by a parent or subsidiary of the Corporation.
3. Exercise of Purchase Option and Closing.
(a) The Corporation may exercise the its purchase right and option
or the Stockholder may exercise his sale right and option pursuant to Section 2
hereof by delivering or mailing to the Stockholder or the Corporation, as the
case may be, in accordance with Section 14, written notice of exercise within
sixty (60) days after the termination of the Stockholder's employment by the
Corporation. Such notice shall specify the number of Shares to be purchased or
sold and the price at which such Shares shall be purchased or sold. If such
rights and options are not so exercised within such 60-day period, such rights
and options shall automatically expire and terminate effective upon the
expiration of such 60-day period.
(b) Within fifteen (15) days after receipt of the notice of the
exercise of any right or option pursuant to Section 3(a) above and the
determination of the Value Per Share, if required, the Stockholder shall tender
to the Corporation at its principal offices the certificate or certificates
representing the Shares held by the Stockholder which the Corporation shall
purchase, duly endorsed in blank by the Stockholder or with duly endorsed stock
powers attached thereto, all in form suitable for the transfer of such Shares to
the Corporation. Upon its receipt of such Shares, the Corporation shall deliver
or mail to the Stockholder a check in the amount of the aggregate applicable
purchase price therefor.
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<PAGE> 3
(c) After the time at which any Shares are required to be delivered
to the Corporation for transfer to the Corporation pursuant to Section 3(b)
above, the Corporation shall not pay any dividend to the Stockholder on account
of such Shares or permit the Stockholder to exercise any of the privileges or
rights of a Stockholder with respect to such Shares, but shall, in so far as
permitted by law, treat the Corporation as the owner of such Shares.
(d) The purchase price may be payable, at the option of the
Corporation, in cancellation of all or a portion of any outstanding indebtedness
of the Stockholder to the Corporation or in cash (by check) or both.
(e) The Corporation shall not purchase any fraction of a Share of
and any fraction of a Share resulting from a computation made pursuant to
Section 2 of this Agreement shall be rounded to the nearest whole Share (with
any one-half Share being rounded upward).
4. Restriction on Transfer of Shares.
(a) Prior to an Initial Public Offering (as defined below) or
transaction described in Section 11(b) hereof, Stockholder may not sell, assign,
transfer, pledge, create a security interest in, grant a lien, encumber, give or
otherwise dispose of any of the Shares acquired pursuant to this Agreement
including any additional shares acquired as a result of a recapitalization,
stock split, stock dividend, merger or other similar event (collectively the
"Restricted Shares"), except as permitted below. "Initial Public Offering" shall
mean the effectiveness of the filing of the first registration statement under
the Securities Act that covers the offer and sale by the Corporation to the
public of Common Stock.
(b) The Stockholder is permitted to transfer any or all of the
Shares only upon compliance with the following terms and conditions:
(i) The Stockholder may transfer any Shares to a family
member, a trust established solely for his benefit and/or the benefit of a
family member or an entity solely owned by him and/or a family member; provided,
however, the Shares must be transferred subject to the provisions of this
Agreement and prior to the transfer of any Shares the transferee shall execute
an agreement containing substantially similar terms to those provided in
Paragraphs 4 through 8 of this Agreement. For purposes of this Agreement,
"family member" shall mean a spouse, lineal descendant or adopted child of the
Stockholder;
(ii) The Stockholder may transfer any or all of the Shares,
provided that all such shares are first offered for sale as provided in
Paragraph 4(c) of this Agreement and further provided that the Transferee (as
defined below) executes an agreement containing substantially similar terms to
those provided in Paragraphs 4 through 8 of this Agreement prior to the transfer
of such shares to the Transferee.
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<PAGE> 4
(c)
(i) In the event that the Stockholder has received an offer to
purchase any of the Shares which he desires to accept, he shall first offer in
writing to sell such shares to the Corporation (the "Offer"). Such Offer shall
state the name and address of the intended transferee (the "Transferee"), the
number of Shares proposed to be transferred, the purchase price, the terms of
payment and the other terms and conditions of the proposed transfer. The Offer
shall be delivered to the Corporation in the manner described in this Agreement.
(ii) The Corporation shall have the right to purchase all, but
not less than all, of the Shares so offered by written notice to the Stockholder
within thirty days of the mailing or delivery of the Offer (the "Purchase
Right") and thereafter, if the Corporation exercises the Purchase Right, the
sole right of the Stockholder shall be to receive the Purchase Price (as defined
below) of the shares pursuant to this Paragraph.
(iii) The purchase price (the "Purchase Price") of each of the
Shares subject to the Offer shall be the lesser of the (A) price per share
offered by the Transferee or (B) the Value Per Share as determined below. The
Purchase Price shall be paid upon substantially similar terms and conditions as
set forth in the offer. The closing shall be the later of (1) the 90th day
following written notice of the Corporation's exercise of the Purchase Right or
(2) the 10th day following the final determination of the Value Per Shares as
provided below, if such determination is necessary.
(iv) The Value Per Share shall be the fair market value of
such Shares subject to the Offer. If the Corporation believes that the Value Per
Share is less than the offered price, it shall notify the Stockholder in writing
of the Value Per Share as determined by the Corporation with the notice of the
exercise of the Purchase Right. Such determination by the Corporation shall be
binding unless the Stockholder gives the Corporation written notice within ten
(10) days of the Corporation's notice of the exercise of the Purchase Right that
he disagrees with the Value Per Share as determined by the Corporation. In such
event, the Stockholder and the Corporation shall attempt to agree upon the Value
Per Share. If the Stockholder and the Corporation are unable to agree upon the
Value Per Share during the 20-day period immediately following the Stockholder's
written notice of disagreement, then the Stockholder and the Corporation shall
each, within ten (10) days after the expiration of such 20-day period, select an
appraiser experienced in the business of evaluating or appraising the market
value of stock and give notice to the other of the appraiser each has selected.
The appraisers so selected (the "Initial Appraisers") shall within thirty (30)
days following the notice of disagreement, appraise the fair market value of
such shares. If the difference between the resulting appraisals is not greater
than ten percent (10%), then the average of the appraisals shall be deemed the
Value Per Share for purposes of determining the Purchase Price above and no
further appraisal of the shares shall be required. Otherwise, the Initial
Appraisers shall select an additional appraiser (the "Additional Appraiser") who
shall be experienced in a manner similar to the Initial Appraisers. If they fail
to select such Additional Appraisers within ten (10) days, as provided above,
then either the Stockholder or the Corporation may apply, after written notice
to the other, to any judge of any designated court of general jurisdiction for
the appointment of such Additional Appraiser. The Additional Appraiser shall
then, within thirty (30) days of appointment, choose from the values determined
by the Initial Appraisers the value that the Additional Appraiser considers
closest to the fair market value of the Shares and such value shall be the Value
Per Share for purposes of
4
<PAGE> 5
determining the Purchase Price. The Additional Appraiser shall forthwith give
written notice of his determination to the Corporation and the Stockholder.
(v) Each party shall pay the expenses and fees of the Initial
Appraiser selected by him or it, and, if an Additional Appraiser is employed,
the party who selected the Initial Appraiser whose value determination was
rejected by the Additional Appraiser shall pay the expenses and fees of the
Additional Appraiser.
(vi) If either the Corporation or the Stockholder shall fail
to appoint an Initial Appraiser within the time period provided in this
Agreement and such failure shall continue for ten (10) days after written
notice, then the Initial Appraiser appointed by the party that does appoint an
Initial Appraiser shall alone determine the Value Per Share of the shares
offered and such appraisal shall be binding upon the parties.
(vii) If the Corporation does not exercise its right to
purchase all of the Shares so offered, the Stockholder shall have the right to
sell or transfer the Shares offered within one hundred twenty (120) days from
the date of the Offer, only to the Transferee described in the Offer and only
under substantially the terms and conditions specified therein and further
provided that the Transferee of the shares executes an agreement containing
substantially similar terms as those provided in Paragraphs 4 through 8 of this
Agreement. Thereafter, the Shares sold shall continue to be subject to this
Agreement.
5. Agreement to Sell. Prior to an Initial Public Offering as defined in
Paragraph 4 above, if the Corporation receives written notice that a majority of
the holders of the Common Stock of the Corporation, a majority of the holders of
the Series A Preferred Stock of the Corporation, and a majority of the holders
of the Series B Preferred Stock of the Corporation have agreed to sell all their
shares pursuant to an offer, the Corporation may send written notice of such
offer to the Stockholder or Transferee and the Stockholder and any Transferee
agree to sell all the Shares of the Corporation at the same price per share as
provided in the offer. The offer may provide for payment in any combination of
cash or securities in any other entity whether publicly traded or otherwise and
may have provision for installment payments.
The Stockholder and Transferee hereby irrevocably constitute and appoint
the Secretary of the Corporation, or his successor with the power to appoint his
substitute, as his true and lawful attorney in fact with the full power and
authority to act in his name, place and stead, to make, execute and acknowledge,
swear to, file, record, deliver and publish any documents necessary or
convenient to effectuate the sale, transfer or assignment of Shares of the
Corporation in accordance with this Paragraph 5.
6. Terms of Closing.
(a) At the time of the closing of any sale of shares of Common Stock
pursuant to this Agreement, the Stockholder or Transferee or his personal
representative shall deliver the stock certificate for the Shares of Common
Stock to be sold, duly endorsed for transfer, with appropriate stock transfer
stamps affixed thereto.
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<PAGE> 6
(b) Except for the continuing application of this Agreement, if
applicable, any sale of Shares of Common Stock pursuant to this Agreement shall
be free and clear of any and all liens, encumbrances, security interest or
interest of any other person.
7. "Market Stand-Off" Agreement. If requested by the Corporation upon the
recommendation of the Board of Directors of the Corporation and an underwriter
of Common Stock (or other securities) of the Corporation, the Stockholder shall
not sell or otherwise transfer or dispose of any of the Shares of the
Corporation held by him during the up to one hundred eighty (180) day period
following the effective date of a registration statement of the Corporation
filed under the Securities Act, provided that:
(a) Such agreement shall apply only with respect to an underwritten
Initial Public Offering; and
(b) Michael Brader-Araje and Mark Jauquet, if then shareholders of
the corporation, enter into similar agreements.
Such agreement shall be in writing in form satisfactory to the Corporation
and such underwriter. The Corporation may impose stop-transfer instructions with
respect to the Shares subject to the foregoing restriction until the end of said
period.
8. Effect of Prohibited Transfer. The Corporation shall not be required
(a) to transfer on its books any of the Shares which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (b) to treat as owner of such Shares or to pay dividends to any transferee to
whom any such Shares shall have been so sold or transferred.
9. Restrictive Legend. All certificates representing Shares shall have
affixed thereto a legend in substantially the following form, in addition to any
other legends that may be required under federal or state securities laws:
"The shares represented by this certificate are subject to
restrictions on transfer and an option to purchase set forth in a
certain Restricted Stock Agreement between the Corporation and the
registered owner of this certificate (or such owner's predecessor in
interest), and such Restricted Stock is on file in, and may be
examined at, the principal office of the Corporation. This legend
shall be removed by the Corporation at the request of the
Stockholder with respect to any Shares for which the repurchase
rights of the Corporation have terminated under Section 2(b) hereof
and the restrictions under Sections 4, 5 and 7 have terminated."
10. Investment Representations. The Stockholder represents, warrants and
covenants as follows:
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<PAGE> 7
(a) The Stockholder is purchasing the Shares for the Stockholder's
own account for investment only, and not with a view to, or for sale in
connection with, any distribution of the Shares in violation of the Securities
Act, or any rule or regulation under the Securities Act.
(b) The Stockholder has had such opportunity as the Stockholder has
deemed adequate to obtain from representatives of the Corporation such
information as is necessary to permit the Stockholder to evaluate the merits and
risks of the Stockholder's investment in the Corporation.
(c) The Stockholder has sufficient experience in business, financial
and investment matters to be able to evaluate the risks involved in the purchase
of the Shares and to make an informed investment decision with respect to such
purchase.
(d) The Stockholder can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding such Shares for an
indefinite period.
(e) The Stockholder understands that (i) the Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available;
(iii) in any event, the exemption from registration under Rule 144 will not be
available for at least one (1) year and even then will not be available unless a
public market then exists for the Common Stock, adequate information concerning
the Corporation is then available to the public, and other terms and conditions
of Rule 144 are complied with; and (iv) there is now no registration statement
on file with the Securities and Exchange Commission with respect to any stock of
the Corporation and the Corporation has no obligation or current intention to
register the Shares under the Securities Act.
(f) A legend substantially in the following form will be placed on
the certificate representing the Shares:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the Corporation to the effect that such registration
is not required."
11. Adjustments for Stock Splits, Stock Dividends, etc.
(a) If from time to time during the term of this Agreement there is
any stock split-up, stock dividend, stock distribution or other reclassification
of the Common Stock of the Corporation, any and all new, substituted or
additional securities to which the Stockholder is entitled by reason of the
Stockholder's ownership of the Shares shall be immediately subject to
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<PAGE> 8
all of the provisions of this Agreement and the Plan in the same manner and to
the same extent as the Shares, and the respective option price shall be
appropriately adjusted.
(b) If the Shares are converted into or exchanged for, or
Stockholders of the Corporation receive by reason of any distribution in total
or partial liquidation, securities of another corporation (an "Acquiring
Corporation"), or other property (including cash), pursuant to any merger of the
Corporation or acquisition of its assets by an Acquiring Corporation, then the
rights of the Corporation under this Agreement shall inure to the benefit of the
Acquiring Corporation and this Agreement shall apply to the securities or other
property received from the Acquiring Corporation upon such conversion, exchange
or distribution in the same manner and to the same extent as the Shares.
12. Withholding Taxes.
(a) The Stockholder acknowledges and agrees that the Corporation has
the right to deduct from payments of any kind otherwise due to the Stockholder
any federal, state or local taxes of any kind required by law to be withheld
with respect to the purchase of the Shares by the Stockholder.
(b) If the Stockholder elects, in accordance with Section 83(b) of
the Internal Revenue Code of 1986, as amended, to recognize ordinary income in
the year of acquisition of the Shares, the Corporation will require at the time
of such election an additional payment for withholding tax purposes based on the
difference, if any, between the purchase price for such Shares and the fair
market value of such Shares as of the day immediately preceding the date of the
purchase of such Shares by the Stockholder. If the Stockholder makes such
election in accordance with Section 83(b) of the Internal Revenue Code of 1986,
as amended, the Corporation shall assist the Stockholder in filing such
election.
13. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.
14. Waiver. Any provision contained in this Agreement may be waived,
either generally or in any particular instance, by the Board of Directors of the
Corporation on behalf of the Corporation.
15. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Corporation and the Stockholder and their respective heirs,
executors, administrators, legal representatives, successors and assigns,
subject to the restrictions on transfer set forth in Section 4 of this
Agreement.
16. No Rights to Employment. Nothing contained in this Agreement shall be
construed as giving the Stockholder any right to be retained, in any position,
by the Corporation, whether as an employee of or consultant to the Corporation
or in any other capacity.
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<PAGE> 9
17. Notice. All notices required or permitted hereunder shall be in
writing and deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by certified mail, postage prepaid, addressed to
the other party hereto at the address shown beneath the Stockholder's or the
Corporation's respective signature to this Agreement, or at such other address
or addresses as either party shall designate to the other in accordance with
this Section 17.
18. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural, and vice
versa.
19. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings,
relating to the subject matter of this Agreement.
20. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Corporation and the Stockholder.
21. Governing Law. Subject to the provisions of Section 22, this Agreement
shall be construed, interpreted and enforced in accordance with the laws of the
State of North Carolina.
22. Administration. This Agreement shall be administered in accordance
with such administrative regulations as the Committee of the OpenSite
Technologies, Inc. Stock Option Plan may from time to time adopt, to the extent
not contrary to the terms and conditions of this Agreement.
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SIGNATURES APPEAR ON THE FOLLOWING PAGE.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
OPENSITE TECHNOLOGIES, INC.
By: /s/
_______________________________________
Name:
Title:
Address: 5315 Highgate Drive, Suite 102
Durham, NC 27713
STOCKHOLDER:
/s/ Kip A. Frey
__________________________________________
Kip A. Frey
Address: 81608 Alexander
Chapel Hill, NC 27514
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<PAGE> 11
EXHIBIT A
$65,000.00 October 15, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, Kip A. Frey, an individual residing in Orange County,
North Carolina (the "Maker"), hereby promises to pay to the order of OpenSite
Technologies, Inc., a Delaware corporation (the "Holder"), at 5315 Highgate
Drive, Durham, North Carolina 27713, or at such other place as Holder of this
Note may designate from time to time, the principal amount of Sixty Five
Thousand Dollars ($65,000.00) in lawful money of the United States of America,
together with simple interest in like money on the unpaid balance thereof at the
rate of six percent (6%) per annum from the date hereof calculated on the basis
of a 365-day year.
Principal and Interest. The principal amount together with all interest
accrued thereon, if not sooner paid, shall be paid in full on December 31, 2002.
Prepayment. At the option of the Maker, this Note may be prepaid, in whole
or in part, without penalty or premium. All prepayments shall be applied in the
inverse order of their maturity, and to accrued interest before the principal
amount.
Events of Default. Notwithstanding anything contained herein to the
contrary, the Holder may accelerate and demand payment of the entire outstanding
principal amount of this Note, accrued interest, and costs (if any) upon the
occurrence of any of the following events (an "Event of Default"):
a. if the Maker defaults in the payment of any amounts due under
this Note and such default is not cured within fifteen (15) days after
receipt of written notice thereof; or
b. if the Maker files a petition in bankruptcy pursuant to the
Federal Bankruptcy Act or any similar law, federal or state, or if, by
decree of a court of competent jurisdiction the Maker is ordered bankrupt,
or be declared insolvent, or makes an assignment for the benefit of
creditors, or admits in writing his inability to pay his debts generally
as they become due, and the Holder, acting in good faith, determines that
any such action adversely affects the Maker's ability to pay the amounts
due hereunder as the same become due; or
c. if the Maker's employment with Holder is terminated voluntarily
by the Maker or for good reason or for cause by the Holder pursuant to
Section 6(b)(iv) or Section 6(b)(vi) of the Executive Employment
Agreement, of even date herewith, by and between the Holder and the Maker;
or
d. if the Maker transfers his shares of the Common Stock of the
Holder to a "Transferee," as defined in the Restricted Stock Agreement,
dated October 15, 1998, by
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<PAGE> 12
and between the Holder and the Maker.
Upon the occurrence of any Event of Default, and the passage of any
applicable cure period, the Holder shall have the unconditional right to declare
the entire principal amount of this Note, all accrued interest, and any other
costs, expenses, charges, or other sums incurred by the Holder which it is
entitled to recover in collecting or enforcing this Note, immediately due and
payable.
Setoff. The principal amount, together with all interest accrued thereon,
may be payable at the option of the Holder in cancellation of all or a portion
of any outstanding indebtedness of the Holder to the Maker.
Collections. In case the Maker shall default and this Note is collected by
or through an attorney, the Holder shall be entitled to recover, in addition to
then outstanding principal amount together with accrued interest, to the extent
allowed by law, costs of collection and attorneys' fees actually incurred based
upon the time devoted to the matter at customary hourly rates.
Waivers. All parties to this Note, including endorsers, sureties, and
guarantors, if any, hereby waive presentment for payment, demand, protest,
notice of nonpayment or dishonor and of protest, and any and all other notices
and demands whatsoever, and any and all defenses on the grounds of any extension
of time for payment which may be granted by the Holder of this Note, or failure
to assert any legal right available to the Holder of this Note, and agree to
remain bound until the principal sum and interest are paid in full.
Successors and Assigns. The respective rights, duties and obligations of
the Maker and the Holder shall inure to their respective heirs, executors,
administrators, successors, and assigns, provided that the rights and
obligations of the Maker pursuant to this Note may not be assigned without the
prior written consent of the Holder, not to be unreasonably withheld.
Governing Law. This Note shall be construed in accordance with, and
governed by the laws of the State of North Carolina without regard to its rules
regarding choice of laws.
Notices. All directions, notices, and other communications by or from the
Holder to or upon the Maker shall be in writing and shall be deemed to have been
duly made, delivered, and received when personally delivered or when sent by
certified mail, postage prepaid, addresses to the Maker at 81608 Alexander,
Chapel Hill, North Carolina 27514, or at such other address as the Maker may
specify by notice to the Holder at the address set forth above, Attention:
Michael Brader-Araje or at such other place as the Holder may direct by notice
to the Maker.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
under Seal, as of the day and year first above written.
/s/ Kip A. Frey
------------------------------------------(SEAL)
Kip A. Frey
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<PAGE> 1
Exhibit 10.12
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into as of _________, 1999 by and
between OpenSite Technologies, Inc., a Delaware corporation (the "Corporation"),
and ____________________ ("Indemnitee").
RECITALS
WHEREAS, Indemnitee, a member of the Board of Directors and/or an officer
of the Corporation, performs a valuable service in such capacity for the
Corporation; and
WHEREAS, in order to induce Indemnitee to continue to serve as a Director
and/or an officer of the Corporation, the Corporation has determined and agreed
to enter into this Agreement with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's continued service as a
Director/and or an officer after the date hereof, the parties hereto agree as
follows:
1. SERVICES TO THE CORPORATION. Indemnitee will serve, at the will of the
Corporation under separate contract, if any such contract exists, as an officer
and/or Director of the Corporation, or as a director, officer or other fiduciary
of an affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the Certificate of Incorporation and
the Bylaws, as amended or amended and restated from time to time, of the
Corporation or of such affiliate (the "Organizational Documents"); provided,
however, that Indemnitee may at any time and for any reason resign from such
position or any other position (subject to any contractual obligation that
Indemnitee may have assumed apart from this Agreement) and that the Corporation
or any affiliate shall have no obligation under this Agreement to continue
Indemnitee in such position or any other position.
2. INDEMNITY OF INDEMNITEE. The Corporation hereby agrees to hold harmless
and indemnify Indemnitee to the fullest extent authorized or permitted by the
Organizational Documents and the Delaware General Corporation Law, as amended
(the "Code"), as the same may be amended from time to time (but only to the
extent that any such amendment permits the Corporation to provide broader
indemnification rights than the Organizational Documents or the Code permitted
prior to adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
Organizational Documents, the Code, any other applicable law and the exclusions
set forth in Section 4 hereof, the Corporation hereby further agrees to hold
harmless and indemnify Indemnitee
<PAGE> 2
against any and all reasonable attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the types customarily incurred
in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, arbitral, administrative or investigative
(including an action by or in the right of the Corporation), to which Indemnitee
is, was or at any time becomes a party, or is threatened to be made a party, by
the reason of the fact that Indemnitee is, was or at any time becomes a
director, officer, employee or other agent of the Corporation or is or was
serving or at any time serves at the written request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other corporation.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to this
Agreement shall be paid by the Corporation:
(a) on account of any claim against Indemnitee for an accounting of
profits made from the purchase or sale by Indemnitee of securities of the
Corporation, pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law; or
(b) for which payment has actually been made to Indemnitee under a valid
and collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment under
such insurance, clause, bylaw or agreement; or
(c) in connection with any proceeding (or part thereof) brought or made by
Indemnitee against the Corporation, unless (i) such indemnification is expressly
required to be made by law, or (ii) the proceeding is initiated pursuant to
Section 9 hereof; or
(d) if it is finally determined (under the procedures, and subject to the
presumptions set forth in Section 5 hereof) to be unlawful under Delaware law.
5. PROCEDURES AND PRESUMPTIONS FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.
It is the intent of this Agreement to secure for Indemnitee rights of
indemnity that are as favorable as may be permitted under the law and public
policy of the State of Delaware. Accordingly, the parties agree that the
following procedures and presumptions shall apply in the event of any question
as to whether Indemnitee is entitled to indemnification under this Agreement:
(a) To obtain indemnification (including, but not limited to,
the advancement of Expenses and contribution by the Corporation) under this
Agreement,
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<PAGE> 3
Indemnitee shall submit to the Corporation a written request, including therein
or therewith such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Secretary of the Corporation
shall, promptly upon receipt of such a request for indemnification, advise the
Board of Directors in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 5(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case by one of the following three methods, which
shall be at the election of Indemnitee: (1) by a majority vote of the
disinterested directors, even though less than a quorum, or (2) by Independent
Counsel in a written opinion, or (3) by the stockholders.
(c) If the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 5(b) hereof, the
Independent Counsel shall be selected as provided in this Section 5(c). The
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall
request that such selection be made by the Board of Directors). Indemnitee or
the Corporation, as the case may be, may, within 10 days after such written
notice of selection shall have been given, deliver to the Corporation or to
Indemnitee, as the case may be, a written objection to such selection; provided,
however, that such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined below, and the objection shall set forth with particularity
the factual basis of such assertion. Absent a proper and timely objection, the
person so selected shall act as Independent Counsel. If a written objection is
made and substantiated, the Independent Counsel selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant to
Section 5(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Corporation or Indemnitee may petition the Court of
Chancery of the State of Delaware or other court of competent jurisdiction for
resolution of any objection which shall have been made by the Corporation or
Indemnitee to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the court or by such
other person as the court shall designate, and the person with respect to whom
all objections are so resolved or the person so appointed shall act as
Independent Counsel under Section 5(b) hereof. The Corporation shall pay any and
all reasonable fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with acting pursuant to Section 5(b) hereof,
and the Corporation shall pay all reasonable fees and expenses incident to the
procedures of this Section 5(c), regardless of the manner in which such
Independent Counsel was selected or appointed.
(d) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination
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<PAGE> 4
shall presume that Indemnitee is entitled to indemnification under this
Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 5(a) of this Agreement. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(e) Indemnitee shall be deemed to have acted in good faith if
Indemnitee's action is based on the records or books of account of the
Corporation, including financial statements, or on information supplied to
Indemnitee by the officers of the Corporation in the course of their duties, or
on the advice of legal counsel for the Corporation or on information or records
given or reports made to the Corporation by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation. In addition, the knowledge and/or actions, or failure to act,
of any director, officer, agent or employee of the Corporation shall not be
imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement. Whether or not the foregoing provisions of this Section
5(e) are satisfied, it shall in any event be presumed that Indemnitee has at all
times acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation. Anyone seeking to overcome
this presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(f) If the person, persons or entity empowered or selected
under Section 5 to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within thirty (30) days after receipt by the
Corporation of the request therefor, the requisite determination of entitlement
to indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 30 day period may be extended for a reasonable
time, not to exceed an additional fifteen (15) days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith requires such additional time for the obtaining or evaluating
documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 5(f) shall not apply if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 5(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Corporation of the request for such
determination the Board of Directors or the Disinterested Directors, if
appropriate, resolve to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within seventy-five (75)
days after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within fifteen (15) days after such receipt
for the purpose of making such determination, such meeting is held for such
purpose within sixty (60) days after having been so called and such
determination is made thereat.
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<PAGE> 5
(g) Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
Independent Counsel, member of the Board of Directors, or stockholder of the
Corporation shall act reasonably and in good faith in making a determination
under the Agreement of the Indemnitee's entitlement to indemnification. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Corporation (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the
Corporation hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(h) The Corporation acknowledges that a settlement or other
disposition short of final judgment may be successful if it permits a party to
avoid expense, delay, distraction, disruption and uncertainty. In the event that
any action, claim or proceeding to which Indemnitee is a party is resolved in
any manner other than by adverse judgment against Indemnitee (including, without
limitation, settlement of such action, claim or proceeding with or without
payment of money or other consideration) it shall be presumed that Indemnitee
has been successful on the merits otherwise in such action, suit or proceedings.
Anyone seeking to overcome this presumption shall have the burden of proof and
the burden of persuasion, by clear and convincing evidence.
(i) "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the Corporation or Indemnitee in any matter material to either such party (other
than with respect to matters concerning the Indemnitee under this Agreement, or
of other indemnitees under similar indemnification agreements), or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Corporation or Indemnitee in an action to determine Indemnitee's
rights under this Agreement. The Corporation agrees to pay the reasonable fees
of the Independent Counsel referred to above and to fully indemnify such counsel
against any and all Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
6. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Indemnitee is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the written request of the Corporation as a director, officer,
employee or other agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other Corporation) and shall continue thereafter
so long as Indemnitee shall be subject to any
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<PAGE> 6
possible claim or threatened, pending or complete action, suit or proceeding,
whether civil, criminal, arbitral, administrative or investigative, by reason of
the fact that Indemnitee was serving in the capacity referred to herein.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Indemnitee of notice of the commencement of any action, suit or
proceeding, Indemnitee will, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability except to the extent that the failure to notify shall prejudice
the Corporation and will not relieve it from any liability which it may have to
Indemnitee otherwise than under this Agreement. With respect to any such action,
suit or proceeding as to which Indemnitee notifies the Corporation of the
commencement thereof:
(a) The Corporation will be entitled to participate therein at its
own expense;
(b) Except as otherwise provided below, the Corporation may, at its option
and jointly with any other indemnifying party similarly notified and electing to
assume such defense, assume the defense thereof, with counsel reasonably
satisfactory to Indemnitee. After notice from the Corporation to Indemnitee of
its election to assume the defense thereof, the Corporation will not be liable
to Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof except for
reasonable costs of investigation or otherwise as provided below. Indemnitee
shall have the right to employ separate counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof shall be at the expense
of Indemnitee unless (i) the employment of counsel by Indemnitee has been
authorized by the Corporation, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Corporation and Indemnitee
in the conduct of the defense of such action or (iii) the Corporation shall not
in fact have employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of Indemnitee's separate counsel shall be at
the expense of the Corporation. The Corporation shall not be entitled to assume
the defense of any action, suit or proceeding brought by or on behalf of the
Corporation or as to which Indemnitee shall have made the conclusion provided
for in clause (ii) above; and
(c) The Corporation shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent, which may be
given or withheld in Indemnitee's sole discretion.
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<PAGE> 7
8. EXPENSES. The Corporation shall advance, prior to the final disposition
of any proceeding, promptly following request thereof, all expenses incurred by
Indemnitee in connection with such proceeding upon receipt of an undertaking by
or on behalf of Indemnitee to repay said amounts if it shall be determined
ultimately that Indemnitee is not entitled to be indemnified under the
provisions of this Agreement, the Organizational Documents, the Code or
otherwise. Advances and undertakings to repay pursuant to this Section 8 shall
be unsecured and interest free. Notwithstanding the foregoing, the obligation of
the Corporation to advance Expenses pursuant to this Section 8 shall be subject
to the condition that, if, when and to the extent that the Corporation
determines that Indemnitee would not be permitted to be indemnified under
applicable law, the Corporation shall be entitled to be reimbursed, within
thirty (30) days of such determination, by Indemnitee (who hereby agrees to
reimburse the Corporation) for all such amounts theretofore paid; provided,
however, that if Indemnitee has commenced or thereafter commences legal
proceedings in a court of competent jurisdiction to secure a determination that
Indemnitee should be indemnified under applicable law, any determination made by
the Corporation that Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and Indemnitee shall not be required to
reimburse the Corporation for any advance of expenses until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed).
9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in
any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee in such enforcement
action, if successful in whole or in part, shall be entitled to be paid also the
expenses of prosecuting his claim. It shall be a defense to any action for which
a claim for indemnification is made under Section 3 hereof (other than an action
brought to enforce a claim for expenses pursuant to Section 8 hereof, provided
that the required undertaking has been tendered to the Corporation) that
Indemnitee is not entitled to indemnification because of the limitations set
forth in Section 4 hereof.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The right conferred on Indemnitee by this
Agreement shall not be exclusive of any other right which Indemnitee may have or
hereafter acquire under any statute, provision of the Organizational Documents,
agreement, vote of stockholders or directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding office.
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<PAGE> 8
12. SURVIVAL RIGHTS.
(a) The rights conferred on Indemnitee by this Agreement shall continue
after Indemnitee has ceased to be a director, officer, employee or other agent
of the Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other Corporation and shall inure to
the benefit of Indemnitee's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
has taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceablility shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify
Indemnitee to the fullest extent provided by the Organizational Documents, the
Code or any other applicable law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be original but
all of which together shall constitute but one and the same Agreement.
17. HEADINGS. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified mail with postage prepaid
addressed as follows or to such other address as a party may hereafter designate
by notice given pursuant hereto:
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(a) If to Indemnitee, at the address indicated on the signature page
hereof.
(b) If the Corporation, to:
OpenSite Technologies, Inc.
6015 Fayetteville Road
Durham, North Carolina 27713
Attention: President
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
OPENSITE TECHNOLOGIES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
INDEMNITEE
_________________________________
Signature
Print Name and Address Below:
_________________________________
_________________________________
_________________________________
9
<PAGE> 1
Exhibit 10.13
OPENSITE BUSINESS PARTNER AGREEMENT
This OpenSite BUSINESS PARTNER AGREEMENT ("Agreement"), dated
____________, 1999, is made and entered into by and between
______________________________("Business Partner"), and OpenSite Technologies,
Inc. ("OpenSite").
WHEREAS, OpenSite owns or possesses the right to market the Software (as
hereinafter defined); and
WHEREAS, both parties desire that OpenSite appoints Business Partner as its
nonexclusive Reseller for the marketing of the Software in the Territory during
the Term (as defined below);
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:
SECTION 1
DEFINITIONS
As used in this Agreement, the capitalized terms set forth herein shall
have the following meanings:
1.1 "AFFILIATE." A company's Subsidiaries, any company of which it is a
Subsidiary, and other Subsidiaries of such company.
1.2 "DERIVATIVE WORKS." Works of authorship based on one or more pre-existing
works of OpenSite which are created by OpenSite, Business Partner, or on behalf
of OpenSite, including Documentation, Software, customized software,
Enhancements, and Updates in whatever from the work may be recast, transformed
or adapted, including translations, ports and screen reformatting.
1.3 "DOCUMENTATION." The written, electronic or recorded work generally provided
by OpenSite to licensed End-Users in connection with specific Software that
describes the function and features of said Software.
1.4 "END-USERS." Customers who license the software for internal productive use;
provided, however, that service bureau or data center users or any users that
are licensed by OpenSite to use the Software without any participation of
Business Partner shall not be considered End-Users for purpose of this
Agreement.
1.5 "ENHANCEMENTS." Modifications, additions, or substitutions, other than
Updates, made to the Software that accomplish performance, structural, or
functional improvements. Enhancements do not include major modifications for
which OpenSite customarily charges separately.
1.6 "LICENSE AGREEMENT." OpenSite's standard form of License Agreement
applicable to any End-User's use of the Software hereunder, as amended from time
to time. The current version of the License Agreement is attached hereto as B.
1.7 "SOFTWARE." The software (including Updates and Enhancements) and
Documentation of OpenSite described in Exhibit B attached hereto.
1.8 "TERM." The period during which this Agreement is effective, beginning with
the time this Agreement has been signed by both parties and ending upon
termination as provided in Section 12 hereof.
1.9 "UPDATES." Modifications, updates, or revisions made to the Software that
correct errors or respond to routine maintenance or support requirements.
Updates shall include modifications made to support industry-standard changes in
supported operating systems and input-output devices generally used by licensed
End-Users.
1.10 "TERRITORY." Unless otherwise specified herein, the territory shall be
limited to the United States of America.
SECTION 2
APPOINTMENT OF BUSINESS PARTNER
Subject to the provisions of this Agreement, OpenSite hereby appoints
Business Partner as a nonexclusive reseller of the Software in the Territory
during the Term (as defined below). Acting in such capacity, Business Partner
shall deliver the Software to licensed End-Users, and collect for OpenSite's
account from End-Users all fees and charges due OpenSite hereunder, as provided
in the License Agreements. OpenSite may, at its sole option, appoint other
resellers of the Software in the Territory at any time during the Term and
reserves the right to license the Software directly or indirectly to End-Users
and to third-party original equipment manufacturers, value-added resellers or
distributors for sublicense or distribution in the Territory. Business Partner
hereby accepts such appointment and agrees to pay and perform the obligations
set forth in this Agreement.
SECTION 3
GRANT OF RIGHTS TO BUSINESS PARTNER
3.1 LICENSE. Subject to the limitations set forth in this Agreement, OpenSite
hereby grants to Business Partner a personal, nonexclusive, nontransferable
license, during the Term of this Agreement, to use, demonstrate, market and
distribute the Software, in object code only, to End-Users in the Territory.
3.2 DEMONSTRATION SOFTWARE LICENSE. Following execution of this Agreement by
both parties and payment of the fees for the Starter Package as defined and
described in Exhibit A, OpenSite shall deliver to Business Partner a
demonstration copy of the Software and Documentation listed in Exhibit A
("Initial Delivery"), which OpenSite represents and warrants will constitute the
most current version of the Software. OpenSite grants Business Partner a
personal, nonexclusive, nontransferable license to use the demonstration copy
("DC") solely for internal testing and demonstration at Business Partner's
facility (Designated Location). Business Partner cannot use the DC Software for
internal production and they cannot resell the DC. Each DC may be run on one (1)
CPU, only.
3.3 SUBSEQUENT ORDERS. Business Partner may place orders for the Software by
submitting to OpenSite a written order for the same. End Users shall license the
Software directly from OpenSite. Software ordered through OpenSite shall be
delivered FOB North Carolina or as otherwise determined by OpenSite from time to
time. Business Partner will reimburse OpenSite for all shipping charges,
premiums for freight insurance, inspection fees, duties, imposts, assessments
and other costs incurred by OpenSite to transport the Software to the ultimate
destination.
SECTION 4
INDEPENDENT CONTRACTOR
Business Partner is an independent contractor, not
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an employee, agent or franchisee of OpenSite. Business Partner will not
represent or hold itself out as an employee, agent or franchisee of OpenSite.
Business Partner will not be entitled to and will not attempt to create or
assume any obligation, express or implied, on behalf of OpenSite. This Agreement
will not be interpreted or construed as creating or evidencing any association,
joint venture or partnership among the parties or as imposing any partnership
obligation or liability on any party.
SECTION 5
OWNERSHIP AND RESTRICTIONS
5.1 OWNERSHIP AND AUTHORITY. OpenSite represents and warrants that it now has
and will at all times maintain sufficient right, title, and interest in the
Software to enter into and perform its obligations under this Agreement. Title
to the Software and all derivative works thereof shall be in and remain with
OpenSite.
5.2 RESTRICTIONS ON USE. Paragraphs 3.1 and 3.2 set forth the entirety of
Business Partner's rights to use, market, sublicense, distribute and otherwise
deal with the Software. OpenSite reserves any rights not expressly granted to
Business Partner in this Agreement. Without limiting the foregoing, Business
Partner will not, directly or through others: (a) market, license, distribute,
transfer or otherwise commercially exploit the Software except as expressly
authorized in paragraph 3; (b) copy or repackage the Software; (c) modify the
Software or translate or port the Software into any other computer or human
language; (d) disassemble, reverse engineer or decompile the Software or
otherwise attempt to discover any portion of the source code or trade secrets
related to the Software; or (e) sell, lend, rent, give, assign or otherwise
transfer or dispose of the Software except in accordance with paragraph 3.2 and
other provisions of this Agreement. No service bureau work, time-sharing
arrangement, or other internal productive use by Business Partner is permitted,
except as may be expressly authorized by OpenSite in a separate written
agreement. Business Partner will use its reasonable best efforts to prevent
unauthorized use of the Software by any person or entity directly or indirectly
acquiring the Software by, through or under Business Partner. Business Partner
will notify OpenSite of any such unauthorized use immediately after Business
Partner becomes aware of it.
5.3 PROPRIETARY FEATURES. The Software is a commercially valuable, proprietary
product of OpenSite, the design and development of which reflect the effort of
skilled development experts and the investment of considerable time and money.
OpenSite has indicated to Business Partner that the Software contains
substantial trade secrets of OpenSite, and Business Partner agrees to employ
reasonable security precautions to maintain the confidentiality of such trade
secrets. Subject to the rights and licenses expressly granted by OpenSite
hereunder, OpenSite claims and reserves all rights and benefits afforded under
federal and international copyright law in all programming and documentation
comprising the Software, including all Documentation and Derivative Works of the
foregoing as well as any new development created pursuant to or in connection
with this Agreement, as copyrighted works.
5.4 LEGENDS. Business Partner must reproduce and include in all copies of the
Software prepared by Business Partner (and in all adaptations thereof, if any)
the copyright notice(s) and proprietary legend(s) of OpenSite and OpenSite's
licensors/vendors, if any, as they appear in the Software and on the media
containing the Software supplied to Business Partner.
5.5 TRADEMARKS. OpenSite reserves all of its trademarks used in association with
the Software but hereby grants to Business Partner the nonexclusive right to use
such trademarks during the Term of this Agreement, in accordance with the
guidelines included in the Business Partner manual, solely to identify the
Software in connection with Business Partner's marketing and distribution of the
Software to End-Users in the Territory. The guidelines are subject to change
from time to time.
SECTION 6
MARKETING RELATIONSHIP
6.1 MARKETING EFFORTS AND PLANS. Business Partner shall use best efforts to
market and promote licenses of the Software to End-Users in the Territory. Where
appropriate, Business Partner shall cooperate and coordinate with End Users and
OpenSite in the installation of Software and training of End Users in the use of
the Software. Business Partner shall also serve as the initial point of contact
with End Users for maintenance and support as hereafter defined and investigate
and report to OpenSite all customer complaints related to the Software
distributed by Business Partner.
6.2 BUSINESS PARTNER CONDUCT. Business Partner shall maintain the organization
and resources necessary for performance of this Agreement. It shall conduct its
business so as to maintain and increase the goodwill and reputation of OpenSite
and the Software. In the circumstance where Business Partner is deemed to be
incapable, in the opinion of OpenSite, of supporting this Agreement, OpenSite
will provide Business Partner with a letter stating the areas for improvement
and providing Business Partner with thirty (30) days to resolve OpenSite's
concerns. Business Partner will not delegate performance of any of its
obligations under this Agreement (other than to its own employees).
6.3 REPORTING. Business Partner agrees to furnish the OpenSite account manager
with a monthly report, using a format provided by OpenSite. The report will
include sales forecast, inventory and prospect information and may include any
other information relevant to OpenSite's business. Business Partner shall notify
OpenSite promptly of any erroneous or missing information.
6.4 COMPETITIVE PRODUCTS. So long as this Agreement is in effect, Business
Partner shall not distribute or act as a business partner or representative for
any developer, publisher, or manufacturer of software programs that are
functionally comparable to or intended, by applicable marketing and promotional
programs directed to such products, to compete directly with the Software.
6.5 BROCHURES. Business Partner shall use only promotional material approved by
OpenSite for purposes of promotion of the Software.
6.6 MARKETING SUPPORT. OpenSite will provide marketing support as described in
Exhibit A.
6.7 NO EXCLUSIVE RIGHTS. This Agreement does not grant to either party any
exclusive privileges, rights, or licenses related to any products or services
and, subject to Section 6.4, each party may contract with other manufacturers,
suppliers, or licensors for the development or procurement of, or right to
license, other products and services.
6.8 BUSINESS PARTNER'S RESPONSIBILITY FOR COSTS. Business Partner shall be
responsible for and pay all
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expenses incurred by Business Partner in the performance of its duties under
this Agreement, including dues and fees, attendance at seminars or conventions,
transportation, telephone, entertainment and promotional expenses. For each
Software product purchased hereunder, Business Partner shall pay OpenSite the
price set forth in Exhibit A.
6.9 LIMITS OF AUTHORITY. Business Partner is an independent contractor, not an
employee, agent or franchisee of OpenSite. Business Partner will not represent
or hold itself out as an employee, agent or franchisee of OpenSite. Business
Partner will not be entitled to and will not attempt to create or assume any
obligation, express or implied, on behalf of OpenSite. Business Partner shall
not, without prior written approval from an authorized representative of
OpenSite, take any of the following actions:
a) waive, alter, or change any provision of any License Agreement;
b) modify or extend the amount of or time for the payment of any charge or fee
required under any License Agreement;
c) enter into any contract with End-Users with respect to the Software other
than for maintenance and support;
d) incur any expense or obligation in the name of OpenSite;
e) disseminate any printed material regarding the Software or OpenSite's
business except as provided herein;
f) use OpenSite's name, trade names, trademarks, or logos in connection with its
business other than in the manner expressly authorized in OpenSite's advertising
and promotional guidelines;
g) engage in any activities which are in violation of any applicable federal,
state or local law, statute or regulation; use the facilities and capabilities
of OpenSite or OpenSite's Software or other proprietary material to conduct or
solicit the performance of any illegal activity or other activity which
infringes the rights of OpenSite or any third party.
SECTION 7
SUPPORT
7.1 GENERAL. Maintenance and support for the Software shall be provided to End
Users either wholly by OpenSite or primarily by Business Partner with backup
support from OpenSite. If OpenSite is the exclusive provider of maintenance and
support, it will contract directly with the End User. In such event Business
Partner shall take no part in the delivery of maintenance and support and will
receive no compensation therefor. If Business Partner is the provider of
maintenance and support then Business Partner shall enter into such an agreement
directly with End User and shall be the initial point of contact with the End
User in each case as described below. Business Partner and OpenSite will then
enter into an agreement for backup support in the form of Exhibit C hereto. Each
End User receiving maintenance and support from Business Partner for whom
OpenSite will provide backup support shall be full identified in an attachment
to Exhibit C, signed by OpenSite and Business Partner.
7.2 BUSINESS PARTNER AS POINT-OF-CONTACT FOR END-USERS. When Business Partner
shall be the provider of maintenance and support for End Users, it shall be
responsible for serving as the point-of-contact for all End-Users with respect
to all support requests or error reports. All requests for support from
End-Users shall be directed to Business Partner. Business Partner shall be
responsible to fully handle all level one and level two requests for support.
Level three and level four support shall be provided by OpenSite to Business
Partner if and to the extent specified in an agreement between Business Partner
and OpenSite. When Business Partner is the provider of maintenance and support
to an End User OpenSite shall NOT accept any support requests directly from such
End User.
Levels of support shall be as follows:
LEVEL ONE: Receives all initial contacts from End Users, whether by email or
telephone. Performs all triage to determine severity level of error or if error
is a user error. Support includes remediation of all cosmetic, template,
configuration and user feature/function questions and errors;
LEVEL TWO: Support includes all cases where errors do not materially and
adversely affect the operation of the Software as a whole or its performance,
but which adversely affects one or more secondary functions (e.g., email
problems);
LEVEL THREE: Support includes cases where errors do not completely prevent the
Software from operating, but which materially and adversely affects the
operation of the Software as a whole or a primary function of the Software; and
LEVEL FOUR: Support includes cases where an error completely prevents the
Software from operating.
7.3 TRAINING BY OPENSITE. At no additional charge, Business Partner is entitled
to OpenSite Training as per Exhibit C. The prices for additional training are
also listed in Exhibit C.
7.4 BUSINESS PARTNER PERSONNEL. During the term of this Agreement, Business
Partner shall have at least one full time employee trained in the Software at
all times. This will be a full time employee of Business Partner who has
participated in and completed OpenSite's technical training course and who
maintains a high level of proficiency in the use of the Software. Unless
otherwise agreed and set forth in Exhibit C, such training shall occur at
OpenSite's premises at a mutually agreeable time for a single session. Business
Partner shall be responsible for all living and travel expenses for its
personnel attending such training sessions.
7.5 NOTIFICATION REGARDING MODIFICATIONS. OpenSite shall provide Business
Partner with advance notification of new releases and updates, including Updates
and Enhancements, that affect the use of the Software by End-Users. Such advance
notification shall be given to Business Partner as soon as practicable.
7.6 NO RESPONSIBILITY OF OPENSITE FOR THIRD-PARTY WORK. Regardless of any
commitment made by Business Partner to any End-User, and without regard to any
termination of this Agreement, OpenSite shall not be responsible for maintaining
or supporting system software, application software, or equipment of Business
Partner or any other vendor, even if used in combination with the Software.
SECTION 8
COMPENSATION
8.1 FEES. OpenSite's License Agreement shall provide for licensed End-Users to
pay fees to Business Partner on OpenSite's behalf. OpenSite's fees generally
consist of (1) an initial fee for the End-User's use of the Software(s), and (2)
annual maintenance and support fees in connection with the Software. OpenSite
shall promptly notify Business Partner of any modification of such fees.
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8.2 BILLING. Prior to delivery of the Software to an End-User, Business Partner
shall have collected all fees owed by the End-User for initial license and
maintenance and support fees, if any, and remitted same to OpenSite, less
applicable discounts. Fees for subsequent yearly maintenance and support, if
provided exclusively by OpenSite shall be due and payable by Business Partner to
OpenSite on the date set forth in the applicable maintenance and support
agreement in effect between OpenSite and the End-User. Failure to pay such
amounts when due shall entitle OpenSite to collect a late fee in the amount of
1.5% per month.
8.3 RECEIVABLES AND COLLECTION. Business Partner shall be entitled to deduct
from license fees and maintenance and support fees collected by Business Partner
pursuant to this Agreement, the percentages set forth in Exhibit A as Business
Partner's total commission/compensation.
8.4 SPLITTING COMMISSIONS. In no event will OpenSite be liable for more than one
single commission for each unit of Software licensed by an End-User. The first
business partner to notify OpenSite in writing of a potential End-User shall be
entitled to commission upon such End-User's execution of OpenSite's License
Agreement and maintenance and support agreement, if any. Should more than one
organization and/or individual claim any right to a commission, a single
commission will be paid by OpenSite as determined by OpenSite in its sole
discretion.
8.5 CHANGES. All Software and service fees described in this Agreement, and any
terms and conditions set forth in the exhibits, are subject to change by
OpenSite at any time. Notwithstanding the aforesaid, such changes for fee
increases shall not become effective as to Business Partner with respect to
shipments of Software or the provision of services for at least thirty (30)
calendar days from Business Partner's receipt of written notice. All Software
shipped on or after the date of any price decrease will be shipped and invoiced
at the price in effect at the time of shipment.
SECTION 9
WARRANTY
OpenSite warrants that, upon delivery, the Software will function in all
material respects in accordance with its specifications set forth in the
applicable user documentation for the Software published by OpenSite. OpenSite
does not warrant that the Software is free from all bugs, errors or omissions.
The warranty does not apply to any modification or change not made by OpenSite
or to any noncompliance caused by use or combination of the Software with
products, goods, services or other items not approved by OpenSite, other than
the hardware for which the Software was designed. OpenSite will use reasonable
efforts to correct any Software that fails to comply with the foregoing
warranty, provided that Business Partner gives OpenSite prompt written notice of
such failure and OpenSite is able to reproduce the noncompliance on the hardware
for which the Software is designed. If after the expenditure of such reasonable
efforts OpenSite is unable to correct such Software, OpenSite may, at its
option, refund all or a reasonable portion of the fees received under this
Agreement in full satisfaction of all claims of Business Partner relating to
such noncompliance. OpenSite's warranties under this Agreement are solely for
the benefit of Business Partner and may be asserted only by Business Partner and
not by any customer of Business Partner. THE WARRANTIES OF OPENSITE AND THE
REMEDIES FOR BUSINESS PARTNER SET FORTH HEREIN ARE EXCLUSIVE AND OPENSITE
DISCLAIMS ALL OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES AND ALL OTHER
RIGHTS, REMEDIES AND CLAIMS OF BUSINESS PARTNER, EXPRESS OR IMPLIED, ARISING BY
LAW OR OTHERWISE, WITH RESPECT TO ANY DEFECT, DEFICIENCY OR NONCONFORMITY IN ANY
SOFTWARE OR OTHER ITEM FURNISHED BY OR ON BEHALF OF OPENSITE UNDER THIS
AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
SECTION 10
TAXES
Business Partner shall collect, report and pay any applicable sales and
use taxes, including any privilege or excise taxes in the nature of sales or use
taxes to the relevant taxing authority on behalf of OpenSite, and indemnify
OpenSite for any liability or costs for any failure to so collect, report, or
pay.
SECTION 11
RECORDKEEPING
Business Partner agrees to maintain complete and adequate records relating
to fees, billings, and collections applicable to the Software marketed pursuant
to this Agreement. Such records shall include shipping and any service records.
Business Partner shall prepare and submit to OpenSite the reports as may be
required from time to time by OpenSite containing all information reasonably
sought by OpenSite with respect to billings and payments.
SECTION 12
TERMINATION AND DEFAULT
12.1 VOLUNTARY TERMINATION. Either OpenSite or Business
Partner may terminate this Agreement at any time without cause by giving the
other party thirty (30) days prior written notice. Business Partner further
agrees to deliver to OpenSite within ten (10) days after the termination of this
Agreement, all marketing aids in its possession, including copies of the
Software, Documentation and related marketing or technical literature.
12.2 TERMINATION FOR CAUSE. OpenSite may terminate this Agreement immediately,
without notice to Business Partner, for just cause. A termination shall be
deemed "for cause" if Business Partner:
a) Breaches any provision of this Agreement;
b) Violates any law or regulation;
c) Commits, pleads guilty or nolo contendere to, or is convicted or, an act or
offence involving moral turpitude;
d) Commits any willful or dishonest act that could injure OpenSite; or
e) Fails to meet minimum performance standards established by OpenSite in its
sole discretion from time to time.
A termination under this Section shall not constitute an election by OpenSite to
forego any claim it may have against Business Partner. The failure of OpenSite
to exercise any of its rights under this Section shall not preclude it from
invoking these rights in the future based on the same or other circumstances.
OPENSITE WILL NOT BE LIABLE TO BUSINESS PARTNER FOR DAMAGES OF ANY KIND,
INCLUDING, BUT NOT LIMITED TO, INCIDENTAL OR
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CONSEQUENTIAL DAMAGES, ON ACCOUNT OF THE TERMINATION OF THIS AGREEMENT. BUSINESS
PARTNER WAIVES ANY RIGHT IT MAY HAVE TO RECEIVE COMPENSATION OR REPARATIONS UPON
TERMINATION OF THIS AGREEMENT.
12.3 CONSEQUENCE OF TERMINATION. Notwithstanding the termination of this
Agreement, all fees payable to OpenSite hereunder shall continue to be paid and
Business Partner may retain the part thereof to which it is entitled hereunder
to the extent that Business Partner continues to satisfy all duties relating to
the then licensed End-Users under this Agreement and to collect all fees and
charges with respect thereto.
12.4 NON-DISPARAGEMENT. During the term of this Agreement and for 3 years after
this Agreement is terminated, Business Partner will not disparage OpenSite or
its products or services, including the Software, to any third party, including
End-Users, and will not delay, hinder or deny the provision of documentation and
agreements required by OpenSite to be executed by any third party, including
End-Users, and will not interfere with the contractual or business relationships
of OpenSite with any third party, including End-Users and will not engage in any
activities which might injure the reputation or goodwill of OpenSite and its
products or services.
12.5 REPLACEMENT. During the term of this Agreement and for 3 years after this
Agreement is terminated, if Business Partner induces, directly or indirectly, or
encourages anyone else to induce, directly or indirectly, any End-User with
respect to whom Business Partner has received Commissions to terminate or
replace the License Agreement or its use of the Licensed Products, in favor of
any competing, non-OpenSite-sponsored software program, Business Partner shall
repay one hundred percent (100%) of all Commissions it received during the prior
3 years with respect to the License Agreements that are terminated or replaced
as a result of Business Partner's actions.
SECTION 13
NON-SOLICITATION
Business Partner agrees that OpenSite's employees possess technical and
other abilities that are in great demand and further agrees that OpenSite has
incurred substantial expense in recruiting and training such employees and would
incur even greater expense if required to replace any such employee. Therefore,
Business Partner agrees not to recruit, employ a present employee of OpenSite,
or in any way induce an employee to leave the employ of OpenSite, either
directly or indirectly, during the term of this Agreement and for one year
following termination thereof.
SECTION 14
INDEMNIFICATION
14.1 INFRINGEMENT. OpenSite will defend or settle, at its own expense, any claim
or suit against Business Partner alleging that any Software furnished under this
Agreement, when used in accordance with the License Agreement, infringes any
U.S. patent, trademark, copyright, or trade secret. OpenSite will also pay all
damages and costs that by final judgment may be assessed against Business
Partner as a result of such infringement.
14.2 CONDITIONS AND EXCEPTIONS. OpenSite's obligations as set forth in this
Section 14 are expressly conditioned upon the following: (1) OpenSite shall be
notified promptly in writing by Business Partner of any claim or suit; (2)
OpenSite shall have sole control of the defense or settlement of any claim or
suit; (3) Business Partner shall cooperate with OpenSite in a reasonable way to
facilitate the settlement or defense of any claim or suit; and (4) the claim or
suit does not arise from Business Partner or End-User modifications to the
Software, or from combinations of the Software with products provided by
Business Partner or others.
14.3 REMEDIES. If any Software becomes, or in OpenSite's opinion is likely to
become, the subject of a claim of infringement, OpenSite will, at its option:
(1) procure for Business Partner and End-User the right to continue using the
Software; (2) replace the Software with a non-infringing product substantially
complying with the Software's specifications; (3) modify the Software so it
becomes non-infringing and performs in a substantially similar manner to the
original Software. If the OpenSite cannot provide any of the preceding options,
OpenSite will repay to Business Partner and End Users all fees paid to OpenSite
over the preceding twelve months.
14.4 INDEMNIFICATION BY BUSINESS PARTNER. Business Partner shall indemnify
Licensor fully for any cost, liability, or harm suffered by OpenSite as a direct
or indirect result of Business Partner's misrepresentation, fraud, or negligence
with respect to any End-User or License Agreement.
14.5 EXCLUSIVE STATEMENT. THIS SECTION 14 STATES THE ENTIRE LIABILITY OF
OPENSITE FOR INFRINGEMENT BY THE SOFTWARE OR ANY OTHER PRODUCT OR SERVICE
PROVIDED BY OPENSITE.
SECTION 15
LIMITATION OF LIABILITY
Except for the claims described in Section 14, neither party hereto
(including its Affiliates for such purpose) shall in any event be liable to the
other for any damages exceeding the aggregate amount of fees paid by Business
Partner during the twelve (12) months preceding the claim, and in no event shall
a party hereto (including its Affiliates for such purpose) be liable to the
other or to any other company or entity for any incidental, consequential,
special, or any other indirect loss or damage arising out of this Agreement or
any obligation resulting therefrom or the use or performance of any products or
services provided hereunder, whether in an action for or arising out of breach
of contract, tort, or any other cause of action.
SECTION 16
GENERAL
16.1 BINDING NATURE AND ASSIGNMENT. This Agreement shall bind the parties and
their successors and permitted assigns. Neither party may assign this Agreement
without the prior written consent of the other except that with respect to
OpenSite the term "assignment" shall not include any transfer by merger,
acquisition, stock transfer or other consolidation of OpenSite with another
entity. Any other assignment attempted without the written consent of the other
party shall be void.
16.2 NOTICES. Any notice, consent or other communication in connection with this
Agreement shall be in writing and may be delivered in person, by mail or by
facsimile copy. If hand delivered, the notice shall be effective upon delivery.
If by facsimile copy, the notice shall be effective when sent. If served by
mail, the notice shall be effective three (3)
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business days after being deposited with the United States Postal Service by
certified mail, return receipt requested, addressed appropriately to the
intended recipient, as follows:
If to OpenSite: ATTN: OpenSite Technologies, Inc.
P.O. Box 12542
Research Triangle Park, NC
27709-2542
If to Business Partner: ATTN:
16.3 HEADINGS. The articles and sections headings and the table of contents are
for reference and convenience only and shall not be considered in the
interpretation of this Agreement.
16.4 APPROVALS AND SIMILAR ACTIONS. Where agreement, approval, acceptance,
consent or similar action by either party is required by any provision of this
Agreement, such action shall not be unreasonably delayed or withheld, unless
specifically permitted by this Agreement.
16.5 FORCE MAJEURE. Neither party shall be liable to the other by reason of any
failure of performance hereunder (except failure to pay) if such failure arises
out of causes beyond such party's reasonable control, despite the reasonable
efforts and without the fault or negligence of such party. Any party
experiencing such an event shall give as prompt notice as possible under the
circumstances.
16.6 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, then both parties shall be relieved of all obligations arising
under such provision, but only to the extent that such provision is
unenforceable, and this Agreement shall be deemed amended by modifying such
provision to the extent necessary to make it enforceable while preserving its
intent or, if that is not possible, by substituting another provision that is
enforceable and achieves the same objective and economic result. IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT EACH PROVISION OF THIS AGREEMENT WHICH PROVIDES FOR A
LIMITATION OF LIABILITY, DISCLAIMER OF WARRANTIES, INDEMNIFOPENSITEION OR
EXCLUSION OF DAMAGES OR OTHER REMEDIES IS INTENDED TO BE ENFORCED AS SUCH.
FURTHER, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT IN THE EVENT ANY REMEDY
UNDER THIS AGREEMENT IS DETERMINED TO HAVE FAILED OF ITS ESSENTIAL PURPOSE, ALL
LIMITATIONS OF LIABILITY AND EXCLUSIONS OF DAMAGES OR OTHER REMEDIES SHALL
REMAIN IN EFFECT.
16.7 WAIVER. No delay or omission by either party to exercise any right or power
it has under this Agreement shall impair or be construed as a waiver of such
right or power. A waiver by either party of any covenant or breach shall not be
construed to be a waiver of any succeeding breach or of any other covenant. All
waivers must be in writing and signed by the party waiving its rights.
16.8 ATTORNEYS' FEES. If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding, in addition to any other
relief to which it may be entitled.
16.9 NO THIRD PARTY BENEFICIARIES. The parties agree that this Agreement is for
the benefit of the parties hereto and is not intended to confer any legal rights
or benefits on any third party and that there are no third party beneficiaries
to this Agreement or any part or specific provision of this Agreement.
16.10 ENTIRE AGREEMENT. This Agreement, including all of its attachments, each
of which is incorporated into this Agreement, is the entire agreement between
the parties with respect to its subject matter, and there are no other
representations, understanding or agreements between the parties relative to
such subject matter. No amendment to, or change, waiver or discharge of any
provision of this Agreement shall be valid unless in writing and signed by any
authorized representative of the party against which such amendment, change,
waiver or discharge is sought to be enforced.
16.11 PUBLICITY. OpenSite may reference Business Partner and this Agreement in
its advertising, sales promotions, trade shows, or other marketing material.
16.12 COMPLIANCE WITH LAWS - APPROVALS. In performing this Agreement, Business
Partner will comply with all applicable laws, regulations and other
requirements, now or hereafter in effect, of governmental authorities having
jurisdiction, including, but not limited to, the U.S. Export Administration Act,
regulations of the U.S. Department of Commerce and other export controls of the
U.S., as they now are and as they may be amended. Business Partner will obtain
at its expense all licenses, permits and other governmental approvals; will
provide all notices; and will pay all duties, taxes and other charges required
for the license, export, re-export and import of the Software distributed by
Business Partner.
16.13 NON-DISCLOSURE. Business Partner hereby agrees that it will not disclose
the terms of this Agreement to any third party without the express written
consent of OpenSite. The Software and any information received by Business
Partner in performance of this Agreement relating to the business affairs,
customers, markets, finances, methods, products, technology, trade secrets or
proprietary rights of OpenSite will be treated as confidential and proprietary
information of OpenSite.
16.14 GOVERNING LAW. [WHERE TERRITORY IS UNITED STATES ONLY] As an incentive to
alternative dispute resolution the parties have agreed concerning disputes
arising hereunder: (1) OpenSite may only commence legal proceedings against
Business Partner in a state or federal court sitting in (insert Business
Partner's county here)_County_(insert Business Partner's state here), in which
event, this Agreement will be construed under the internal laws of the State of
(insert Business Partner's state here) and (2) Business Partner may only
commence legal proceedings against OpenSite in state or federal court sitting in
North Carolina, in which event, this Agreement will be construed under the
internal laws of the State of North Carolina; provided that once litigation is
initiated by one of the parties, the parties, the other may assert counterclaims
in those proceedings.
[WHERE TERRITORY IS NOT U.S. ONLY OR IF TERRITORY IS WHOLLY OUTSIDE THE
U.S.] This Agreement will be interpreted, construed and enforced in all respects
in accordance with the local laws of the State of North Carolina, U.S.A. without
reference to its choice of law principles. The parties waive application of the
1980 U.N. Convention on Contracts for the International Sale of Goods to this
Agreement and the transactions contemplated by this
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Agreement. Business Partner will not commence or prosecute any suit, proceeding
or claim to enforce the provisions of this Agreement, or otherwise arising under
or by reason of this Agreement, other than in the courts of the State of North
Carolina or a United States District in North Carolina. Business Partner hereby
irrevocably consents to the jurisdiction and venue of the above-identified
courts.
16.16 SURVIVAL OF PROVISIONS. Provisions 4, 5, 6.7, 6.9, 7.6, 10, 12.3, 12.4,
12.5, 13, 15, and 16 and all accrued and unpaid obligations arising hereunder
shall survive the termination hereof.
IN WITNESS WHEREOF, OpenSite and Business Partner have each caused this
Agreement to be signed and delivered by its duly authorized representative,
effective as of the date first stated above.
OpenSite Technologies, Inc.
By:______________________________
Printed Name:____________________
Title:___________________________
Date: ___________________________
Business Partner:________________
By:______________________________
Printed Name:____________________
Title:___________________________
Date:____________________________
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Exhibit 10.14
OPENSITE CONCIERGE AUCTION HOSTING AND SERVICES AGREEMENT
THIS AUCTION HOSTING AND SERVICES AGREEMENT (the "Agreement"), is made and
entered into effective as of _____, 1999 (the "Effective Date") by and between
OPENSITE TECHNOLOGIES, INC., a Delaware corporation ("OpenSite"), and _____, a
_____ corporation (the "Client").
WHEREAS, OpenSite develops and markets certain computer software products
known as OpenSite Auction for creating and operating Internet-based auctions
(the "Software") and develops, administers and maintains auction sites and hosts
Internet-based auctions for its clients using the Software; and
WHEREAS, Client desires for OpenSite to develop, administer, and maintain
an auction site and host an Internet-based auction open to the public for Client
upon the terms and conditions herein.
NOW THEREFORE, in consideration of the mutual agreements and
representations and warranties set forth herein, OpenSite and Client hereby
agree as follows:
1. DEFINITIONS.
(a) Auction Items. The term "Auction Items" shall mean all products or
other items or services offered by Client for auction on the Auction Site.
(b) Auction Policies. The term "Auction Policies" shall mean OpenSite's
policies as listed on Exhibit A governing the Auction Site and the conduct of
Internet-based auctions, as in effect and as may be amended from time to time by
OpenSite within its sole discretion and upon reasonable notice to Client.
(c) Auction Services. The term "Auction Services" shall mean OpenSite's
business of developing, administering, and maintaining Internet-based auction
Web sites and the hosting thereof. A description of Auction Services is attached
hereto as Exhibit B.
(d) Auction Site. The term "Auction Site" shall mean the web pages
constituting Client's site on the Internet through which the Auction Items are
made accessible to Client's Customers and through which Auction Services are
provided by OpenSite.
(e) Client Content. The term "Client Content" shall mean all information
provided by Client to be included on the Auction Site, including without
limitation, listings and descriptions of the Auction Items, animations, images,
trademarks, logos, photographs, sounds, texts, and video segments.
(f) Client's Customers. The term "Client's Customers" shall mean any
person authorized by Client or OpenSite to have access to, or participate in,
the Auction Site.
(g) Errors. The term "Errors" shall mean any failure of the Auction Site
to conform to the "Specifications," as defined herein. Notwithstanding the
foregoing, any nonconformity resulting from the alteration or misuse by Client,
Client's Customers, or any other third party shall be not an Error.
(h) Internet. The term "Internet" shall mean the principal international
network interconnecting computers and other networks through the Internet
Protocol and all web pages and web sites that can be accessed thereby.
(i) Prohibited Content. The term "Prohibited Content" shall mean all
information, whether or not included in Client Content, that OpenSite
determines, without any duty of investigation, and within its sole discretion to
be: (i) obscene, in poor taste, or otherwise socially objectionable; (ii) false,
misleading, or libelous; (iii) in violation of any international, federal,
state, or local law, statute, regulation, or rule; or (iv) infringing upon or in
violation of any copyright, patent, service mark, trademark, or any other
intellectual or proprietary right of any third party.
(j) Web Server. The term "Web Server" shall mean all of the shared
hardware and software located at OpenSite's location or at such other location
as may be designated by OpenSite that are necessary to host the Auction Site and
to make the Auction Site available to Client's Customers on the Internet.
2. DEVELOPMENT OF AUCTION SITE.
(a) Development of Auction Site. As soon as practicable after the
Effective Date, OpenSite and Client shall mutually agree on: (i) the functional
specifications, the graphics, and the "look and feel" of the Auction Site, all
of which shall be attached hereto as Exhibit C (the "Specifications") and (ii)
the schedule for the development by OpenSite of the Auction Site which shall be
attached hereto as Exhibit D (the "Schedule"). OpenSite shall use its
commercially reasonable efforts to develop the Auction Site in accordance with
the Specifications and the Schedule. Client hereby acknowledges and agrees that,
subject to the Schedule and the Specifications, OpenSite shall determine in its
sole discretion the method and manner in which OpenSite develops the Auction
Site. If the Specifications provides for any custom development work, Client
shall pay OpenSite for such custom development work in accordance with
OpenSite's standard fees and hourly rates, a copy of which are attached hereto
in Exhibit E.
(b) Changes to the Specifications. If Client desires to change the
Specifications, Client shall notify OpenSite. All such changes to the
Specifications shall be made by OpenSite pursuant to the terms and conditions of
a separate Consulting Services Agreement and not pursuant to the terms and
conditions of this Agreement. Client hereby acknowledges and agrees that such
changes to the Specifications may result in one or more of the following: (i)
changes to the Schedule; (ii) delays in the development of the Auction Site; or
(iii) custom development work.
(c) Client Content. Client shall provide Client Content required for the
development of the Auction Site to OpenSite in accordance with the Schedule.
Client hereby acknowledges and agrees that it shall be solely responsible for
the accuracy and completeness of Client Content and that OpenSite shall not have
any duty or obligation to review Client Content or to confirm its accuracy or
completeness. Notwithstanding the foregoing, OpenSite reserves the right to
refuse to include in the Auction Site any Prohibited Content.
Client hereby grants OpenSite a non-exclusive and royalty-free license
during the term of this Agreement to use Client Content in connection with the
Auction Site as contemplated by this Agreement. Client Content and any HTML
modified version of Client Content, is the sole and exclusive property of Client
or its Licensors. Except for the limited license to use Client Content,
including any HTML modified version of Client Content, set forth in the
foregoing sentences, OpenSite has no rights in or to Client Content, and
OpenSite shall not use Client Content except as described herein.
(d) Acceptance. Upon the completion of the development of the Auction
Site, OpenSite shall provide Client access to the Auction Site on the Web Server
for the sole purpose of examining the Auction Site. As soon as practicable
thereafter,
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OpenSite and Client shall examine the Auction Site and shall determine, on the
mutually agreed terms described in the Specifications, whether the Auction Site
substantially conforms to the features and functions set forth in the Auction
Services. If the Auction Site does not substantially conform to the features and
functions set forth in the Auction Services, then Client shall notify OpenSite
and OpenSite shall, at its cost and expense and as soon as practicable after
receipt of such notice, make such changes as are necessary such that the Auction
Site substantially conforms to the features and functions set forth in the
Auction Services. As soon as practicable thereafter, OpenSite and Client shall
reexamine the Auction Site to determine whether the Auction Site substantially
conforms to the features and functions set forth in the Auction Services.
OpenSite and Client shall repeat the foregoing procedures until such time as the
Auction Site conforms in all material respects to the features and functions set
forth in the Auction Services.
(e) Hosting. OpenSite shall host and operate the Auction Site on the Web
Server, for and on behalf of Client, solely for the purpose of running auctions
of the Auction Items. OpenSite shall provide Client storage capacity on the Web
Server and necessary system and file back-up as set forth in the Specifications.
(f) Auction Services. During the Term and subject to the terms and
conditions hereof, OpenSite shall provide the Auction Services for and on behalf
of Client. Client agrees to comply with the Auction Policies.
(g) Auction Listings. Client hereby grants to OpenSite the right to
access, reproduce, display and distribute a list of the Auction Items and the
descriptions thereof provided by Client through a search service (the "Search
Service") located on OpenSite's corporate Website on the Internet or any other
Website on the Internet that is owned or controlled by OpenSite or a strategic
partner of OpenSite. Client hereby acknowledges and agrees that the Search
Service may contain listings and descriptions of auction items of others which
may include listings of similar or competing items.
3. MAINTENANCE OF THE AUCTION SITE AND TRAINING.
(a) Continuous Operation. OpenSite shall use its commercially reasonable
efforts to maintain the operation of the Web Server and access to the Auction
Site by Client's Customers continuously on a twenty four (24) hours a day three
hundred and sixty five (365) day a year basis. Notwithstanding the foregoing,
OpenSite may, from time to time and upon reasonable notice to Client, shut down
the Web Server and the Auction Site during off-peak hours as reasonably
necessary to perform maintenance or install upgrades.
(b) Correction of Errors. OpenSite shall use its reasonable best efforts
to maintain the Auction Site so that it continues to conform to the features and
functions set forth in the Auction Services, including the correction of Errors
as soon as practicable after receipt of notice thereof from Client.
4. FEES.
(a) Fee Schedule. In consideration of the services provided by OpenSite to
Client pursuant to this Agreement, Client shall pay OpenSite the fees set forth
on Exhibit F attached hereto. All such fees shall be due and payable by Client
to OpenSite in accordance with the payment terms and conditions set forth on
Exhibit F.
(b) Taxes. The fees set forth on Exhibit A may not include applicable
local, state, or federal excise, personal property, sales, use, or other duties
or taxes. The agrees that it shall be responsible for the collection, reporting,
remittance and payment of all such applicable duties and taxes.
(c) Late Payment; Default in Payment. Any amount not paid within thirty
(30) days after the date due shall bear interest from the date due until paid at
the rate of one and one-half percent (1-1/2%) per month or, if less, the highest
rate allowed by applicable law.
5. CLIENT OBLIGATIONS.
In connection with the sale and purchase of Auction Items on the Auction
Site, Client shall be solely responsible for: (i) shipping and delivering the
Auction Items to the purchasers thereof; (ii) billing the purchasers for all
amounts due; (iii) collecting all amounts due from the purchasers; and (iv)
handling all purchaser complaints and questions. OpenSite shall be responsible
only to forward to Client each purchaser's name, address, and email address as
provided to OpenSite by such purchaser. OpenSite shall not take possession of or
any interest in the Auction Items. Further, it shall not be responsible for
shipping, delivery, billing, collection, or responding to purchaser complaints
and questions not relating to operation of the Auction Site. OpenSite shall not
have any liability or responsibility for any auction conducted for third parties
by Client through the Auction Services.
6. REPRESENTATIONS AND WARRANTIES OF CLIENT. Client hereby represents and
warrants to OpenSite that:
(a) Client is a corporation duly organized, validly existing, and in good
standing under the laws of the State of its incorporation, and has all requisite
power and authority to execute and deliver this Agreement and to perform its
duties and obligations hereunder.
(b) Client Content does not and shall not contain any Prohibited Content.
(c) Client either: (i) is the sole owner of Client Content free and clear
of all claims and rights of third parties or (ii) has all licenses from third
parties necessary to grant OpenSite the license set forth in Section 2(c) to use
Client Content.
(d) Client has obtained all rights necessary for the sale of the Auction
Items by Client free and clear of all liens, security interests, and other
encumbrances.
7. REPRESENTATIONS AND WARRANTIES OF OPENSITE OpenSite represents and
warrants to client that:
(a) OpenSite will operate the site in a professional and workmanlike
manner by qualified personnel.
(b) The Auction Site (including updates and upgrades) in the form
delivered by OpenSite, will be able to calculate and compare date data between
the twentieth and twenty-first centuries, without impairment in function, when
used in accordance with the documentation provided by OpenSite, but only if all
associated products, such as hardware, software and firmware used in combination
with the Software properly exchange date data with the underlying Software. In
case of a breach of the above warranty, OpenSite shall correct the defect, and,
if such correction is not reasonably possible, OpenSite shall upon Client's
request, refund all service fees and any maintenance and support fees paid after
January 1, 2000.
(c) OpenSite is the owner of the Software and it has all necessary right,
title and interest to enter into and fulfill its obligations to Client
hereunder.
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8. DISCLAIMER AND LIMITATION OF LIABILITY
(a) Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, OPENSITE
DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS, IMPLIED,
OR STATUTORY, OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OR
OTHERWISE, REGARDING THE AUCTION SITE, THE SOFTWARE OR ANY SERVICES PROVIDED BY
OPENSITE UNDER THIS AGREEMENT. FURTHER, OPENSITE DOES NOT MAKE ANY
REPRESENTATIONS OR WARRANTIES REGARDING: (I) THE SUCCESS OF ANY AUCTION
REQUESTED BY CLIENT AND HOSTED BY OPENSITE; (II) THE ACCURACY OR COMPLETENESS OF
CLIENT CONTENT; (III) THE SECURITY OF THE AUCTION SITE; OR (IV) THE QUALITY OR
CONTINUITY OF THIRD PARTY TELECOMMUNICATIONS SYSTEMS, INFORMATION SYSTEMS OR
SERVICES. CLIENT HEREBY ACKNOWLEDGES AND AGREES THAT THE INTERNET IS NOT
CONTROLLED, OPERATED, OR OWNED BY A SINGLE ENTITY, AND AS A RESULT, OPENSITE
DOES NOT MAKE ANY REPRESENTATION OR WARRANTY THAT ANY CLIENT CUSTOMER SHALL BE
ABLE TO ACCESS THE AUCTION SITE AT ANY PARTICULAR TIME.
(b) Limitation of Liability. OPENSITE SHALL NOT BE LIABLE TO CLIENT FOR
CONSEQUENTIAL, INCIDENTIAL, SPECIAL, OR EXEMPLARY DAMAGES, INCLUDING LOST
PROFITS OR LOSS OF USE, EVEN IF OPENSITE IS NOTIFIED OF THE LIKELIHOOD OF SUCH
DAMAGES. OPENSITE SHALL NOT BE LIABLE TO CLIENT FOR DAMAGES RESULTING FROM A
THIRD PARTY ACCESSING THE WEB SERVER OR THE AUCTION SITE. NOTWITHSTANDING THE
FOREGOING, OPENSITE'S LIABILITY HEREUNDER FOR ANY CAUSE SHALL BE LIMITED TO THE
AGGREGATE AMOUNT OF FEES PAID BY CLIENT TO OPENSITE FOR THE (3) THREE MONTH
PERIOD IMMEDIATELY PRECEDING ANY CLAIM.
8. CONFIDENTIALITY
OpenSite and Client agree that all information provided to the other
during the Term constitutes the proprietary and valuable property of the
disclosing party (the "Confidential Information"). Except as required in
connection with this Agreement, as required by law, or with the prior consent of
the other party, during the Term and for a period of three (3) years after the
termination of this Agreement, OpenSite and Client shall not use, copy,
recreate, or disclose the Confidential Information of the other party. OpenSite
and Client shall use their respective best efforts to ensure and preserve the
confidentiality of the other party's Confidential Information. Upon the
termination of this Agreement, OpenSite and Client shall return to the other all
Confidential Information, and all of copies thereof, of the other party.
Notwithstanding the foregoing, Confidential Information shall not include: (i)
information that at the time of its disclosure was or thereafter becomes part of
the public domain through no act or omission of the receiving party; (ii)
information that was in the receiving party's lawful possession prior to the
time of the disclosure; (iii) information that is thereafter lawfully disclosed
to the receiving party by a third party under no obligation of confidentiality
with respect to such information; and (iv) information that is thereafter
independently developed by the receiving party without access to the
Confidential Information of the other party as shown by written record
maintained contemporaneously with such development.
9. OWNERSHIP
Client hereby acknowledges and agrees that OpenSite owns all intellectual
property rights in and to the Software and the Auction Sites, excluding the
rights with respect to Client Content that are retained or granted to Client in
Section 2(c) hereof. Client also acknowledges and agrees that this is an
agreement for services only, and OpenSite does not grant to Client any right,
title, interest or license in or to the Software.
10. INDEMNIFICATION
(a) Indemnification by OpenSite. OpenSite shall indemnify, defend and hold
harmless Client against any loss, damage or expense incurred by Client as a
result of claims, actions, or proceedings brought by any third party alleging
infringement by the Software, the Auction Services, Documentation, Updates, and
Enhancements relating thereto of copyright, trademark, patent, or other
proprietary rights, and against its reasonable attorneys' fees and any money
damages or costs awarded in respect of any such claim(s) and any suit raising
any such claim(s); provided, however, that (a) Client shall have given OpenSite
prompt written notice of any such claim, demand, suit or action; (b) Client
shall cooperate with said defense by complying with OpenSite's reasonable
instructions and requests to Client in connection with said defense; and (c)
OpenSite shall have control of the defense of such claim, suit, demand, or
action and the settlement or compromise thereof. If a temporary or permanent
injunction is obtained against Client's use of the Software or Auction Site as a
result of the matters described in this section, OpenSite shall, at its option
and expense, either procure for Client the right to continue using the Software
or Auction Site or replace or modify the Software or Auction Site or infringing
portion thereof so that it no longer infringes the alleged proprietary right.
This Section 10(a) sets forth the exclusive remedy of Client against OpenSite
with respect to any action or claim described herein. OpenSite shall not
indemnify Client for uses, damages or expenses incurred by Client as a result of
claims, actions or proceedings brought by any third party based on code or
design specifications provided to OpenSite by Client.
(b) Indemnification by Client. Client shall defend, indemnify and hold
harmless OpenSite against all claims, including without limitation, any tax
claims or assessments, lawsuits, liabilities, losses, costs, and expenses
(including reasonable attorneys' fees) suffered or incurred as a result of: (i)
any acts of negligence or willful misconduct by any employees of Client relating
to this Agreement; (ii) code or design specifications provided by Client to
OpenSite in connection with OpenSite's performance hereunder and (iii) the sale
of the Auction Items by Client, including without limitation the shipping,
delivery, billing, and collection with respect to the Auction Items and the
failure by Client to collect or pay any taxes or fees which it is obligated to
pay in connection with the sale of the Auction Items. Client will indemnify
OpenSite against its reasonable attorneys' fees and any money damages or costs
awarded in respect of any such claim(s) and any suit raising any such claim(s).
(c) Notice. A party claiming indemnification shall give the other party
prompt written notice of all claims, provide reasonable cooperation in its
investigation and defense, and permit the other party to defend the claims at
its expense with legal counsel of its choice.
11. TERM AND TERMINATION
(a) Term. Unless earlier terminated as provided herein, the initial term
of this Agreement shall begin on the Effective Date and shall continue for a
period of one year. (the
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"Term"). After the initial term, this Agreement shall automatically renew for
successive one-year intervals unless terminated by either party as set forth in
this Agreement.
(b) Termination Upon Notice. Either party hereto may terminate this
Agreement for any reason upon ninety days written notice to the other. A party
may terminate this Agreement immediately upon delivery of notice to the other:
(i) if such other breaches any provision of this Agreement and such breach
remains uncured for a period of thirty (30) days following the delivery of
notice of such breach; (ii) if such other becomes insolvent or makes a general
assignment for the benefit of creditors; or (iii) if such other files a petition
in bankruptcy or an involuntary petition in bankruptcy is filed against it.
(c) Effect of Termination. Upon the termination of this Agreement: (i)
Client shall pay all amounts due to OpenSite hereunder, and (ii) OpenSite shall,
upon request, return to Client all of Client Content, and the HTML modified
version of Client Content.
(d) Termination of Auctions. OpenSite reserves the right to terminate,
suspend, or limit access to any auction which it determines: (i) contains
Prohibited Content; or (ii) violates OpenSite's then current Auction Policies.
12. MISCELLANEOUS
(a) Force Majeure. Neither OpenSite nor Client shall be responsible for
delays or failures to perform their respective duties and obligations hereunder
to the extent that such delays or failures result from acts of God, strikes,
lockouts, riots, war, epidemics, governmental regulations, fire, power failures,
materials shortages, earthquakes, other natural elements, or any other act
beyond such party's control.
(b) Relationship of the Parties. For all purposes, OpenSite and Client
shall be deemed to be independent contractors and nothing contained herein shall
be deemed to constitute a joint venture, partnership, employer-employee
relationship, or other agency relationship.
(c) Notices. All notices, consents, approvals, invoices, reports, and
other communications to, upon, and between the parties shall be in writing and
shall be deemed to have been given, delivered, made, and received when
personally delivered, when sent by facsimile, with confirmation, when sent by a
nationally recognized overnight delivery service, delivery charges prepaid, or
when sent by certified mail, postage prepaid and return receipt requested,
addressed to OpenSite at P.O. Box 12542 Research Triangle Park, North Carolina
27709, Facsimile Number (919) 544-9367, Attention: Vice President - Business
Affairs, and addressed to Client at:,Facsimile Number, Attention:
(d) Effect. This Agreement shall be binding upon and inure to the benefit
of OpenSite and the Client and their respective successors and permitted
assigns.
(e) Entire Agreement. This Agreement, together with any Exhibits hereto,
constitutes the entire agreement between OpenSite and Client with respect to the
subject matter hereof and supersedes all or any prior written or oral
understandings or agreements with respect to the subject matter hereof.
(f) Defined Terms. Unless and except as the context requires otherwise,
defined terms when used in this Agreement in the singular shall include the
plural and when used in the plural shall include the singular.
(g) Modification. No provision of this Agreement, including the provisions
of this Section, and the Exhibits hereto, may be amended, modified, or deleted,
except by an agreement in writing executed by OpenSite and Client.
(h) Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision hereof.
(i) No Assignment. Neither this Agreement nor any interest herein may be
assigned by either OpenSite or Client without the consent of the other;
provided, however no such consent shall be required in connection with the sale
of all or substantially all the assets or stock of a party, whether by merger,
sale or otherwise.
(j) Governing Law. As an incentive to alternative dispute resolution the
parties have agreed concerning disputes arising hereunder: (1) OpenSite may only
commence legal proceedings against Client in a state or federal court sitting in
(insert Client's county here)_County_(insert Client's state here), in which
event, this License agreement will be construed under the internal laws of the
State of (insert Client's state here) and (2) Client may only commence legal
proceedings against OpenSite in state or federal court sitting in North
Carolina, in which event, this License Agreement will be construed under the
internal laws of the State of North Carolina; provided that once litigation is
initiated by one of the parties, the parties, the other may assert counterclaims
in those proceedings.
(k) Counterparts. This Agreement is executed and delivered by the parties
in more than one counterpart, each of which shall be deemed to be an original,
and all of which shall be deemed to be the same Agreement.
(l) Headings. The underlined headings herein are for convenience only and
shall not affect the interpretation of this Agreement.
(m) Publicity. OpenSite may prepare press releases concerning the
existence of this Agreement and may reference Client and this Agreement in its
advertising, sales promotions, trade shows, or other marketing material.
Additionally, Client agrees to have the Auction Site display a "Powered by
OpenSite" logo as provided by OpenSite.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
OpenSite and Client as of the Effective Date.
OPENSITE TECHNOLOGIES, INC.
By:_____________________________
Title:__________________________
CLIENT
By:_____________________________
Title:__________________________
<PAGE> 5
EXHIBIT A
AUCTION POLICIES
THE FOLLOWING ARE THE STANDARD OPENSITE AUCTION HOSTING POLICIES:
- - Number of categories and sub-categories limited to 100.
- - Item images uploaded must be less than 50,000 bytes (50KB each).
- - Single Auction duration must be at least 24 hours.
- - Client must provide new auction item information at least 48 hours prior
to an auction opening.
- - Item information must be provided in the specified Item Upload file
format.
THE FOLLOWING POLICY CHANGES MAY BE MADE:
- - Total Number of categories and sub-categories up to 899
- - Large item images
- - Auctions shorter than 24 hours.
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EXHIBIT B
AUCTION SERVICES
THE FOLLOWING ADMINISTRATION SERVICES ARE PROVIDED AS PART OF THE CONCIERGE
AUCTION SERVICES:
- - Software Installation and Configuration at hosting site
- - Initial Site Design not to exceed two (2) days
- - Web Server sizing, administration and maintenance 24hrs x 7days/week
- - Daily uploading of auction items to the Auction Site based on Client
Content provided in the proper format
- - Issue auction results and reports including:
- - Email notification to both Client and Winner (Client's customer) within 24
hours of auction closing
- - Results and reports to include winning user information, shipping address
and payment processing data within 2 business days of an auction closing.
- - A Monthly report on all customer including contact information
THE FOLLOWING ADMINISTRATION SERVICES ARE AVAILABLE AT EXTRA CHARGE:
- - Customized reports in hard copy or specialized format such as Quickbooks
or MS Access
- - Integration with Transaction Processing systems such as CyberCash or Open
Market Transact
- - Integration with a fulfillment system
- - Integration with customer's ad serving system
- - Private Labeled AuctionWatch Desktop
- - Auction administration training (Admin access is not provided as part of
base service)
THE FOLLOWING OPENSITE AUCTION SOFTWARE COMPONENTS ARE PROVIDED AS PART OF THE
CONCIERGE AUCTION SERVICES:
- - Single auction type auction with multiple categories and sub categories as
agreed upon in Specifications
- - Bidder registration
- - AuctionWatch features
- - Bidding Activity Feature
- - New Item Listings
- - Winners Listing
- - Activate Hot Item Component
- - Activate OpenSite Search Engine
- - Activate Category Watch Module
- - Dynamic Paging
THE FOLLOWING OPENSITE AUCTION SOFTWARE COMPONENTS MAY BE ADDED AT EXTRA CHARGE:
- - AuctionRate(TM)Component
- - Banner Ad Module
- - Classified Ads Module
- - Online Store Module
- - Sellers Module
- - Multiple Auction Types
- - Private Auction Module
- - Custom Security Features
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EXHIBIT C
SPECIFICATIONS FOR AUCTION SITE
For the term of this contract, OpenSite will provide an Auction Service using
the English auction format allowing both single and multiple unit auction lots.
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EXHIBIT D
DEVELOPMENT SCHEDULE
Not Applicable
8
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EXHIBIT E
STANDARD FEES AND HOURLY RATES FOR CUSTOM DEVELOPMENT
Not Applicable
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EXHIBIT F
AUCTION SITE FEES
ONE-TIME SETUP FEE $ 2,500
The One-time Setup Fee is for services provided by OpenSite regarding initial
installation and implementation of the Auction Site.
MONTHLY FEE SCHEDULE
<TABLE>
<CAPTION>
-------------------------------------------------------
NUMBER OF HELD AUCTIONS MONTHLY LICENSE
FEE
-------------------------------------------------------
<S> <C>
001 - 100 *$2,500
-------------------------------------------------------
101 - 250 $5,500,
-------------------------------------------------------
251 - 400 $7,750
-------------------------------------------------------
Each Additional 100 Auctions $1,250
-------------------------------------------------------
</TABLE>
* Minimum Monthly Fee
PAYMENT TERMS
Client shall pay to OpenSite the Minimum Monthly Fee for the first month of the
contract, plus the One-time Setup Fee and any completed Custom Development Fees
in advance of the first day of the Auction Site going live. If the number of
Held Auctions during the prior month exceeds the Minimum Monthly Fee for which
Client has paid in advance, Client shall pay an additional fee equal to the
difference between the Minimum Monthly Fee and the applicable fee due based on
the number of Held Auction. The Minimum Monthly Fee and any additional fees are
due within 10 days of receiving the prior months auction results from OpenSite.
For the purposes of this Agreement, a "Held Auction" shall mean any auction that
opens on the Auction Site, whether or not that auction receives any bids or
results in any winners.
FEES DUE PRIOR TO LAUNCH OF AUCTION SITE:
<TABLE>
<S> <C>
One-time Setup Fee $2,500
First Month of Service Fee $2,500
Total $5,000
</TABLE>
10
<PAGE> 1
EXHIBIT 10.15
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is entered into this the day of _______,
1999, ("Effective Date") by and between OpenSite Technologies, Inc.
("Licensor"), and ________________________________________________________
("Licensee").
AGREEMENT
1. DEFINITIONS. Unless otherwise defined herein, the following terms shall have
the meanings set forth below:
1.1. "Customization" - means any modification of or changes to the
Software performed by or on behalf of Licensor pursuant to a services
agreement.
1.2. "Customized Software" - means the Software modified by Licensor for
Licensee pursuant to a services agreement executed by Licensor and
Licensee.
1.3. "Defect" - means a material failure of the Software to substantially
conform to the functional specifications set forth in the current
published Documentation.
1.4. "Derivative Works" - means works of authorship based on one or more
pre-existing works of Licensor which are created by Licensor or on behalf
of Licensor, including Documentation, Software, Enhancements, Updates
thereto, in whatever form the work may be recast, transformed or adapted,
including translations, ports and screen reformatting.
1.5. "Designated Location" - means the CPU at the physical location
identified in Exhibit A on which Licensee may use the Software and a
single web site domain address (such as www.opensite.com).
1.6. "Designated Operating Environment" - means the computer hardware and
software identified in Exhibit A, with which Licensee may use the
Software.
1.7. "Development Work" - means original computer software developed by or
on behalf of Licensor for Licensee pursuant to a services agreement
executed by Licensor and Licensee.
1.8. "Documentation" - means the written, electronic, or recorded work
provided to Licensee in connection with the Software that describes the
functions and features, of the Software, including end user manuals.
1.9. "Enhancements" - means any software program, any part thereof, or any
improvement or addition thereto, or any materials not included in the
Software at the time of execution of this License, or that are
subsequently developed by Licensor, or on behalf of Licensor, which modify
the Software to provide a function or feature not originally offered or an
improvement in function and which relate to the Software and which are not
major modifications and separately priced by Licensor.
1.10. "Executable Code" - means the compiled or interpreted machine
readable program code executed by a computer to perform the functions of
the Software.
1.11. "License Fee" - means fees charged for the License.
1.12. "Licensed Materials" - means the Software, Customized Software and
Development Work, if any, and Documentation covered by this Agreement or
services agreement between the parties hereto.
1.13. "Permitted Users" - means those employees of Licensee who have been
trained properly in the use of and are able to use properly the Licensed
Materials.
1.14. "Software" - means the computer software program(s) covered by this
Agreement and described on Exhibit A attached hereto and made a part
hereof and all Updates and Enhancements thereto.
1.15. "Third Party Product" - means those third party software and
hardware products provided to Licensee by Licensor if any, all as further
described in Exhibit A attached hereto, subject to the terms and
conditions set forth herein.
1.16. "Updates" - means program logic changes made by Licensor to correct
Defects in the Software delivered hereunder.
2. LICENSE GRANT.
2.1. LICENSE TO SOFTWARE. Except as otherwise provided herein, Licensor
hereby grants to Licensee a perpetual, non-exclusive, non-transferable
license to use the Software and Documentation as set forth herein. Except
as otherwise expressly set forth in a services agreement, upon the
completion, delivery and acceptance of any Development Work or
Customization pursuant to a services agreement, such Customization or
Development Work shall be considered part of and incorporated into the
Software and shall be subject to the terms and conditions of this
Agreement.
2.2. LICENSE TO THIRD PARTY PRODUCT. Licensor hereby grants to Licensee a
license to use the Third Party Product if any only as subject to the terms
and conditions of this Agreement and the terms and conditions applicable
to a particular product as set forth on Exhibit A. In the event of a
conflict between the terms and conditions of this Agreement and Exhibit A,
the terms and conditions of Exhibit A shall control.
2.3. USE. Licensee shall have the right to use the Software on a single
CPU at the Designated Location. The right to use the Software does not
include use by Licensee's affiliates or subsidiaries. Licensee shall have
the right to use the Software and Documentation only as set forth in this
Agreement or in the Documentation. Any other use of the Software shall
constitute an Event of Default under this Agreement. Unless otherwise
agreed by the parties hereto in writing, Licensee shall not use the
Software in the operation of a service bureau or time sharing arrangement
or provide same to a disaster recovery provider; nor shall Licensee
modify, assign, sublicense, sell or rent the Software. Any rights not
expressly granted herein are hereby expressly reserved to Licensor.
Licensee understands and agrees that, in order to facilitate quality
control, whenever an error message is generated in connection with
Licensee's use of the Software, a copy of the error message is emailed to
Licensor.
2.4. ACCESS. Access to the Software shall be granted only to Permitted
Users.
2.5. SINGLE POINT OF CONTACT. Licensee shall designate a single point of
contact to communicate with Licensor in all matters relating to this
Agreement, including notifications of changes to Permitted Users at
Designated Location(s)or the Designated Operating Environment.. The
identity of the contact may be changed upon five (5) days written notice
to Licensor.
2.6. CHANGES. No changes with regard to the Designated Locations,
Permitted Users, or the Designated Operating Environment shall be made
without the written consent of Licensor.
2.7. COPIES. Licensor shall deliver one (1) copy of the Software, in
Executable Code form, and one (1) copy of the accompanying Documentation
to Licensee. Licensee shall make no copies of the Documentation and
Software except one (1) copy of the Software may be made for backup or
archival purposes. Any such copy shall be clearly marked as proprietary to
Licensee and contain Licensor's proprietary notices. Additional copies of
Documentation will be made available to Licensee by Licensor at an
additional charge.
2.8. TRANSFER. Licensee may transfer the Software and Documentation to a
different Designated Location upon written approval by Licensor. Such
transfer shall obligate License to pay a transfer fee of Six Hundred
Dollars ($600.00) to Licensor. Upon transfer, the new physical location
shall become Designated Location for the purposes of this Agreement.
Notwithstanding the foregoing, Licensee understands and agrees that
Licensor's approval may be contingent upon agreement of the parties to
different or additional terms and that Licensor may, at its sole
discretion, terminate or modify any services or maintenance and support
agreements executed in connection herewith. Notwithstanding the foregoing,
Licensee understands and agrees that Third Party Products if any may not
be transferred without the consent of the applicable third party vendors.
2.9. LOGO. Licensee shall maintain on its Auction Home Page the "Powered
by OpenSite Auction" logo as provided by Licensor.
3. INSTALLATION; MAINTENANCE AND SUPPORT.
3.1. DELIVERY. Licensor shall deliver the Software and Documentation to
Licensee at the Designated Location; provided, however, that all
modification of the Software and any Updates and Enhancements shall be
conducted pursuant to a service agreement and shall be priced separately.
3.2. ENHANCEMENTS AND UPDATES. Licensor shall provide Enhancements and
Updates to Licensee at no charge so long as a maintenance and support
agreement between the parties is in effect and Licensee has paid the fees
due thereunder. Upon delivery to Licensee, such Enhancements and Updates
shall be subject to the terms and conditions of this Agreement and shall
be deemed incorporated into and made part of the Software.
4.OWNERSHIP. Except as otherwise expressly agreed in writing, as between
Licensor and Licensee, Licensor shall have exclusive ownership of all Licensed
Materials and all Derivative Works and written, electronic, or recorded
products, data, reports, or other materials resulting from performance of
additional services that affect the Licensed Materials or Derivative Works and
all other intellectual property rights, including copyrights, trademarks,
service marks, and trade secrets attributable to the foregoing (collectively
"Intellectual Property"); provided however, that the Intellectual Property shall
not include proprietary data of Licensee. Licensee shall have no ownership or
proprietary right in the Intellectual Property and shall not use the
Intellectual Property for any purpose not approved
<PAGE> 2
in writing by Licensor.
5. PAYMENTS.
5.1. LICENSE FEES. In consideration of the license granted under this
Agreement, Licensee shall pay a License Fee as described on Exhibit A.
Unless otherwise provided in Exhibit A. License Fees charged hereunder
shall be due and payable in advance of shipment of the Licensed Materials
to Licensee. Amounts unpaid when due shall be subject to a late charge of
one and one half percent (1.5%) per month or the maximum rate allowed by
law, whichever is less.
5.2. TAXES. Licensee agrees to pay all present or future sales, excise,
import, use, value-added or other similar taxes or duties (not including
taxes or duties on the income of Licensor) levied or based on payments
made pursuant to this Agreement.
6. TERMINATION.
6.1. TERMINATION FOR DEFAULT. By giving written notice, either party may
terminate this Agreement upon the occurrence of one or more of the
following events, which shall constitute a non-exclusive Event of Default
under this Agreement:
6.1.1. Either party fails to perform any material covenant,
agreement, obligation, term or condition contained herein;
6.1.2. Either party fails to comply with the provisions of the
confidentiality agreement executed by and between the parties
hereto;
6.1.3. Either party attempts to assign, terminate or cancel this
Agreement contrary to the terms thereof;
6.1.4. Licensee fails to make payment as provided herein;
6.1.5. Either party ceases to do business as a going concern, makes
an assignment for the benefit of creditors, admits in writing its
inability to pay debts as they become due, files a petition in
bankruptcy (except in connection with a reorganization under which
the business of such party is continued and performance of all its
obligations under this Agreement shall continue) or appoints a
receiver, acquiesces in the appointment of a receiver or trustee, or
liquidator for it or any substantial party of its assets or
properties.
6.2. EVENTS OF DEFAULT by either party shall not be cause for termination
if the defaulting party cures such default (if the default is susceptible
to cure) within thirty (30) days of receipt of written notice of default
from the other party.
6.3. RIGHTS UPON TERMINATION. Upon an uncured Event of Default, the
non-breaching party may, except as limited by this Agreement, seek all
legal and equitable remedies to which it is entitled. The remedies set
forth herein shall be deemed cumulative and not exclusive and may be
exercised by the non-breaching party, successively or concurrently, in
addition to any other remedies available to it. Upon termination by
Licensor for Licensee's default, all amounts under this Agreement shall
become immediately due and payable.
6.4. DUTIES UPON TERMINATION. Upon termination of this Agreement, each
party shall return to the other any confidential information in its
possession belonging to such other party.
7.RELATIONSHIP OF THE PARTIES. The relationship of the parties established by
this Agreement is solely that of independent contractors, and nothing contained
in this Agreement shall be construed to (a) give any party the power to direct
and control the day-to-day activities of the other; or (b) constitute such
parties as partners, joint ventures, co-owners or otherwise as participants in a
joint or common undertaking; or (c) make either party an agent of the other for
any purpose whatsoever. Neither party nor its agents or employees is the
representative of the other for any purpose, and neither has power or authority
to act as agent, employee to represent, to act for, bind, or otherwise create or
assume any obligation on behalf of the other.
8. WARRANTY.
8.1. LIMITED WARRANTY. Licensor warrants that for a period of three (3)
months from delivery the Software shall operate without Defects. THIS
LIMITED EXPRESS WARRANTY SPECIFIED ABOVE IS THE ONLY WARRANTY MADE BY
LICENSOR AND THERE ARE NO OTHER WARRANTIES, EXPRESS OR IMPLIED, BY
OPERATION OF LAW OR OTHERWISE, INCLUDING WARRANTIES OR MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
8.2. NEGATION OF WARRANTY. The above warranty shall be negated by (a) the
use of the Software by any user not a permitted user, (b) Licensee's use
of the Software in a manner not permitted by this Agreement, (c)
Licensee's unauthorized use of the Software in conjunction with third
party software not expressly approved by Licensor, or (e) installation or
use of the Software in an environment other than the Designated Operating
Environment.
8.3. REMEDIES. Remedies for the breach of warranty obligations hereunder
shall be limited to replacement or repair of such non-conforming Software.
THE FOREGOING SHALL BE LICENSEE'S SOLE AND EXCLUSIVE REMEDY FOR ANY
MALFUNCTION OR DEFECT IN THE SOFTWARE. IF SUCH MALFUNCTIONS OR DEFECT
MATERIALLY IMPAIRS LICENSEE'S USE OF THE SOFTWARE AND CANNOT BE CURED AS
PROVIDED IN THIS SECTION, THEN LICENSEE'S ALTERNATIVE AND EXCLUSIVE REMEDY
SHALL BE TO TERMINATE THIS AGREEMENT WITHOUT FURTHER LIABILITY TO LICENSOR
OR DAMAGES HEREUNDER. THIS WARRANTY IS NON-TRANSFERABLE.
8.4. LIMITATION OF LIABILITY. Subject to Section 8.2, Licensor's liability
on any claim of damages arising out of this Agreement shall be limited to
direct damages and shall not exceed the amounts paid by Licensee to
Licensor under this Agreement. In no event shall Licensor be liable for
indirect, exemplary, incidental, special or consequential damages arising
from this Agreement, even if Licensor has been advised of the possibility
or likelihood of such damages. The limitations of liability set forth
herein do not apply to any legal or equitable obligation that Licensor has
or may have to indemnify Licensee for any reason.
9. INDEMNIFICATION.
9.1. BY LICENSOR. Licensor shall indemnify, defend and hold harmless
Licensee against any loss, damage or expense incurred by Licensee as a
result of claims, actions, or proceedings brought by any third party
alleging infringement by the Software and Documentation, Updates, and
Enhancements relating thereto of copyright, trademark, patent, or other
proprietary rights, and against its reasonable attorneys' fees and any
money damages or costs awarded in respect of any such claim(s) and any
suit raising any such claim(s); provided, however, that (a) Licensee shall
have given Licensor prompt written notice of any such claim, demand, suit
or action; (b) Licensee shall cooperate with said defense by complying
with Licensor's reasonable instructions and requests to Licensee in
connection with said defense; and (c) Licensor shall have control of the
defense of such claim, suit, demand, or action and the settlement or
compromise thereof. Further, Licensor shall have no liability for any
infringement action or claim that is based upon or arising from the
matters described in Section 9.2. If a temporary or permanent injunction
is obtained against Licensee's use of the Software as a result of the
matters described in this section, Licensor shall, at its option and
expense, either procure for Licensee the right to continue using the
Software or replace or modify the Software or infringing portion thereof
so that it no longer infringes the alleged proprietary right. This Section
9.1 sets forth the exclusive remedy of Licensee against Licensor with
respect to any action or claim described herein. Licensor shall not
indemnify Licensee for uses, damages or expenses incurred by Licensee as a
result of claims, actions or proceedings brought by any third party based
on code or design specifications provided to Licensor by Licensee.
9.2. BY LICENSEE. Licensee shall indemnify, defend and hold harmless
Licensor against any loss, damage or expense incurred by Licensor as a
result of claims, actions, or proceedings brought by any third party
arising from (a) Licensee's use of the Software other than the Designated
Operating Environment or in a manner not permitted by this Agreement, (b)
Licensee's unauthorized use of the Software in conjunction with third
party software not expressly approved by Licensor, (c) Licensee's
installation or use of the Software in an environment other than the
Designated operating Environment; (d) acts of negligence or willful
misconduct by any employees of Licensee relating to this Agreement; or (e)
code or design specifications provided by Licensee to Licensor in
connection with Licensor's performance of Development Work, Customization
or modification of Software. Licensee will indemnify Licensor against its
reasonable attorneys' fees and any money damages or costs awarded in
respect of any such claim(s) and any suit raising any such claim(s).
10. GOVERNING LAW. As an incentive to alternative dispute resolution the parties
have agreed concerning disputes arising hereunder: (1) Licensor may only
commence legal proceedings against Licensee in a state or federal court sitting
in (insert Licensee's county here)_County_(insert Licensee's state here), in
which event, this License agreement will be construed under the internal laws of
the State of (insert Licensee's state here) and (2) Licensee may only commence
legal proceedings against Licensor in state or federal court sitting in North
Carolina, in which event, this License Agreement will be construed under the
internal laws of the State of North Carolina; provided that once litigation is
initiated by one of the parties, the parties, the other may assert counterclaims
in those proceedings.
11. MISCELLANEOUS.
11.1. BINDING NATURE AND ASSIGNMENT. This Agreement shall bind the parties
and their successors and permitted assigns. Neither party may assign this
Agreement without the prior written consent of the other except that with
respect to Licensor the term "assignment" shall not include any transfer
by merger, acquisition, stock transfer or other consolidation of Licensor
with another entity. Any other assignment attempted without the written
consent of the other party shall be void.
11.2. NOTICES. Any notice, consent or other communication in connection
with the Agreement shall be in writing and may be delivered in person, by
mail or by
<PAGE> 3
facsimile copy. If hand delivered, the notice shall be effective upon
delivery. If by facsimile copy, the notice shall be effective when sent.
If served by mail, the notice shall be effective three (3) business days
after being deposited with the United States Postal Service by certified
mail, return receipt requested, addressed appropriately to the intended
recipient, as follows:
If to Licensor: ATTN: OpenSite Technologies, Inc.
PO Box 12542
Research Triangle Park, NC 27709-2542
If to Licensee: ATTN:
Each party may change its address for notification purposes by giving the
other party written notice of the new address and the date upon which it
shall become effective.
11.3. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one single
agreement between the parties.
11.4. HEADINGS. The articles and sections headings and the table of
contents are for reference and convenience only and shall not be
considered in the interpretation of this Agreement.
11.5. APPROVALS AND SIMILAR ACTIONS. Where agreement, approval,
acceptance, consent or similar action by either party is required by any
provision of this Agreement, such action shall not be unreasonably delayed
or withheld, unless specifically permitted by this Agreement.
11.6. PUBLICITY. Licensor may prepare press releases concerning the
existence of this Agreement and may reference Licensee and this Agreement
in its advertising, sales promotions, trade shows, or other marketing
material.
11.7. FORCE MAJEURE. Neither party shall be liable to the other by reason
of any failure of performance hereunder (except failure to pay) if such
failure arises out of causes beyond such party's reasonable control,
despite the reasonable efforts and without the fault or negligence of such
party. Any party experiencing such an event shall give as prompt notice as
possible under the circumstances.
11.8. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, then both parties shall be relieved of all obligations
arising under such provision, but only to the extent that such provision
is unenforceable, and this Agreement shall be deemed amended by modifying
such provision to the extent necessary to make it enforceable while
preserving its intent or, if that is not possible, by substituting another
provision that is enforceable and achieves the same objective and economic
result. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT EACH PROVISION OF THIS
AGREEMENT WHICH PROVIDES FOR A LIMITATION OF LIABILITY, DISCLAIMER OF
WARRANTIES, INDEMNIFICATION OR EXCLUSION OF DAMAGES OR OTHER REMEDIES IS
INTENDED TO BE ENFORCED AS SUCH. FURTHER, IT IS EXPRESSLY UNDERSTOOD AND
AGREED THAT IN THE EVENT ANY REMEDY UNDER THIS AGREEMENT IS DETERMINED TO
HAVE FAILED OF ITS ESSENTIAL PURPOSE, ALL LIMITATIONS OF LIABILITY AND
EXCLUSIONS OF DAMAGES OR OTHER REMEDIES SHALL REMAIN IN EFFECT.
11.9. WAIVER. No delay or omission by either party to exercise any right
or power it has under this Agreement shall impair or be construed as a
waiver of such right or power. A waiver by either party of any covenant or
breach shall not be construed to be a waiver of any succeeding breach or
of any other covenant. All waivers must be in writing and signed by the
party waiving its rights.
11.10. ATTORNEYS' FEES. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action
or proceeding, in addition to any other relief to which it may be
entitled.
11.11. NO THIRD PARTY BENEFICIARIES. The parties agree that this Agreement
is for the benefit of the parties hereto and is not intended to confer any
legal rights or benefits on any third party and that there are no third
party beneficiaries to this Agreement or any part or specific provision of
this Agreement.
11.12. COMPLIANCE WITH LAWS. Each party shall comply with all
governmental, including federal, state, and local laws, statutes, rules
and regulations applicable to this Agreement and in the conduct of its
business. Failure to comply with this provision shall constitute a
material default under this Agreement entitling the non-breaching party to
terminate this Agreement.
11.13. ENTIRE AGREEMENT. This Agreement, including all of its attachments,
each of which is incorporated into this Agreement, is the entire agreement
between the parties with respect to its subject matter, and there are no
other representations, understandings or agreements between the parties
relative to such subject matter. No amendment to, or change, waiver or
discharge of any provision of this Agreement shall be valid unless in
writing and signed by any authorized representative of the party against
which such amendment, change, waiver or discharge is sought to be
enforced. 11.14. SURVIVAL OF PROVISIONS. Provisions 4, 6.2, 6.3, 8.3, 8.4,
9, 10, 11.6, and 11.10 and all accrued and unpaid obligations arising
hereunder shall survive the termination hereof.
ACKNOWLEDGED AND AGREED TO, as of the day and year first written above.
LICENSEE
By:___________________________________
Printed Name:_________________________
Title:________________________________
Date:_________________________________
LICENSOR
By:___________________________________
Printed Name:_________________________
Title: _______________________________
Date:_________________________________
<PAGE> 1
Exhibit 10.16
================================================================================
CMD 103A (8/98)
Base Years
OFFICE LEASE
WITH
OpenSite Technologies, Inc.
SUITE(S): 100
BUILDING: 2800 Meridian Parkway
Durham, North Carolina 27713
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1: BASIC PROVISIONS............................................1
ARTICLE 2: TERM AND COMMENCEMENT.......................................3
ARTICLE 3: BASE RENT AND ADDITIONAL RENT...............................4
ARTICLE 4: CONDITION OF PREMISES.......................................7
ARTICLE 5: QUIET ENJOYMENT.............................................8
ARTICLE 6: UTILITIES AND SERVICES......................................8
ARTICLE 7: USE, COMPLIANCE WITH LAWS, AND RULES.......................11
ARTICLE 8: MAINTENANCE AND REPAIRS....................................12
ARTICLE 9: ALTERATIONS AND LIENS......................................12
ARTICLE 10: INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS...............14
ARTICLE 11: CASUALTY DAMAGE............................................15
ARTICLE 12: CONDEMNATION...............................................17
ARTICLE 13: ASSIGNMENT AND SUBLETTING..................................17
ARTICLE 14: PERSONAL PROPERTY, RENT AND OTHER TAXES....................20
ARTICLE 15: LANDLORD'S REMEDIES........................................21
ARTICLE 16: SECURITY DEPOSIT...........................................24
ARTICLE 17: ATTORNEYS' FEES AND VENUE..................................25
ARTICLE 18: SUBORDINATION, ATTORNMENT AND LENDER PROTECTION............25
ARTICLE 19: ESTOPPEL CERTIFICATES......................................26
ARTICLE 20: RIGHTS RESERVED BY LANDLORD................................26
ARTICLE 21: RIGHT TO CURE..............................................27
ARTICLE 22: INDEMNIFICATION............................................28
ARTICLE 23: RETURN OF POSSESSION.......................................29
ARTICLE 24: HOLDING OVER...............................................30
ARTICLE 25: NOTICES....................................................30
ARTICLE 26: REAL ESTATE BROKERS........................................31
ARTICLE 27: NO WAIVER..................................................31
ARTICLE 28: TELECOMMUNICATION LINES....................................31
ARTICLE 29: HAZARDOUS MATERIALS........................................32
ARTICLE 30: DEFINITIONS................................................34
ARTICLE 31: OFFER......................................................39
ARTICLE 32: MISCELLANEOUS..............................................39
ARTICLE 33: ENTIRE AGREEMENT...........................................41
EXHIBITS................................................ Listed in Article 1.P
<PAGE> 3
OFFICE LEASE
THIS OFFICE LEASE ("Lease") is made and entered into as of the __ day
of June, 1999, by and between CMD PROPERTIES, INC., ("Landlord"), an Illinois
corporation, and OpenSite Technologies, Inc. ("Tenant"), a Delaware corporation.
ARTICLE 1: BASIC PROVISIONS
This Article contains the basic lease provisions between Landlord and
Tenant.
A. Building: Located at 2800 Meridian Parkway, Durham, North
Carolina (the "Property", as further described in
Article 30).
B. Premises: Suite 100 located on the 1st floor of the Building as
outlined or cross-hatched on Exhibit A hereto.
C. Commencement Date: July 1, 1999, subject to Articles 2 and 4.
D. Expiration Date: February 28, 2006, subject to Articles 2 and 4.
E. Rentable Area: The rentable area of the Premises shall be deemed to
be 25,033 square feet, and the rentable area of the
Property shall be deemed to be 50,052 square feet,
for purposes of this Lease, subject to Article 30.
The preceding measurements were made using the
BOMA/ANSI Standards as of June 7, 1996.
F. Tenant's Share: Fifty and 01/100 percent (50.01%), subject to Article
30.
G. Base Rent: Tenant shall pay monthly Base Rent pursuant to the
following schedule and as described in Article 3:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Period Monthly Base Rent
------------------------------------------------------------------------------
<S> <C>
Commencement Date - 6/30/00 $34,420.38
------------------------------------------------------------------------------
7/1/00 - 6/30/01 $35,463.42
------------------------------------------------------------------------------
7/1/01 - 6/30/02 $36,506.46
------------------------------------------------------------------------------
7/1/02 - 6/30/03 $37,549.50
------------------------------------------------------------------------------
7/1/03 - 6/30/04 $38,592.54
------------------------------------------------------------------------------
7/1/04 - 6/30/05 $39,635.58
------------------------------------------------------------------------------
7/1/05 - Expiration Date $40,678.68
------------------------------------------------------------------------------
</TABLE>
H. Additional Rent: Tenant shall pay Tenant's Share of Taxes and Expenses
in excess of the amounts respectively for 2000 ("Base
Tax Year") and 2000 ("Base Expense Year"), as further
described in Article 3.
I. Permitted Use: General office use, subject to Article 7.
J. Security Deposit: $34,420.38, subject to Article 16.
K. Broker (if any): Advantis
L. Guarantor(s): N/A
<PAGE> 4
M. Landlord's Notice Address (subject to Article 25):
c/o CMD Realty Investors, Inc., Suite 135, 2500
Meridian Parkway, Durham, North Carolina 27713,
Attn.: Regional Manager; with copies c/o CMD Realty
Investors, Inc., 227 West Monroe Street, Suite 3900,
Chicago, Illinois 60606, Attn.: General Counsel and
Attn.: Asset Manager.
N. Tenant's Notice Address (subject to Article 25):
Until the Commencement Date: OpenSite Technologies,
Inc., 5315 Highgate Dr., Suite 102, Durham, NC 27713
Attn: V.P. Finance/COO
On the Commencement Date: OpenSite Technologies,
Inc., 2800 Meridian Parkway, Suite 100, Durham, NC
27713. Attn: V.P. Finance/COO
With a copy to: Steven I. Reinhard, Esq., Ragsdale,
Liggett & Foley, CrossPointe Plaza, 2840 Plaza Place,
Suite 400, Raleigh, North Carolina 27612.
O. Rent Payments: Rent shall be paid to Landlord c/o The First National
Bank of Chicago, P.O. Box 93150, Chicago, Illinois
60673-3150, or such other parties and addresses as to
which Landlord shall provide thirty (30 ) days'
advance notice.
P. Exhibits: This Lease includes, and incorporates by this
reference:
Exhibit A: Premises
Exhibit B: Rules
Exhibit C: Work Letter
Exhibit D: Cleaning Specifications
Exhibit E: Extension Option
Exhibit F: Letter of Credit Requirements
Exhibit G: Tenant Exterior Sign
Exhibit H: Tenant's Name on Landlord's Monument Sign
The foregoing provisions shall be interpreted and applied in accordance
with the other provisions of this Lease. The terms of this Article, and the
terms defined in Article 30 and other Articles, shall have the meanings
specified therefor when used as capitalized terms in other provisions of this
Lease or related documentation (except as expressly provided to the contrary
therein).
4
<PAGE> 5
ARTICLE 2: TERM AND COMMENCEMENT
A. Term. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises for the Term, subject to the other provisions of this
Lease. The term ("Term") of this Lease shall commence on the Commencement Date
and end on the Expiration Date set forth in Article 1, unless sooner terminated
as provided in this Lease, subject to adjustment as provided below and the other
provisions of this Lease.
B. Early Commencement. The Commencement Date, Rent and Tenant's other
obligations shall be advanced to such earlier date as Tenant, with Landlord's
written permission, commences occupying the Premises for the operation and
conduct of business. If such event occurs with respect to a portion of the
Premises, the Commencement Date, Rent and Tenant's other obligations shall be so
advanced with respect to such portion (and fairly prorated based on the rentable
square footage involved). During any period that Tenant shall be permitted to
enter the Premises prior to the Commencement Date other than to occupy the same
for the operation and conduct of business (e.g., to perform alterations or
improvements), Tenant shall comply with all terms and provisions of this Lease,
except those provisions requiring the payment of Rent. Landlord shall permit
early entry, so long as the Premises are legally available, Landlord has
completed any work required to be performed by Landlord under this Lease (or can
reasonably accommodate the scheduling of minor work Tenant desires to perform,
such as cabling, without delaying any such Landlord work), and Tenant is in
compliance with the other provisions of the Lease, including the insurance
requirements.
C. Commencement Delays. The Commencement Date and Rent and Tenant's
other obligations relating thereto shall be postponed to the extent Tenant is
not reasonably able to occupy the Premises for the operation and conduct of
business because Landlord fails, by the Commencement Date set forth in Article 1
to: (i) deliver possession of the Premises and (ii) substantially complete the
improvements to the Premises required to be performed by Landlord under Exhibit
C to this Lease, except to the extent that Tenant, its space planners,
architects, contractors, agents or employees in any way contribute to such
failure. The substantial completion referred to in subsection (ii) above,
Section 4B of the Lease and in Exhibit C shall be deemed to have occurred when
evidenced by the city of Durham inspector's issuance of a temporary certificate
of occupancy and a certificate of substantial completion issued by the Architect
(as defined in Exhibit C). If such failure occurs with respect to a portion of
the Premises, the Commencement Date, Rent and Tenant's other obligations shall
be so postponed with respect to such portion (and fairly prorated based on the
rentable square footage involved). If the Commencement Date is postponed
pursuant to the foregoing provisions for a ninety (90) day initial grace period,
Tenant shall have the right to terminate this Lease by notice to Landlord given
within ten (10) days thereafter, subject to Landlord's right to cure as provided
in Article 21. Any such delay in the Commencement Date shall not subject
Landlord to liability for loss or damage resulting therefrom, and Tenant's sole
recourse with respect thereto shall be the postponement of Rent and other
obligations and right to terminate this Lease described herein.
D. Adjustments to Dates and Other Matters; Confirmation. If the
Commencement Date is advanced to an earlier date as provided above, the
Expiration Date shall not be changed. If the Commencement Date is postponed as
provided above, the Expiration Date shall be extended by the same length of time
and all other specific dates within this Lease (including Base Rent increases)
shall likewise be postponed. If the Commencement Date occurs other than on the
first day of a calendar month, then the Term shall be extended so that the
Expiration Date is the last day of the calendar month in which it would
otherwise occur, and the dates for any fixed increases in the Base Rent shall be
adjusted so that they occur on the first day of the calendar month following the
month in which they would otherwise occur. Tenant shall execute a confirmation
of any dates, as adjusted herein, in such form as Landlord may reasonably
request; any failure to respond within thirty (30) days after requested shall be
deemed an acceptance of the matters set forth in Landlord's confirmation. If
Tenant disagrees with Landlord's adjustment of such dates, then Tenant shall pay
Rent and perform all other obligations, in the amounts and on the dates set
forth in Article 1, subject to retroactive and prospective adjustment between
the parties promptly after the matter is resolved.
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ARTICLE 3: BASE RENT AND ADDITIONAL RENT
A. Base Rent. Tenant shall pay Landlord the monthly Base Rent set forth
in Article 1 in advance on or before the first day of each calendar month during
the Term; provided, Tenant shall pay Base Rent for the first full calendar month
for which Base Rent shall be due (and any initial partial month) when Tenant
executes this Lease.
B. Taxes and Expenses. Effective January 1, 2001, Tenant shall pay
Landlord Tenant's Share of Taxes and Expenses in excess of the amounts of Taxes
and Expenses respectively for the Base Tax Year and Base Expense Year in the
manner described below. The foregoing capitalized terms shall have the meanings
specified therefor in Articles 1 and 30.
C. Payments.
(i) Commencing January 1, 2001, Landlord may reasonably estimate in
advance the amounts Tenant shall owe for Taxes and Expenses for any full or
partial calendar year of the Term; such estimate shall be made by Landlord in
good faith and shall contain a listing in reasonable detail for categories of
Expenses. In such event, Tenant shall pay such estimated amounts, on a monthly
basis, on or before the first day of each calendar month, together with Tenant's
payment of Base Rent. Such estimate may be reasonably adjusted from time to time
by Landlord, but not more than once per calendar year.
(ii) Within 120 days after the end of each calendar year (beginning
with the calendar year 2001), or as soon thereafter as practicable, Landlord
shall provide a statement (the "Statement") to Tenant showing: (a) the amount of
actual Taxes and Expenses for such calendar year, with a listing in reasonable
detail of amounts for categories of Expenses, (b) any amount paid by Tenant
towards Taxes and Expenses during such calendar year on an estimated basis, and
(c) any further revised estimate of Tenant's obligations for Taxes and Expenses
for the current calendar year.
(iii) If the Statement shows that Tenant's estimated payments were less
than Tenant's actual obligations for Taxes and Expenses for such year, Tenant
shall pay the difference within thirty (30) days after Landlord sends the
Statement. If the Statement shows that Tenant's estimated payments exceeded
Tenant's actual obligations for Taxes and Expenses, Landlord shall credit the
difference against the payment of Rent next due. If the Term shall have expired
or been terminated and no further Rent shall be due, Landlord shall provide a
refund of such difference at the time Landlord sends the Statement.
(iv) If the Statement shows a further increase in Tenant's estimated
payments for the current calendar year (beginning with the calendar year 2001),
Tenant shall: (a) thereafter pay the new estimated amount until Landlord further
revises such estimated amount, and (b) pay the difference between the new and
former estimates for the period from January 1 of the current calendar year
through the month in which the Statement is sent within thirty (30) days after
Landlord sends the Statement, provided that Landlord has sent the Statement by
April 30 of the calendar year following the calendar year to which the Statement
relates. If Landlord sends the Statement after April 30 of the calendar
following the calendar year to which the Statement relates, then Tenant's
payments shall be as follows: (1) within thirty (30) days after Landlord sends
the Statement, Tenant shall pay the difference between the new and former
estimates for the months of January through April of the current year, (2)
within sixty (60) days after Landlord sends the Statement, Tenant shall pay the
difference between the new and former estimates for the month of May through the
month in which Landlord sends the Statement.
D. Tax Refunds, Protest Costs, Fiscal Years and Special Assessments.
Landlord shall each year: (i) credit against Taxes any refunds received during
such year, whether or not for a prior year, (ii) include in Taxes any additional
amount paid during such year involving an adjustment to Taxes for a prior year
due to error by the taxing authority, supplemental assessment, or other reason,
(iii) for Taxes payable in installments over more than one year, include only
the minimum amounts payable each year and any interest thereon, and (iv)
include, in either Taxes or Expenses, any fees for attorneys, consultants and
experts, and other costs paid during such year in attempting to protest, appeal
or otherwise seek to reduce or minimize Taxes, whether or not successful.
Notwithstanding anything to the contrary contained in this Lease, if any taxing
authority, at any time, uses a fiscal year other than a current
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calendar year, Landlord may elect to require payments by Tenant based on: (a)
amounts paid or payable during each calendar year without regard to such fiscal
years, or (b) amounts paid or payable for or during each fiscal tax year.
E. Grossing Up Variable Expenses; Taxes. In order to allocate variable
Expenses (i.e. those items that vary based on occupancy levels, such as
janitorial and utility costs) among those parties who are incurring such
Expenses when the Property is not fully occupied during all or a portion of any
calendar year, Landlord may, in accordance with sound accounting and management
practices, determine the amount of such variable Expenses that would have been
paid had the Property been fully occupied, and the amount so determined shall be
deemed to have been the amount of Expenses for such year (rather than adjusting
Tenant's Share by subtracting vacant space from the denominator); if Landlord
makes such an adjustment to Expenses for any year following the Base Expense
Year, Landlord shall also make such an adjustment to Expenses for the Base
Expense Year. If Landlord adds a new type of expense in a subsequent year that
was not included in the Base Year (e.g. an annual HVAC maintenance contract that
was not needed during the Base Expense Year because of an HVAC warranty), then
Landlord shall make an appropriate adjustment to the Base Expense Year by adding
thereto a reasonable amount to reflect the expense that would have been incurred
if such new type of expense (e.g. such annual HVAC maintenance contract) had
been incurred in the Base Expense Year. Similarly, If Landlord is not furnishing
any particular utility or service (the cost of which, if performed by Landlord,
would be included in Expenses) to a tenant during any period, Landlord may for
such period: (i) adjust Expenses to reflect the additional amount that would
reasonably have been incurred during such period had Landlord furnished such
utility or service to such tenant, or (ii) exclude the rentable area of such
tenant from the rentable area of the Property in computing Tenant's Share of the
component of Expenses for such utility or service.
Landlord shall adjust the Taxes for the Base Tax Year to the amount
that the Taxes would have been for the Base Tax Year if the Building had been
fully occupied and fully improved.
F. Prorations; Payments After Term Ends. If the Term commences on a day
other than the first day of a calendar month or ends on a day other than the
last day of a calendar month, the Base Rent and any other amounts payable on a
monthly basis shall be prorated on a per diem basis for such partial calendar
months. If the Base Rent is scheduled to increase under Article 1 other than on
the first day of a calendar month, the amount for such month shall be prorated
on a per diem basis to reflect the number of days of such month at the then
current and increased rates, respectively. If the Term commences other than on
January 1, or ends other than on December 31, Tenant's obligations to pay
amounts towards Taxes and Expenses for such first or final calendar years shall
be prorated on a per diem basis to reflect the portion of such years included in
the Term. Tenant's and Landlord's obligations regarding Taxes and Expenses (or
any other amounts) accruing during, or relating to, the period prior to
expiration or earlier termination of this Lease, shall survive such expiration
or termination.
G. Landlord's Accounting Practices and Records. Landlord shall maintain
records respecting Taxes and Expenses and determine the same in accordance with
sound accounting and management practices consistently applied in accordance
with this Lease. Although this Lease contemplates the general computation of
Taxes and Expenses on a cash basis, Landlord shall make reasonable and
appropriate accrual adjustments to ensure that each calendar year includes
substantially the same recurring items. Landlord reserves the right to apply a
full accrual system of accounting so long as the same is consistently applied
and Tenant's obligations are not materially adversely affected, and further
provided that Landlord shall continue to pay Expenses and Taxes on a timely
basis. Tenant or its representative (acting on a non-contingent fee basis) shall
have the right to review such records by sending notice to Landlord no later
than ninety (90) days following the furnishing of the Statement specifying such
records as Tenant reasonably desires to review. Such review shall be subject to
the continuing condition that Tenant not be in Default, and subject to
reasonable scheduling by Landlord during normal business hours at the place or
places where such records are normally kept provided that such records shall be
kept within the 48 continental United States. No later than ninety (90) days
after Landlord makes such records available for review, Tenant shall send
Landlord notice specifying any exceptions that Tenant takes to matters included
in such Statement, Tenant's detailed reasons for each exception which support a
conclusion that such exception properly identifies an error in such Statement,
and a complete copy of the review report. Such Statement shall be considered
final and binding on Tenant, except as to matters to which exception is taken
after review of Landlord's records in the foregoing manner
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and within the foregoing times. The foregoing times for sending Tenant's notices
hereunder are critical to Landlord's budgeting process, and are therefore of the
essence of this Paragraph. If Tenant takes timely exception as provided herein,
Landlord may seek certification from an independent certified public accountant
or financial consultant (who shall be subject to Tenant's reasonable approval)
as to the proper amount of Taxes and Expenses or the items as to which Tenant
has taken exception. In such case: (i) such certification shall be considered
final and binding on both parties (except as to additional amounts not then
known or omitted by error), and (ii) Tenant shall pay Landlord for the cost of
such certification, unless it shows that Tenant's Share of Taxes and Expenses
were overstated by a net amount of three percent (3%) or more, in which event
Landlord shall pay the reasonable cost of such certification provided that such
reasonable cost does not exceed the amount of the overstatement. Pending review
of such records and resolution of any exceptions, Tenant shall pay Tenant's
Share of Taxes and Expenses in the amounts shown on such Statement, subject to
credit, refund or additional payment after any such exceptions are resolved.
H. Base Year Adjustments. If Taxes for the Base Tax Year are reduced as
the result of protest or otherwise, Landlord may use the final reduced amount of
Taxes for the Base Tax Year to compute Tenant's obligations for increases in
Taxes during the Term. In such case, Tenant shall pay Landlord, within fifteen
(15) days after notice, any additional amount of Taxes required by such
computation for any period that has theretofore occurred during the Term
following the Base Tax Year. Landlord may exclude from Base Year Expenses any
non-recurring items, including capital expenditures otherwise permitted under
Article 30 (and shall only include the amortization of such expenditures in
subsequent year Expenses to the extent permitted under Article 30). If Landlord
eliminates from any subsequent year Expenses a recurring category of Expenses
previously included in Base Year Expenses, Landlord may subtract such category
from Base Year Expenses commencing with such subsequent year.
I. General Payment Matters. Base Rent, Taxes, Expenses and any other
amounts which Tenant is or becomes obligated to pay Landlord under this Lease or
other agreement entered in connection herewith are sometimes herein referred to
collectively as "Rent," and all remedies applicable to the non-payment of rent
shall be applicable thereto. Tenant shall pay Rent in good funds and legal
tender of the United States of America, together with any applicable sales tax
or other taxes on Rent as further described in Article 14. Tenant shall pay Rent
without any deduction, recoupment, set-off or counterclaim, and without relief
from any valuation or appraisement laws, except as may be expressly provided in
this Lease. No delay by Landlord in providing the Statement shall be deemed a
default by Landlord or, unless Landlord fails to provide the Statement within
one (1) calendar year following the close of the calendar year to which the
Statement relates, a waiver of Landlord's right to require payment of Tenant's
obligations for actual or estimated Taxes or Expenses. In no event shall a
decrease in Taxes or Expenses serve to decrease Base Rent. Landlord may apply
payments received from Tenant to any obligations of Tenant then accrued, without
regard to such obligations as may be designated by Tenant.
ARTICLE 4: CONDITION OF PREMISES
A. General Condition of Premises. Tenant has inspected, or had an
opportunity to inspect, the Premises (and portions of the Property, Systems and
Equipment providing access to or serving the Premises), and agrees to accept the
same "as is" without any agreements, representations, understandings or
obligations on the part of Landlord to perform any alterations, repairs or
improvements, except as may be expressly provided under this Lease (which term
includes any Exhibit hereto). To the extent that Landlord has expressly agreed
to perform any improvements to the Premises under this Lease, the following
provisions shall apply.
Landlord warrants and represents that, as of the date that Landlord
delivers possession of the Premises to Tenant: (1) the Systems and Equipment
serving the Property and the systems and equipment serving the Premises (to the
extent that the same are part of the Work under Exhibit C) shall be in good
working order, and (2) the common areas of the Building shall comply with all
Laws, including, but not limited to, the Americans with Disabilities Act.
Landlord's sole liability for breach of any of the foregoing warranties shall be
the obligation to make such repairs or alterations to the Property and the
Premises as are necessary to cure the violation of the warranty.
Landlord warrants and represents that, to Landlord's actual knowledge
as of the date of this Lease: (1) the
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systems and equipment existing in the Premises are in good working order, and
(2) there are no current material violations of Laws, including but not limited
to building codes, Laws governing Hazardous Materials, or the Americans With
Disabilities Act and related state statutes, affecting Tenant's use of the
Premises. Landlord's sole liability for breach of any of the foregoing
warranties shall be the obligation to make such repairs or alterations to the
Property and the Premises as are necessary to cure the violation of the
warranty. "Landlord's actual knowledge" herein means the actual knowledge,
without investigation, of the Regional Manager for the management company for
the Property.
B. Improvements. With respect to the improvements to the Premises that
Landlord is required to perform under Exhibit C to this Lease: (i) Landlord
shall use diligent, good faith efforts to substantially complete any such
improvements to an extent that Tenant can reasonably occupy the Premises for the
operation and conduct of business by the Commencement Date set forth in Article
1, subject to Article 2 and the other provisions of this Lease, (ii) Tenant
shall use diligent, good faith efforts to cooperate, and to cause its space
planners, architects, contractors, agents and employees to cooperate, diligently
and in good faith with Landlord and any space planners, architects, contractors
or other parties designated by Landlord, such that any such improvements to the
Premises can be planned, permits can be obtained, and the work can be
substantially completed by the Commencement Date set forth in Article 1, and
(ii) the Commencement Date, Rent and Tenant's other obligations shall be subject
to postponement as further described in Article 2. In the event of any dispute
as to whether any such improvements have been substantially completed, Landlord
shall refer the matter to a third party mutually and reasonably agreeable to
both Landlord and Tenant whose decision shall be final and binding on the
parties.
ARTICLE 5: QUIET ENJOYMENT
Landlord agrees that, if Tenant timely pays the Rent and performs the
terms and provisions hereunder, Tenant shall hold and enjoy the Premises during
the Term free of lawful claims by any party acting by or through Landlord,
subject to all other terms and provisions of this Lease.
ARTICLE 6: UTILITIES AND SERVICES
A. Standard Landlord Utilities and Services. Landlord shall provide the
following utilities and services (the cost of which shall be included in
Expenses):
(i) Heat and air-conditioning to provide a temperature required, in
Landlord's reasonable opinion and in accordance with applicable Law, for
occupancy of the Premises as offices during Building Hours (as defined in
Article 30).
(ii) Water from city mains for drinking, lavatory and toilet purposes
only, at those points of supply provided for nonexclusive general use of tenants
at the Property, or points of supply in the Premises installed by or with
Landlord's written consent for such purposes.
(iii) Cleaning and trash removal in and about the Premises
substantially in accordance with the specifications attached hereto as Exhibit
D.
(iv) Passenger elevator service at all times (if the Property has such
equipment serving the Premises, and subject to changes in the number of
elevators in service after Building Hours or at other times), and freight
elevator service (if the Property has such equipment serving the Premises, and
subject to scheduling by Landlord), in common with Landlord and other parties.
(v) Electricity for building-standard overhead office lighting
fixtures, and equipment and accessories customary for offices, where: (a) Tenant
uses an amount of electricity that is generally consistent with average office
use at the Property, as reasonably determined by Landlord, (b) the Systems and
Equipment are suitable, and the safe and lawful capacity thereof is not
exceeded, and (c) sufficient capacity remains at all times for other existing
and
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future tenants, as reasonably determined by Landlord. Landlord shall include in
Expenses the cost of replacement of lamps, starters and ballasts for lighting
fixtures within the Premises.
(vi) Sprinklering of the Building in accordance with applicable Laws.
(vii) Landscaping and snow removal services comparable to those
provided as standard services by landlords for office space in comparable
buildings in the vicinity.
B. Additional Utilities and Services. Landlord shall seek to provide
such extra utilities or services as Tenant may from time to time request, if the
same are reasonable and feasible for Landlord to provide and do not involve
modifications or additions to the Property or existing Systems and Equipment,
and if Landlord shall receive Tenant's request within a reasonable period prior
to the time such extra utilities or services are required. Landlord may comply
with written or oral requests by any officer or employee of Tenant, unless
Tenant shall notify Landlord of, or Landlord shall request, the names of
authorized individuals (up to 3 for each floor on which the Premises are
located) and procedures for written requests. Tenant shall pay for the actual
cost to Landlord of any extra utilities or services, including Landlord's
actual, reasonable out-of-pocket costs for architects, engineers, consultants
and other parties relating to such extra utilities or services, and a fee equal
to five percent (5%) of such costs. All payments for such extra utilities or
services shall be due at the same time as the installment of Base Rent with
which the same are billed, or if billed separately, shall be due within fifteen
(15) days after such billing. Landlord shall not be responsible for inadequate
air-conditioning or ventilation whenever the use or occupancy of the Premises
exceeds the normal capacity or design loads of, affects the temperature or
humidity otherwise maintained by, or otherwise adversely affects the operation
of, the Systems and Equipment for the Property, whether due to items of
equipment or machinery generating heat, above-normal concentrations of personnel
or equipment, or alterations to the Premises made by or through Tenant without
balancing the air or installing supplemental HVAC equipment. In any such case,
Landlord may elect to balance the air and/or install, operate, maintain and
replace such supplemental HVAC equipment during the Term, at Tenant's expense,
as an extra utility or service (or require that Tenant arrange for the same as
Work under Article 9). Notwithstanding the foregoing to the contrary, in lieu of
charging separately for additional utilities and services, Landlord may
reasonably elect from time to time to expand the amounts of services and
utilities available without separate charge, in which case the costs thereof
shall be included in Expenses, subject to the following sentence. In the event
that, in any calendar year, any increase in Expenses resulting from the
expansion of the amounts of services and utilities included in Expenses pursuant
to the preceding sentence is estimated to exceed $0.50 per rentable square foot
in the aggregate in any calendar year, then Landlord shall be required to obtain
Tenant's approval (which shall not be unreasonably withheld, conditioned or
delayed) of any amounts exceeding $0.50 per rentable square foot, provided that
this sentence shall not apply to: (1) any increase in Expenses due to a
reasonable increase in normal Building hours, and (2) any increase in Expenses
due to changes in how a service or utility already included in Expenses is
furnished.
Notwithstanding anything to the contrary contained herein, it is
understood and agreed by the parties that, due to the size and manner of design
of the Building, HVAC services shall be available at all times without
additional charge therefor (other than as part of Expenses), except that
Landlord reserves the right pursuant to Article 6A(v) above to determine in a
reasonable manner and charge Tenant for the cost of electricity used by Tenant
in excess of average office use. If Tenant disputes the excess electricity
charges as determined by Landlord, Tenant shall have the right, at Tenant's
expense, to engage a consultant to provide another determination of such charges
and Landlord agrees to reasonably and in good faith consider the merit and
accuracy of such alternative determination in making its final determination of
the excess electricity charges.
C. Monitoring. Landlord may install and operate meters, submeters or
any other reasonable system for monitoring or estimating any services or
utilities used by Tenant in excess of those required to be provided by Landlord
under this Article (including a system for Landlord's engineer to reasonably
estimate any such excess usage). If such system indicates such excess services
or utilities, Tenant shall pay Landlord's charges and fees as described in
Paragraph B above for installing and operating such system and any supplementary
air-conditioning, ventilation, heat, electrical or other systems or equipment
(or adjustments or modifications to the existing Systems and Equipment) which
Landlord may make, and Landlord's charges for such amount of excess services or
utilities
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used by Tenant.
D. Interruptions and Changes. Landlord shall have no liability for
interruptions, variations, shortages, failures, changes in quality, quantity,
character or availability of any utilities or services caused by repairs,
maintenance, replacements, alterations (including any freon retrofit work),
labor controversies, accidents, inability to obtain services, utilities or
supplies, governmental or utility company acts or omissions, requirements,
guidelines or requests, or other causes beyond Landlord's reasonable control (or
under any circumstances with respect to utilities or services not required to be
provided by Landlord hereunder). Under no circumstances whatsoever shall any of
the foregoing be deemed an eviction or disturbance of Tenant's use and
possession of the Premises or any part thereof, serve to abate Rent, or relieve
Tenant from performance of Tenant's obligations under this Lease; provided,
however, after Landlord's receipt of notice, Landlord shall act reasonably and
in good faith to cure the interruption or curtailment of services or utilities
as soon as practicable thereafter.
E. Abatement of Rent. Notwithstanding Paragraph D above to the
contrary, if: (a) any services or utilities required to be provided by Landlord
hereunder are interrupted or discontinued as a result of Landlord's negligence
(and not caused by Tenant or its employees, agents or contractors), and Tenant
is unable to and does not use, the Premises as a result of such interruption or
discontinuance, and (b) Tenant shall have given written notice respecting such
interruption or discontinuance to Landlord, and Landlord shall have failed to
cure such interruption or discontinuance within five (5) consecutive business
days after receiving such notice, Base Rent hereunder shall thereafter be abated
until such time as such services or utilities are restored or Tenant begins
using the Premises again, whichever shall first occur. Notwithstanding anything
to the contrary contained herein, if Tenant, or its contractors, or their
respective officers, employees, contractors, invitees or agents, delay Landlord
in restoring the utilities or services, Landlord shall have additional time to
complete the restoration equal to such delay and Tenant shall pay Landlord all
Rent for the period of such delay.
ARTICLE 7: USE, COMPLIANCE WITH LAWS, AND RULES
A. Use of Premises. Tenant shall use the Premises only for the
permitted use identified in Article 1, and no other purpose whatsoever, subject
to the other provisions of this Article and this Lease. Unless expressly
permitted in Article 1, Tenant shall not use or permit the Premises to be used
as a: (i) social-welfare office, (ii) medical, dental, psychology, psychiatry,
or science office or laboratory, (iii) multi-party "executive" or "legal" suite
type offices, (iv) data processing, telecommunications or telemarketing center,
(v) school, educational or training facility, (vi) employment, placement,
recruiting or clerical support agency, (vii) computerized vehicle sales, loan or
"finder" service, (viii) governmental, quasi-governmental, trade association or
union office or activities, (ix) travel agency or reservation center, (x) radio
or television studio or broadcasting or recording facility, or (xi) retail real
estate brokerage, retail stock brokerage, retail bank or other retail financial
institution, loan office, depository, check-cashing or wire-transferring
service.
B. Compliance With Laws. Subject to Section 4A and except to the extent
that such compliance is allocated to Landlord elsewhere under this Lease, the
Tenant shall comply with all Laws relating to the Premises and Tenant's use of
the Premises and Property, and shall promptly reimburse (within thirty (30) days
after Tenant's receipt of Landlord's invoice) Landlord for any expenses Landlord
incurs for work or other matters relating to areas outside of the Premises in
order to comply with Laws as a result of Tenant's use of the Premises or
Property; provided, Tenant shall not be required by this provision to perform
structural or capital improvements to the Premises unless required by a Law
pertaining to: (i) Tenant's particular use of the Premises (as opposed to a Law
that applies to office tenants in general), (ii) Work performed by or for Tenant
or any Transferee (i.e. excluding any improvements or work that Landlord is
required to perform under this Lease), or (iii) other acts or omissions of
Tenant or any Transferee.
Landlord shall comply with all Laws affecting the structure or common
areas of the Property (the cost of which shall be included in Expenses, but only
to the extent permitted in the definition thereof in Article 30), except to the
extent that such compliance is Tenant's responsibility under this Lease or is
the responsibility of another occupant of the Property. To the best of
Landlord's actual knowledge as of the date of this Lease and as of the
Commencement Date, there are no current violations of Laws affecting the
Premises or Tenant's use of the Property.
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C. Rules. Tenant shall comply with the Rules set forth in Exhibit B
attached hereto (the "Rules"). Landlord shall have the right, by notice to
Tenant, to reasonably amend such Rules and supplement the same with other
reasonable Rules relating to the Property, or the promotion of safety, care,
efficiency, cleanliness or good order therein provided that such amended Rules
are not contrary to this Lease. Although Landlord shall not discriminate against
Tenant in the enforcement of the Rules, nothing herein shall be construed to
give Tenant or any other Person any claim, demand or cause of action against
Landlord arising out of the violation of Laws or the Rules by any other tenant
or visitor of the Property, or out of the enforcement, modification or waiver of
the Rules by Landlord in any particular instance.
D. Other Requirements. So long as Tenant receives written notification
of the applicable requirements, Tenant shall not use or permit the Premises or
Property to be used in a way that will: (i) violate the requirements of
Landlord's insurers, the American Insurance Association, or any board of
underwriters, (ii) cause a cancellation of Landlord's policies, impair the
insurability of the Property, or increase Landlord's premiums (any such increase
shall be paid by Tenant without such payment being deemed permission to continue
such activity or a waiver of any other remedies of Landlord), or (iii) violate
the requirements of any certificates of occupancy issued for the Premises or the
Property, or any other requirements, covenants, conditions or restrictions
affecting the Property at any time (provided none of the foregoing shall
prohibit or materially impair use of the Premises as set forth in Article 1 in
compliance with the other provisions of this Lease and the enjoyment of the
other rights accorded to Tenant under this Lease).
ARTICLE 8: MAINTENANCE AND REPAIRS
Except for customary cleaning and trash removal provided by Landlord
under Article 6, casualty damage to be repaired by Landlord under Article 11 and
any other obligations of Landlord hereunder, Tenant shall keep and maintain (or
cause to be kept and maintained) the Premises in good and sanitary condition,
working order and repair, in compliance with all applicable Laws as described in
Article 7, and as required under other provisions of this Lease, including the
Rules (including any carpet and other flooring material, paint and
wall-coverings, doors, windows, ceilings, interior surfaces of walls, lighting,
plumbing and other fixtures, alterations, improvements, and systems and
equipment in or exclusively serving the Premises whether installed by Landlord
or Tenant). In the event that any repairs, maintenance or replacements are
required, Tenant shall promptly notify Landlord and arrange for the same either:
(i) through Landlord for such reasonable charges as Landlord may establish from
time to time, payable within fifteen (15) days after billing, or (ii) at
Tenant's option, by engaging such contractors or staff as Landlord shall first
designate or approve in writing to perform such work, all in a first class,
workmanlike manner approved by Landlord in advance in writing and otherwise in
compliance with Article 9 respecting "Work". Tenant shall promptly notify
Landlord concerning the necessity for any repairs or other work hereunder and
upon completion thereof. Tenant shall pay Landlord for any repairs, maintenance
and replacements to areas of the Property outside the Premises caused, in whole
or in part, as a result of moving any furniture, fixtures, or other property to
or from the Premises, or otherwise by Tenant or its employees, agents,
contractors, or visitors (subject to Article 10C). Except as provided in the
preceding sentence, or for damage covered under Article 11, Landlord shall keep
the roof, structure, Systems and Equipment, and common areas of the Property in
good and sanitary condition, working order and repair (the cost of which shall
be included in Expenses to the extent permitted in the definition thereof in
Article 30).
ARTICLE 9: ALTERATIONS AND LIENS
A. Alterations and Approval. Tenant shall not attach any fixtures,
equipment or other items to the Premises, or paint or make any other additions,
changes, alterations or improvements to the Premises or the Systems and
Equipment serving the Premises (all such work is referred to collectively herein
as the "Work"), without the prior written consent of Landlord. Landlord shall
not unreasonably withhold, condition or delay consent, except that Landlord
reserves the right to withhold consent in Landlord's sole discretion for Work
affecting the structure, safety, efficiency or security of the Property or
Premises, the Systems and Equipment, or the appearance of the Premises from any
common or public areas. Landlord may only require removal of Work installed by
or for Tenant as provided
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under Article 23.
Notwithstanding the foregoing to the contrary, Tenant may perform minor
Work in the Premises without Landlord's consent, and without paying Landlord's
fee described below (but subject to paying Landlord's out-of-pocket costs as
described below), provided: (i) such work shall be primarily cosmetic in nature
(i.e. shall primarily consist of paint, carpeting and/or wall-coverings), shall
not affect the Systems or Equipment, and shall not affect the structure of the
Property, (ii) Tenant shall give reasonable advance notice to, and shall
coordinate the scheduling of such work with, Landlord, (iii) such Work shall not
cost more than $50,000 in the aggregate in any twelve (12) month period, and
(iv) such Work shall be subject to all other provisions of this Lease,
including, but not limited to, the other provisions of this Article (other than
Paragraph B), and the Rules attached hereto as Exhibit B.
B. Approval Conditions. Landlord reserves the right to impose
reasonable requirements as a condition of such consent or otherwise in
connection with the Work, including requirements that Tenant: (i) use parties
contained on Landlord's approved list (if reputable and available on
commercially reasonable terms) or submit for Landlord's prior written approval
the names, addresses and background information concerning all architects,
engineers, contractors, subcontractors and suppliers Tenant proposes to use,
(ii) submit for Landlord's written approval detailed plans and specifications
prepared by licensed and competent architects and engineers, (iii) obtain and
post permits, (iv) provide additional insurance, bonds (or evidence reasonably
satisfactory to Landlord that the contractor(s) to be used by Tenant are
bondable) and/or other reasonable security and/or documentation protecting
against damages, liability and liens, (v) use union labor (if Landlord uses
union labor in the Durham area or if the use of non-union labor would cause
strikes, picketing, boycotts or other labor disturbances, disputes or unrest at
the Property or at Landlord's other buildings in the Durham area), (vi) permit
Landlord or its representatives to inspect the Work at reasonable times, and
(vii) comply with such other reasonable requirements as Landlord may impose
concerning the manner and times in which such Work shall be done. Landlord may
require that all Work be performed under Landlord's supervision. If Landlord
consents, inspects, supervises, recommends or designates any architects,
engineers, contractors, subcontractors or suppliers, the same shall not be
deemed a warranty as to the adequacy of the design, workmanship or quality of
materials, or compliance of the Work with the plans and specifications or any
Laws.
C. Performance of Work. All Work shall be performed: (i) in a
thoroughly first class, professional and workmanlike manner, (ii) only with
materials that are new, high quality, and free of material defects, (iii) only
by parties, and strictly in accordance with plans, specifications, and other
matters, approved or designated by Landlord in advance in writing, (iv) so as
not to adversely affect the Systems and Equipment or the structural components
of the Property, (v) diligently to completion and so as to avoid any
disturbance, disruption or inconvenience to other tenants and the operation of
the Property, and (vi) in compliance with all Laws, the Rules and other
provisions of this Lease, and such other reasonable requirements as Landlord may
impose concerning the manner and times in which such Work shall be done. Any
floor, wall or ceiling coring work or penetrations or use of noisy or heavy
equipment, any of which occurs at or near a demising wall and which may
interfere with the conduct of business by other tenants at the Property shall,
at Landlord's option, be performed at times other than Building Hours (at
Tenant's sole cost). If Tenant fails to perform the Work as required herein or
the materials supplied fail to comply herewith or with the specifications
approved by Landlord, and Tenant fails to cure such failure within 48 hours
after written or oral notice by Landlord (except notice shall not be required in
emergencies), Landlord shall have the right to stop the Work until such failure
is cured (which shall not limit Landlord's other remedies and shall not serve to
abate the Rent or Tenant's other obligations under this Lease). Upon completion
of any Work hereunder, Tenant shall provide Landlord with "as built" plans,
copies of all construction contracts, and proof of payment for all labor and
materials.
D. Liens. Tenant shall pay all costs for the Work when due. Tenant
shall keep the Property, Premises and this Lease free from any mechanic's,
materialman's, architect's, engineer's or similar liens or encumbrances, and any
claims therefor, or stop or violation notices, in connection with any Work.
Tenant shall give Landlord notice at least ten (10) days prior to the
commencement of any Work (or such additional time as may be necessary under
applicable Laws), to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility. Tenant shall remove any such claim,
lien or encumbrance, or stop or violation notices of record, by bond or
otherwise within thirty (30) days after notice by Landlord. If Tenant fails to
do so, Landlord may pay the amount (or any portion
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thereof) or take such other action as Landlord deems necessary to remove such
claim, lien or encumbrance, or stop or violation notices, without being
responsible for investigating the validity thereof. The amount so paid and costs
incurred by Landlord shall be deemed additional Rent under this Lease payable
upon demand, without limitation as to other remedies available to Landlord.
Nothing contained in this Lease shall authorize Tenant to do any act which shall
subject Landlord's title to, or any Lender's interest in, the Property or
Premises to any such claims, liens or encumbrances, or stop or violation
notices, whether claimed pursuant to statute or other Law or express or implied
contract.
E. Landlord's Fees and Costs. Tenant shall pay Landlord a fee for
reviewing, scheduling, monitoring, supervising, and providing access for or in
connection with the Work, in an amount equal to five percent (5%) of the total
cost of the Work (including costs of plans and permits therefor), and Landlord's
out-of-pocket costs, including any costs for security, utilities, trash removal,
temporary barricades, janitorial, engineering, architectural or consulting
services, and other matters in connection with the Work, payable within fifteen
(15) days after billing.
ARTICLE 10: INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS
A. Required Insurance. Tenant shall maintain during the Term: (i)
commercial general liability ("CGL") insurance, with limits of not less than
$1,000,000 for personal injury, bodily injury or death, and property damage or
destruction (including loss of use thereof), combined single limit, for any one
occurrence, and $2,000,000 in the aggregate per policy year, with endorsements:
(a) for contractual liability covering Tenant's indemnity obligations under this
Lease, and (b) adding Landlord, the management company for the Property, and
other parties reasonably designated by Landlord, as additional insureds, and
(ii) primary, noncontributory, extended coverage or "all-risk" property damage
insurance (including installation floater insurance during any alterations or
improvements that Tenant makes to the Premises after the improvements made
pursuant to Exhibit C) covering any alterations or improvements beyond any work
or allowance provided by Landlord under this Lease (provided that Tenant shall
be required to insure improvements made pursuant to Exhibit C only to the extent
that the cost of such improvements exceeds $2.00 per rentable square foot over
the Allowance given by Landlord pursuant to Exhibit C, as further set forth
below), and Tenant's personal property, business records, fixtures and
equipment, for damage or other loss caused by fire or other casualty or cause
including, but not limited to, vandalism and malicious mischief, theft, water
damage of any type, including sprinkler leakage, bursting or stoppage of pipes,
explosion, business interruption (for at least nine (9) months), and other
insurable risks in amounts not less than the full insurable replacement value of
such property and full insurable value of such other interests of Tenant
(subject to reasonable deductible amounts).
B. Certificates and Other Matters. Tenant shall provide Landlord with
certificates evidencing the coverage required hereunder prior to the
Commencement Date, or Tenant's entry to the Premises for delivery of materials
or construction of improvements or any other purpose (whichever first occurs).
Such certificates shall state that such insurance coverage may not be reduced,
canceled or allowed to expire without at least thirty (30) days' prior written
notice to Landlord, and shall include, as attachments, originals of the
additional insured endorsements to Tenant's CGL policy required above. Tenant
shall provide renewal certificates to Landlord at least thirty (30) days prior
to expiration of such policies. Except as provided to the contrary herein, any
insurance carried by Landlord or Tenant shall be for the sole benefit of the
party carrying such insurance. Tenant's insurance policies shall be primary to
all policies of Landlord and any other additional insureds (whose policies shall
be deemed excess and non-contributory). All insurance required hereunder shall
be provided by responsible insurers licensed in the State in which the Property
is located, and shall have a general policy holder's rating of at least A- and a
financial rating of at least X in the then current edition of Best's Insurance
Reports. Landlord disclaims any representation as to whether the foregoing
coverages will be adequate to protect Tenant.
C. Mutual Waiver of Claims and Subrogation. Notwithstanding anything to
the contrary contained in this Lease (including indemnity provisions), the
parties hereby mutually hereby waive all claims against each other for all
losses covered or required to be covered hereunder by their respective insurance
policies, and waive all rights of subrogation of their respective insurers; for
purposes hereof, any deductible amount shall be treated as though it were
recoverable under such policies. SUCH MUTUAL WAIVER OF CLAIMS SHALL APPLY
REGARDLESS OF THE
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NEGLIGENCE OR GROSS NEGLIGENCE OF THE OTHER PARTY OR ITS AFFILIATES, AGENTS OR
EMPLOYEES. The parties agree that their respective insurance policies are now,
or shall be, endorsed such that said waiver of subrogation shall not affect the
right of the insured to recover thereunder.
D. Landlord's Insurance. Landlord agrees to maintain, as part of
Expenses, during the Term, commercial general liability insurance, and property
damage insurance on the Property covering such risks and in such amounts as
Landlord shall deem commercially reasonable, and such other insurance as
Landlord shall deem commercially reasonable (subject to such deductibles,
self-insurance retention amounts, blanket and umbrella policy arrangements or
other features as Landlord deems commercially reasonable); provided, (i) such
commercial general liability insurance shall be at least One Million Dollars
($1,000,000.00) per occurrence and Two Million Dollars ($2,000,000.00) general
aggregate, and (ii) such property damage insurance shall cover the Building, and
leasehold improvements to the extent provided or paid for by Landlord (provided
that Landlord shall be required to insure improvements made pursuant to Exhibit
C to the extent that the cost of such improvements does not exceed $2.00 per
rentable square foot over the Allowance given by Landlord pursuant to Exhibit
C), and shall be in the amount of the full replacement cost, excluding
basements, footings and foundations (subject, in each case, to such deductibles,
self-insurance retention amounts, blanket and umbrella policy arrangements or
other features as Landlord deems commercially reasonable).
ARTICLE 11: CASUALTY DAMAGE
A. Restoration. Tenant shall promptly notify Landlord of any damage to
the Premises by fire or other casualty. If the Premises or any common areas of
the Property providing access thereto shall be damaged by fire or other
casualty, Landlord shall use available insurance proceeds and diligently proceed
in good faith to restore the same. Such restoration shall be to substantially
the same condition as prior to the casualty, except for modifications required
by zoning and building codes and other Laws or by any Lender, any other
modifications to the common areas deemed desirable by Landlord (provided access
to the Premises is not materially impaired), and except that Landlord shall not
be required to repair or replace any of Tenant's furniture, furnishings,
fixtures, systems or equipment, or any alterations or improvements in excess of
the improvements made pursuant to Exhibit C which Landlord is required to insure
pursuant to Section 10D above. Tenant shall reasonably cooperate in approving
any plans for repairs to the Premises hereunder, and in vacating the Premises to
the extent reasonably required to avoid any interference or delay in Landlord's
repair work. Promptly following completion of Landlord's work, Tenant shall
repair and replace Tenant's furniture, furnishings, fixtures, systems or
equipment, and any alterations or improvements made by Tenant in excess of those
provided by Landlord, subject to and in compliance with the other provisions of
this Lease.
B. Abatement of Rent. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's
business resulting in any way from such damage or the repair thereof. However,
Landlord shall allow Tenant a proportionate abatement of Rent from the date of
the casualty through the date that Landlord substantially completes Landlord's
repair obligations hereunder (or the date that Landlord would have substantially
completed such repairs, but for delays by Tenant or any other occupant of the
Premises, or any of their agents, employees, invitees, Transferees and
contractors), provided such abatement: (i) shall apply only to the extent the
Premises are untenantable for the purposes permitted under this Lease and not
used by Tenant as a result thereof, based proportionately on the square footage
of the Premises so affected and not used, and (ii) shall not apply if Tenant or
any other occupant of the Premises, or any of their agents, employees, invitees,
Transferees or contractors were negligent in causing the damage.
C. Termination of Lease by Landlord. Notwithstanding the foregoing to
the contrary, in lieu of performing the restoration work, Landlord may elect to
terminate this Lease by notifying Tenant in writing of such termination within
sixty (60) days after the date of damage (such termination notice to specify the
basis for termination and to include a termination date providing at least
thirty (30) days for Tenant to vacate the Premises), if the Property shall be
materially damaged by the negligence or intentional misconduct of Tenant or any
other occupant of the Premises, or any of their agents, employees, invitees,
Transferees or contractors, or if the Property shall be damaged by fire or other
casualty or cause such that: (i) repairs to the Premises and access thereto
cannot reasonably be
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completed within 120 days after the casualty without the payment of overtime or
other premiums, (ii) more than twenty-five percent (25%) of the Premises is
affected by the damage and fewer than twenty-four (24) months remain in the
Term, or any material damage occurs to the Premises during the last twelve (12)
months of the Term, (iii) any Lender shall require that the insurance proceeds
or any material portion thereof be used to retire the Mortgage debt (or shall
terminate the ground lease, as the case may be), provided, however, that
Landlord shall use commercially reasonable efforts to cause the Lender to permit
such insurance proceeds to be used for restoration of the Property, or the
damage is not fully covered, except for reasonable deductible amounts, by
Landlord's insurance policies, or (iv) the cost of the repairs, alterations,
restoration or improvement work would exceed thirty-five percent (35%) of the
replacement value of the Building (whether or not the Premises are affected by
the damage). Tenant agrees that the abatement of Rent provided herein shall be
Tenant's sole recourse in the event of such damage, and waives any other rights
Tenant may have under any applicable Law to perform repairs or terminate the
Lease by reason of damage to the Premises or Property.
D. Termination of Lease By Tenant. Notwithstanding Paragraph C above to
the contrary, Tenant may terminate this Lease if Tenant is unable to use all or
a substantial portion of the Premises as a result of fire or other casualty not
caused by the negligence or intentional misconduct of Tenant or its employees or
agents, and: (i) Landlord fails to commence the restoration work within sixty
(60) days after the casualty, (ii) such work is estimated (which estimate
Landlord shall provide within sixty (60) days following the casualty) to take
(without the use of overtime labor or other premiums) more than 120 days to
complete after the casualty, (iii) Landlord fails to substantially complete the
repairs to the Premises and access thereto within 180 days after the casualty,
(iv) more than 50% of the Premises is affected by the damage, and fewer than 24
months remain in the Term, or (v) more than 25% of the Premises is affected by
the damage, and fewer than 12 months remain in the Term. In order to exercise
any of the foregoing termination rights, Tenant must send Landlord at least
sixty (60) days (but not more than 120 days) advance notice specifying the basis
for termination, and such notice must be given no later than fifteen (15) days
following the occurrence of the condition serving as the basis for the
termination right invoked by Tenant. Such termination rights shall not be
available to Tenant if: (a) Landlord substantially completes the repairs to the
Premises and access thereto within thirty (30) days after Tenant's notice.
Notwithstanding anything to the contrary contained herein, if Tenant, or its
officers, employees, contractors, invitees or agents delay Landlord in
performing the repairs, Landlord shall have additional time to complete the work
equal to such delay and Tenant shall pay Landlord all Rent for the period of
such delay.
ARTICLE 12: CONDEMNATION
If at least fifty percent (50%) of the rentable area of the Premises
shall be taken by power of eminent domain or condemned by a competent authority
or by conveyance in lieu thereof for public or quasi-public use
("Condemnation"), including any temporary taking for a period of one year or
longer, this Lease shall terminate on the date possession for such use is so
taken. If: (i) less than fifty percent (50%) of the Premises is taken, but the
taking includes or affects a material portion of the Building or Property, or
the economical operation thereof, or (ii) the taking is temporary and will be in
effect for less than one year but more than thirty (30) days, then in either
such event, Landlord may elect to terminate this Lease upon at least thirty (30)
days' prior notice to Tenant. The parties further agree that: (a) if this Lease
is terminated, all Rent shall be apportioned as of the date of such termination
or the date of such taking, whichever shall first occur, (b) if the taking is
temporary, Rent shall not be abated for the period of the taking, but Tenant may
seek a condemnation award therefor (and the Term shall not be extended thereby),
and (c) if this Lease is not terminated but any part of the Premises is
permanently taken, the Rent shall be proportionately abated based on the square
footage of the Premises so taken. Landlord shall be entitled to receive the
entire award or payment in connection with such Condemnation and Tenant hereby
assigns to Landlord any interest therein for the value of Tenant's unexpired
leasehold estate or any other claim and waives any right to participate therein,
except that Tenant shall have the right to file any separate claim available to
Tenant for a temporary taking of the leasehold as described above, and for
moving expenses and any taking of Tenant's personal property, provided such
award is separately payable to Tenant and does not diminish the award available
to Landlord or any Lender.
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ARTICLE 13: ASSIGNMENT AND SUBLETTING
A. Transfers. Tenant shall not, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed as further described below: (i) assign, mortgage, pledge, hypothecate,
encumber, or permit any lien to attach to, or otherwise transfer, this Lease or
any interest hereunder, by operation of Law or otherwise, (ii) sublet the
Premises or any part thereof, (iii) permit the use of the Premises by any
Persons other than Tenant and its employees and Tenant Affiliates (all of the
foregoing are hereinafter sometimes referred to collectively as "Transfers" and
any Person to whom any Transfer is made or sought to be made is hereinafter
sometimes referred to as a "Transferee"), or (iv) advertise the Premises or
Lease for Transfers. If Tenant shall desire Landlord's consent to any Transfer,
Tenant shall notify Landlord in writing, which notice shall include: (a) the
proposed effective date (which shall not be less than thirty (30) nor more than
180 days after Tenant's notice), (b) the portion of the Premises to be
Transferred (herein called the "Subject Space"), (c) the terms of the proposed
Transfer and the consideration therefor, the name, address and background
information concerning the proposed Transferee, and a true and complete copy of
all proposed Transfer documentation, (d) financial statements (balance sheets
and income/expense statements for the current and prior year) of the proposed
Transferee, in form and detail reasonably satisfactory to Landlord, certified by
an officer, partner or owner of the Transferee, (e) at least one (1) favorable
financial and business character/reputation references respecting the Transferee
from independent third parties (including a current or recent commercial
landlord), and any other reasonable information to enable Landlord to determine
the financial responsibility, character, and reputation of the proposed
Transferee, nature of such Transferee's business and proposed use of the Subject
Space, and such other information as Landlord may reasonably require. Any
Transfer made without complying with this Article shall, at Landlord's option,
be null, void and of no effect, or shall constitute a Default under this Lease.
Whether or not Landlord shall grant consent, Tenant shall pay $500 towards
Landlord's review and processing expenses, as well as any reasonable legal fees
incurred by Landlord for outside counsel within fifteen (15) days after written
request by Landlord.
B. Approval. Landlord will not unreasonably withhold its consent to any
proposed Transfer of the Subject Space to the Transferee on the terms specified
in Tenant's notice. The parties hereby agree that it shall be reasonable under
this Lease and under any applicable Law for Landlord to withhold consent to any
proposed Transfer where one or more of the following applies (without limitation
as to other reasonable grounds for withholding consent): (i) the Transferee is
of a character or reputation or engaged in a business which is not consistent
with the quality or nature of the Property or other tenants of the Property,
(ii) the Transferee intends to use the Subject Space for purposes which are not
permitted under this Lease, (iii) the Subject Space is not regular in shape with
appropriate means of ingress and egress suitable for normal renting purposes,
would result in more than a reasonable number of occupants, or would require
increased services by Landlord, (iv) the Transferee is a government (or agency
or instrumentality thereof), (v) the proposed Transferee or any affiliate
thereof is an occupant of the Property or has negotiated to lease space in the
Property from Landlord during the prior six (6) months, (vi) the proposed
Transferee does not have, in Landlord's sole but reasonable good faith
determination, satisfactory references or a reasonable financial condition in
relation to the obligations to be assumed in connection with the Transfer, (vii)
the Transfer involves a partial or collateral assignment, or a mortgage, pledge,
hypothecation, or other encumbrance or lien on this Lease, (viii) the proposed
Transfer involves conversion, merger or consolidation of Tenant into a limited
liability company or limited liability partnership which would have the legal
effect of releasing Tenant from any obligations under this Lease, unless all or
substantially all of the business and assets of Tenant are transferred from
Tenant to the surviving limited liability company or limited liability
partnership, (ix) the proposed Transfer would cause Landlord to be in violation
of any Laws or any other lease or agreement to which Landlord is a party as of
the date of this Lease, or (x) Tenant has committed and failed to cure a
Default.
C. Transfer Premiums. If Landlord consents to a Transfer, and as a
condition thereto which the parties hereby agree is reasonable, Tenant shall
retain fifty percent (50%) of any Transfer Premium, and shall pay Landlord fifty
percent (50%) of any Transfer Premium, derived by Tenant from such Transfer.
"Transfer Premium" shall mean: (i) for a lease assignment, all consideration
paid or payable therefor, and (ii) for a sublease, all rent, additional rent or
other consideration paid by such Transferee in excess of the Rent payable by
Tenant under this Lease (on a monthly basis during the Term, and on a per
rentable square foot basis, if less than all of the Premises is transferred). In
exchange for Landlord's agreement to permit Tenant to retain fifty percent (50%)
of any Transfer Premium herein,
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Tenant shall be responsible for any costs incurred by Tenant in connection with
such Transfer, such as brokerage commissions, attorneys' fees and leasehold
improvements; Tenant shall have the right to recover the aforesaid costs prior
to making any payments of the Transfer Premium to Landlord. "Transfer Premium"
shall also include so-called "key money," or other bonus amount paid by
Transferee to Tenant, and any payment in excess of fair market value for
services rendered by Tenant to Transferee or in excess of Tenant's fair market
value for assets, fixtures, inventory, equipment or furniture transferred by
Tenant to Transferee; provided, however, that this sentence shall not apply to
sale by Tenant of all or substantially all of its assets. If part of the
consideration for such Transfer shall be payable other than in cash, Landlord's
share of such non-cash consideration shall be in such form as is reasonably
satisfactory to Landlord. Tenant shall pay the percentage of the Transfer
Premium due Landlord hereunder within fifteen (15) days after Tenant receives
any Transfer Premium from the Transferee.
D. Intentionally omitted.
E. Terms of Consent. If Landlord consents to a Transfer: (i) the terms
and conditions of this Lease, including Tenant's liability for the Subject
Space, shall in no way be deemed to have been waived or modified, (ii) such
consent shall not be deemed consent to any further Transfer by either Tenant or
a Transferee, (iii) intentionally omitted, (iv) Tenant shall deliver to
Landlord, promptly after execution, an original executed copy of all
documentation pertaining to the Transfer in form reasonably acceptable to
Landlord, and (v) Tenant shall furnish a complete statement, certified by an
independent certified public accountant, or Tenant's chief financial officer,
setting forth in detail the computation of any Transfer Premium that Tenant has
derived and shall derive from such Transfer. Landlord or its authorized
representatives shall have the right at all reasonable times to audit the books,
records and papers of Tenant and any Transferee relating to any Transfer (except
a Transfer in connection with a sale by Tenant of all or substantially all of
its assets), and shall have the right to make copies thereof. If the Transfer
Premium respecting any Transfer shall be found to have been understated, Tenant
shall pay the deficiency within fifteen (15) days after demand (and if
understated by more than five percent (5%), Tenant shall include with such
payment Landlord's costs of such audit). Any sublease hereunder shall be
subordinate and subject to the provisions of this Lease, and if this Lease shall
be terminated during the term of any sublease, whether based on Default or
mutual agreement, Landlord shall have the right to: (a) deem such sublease as
merged and canceled and repossess the Subject Space by any lawful means, or (b)
require that such subtenant attorn to and recognize Landlord as its landlord
under such sublease with respect to obligations arising thereafter, subject to
the terms of Landlord's standard form of attornment documentation. If Tenant
shall commit a Default under this Lease, Landlord is hereby irrevocably
authorized to direct any Transferee to make all payments under or in connection
with the Transfer directly to Landlord (which Landlord shall apply toward
Tenant's obligations under this Lease).
F. Certain Transfers. For purposes of this Lease, the term "Transfer"
shall also include, and all of the foregoing provisions shall apply to: (i) the
conversion, merger or consolidation of Tenant into a limited liability company
or limited liability partnership, (ii) if Tenant is a partnership or limited
liability company, the withdrawal or change, voluntary, involuntary or by
operation of law, of a majority of the partners or members, or a transfer of a
majority of partnership or membership interests, within a twelve month period,
or the dissolution of the partnership or company, and (iii) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), the dissolution, merger, consolidation
or other reorganization of Tenant, or within a twelve month period: (a) the sale
or other transfer of more than an aggregate of 50% of the voting shares of
Tenant (other than to immediate family members by reason or gift or death) or
(b) the sale, mortgage, hypothecation or pledge of more than an aggregate of 50%
of Tenant's net assets.
Notwithstanding the foregoing to the contrary: (1) a transaction described in
Section 13F above shall not be deemed to be a Transfer requiring Landlord's
consent so long as, after the transaction, Tenant or the surviving entity (as
the case may be) shall directly or indirectly own all or substantially all of
the business and assets of Tenant, and (2) the sale of Tenant's stock or a
change in control of Tenant in connection with a public offering of Tenant's
stock shall not be a Transfer requiring Landlord's consent.
G. Transfer to Tenant Affiliates. Notwithstanding anything to the
contrary in this Article, Tenant may, without Landlord's consent, assign this
Lease to any party (herein referred to as a "Tenant Affiliate") which directly
or
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indirectly: (i) wholly owns or controls Tenant, (ii) is wholly owned or
controlled by Tenant, (iii) is under common ownership or control with Tenant, or
(iv) into which Tenant or any of the foregoing parties is merged, consolidated
or reorganized, or to which all or substantially all of Tenant's assets or any
such other party's assets are sold, so long as the resulting entity will be an
on-going business with a net worth and financial condition at least as strong as
that of the initial named Tenant herein on the date of this Lease (and in the
event of such a sale of all or substantially all of Tenant's assets to any
party, Tenant shall include an assignment and assumption of this Lease as part
of the assets transferred thereunder); provided: (a) Landlord shall receive at
least fifteen (15) days advance notice describing the structure of the
transaction, the parties involved, and the financial information required
herein, certified by an officer of Tenant and/or the Transferee, and a copy of
the executed transfer document (in form reasonably acceptable to Landlord
consistent with the foregoing provisions) promptly after execution, (b) Tenant
shall remain liable for all of Tenant's obligations under this Lease, (c) the
Transferee shall expressly assume all of Tenant's obligations under this Lease,
and (d) this provision shall not be deemed consent to any further sublease,
assignment or other Transfer.
ARTICLE 14: PERSONAL PROPERTY, RENT AND OTHER TAXES
Tenant shall pay, prior to delinquency, all taxes, charges or other
governmental impositions assessed against or levied upon all of Tenant's
fixtures, furnishings, personal property, built-in and modular furniture, and
systems and equipment located in or exclusively serving the Premises (to the
extent that such items are not included in Taxes), notwithstanding that certain
such items may become Landlord's property under Article 23 upon termination of
the Lease. Whenever possible, Tenant shall cause all such items to be assessed
and billed separately from the other property of Landlord. In the event any such
items shall be assessed and billed with the other property of Landlord, Tenant
shall pay Landlord its share of such taxes, charges or other governmental
impositions within fifteen (15) days after Landlord delivers a statement and a
copy of the assessment or other documentation showing the amount of impositions
applicable to Tenant's property. Tenant shall pay any rent tax, sales tax,
service tax, transfer tax, value added tax, or any other applicable tax on the
Rent, utilities or services herein, the privilege of renting, using or occupying
the Premises or collecting Rent therefrom, or otherwise respecting this Lease or
any other document entered in connection herewith.
ARTICLE 15: LANDLORD'S REMEDIES
A. Default. The occurrence of any one or more of the following events
shall constitute a "Default" by Tenant and shall give rise to Landlord's
remedies set forth in Paragraph B below: (i) failure to make when due any
payment of Rent, unless such failure is cured within five (5) business days
after notice; (ii) failure to observe or perform any term or condition of this
Lease other than the payment of Rent (or the other matters expressly described
herein), unless such failure is cured within any period of time following notice
expressly provided with respect thereto in other Articles hereof, or otherwise
within thirty (30) days following notice (provided, if the nature of Tenant's
failure is such that more time is reasonably required in order to cure, Tenant
shall not be in Default if Tenant commences to cure promptly within such period,
diligently seeks and keeps Landlord reasonably advised of efforts to cure such
failure to completion, and completes such cure within sixty (60) days following
Landlord's notice); (iii) failure to cure immediately upon notice thereof any
condition which is hazardous, materially interferes with another tenant or the
operation or leasing of the Property, or may cause the imposition of a fine,
penalty or other remedy on Landlord or its agents or affiliates, (iv) violating
Article 13 respecting Transfers, or abandoning, vacating or failing to occupy
the Premises for more than thirty (30) days coupled with a failure to pay Rent
for such period beyond the applicable cure period, or (v) (a) making by Tenant
or any guarantor of this Lease ("Guarantor") of any general assignment for the
benefit of creditors, (b) filing by or for reorganization or arrangement under
any Law relating to bankruptcy or insolvency (unless, in the case of a petition
filed against Tenant or such Guarantor, the same is dismissed within ninety (90)
days), (c) appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located in the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within thirty
(30) days, (d) attachment, execution or other judicial seizure of substantially
all of Tenant's assets located in the Premises or of Tenant's interest in this
Lease, (e) Tenant's or any Guarantor's convening of a meeting of its creditors
or any class thereof for the purpose of effecting a moratorium upon or
composition of its debts, (f) Tenant's or any Guarantor's insolvency or failure,
or admission of an inability, to pay debts as they mature, or (g) a violation by
Tenant
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under any other lease or agreement with Landlord or any affiliate thereof which
is not cured within the time permitted for cure thereunder. If Tenant violates
the same term or condition of this Lease within the scope of subsections (i) or
(ii) above on more than two (2) occasions during any twelve (12) month period,
and Landlord has provided notice to Tenant thereof within thirty (30) days
following each such violation, then Landlord shall have the right to exercise
all remedies for any further violations of the same term or condition during the
next twelve (12) months without providing further notice or an opportunity to
cure such violation, except that with respect to defaults in the payment of
Rent, Tenant shall have the cure period set forth in Article 30A(i) above . The
notice and cure periods herein are intended to satisfy and run concurrently with
any notice and cure periods provided by Law, and shall not be in addition
thereto; provided, Landlord may elect to comply with such notice and cure
periods provided by Law in lieu of the notice and cure periods provided herein.
B. Remedies. If a Default occurs, Landlord shall have the rights and
remedies hereinafter set forth to the extent permitted by Law, which shall be
distinct, separate and cumulative with and in addition to any other right or
remedy allowed under any Law or other provision of this Lease:
(1) Landlord may terminate this Lease, reenter and repossess the
Premises by detainer suit, summary proceedings or other lawful means, and
recover from Tenant: (i) any unpaid Rent as of the termination date, (ii) the
amount by which: (a) any unpaid Rent which would have accrued after the
termination date during the balance of the Term exceeds (b) the reasonable
rental value of the Premises under a lease substantially similar to this Lease,
taking into account, among other things, the condition of the Premises, market
conditions, the period of time the Premises may reasonably remain vacant before
Landlord is able to re-lease the same to a suitable replacement tenant, and
(iii) any other amounts necessary to compensate Landlord for all damages
proximately caused by Tenant's failure to perform its obligations under this
Lease. For purposes of computing the amount of Rent herein that would have
accrued after the termination date, Tenant's obligations for Taxes and Expenses
shall be projected based upon the average rate of increase in such items from
the Commencement Date through the termination date (or if such period shall be
less than three years, then based on Landlord's reasonable estimates). The
amounts computed in accordance with the foregoing subclauses (a) and (b) shall
both be discounted in accordance with accepted financial practice at the rate of
five percent (5%) per annum to the then present value.
(2) Landlord may terminate Tenant's right of possession, reenter and
repossess the Premises by detainer suit, summary proceedings or other lawful
means, with or without terminating this Lease (except as required by Law), and
recover from Tenant: (i) any unpaid Rent as of the date possession is
terminated, (ii) any unpaid Rent which thereafter accrues during the Term from
the date possession is terminated through the time of judgment (or which may
have accrued from the time of any earlier judgment obtained by Landlord), less
any consideration received from replacement tenants as further described and
applied pursuant to Paragraph H, below, and (iii) any other amounts necessary to
compensate Landlord for all damages proximately caused by Tenant's failure to
perform its obligations under this Lease. Tenant shall pay any such amounts to
Landlord as the same accrue or after the same have accrued from time to time
upon demand. At any time after terminating Tenant's right to possession as
provided herein, Landlord may terminate this Lease as provided in clause (1)
above by notice to Tenant, and Landlord may pursue such other remedies as may be
available to Landlord under this Lease or applicable Law.
Notwithstanding anything in this Lease to the contrary or under law or
in equity, Landlord shall not be entitled to terminate this Lease or Tenant's
rights of possession hereunder without obtaining a judgment or order from a
court of competent jurisdiction.
C. Mitigation of Damages. If Landlord terminates this Lease or Tenant's
right to possession, Landlord shall be obligated to mitigate Landlord's damages,
provided, however, that: (i) Landlord shall be required only to use reasonable
efforts to mitigate, which shall not exceed such efforts as Landlord generally
uses to lease other space at the Property, (ii) Landlord will not be deemed to
have failed to mitigate if Landlord or its affiliates lease any other portions
of the Property or other projects owned by Landlord or its affiliates in the
same geographic area, before reletting all or any portion of the Premises, and
(iii) any failure to mitigate as described herein with respect to any period of
time shall only reduce the Rent and other amounts to which Landlord is entitled
hereunder by the reasonable rental value of the Premises during such period,
taking into account the factors described in clause B(1)
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above. In recognition that the value of the Property depends on the rental rates
and terms of leases therein, Landlord's rejection of a prospective replacement
tenant based on an offer of rentals below fair market value (as reasonably
determined by Landlord) for new leases of comparable space at the Property at
the time in question, or at Landlord's option, below the rates provided in this
Lease, or containing terms less favorable than those contained herein, shall
not, in and of itself, give rise to a claim by Tenant that Landlord failed to
mitigate Landlord's damages. If Landlord has not terminated this Lease or
Tenant's right to possession, Landlord shall have no obligation to mitigate
under any circumstances and may permit the Premises to remain vacant or
abandoned; in such case, Tenant may seek to mitigate damages by attempting to
sublease the Premises or assign this Lease pursuant to Article 13.
D. Reletting. If this Lease or Tenant's right to possession is
terminated, or Tenant abandons the Premises, Landlord may: (i) enter and secure
the Premises, change the locks, install barricades, remove any improvements,
fixtures or other property of Tenant therein, perform any decorating,
remodelling, repairs, alterations, improvements or additions and take such other
actions as Landlord shall determine in Landlord's sole discretion to prevent
damage or deterioration to the Premises or prepare the same for reletting, and
(ii) relet all or any portion of the Premises (separately or as part of a larger
space), for any rent, use or period of time (which may extend beyond the Term
hereof), and upon any other terms as Landlord shall determine in Landlord's sole
discretion, directly or as Tenant's agent (if permitted or required by
applicable Law). The consideration received from such reletting shall be applied
pursuant to the terms of Paragraph H hereof, and if such consideration, as so
applied, is not sufficient to cover all Rent and damages to which Landlord may
be entitled hereunder, Tenant shall pay any deficiency to Landlord as the same
accrues or after the same has accrued from time to time upon demand, subject to
the other provisions hereof.
E. Specific Performance, Collection of Rent and Acceleration. Landlord
shall at all times have the right without prior demand or notice except as
required by applicable Law to: (i) seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease or restrain or enjoin a
violation of any provision hereof, and (ii) sue for and collect any unpaid Rent
which has accrued.
F. Late Charges, Interest, and Returned Checks. Beginning with the next
such occurrence within twelve (12) months after Landlord's written notice to
Tenant that Rent or any portion thereof was not received within five (5)
business days after the date that it was due, Tenant shall pay, as additional
Rent, a service charge of Two Hundred Fifty Dollars ($250.00) or three and
00/100 percent (3.0%) of the delinquent amount, whichever is greater, if any
portion of Rent is not received within five (5) business days after it is due.
In addition, any Rent not paid when due shall accrue interest from the due date
at the Default Rate until payment is received by Landlord. Such service charges
and interest payments shall not be deemed consent by Landlord to late payments,
nor a waiver of Landlord's right to insist upon timely payments at any time, nor
a waiver of any remedies to which Landlord is entitled as a result of the late
payment of Rent. If Landlord receives two (2) or more checks from Tenant which
are returned by Tenant's bank for insufficient funds, Landlord may require that
all checks thereafter be bank certified or cashier's checks (without limiting
Landlord's other remedies). All bank service charges resulting from any returned
checks shall be borne by Tenant.
G. Landlord's Cure of Tenant Violations. If Tenant fails to perform any
obligation under this Lease for ten (10) days after notice thereof by Landlord
(except that no notice shall be required in emergencies), Landlord shall have
the right (but not the duty), to perform such obligation on behalf and for the
account of Tenant. In such event, Tenant shall reimburse Landlord upon demand,
as additional Rent, for all expenses incurred by Landlord in performing such
obligation, and interest thereon at the Default Rate from the date such expenses
were incurred. Landlord's performance of Tenant's obligations hereunder shall
not be deemed a waiver or release of Tenant therefrom.
H. Other Matters. No re-entry or repossession, repairs, changes,
alterations and additions, reletting, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease
or Tenant's right to possession, nor shall the same operate to release Tenant in
whole or in part from any of Tenant's obligations hereunder, unless express
notice of such intention is sent by Landlord to Tenant (and if applicable Law
permits, and Landlord shall not have expressly terminated this Lease in writing,
then any termination shall be deemed
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a termination of Tenant's right of possession only). Landlord may bring suits
for amounts owed by Tenant hereunder or any portions thereof, as the same accrue
or after the same have accrued, and no suit or recovery of any portion due
hereunder shall be deemed a waiver of Landlord's right to collect all amounts to
which Landlord is entitled hereunder, nor shall the same serve as any defense to
any subsequent suit brought for any amount not theretofore reduced to judgment.
Landlord may pursue one or more remedies against Tenant and need not make an
election of remedies until findings of fact are made by a court of competent
jurisdiction. All rent and other consideration paid by any replacement tenants
shall be applied at Landlord's option: (i) first, to the Costs of Reletting,
(ii) second, to the payment of all costs of enforcing this Lease against Tenant
or any Guarantor, (iii) third, to the payment of all interest and service
charges accruing hereunder, (iv) fourth, to the payment of Rent theretofore
accrued, and (v) with the residue, if any, to be held by Landlord and applied to
the payment of Rent and other obligations of Tenant as the same become due (and
with any remaining residue to be retained by Landlord). "Costs of Reletting"
shall include without limitation, all costs and expenses incurred by Landlord
for any repairs or other matters described in Paragraph D above, brokerage
commissions, advertising costs, attorneys' fees, any economic incentives given
to enter leases with replacement tenants, and costs of collecting rent from
replacement tenants. Landlord shall be under no obligation to observe or perform
any provision of this Lease on its part to be observed or performed which
involves the payment of money by Landlord to Tenant, or the performance of
alterations or improvements to the Premises, while Tenant is in violation or
Default of this Lease. The times set forth herein for the curing of Defaults by
Tenant are of the essence of this Lease. Tenant hereby irrevocably waives any
right otherwise available under any Law to redeem or reinstate this Lease, or
Tenant's right to possession, after this Lease, or Tenant's right to possession,
is terminated based on a Default by Tenant.
ARTICLE 16: SECURITY DEPOSIT
Tenant shall deposit with Landlord a letter of credit ("Letter of
Credit") in the amount set forth in Article 1 ("Security Deposit"), upon
Tenant's execution and submission of this Lease. The Security Deposit shall
serve as security for the prompt, full and faithful performance by Tenant of the
terms and provisions of this Lease. If Tenant commits a Default, Landlord may
use or apply the whole or any part of the Security Deposit for the payment of
Tenant's obligations hereunder. The use or application of the Security Deposit
or any portion thereof shall not prevent Landlord from exercising any other
right or remedy provided hereunder or under any Law and shall not be construed
as liquidated damages. In the event the Security Deposit is reduced by such use
or application, Tenant shall deposit with Landlord within ten (10) days after
notice, an amount sufficient to restore the full amount of the Security Deposit.
Unless required by applicable Law, Landlord shall not be required to keep any
cash portion of the Security Deposit separate from Landlord's general funds or
pay interest on the Security Deposit. Notwithstanding the foregoing to the
contrary, the parties agree that so long as Tenant has fully and faithfully
complied with all provisions of this Lease, the Letter of Credit shall be
reduced to zero (--0--) within sixty (60) days after the earlier to occur of (a)
the twenty fourth (24th) full calendar month of the Term, or (b) the date that
Tenant completes a public offering of its stock. Tenant shall not assign, pledge
or otherwise transfer any interest in the Security Deposit except as part of an
assignment of this Lease approved by Landlord under Article 13, and any attempt
to do so shall be null and void. See Exhibit F for additional requirements
regarding the Letter of Credit.
ARTICLE 17: ATTORNEYS' FEES AND VENUE
In the event of any litigation or arbitration between the parties
relating to this Lease, the Premises or Property (including pretrial, trial,
appellate, administrative, bankruptcy or insolvency proceedings), the prevailing
party shall be entitled to recover its attorneys' fees and costs as part of the
judgment, award or settlement therein. In the event of a breach of this Lease by
either party which does not result in litigation but which causes the
non-breaching party to incur attorneys' fees or costs, the breaching party shall
reimburse such reasonable fees and costs to the non-breaching party upon demand.
If either party or any of its officers, directors, trustees, beneficiaries,
partners, agents, affiliates or employees shall be made a party to any
litigation or arbitration commenced by or against the other party and is not at
fault, the other party shall pay all costs, expenses and attorneys' fees
incurred by such parties in connection with such litigation. Any action or
proceeding brought by either party against the other for any matter
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arising out of or in any way relating to this Lease, the Premises or the
Property, shall be heard, at Landlord's option, in the court having jurisdiction
located closest to the Property.
ARTICLE 18: SUBORDINATION, ATTORNMENT AND LENDER PROTECTION
This Lease is subject and subordinate to all Mortgages now or hereafter
placed upon the Property, and all other encumbrances and matters of public
record applicable to the Property; provided, this Lease shall only be
subordinate to Mortgages made hereafter if the holders thereof agree to enter
into their commercially reasonable standard forms of subordination,
non-disturbance and attornment agreement with Tenant. Whether before or after
any foreclosure or power of sale proceedings are initiated or completed by any
Lender or a deed in lieu is granted (or any ground lease is terminated), Tenant
agrees, upon written request of any such Lender or any purchaser at such sale,
to attorn and pay Rent to such party, and recognize such party as Landlord
(provided such Lender or purchaser shall agree not to disturb Tenant's occupancy
and other rights of Tenant hereunder so long as Tenant does not Default
hereunder, on a form of agreement customarily used by, or otherwise reasonably
acceptable to, such party). However, in the event of attornment, no Lender shall
be: (i) liable for any act or omission of Landlord, or subject to any offsets or
defenses which Tenant might have against Landlord (arising prior to such Lender
becoming Landlord under such attornment), or (ii) liable for any security
deposit or bound by any Rent prepaid more than one (1) month and not actually
received by Lender. Any Lender may elect to make this Lease prior to the lien of
its Mortgage by written notice to Tenant, and if the Lender of any prior
Mortgage shall require, this Lease shall be prior to any subordinate Mortgage;
such elections shall be effective upon written notice to Tenant, or shall be
effective as of such earlier or later date set forth in such notice. Tenant
agrees to give any Lender by certified mail, return receipt requested, a copy of
any notice of default served by Tenant upon Landlord, provided that prior to
such notice Tenant has been notified in writing (by way of service on Tenant of
a copy of an assignment of leases, or otherwise) of the address of such Lender.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time permitted Landlord for cure under this Lease, any such Lender
whose address has been provided to Tenant shall have an additional period of
thirty (30) days in which to cure (or such additional time as may be required
due to causes beyond such Lender's reasonable control, including time to obtain
possession of the Property by appointment of receiver, power of sale or judicial
action). Except as expressly provided to the contrary herein, the provisions of
this Article shall be self-operative; however Tenant shall execute and deliver,
within ten (10) days after request therefor, such documentation as Landlord or
any Lender may request from time to time, whether prior to or after a
foreclosure or power of sale proceeding is initiated or completed, a deed in
lieu is delivered, or a ground lease is terminated, in order to further confirm
or effectuate the matters set forth in this Article in recordable form.
Landlord hereby represents and warrants that there is no Mortgage
encumbering the Property as of the date of this Lease.
ARTICLE 19: ESTOPPEL CERTIFICATES
Tenant shall from time to time, within fifteen (15) days after written
request from Landlord, execute, acknowledge and deliver a statement certifying:
(i) that this Lease is unmodified and in full force and effect or, if modified,
stating the nature of such modification and certifying that this Lease as so
modified, is in full force and effect (or specifying the ground for claiming
that this Lease is not in force and effect), (ii) the dates to which the Rent
has been paid, and the amount of any Security Deposit, (iii) that Tenant is in
possession of the Premises, and paying Rent on a current basis with, to Tenant's
actual knowledge, no offsets, defenses or claims, or specifying the same if any
are claimed, (iv) that there are not, to Tenant's actual knowledge, any uncured
defaults on the part of Landlord or Tenant, or specifying the same if any are
claimed, and (v) certifying such other factual matters as Landlord may
reasonably request, or as may be reasonably requested by Landlord's current or
prospective Lenders, insurance carriers, auditors, and prospective purchasers
(and including a comparable certification statement from any subtenant
respecting its sublease). Any such statement may be relied upon by any such
parties. If Tenant shall fail to execute and return such statement within the
time required herein, Tenant shall be in Default, and shall be deemed to have
agreed with the matters set forth therein (which shall not be in limitation of
Landlord's other remedies).
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ARTICLE 20: RIGHTS RESERVED BY LANDLORD
Except to the extent expressly limited herein, Landlord reserves full
rights to control the Property (which rights may be exercised without subjecting
Landlord to claims for constructive eviction, abatement of Rent, damages or
other claims of any kind), including more particularly, but without limitation,
the following rights:
A. General Matters. To: (i) change the name or street address of the
Property or designation of the Premises, (ii) install and maintain signs on and
about the Property, and grant any other Person the right to do so, (iii) retain
at all times, and use in appropriate instances, keys to all doors within and
into the Premises, (iv) grant to any Person the right to conduct any business or
render any service at the Property, whether or not the same are similar to the
use permitted Tenant by this Lease, (v) have access for Landlord and other
tenants of the Property to any mail chutes located on the Premises according to
the rules of the United States Postal Service (and to install or remove such
chutes), and (vi) in case of fire, invasion, insurrection, riot, civil disorder,
public excitement or other dangerous condition, or threat thereof: (a) limit or
prevent access to the Property, (b) shut down elevator service, (c) activate
elevator emergency controls, and (d) otherwise take such action or preventative
measures deemed necessary by Landlord for the safety of tenants of the Property
or the protection of the Property and other property located thereon or therein
(but this provision shall impose no duty on Landlord to take such actions, and
no liability for actions taken in good faith).
B. Access To Premises. Subject to the following provisions, to enter
the Premises in order to: (i) inspect the Premises during normal business hours,
(ii) supply cleaning service or other services to be provided Tenant hereunder,
(iii) show the Premises (during normal business hours and after at least one (1)
business day prior notice) to current and prospective Lenders, insurers,
purchasers, governmental authorities, and their representatives, and during the
last twelve (12) months of Tenant's occupancy, show the Premises (during normal
business hours and after at least one (1) business days' prior notice) to
prospective tenants and leasing brokers, and (iv) intentionally omitted, and (v)
perform any work or take any other actions under Paragraph C below, or exercise
other rights of Landlord under this Lease or applicable Laws. However, except in
emergencies, or for cleaning or other routine services to be provided Tenant
under this Lease, Landlord shall: (a) provide reasonable advance written or oral
notice to Tenant's on-site manager or other appropriate person, (b) take
reasonable steps to minimize any disruption to Tenant's business, and (c) at
Tenant's option, be accompanied during entry into the Premises by a
representative of Tenant. If Tenant requests that any such access occur before
or after Building Hours, and Landlord schedules the work accordingly, Tenant
shall pay all overtime and other additional costs in connection therewith.
C. Changes To The Property. Subject to the last sentence of this
Paragraph, to: (i) paint and decorate, (ii) perform repairs or maintenance,
(iii) add land, buildings, easements or other interests to, or sell or eliminate
the same from, the Property, grant interests and rights in the Property to other
parties, and convert common areas to rentable areas and rentable areas to common
areas, and (iv) make replacements, restorations, renovations, alterations,
additions and improvements, structural or otherwise (including freon retrofit
work), in and to the Property or any part thereof, including any adjacent
building, structure, facility, land, street or alley, or change the uses thereof
(other than Tenant's permitted use under this Lease), including changes,
reductions or additions of corridors, entrances, doors, lobbies, parking
facilities and other areas, structural support columns and shear walls,
elevators, stairs, escalators, mezzanines, solar tint windows or film, kiosks,
planters, sculptures, displays, and other amenities and features therein, and
changes relating to the connection with or entrance into or use of the Property
or any other adjoining or adjacent building or buildings, now existing or
hereafter constructed. In connection with such matters, Landlord may among other
things erect scaffolding, barricades and other structures, open ceilings, close
entry ways, restrooms, elevators, stairways, corridors, parking and other areas
and facilities, and take such other actions as Landlord deems appropriate.
However, Landlord shall: (a) maintain reasonable access to the Premises, (b) in
connection with entering the Premises, comply with Paragraph B above, and (c) to
the extent that, in Landlord's reasonable opinion, the Premises are materially
affected, give Tenant reasonable prior notice of such changes to the Property.
Notwithstanding anything to the contrary contained herein, changes which may be
made by Landlord as permitted under this Section shall not increase Tenant's
Share.
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ARTICLE 21: RIGHT TO CURE
If Landlord shall fail to perform any obligation under this Lease
required to be performed by Landlord, Landlord shall not be deemed to be in
default hereunder nor subject to any claims for damages of any kind, unless such
failure shall have continued for a period of thirty (30) days (or, in an
emergency situation, five (5) days) after notice thereof by Tenant (provided, if
the nature of Landlord's failure is such that more time is reasonably required
in order to cure, Landlord shall not be in default if Landlord commences to cure
within such applicable period and thereafter diligently seeks to cure such
failure to completion). If Landlord shall default and fail to cure as provided
herein, Tenant shall have such rights and remedies as may be available to Tenant
under applicable Laws, subject to the other provisions of this Lease; provided,
Tenant shall have no right of self-help to perform repairs or any other
obligation of Landlord (except as set forth in the following paragraph), and
shall have no right to withhold, set-off, or abate Rent, except as may be
expressly provided in this Lease (including, without limitation, Section 6E),
and shall have no right to terminate this Lease without entry of an order and
judgment by a court of competent jurisdiction (provided that should Tenant prove
a breach by Landlord entitling Tenant to terminate this Lease, Tenant shall not
be responsible for performance of obligations under this Lease arising after the
earlier to occur of the following:
(a) the effective termination date as determined by the court
in its order or judgment, or
(b) the later to occur of: (i) Landlord's breach giving rise
to such termination, or (ii) any applicable period for Landlord to cure
following notice or other time period specifically set forth in this Lease, such
as the time periods set forth in Article 11.D (as determined by the court in its
order or judgment); provided, in any case, Tenant shall comply with all
obligations under this Lease until Tenant vacates the Premises in the condition
required Article 23 of this Lease. Tenant hereby expressly waives the provisions
of any Law to the contrary.
Notwithstanding anything to the contrary contained herein, if Landlord
fails to make any repairs within the Premises which Landlord is obligated to
perform under this Lease, and which do not affect the Systems or Equipment, and
such failure directly and adversely affects Tenant's use of the Premises, and
Tenant gives Landlord reasonable advance notice of Tenant's intent to perform
such work, describing the same in detail, and enclosing a copy of the proposed
contract (which notice shall be at least ten (10) days in advance, except to the
extent that there is an immediate threat to Tenant's property or business or to
persons), then Tenant may make such repairs in a good and workmanlike manner
using a contractor which is then currently approved in writing by Landlord to
perform work in the Property provided Landlord has previously provided to Tenant
such a list (and in absence of such list, such repairs shall be made by a
contractor selected by Tenant), at a competitive and reasonable cost, and
subject to all of the other provisions of this Lease respecting work at the
Property other than those provisions requiring any additional approvals from
Landlord, and the Property rules and regulations pertaining thereto. In such
case, Landlord shall reimburse Tenant therefor within thirty (30) days after the
completion of the repairs by Tenant and Landlord's receipt of a copy of the paid
invoice and reasonable supporting documentation, including, but not limited to,
recordable lien releases and affidavits of payment in statutory form acceptable
to Landlord, but Tenant shall have no right to withhold or set off such amount
against Rent.
ARTICLE 22: INDEMNIFICATION
Subject to the provisions of Articles 10C and 11, Tenant shall defend,
indemnify and hold Landlord harmless from and against any and all claims,
demands, losses, penalties, fines, fees, charges, assessments, liabilities,
damages, judgments, orders, decrees, actions, administrative or other
proceedings, costs and expenses (including reasonable attorneys' and expert
witness fees, and court costs actually incurred), arising or alleged to arise
from: (i) any violation or breach of this Lease or applicable Law by any Tenant
Parties (as defined below), (ii) damage, loss or injury to persons, property or
business directly or indirectly arising out of any Tenant Party's use of the
Premises or negligent use of the Property, or out of any other intentional
misconduct or negligent act or omission of any Tenant Parties, and (iii) any
other damage, loss or injury to persons, property or business occurring in,
about or from the Premises, except to the extent that such other damage, loss or
injury to persons, property or business is caused by the negligence or
intentional misconduct of Landlord. For purposes of this provision, "Tenant
Parties" shall mean
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Tenant, any other occupant of the Premises and any of their respective agents,
employees, invitees, Transferees and contractors.
Subject to Articles 10C and 11 of this Lease, and excluding matters
covered by Tenant's foregoing indemnity obligations, Landlord shall defend,
indemnify and hold harmless Tenant from and against claims, demands, losses,
penalties, fines, fees, charges, assessments, liabilities, damages, judgments,
orders, decrees, actions, administrative or other proceedings, costs and
expenses (including reasonable attorneys' and expert witness fees, and court
costs) arising in the common areas of the Property from or relating to any loss
of life, damage or injury to persons, property or business to the extent caused
by or in connection with any violation of this Lease by, or any intentional
misconduct or negligent acts or omissions of, Landlord or Landlord's agents or
employees.
ARTICLE 23: RETURN OF POSSESSION
A. General Provisions. At the expiration or earlier termination of this
Lease or Tenant's right of possession, Tenant shall vacate and surrender
possession of the entire Premises in the condition required under Article 8 and
the Rules, ordinary wear and tear and casualty damage excepted, shall surrender
all keys and key cards, and any parking transmitters, stickers or cards, to
Landlord, and shall remove all personal property and office trade fixtures that
may be readily removed without damage to the Premises or Property (and Tenant
hereby waives any statutory notices to vacate or quit the Premises upon
expiration of this Lease), subject to the following provisions.
B. Landlord's Property. All improvements, fixtures and other items,
including ceiling light fixtures; HVAC equipment (unless paid for by Tenant);
plumbing fixtures; hot water heaters; fire suppression and sprinkler systems;
Lines under Article 28; interior partitioning, built-in shelves and cabinets,
interior stairs, wall coverings, carpeting and other flooring, blinds, drapes
and window treatments (unless paid for by Tenant); in or serving the Premises,
whether installed by Tenant or Landlord, and any other items installed or
provided by Landlord or at Landlord's expense, shall be Landlord's property and
shall remain upon the Premises, all without compensation, allowance or credit to
Tenant, unless Landlord elects otherwise as provided in Paragraph C below.
C. Removal of Items by Tenant. Notwithstanding the foregoing to the
contrary, if prior to expiration or earlier termination of this Lease or within
thirty (30) days thereafter Landlord so directs by notice, Tenant shall promptly
remove such of the items described in Paragraph B above as are designated in
such notice and restore the Premises to the condition prior to the installation
of such items in a good and workmanlike manner; provided, Landlord shall not
require removal of any such items that: (i) already existed in the Premises
before this Lease and Tenant's occupancy of the Premises, or (ii) involve office
improvements that are installed by or for Tenant pursuant to the provisions of
this Lease (including any Exhibit hereto) except to the extent that Landlord
reserves the right to require such removal in connection with Landlord's
approval of the plans for such improvements.
If Tenant elects to remove any HVAC equipment and/or back-up generators
that were paid for by Tenant, it is understood and agreed that Tenant's
obligation to restore the Premises shall include both the obligation to repair
any physical damage to the Premises or Property caused by such removal and to
re-balance the HVAC system within the Premises to the extent that such
re-balancing is necessary because of such removal of HVAC equipment being
removed by Tenant.
D. Tenant's Failure to Remove Items. If Tenant shall fail to remove any
items from the Premises as required hereunder, Landlord may do so and Tenant
shall pay Landlord's charges therefor upon demand. All such property removed
from the Premises by Landlord pursuant to any provisions of this Lease or any
Law may be handled or stored by Landlord at Tenant's expense, and Landlord shall
in no event be responsible for the value, preservation or safekeeping thereof.
All such property not removed from the Premises or retaken from storage by
Tenant within thirty (30) days after expiration or earlier termination of this
Lease or Tenant's right to possession shall, at Landlord's option, be
conclusively deemed to have been conveyed by Tenant to Landlord as if by bill of
sale without payment by Landlord. Unless prohibited by applicable Law, Landlord
shall have a lien against such property for the costs incurred in removing and
storing the same.
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ARTICLE 24: HOLDING OVER
Unless Landlord expressly agrees otherwise in writing, Tenant shall pay
Landlord 150% for the first month and 200% thereafter of the amount of Rent then
applicable prorated on a per diem basis for each day that Tenant shall fail to
vacate or surrender possession of the Premises or any part thereof after
expiration or earlier termination of this Lease as required under Article 23,
together with all damages (direct and consequential) sustained by Landlord on
account thereof. Tenant shall pay such amount of Rent monthly in advance
(subject to refund of any partial month occupancy), and such other amounts on
demand. The foregoing provisions, and Landlord's acceptance of any such amounts,
shall not serve as permission for Tenant to hold-over, nor serve to extend the
Term (although Tenant shall remain a tenant-at-sufferance bound to comply with
all other provisions of this Lease until Tenant properly vacates the Premises,
including Article 23). Landlord shall have the right at any time after
expiration or earlier termination of this Lease or Tenant's right to possession
to reenter and possess the Premises and remove all property and persons
therefrom, and Landlord shall have such other remedies for holdover as may be
available to Landlord under other provisions of this Lease or applicable Laws.
ARTICLE 25: NOTICES
Except as expressly provided to the contrary in this Lease, every
notice or other communication to be given by either party to the other with
respect hereto or to the Premises or Property, shall be in writing and shall not
be effective for any purpose unless the same shall be served personally or by
national air courier service providing for next business day delivery, or United
States certified mail, return receipt requested, postage prepaid, to the parties
at the addresses set forth in Article 1, or such other address or addresses as
Tenant or Landlord may from time to time designate by notice given as above
provided. Every notice or other communication hereunder shall be deemed to have
been given as of the third business day following the date of such mailing (or
as of any earlier date evidenced by a receipt from such national air courier
service or the United States Postal Service) or immediately if personally
delivered. Notices not sent in accordance with the foregoing shall be of no
force or effect until received by the foregoing parties at such addresses
required herein.
ARTICLE 26: REAL ESTATE BROKERS
Landlord and Tenant hereby mutually: (i) represent and warrant to each
other that they have dealt only with the broker, if any, designated in Article 1
(whose commission, if any, shall be paid pursuant to separate written agreement
by the party signing such agreement) as broker, agent or finder in connection
with this Lease, and (ii) agree to defend, indemnify and hold each other
harmless from and against any and all claims, demands, losses, liabilities,
damages, judgments, costs and expenses (including reasonable attorneys' and
expert witness fees, and court costs), arising or alleged to arise from any
breach of their respective foregoing representation and warranty under this
Article.
ARTICLE 27: NO WAIVER
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing and signed by the waiving party. No waiver shall be
implied by delay or any other act or omission of either party. No waiver by
either party of any provision of this Lease shall be deemed a waiver of such
provision with respect to any subsequent matter relating to such provision, and
Landlord's consent or approval respecting any action by Tenant shall not
constitute a waiver of the requirement for obtaining Landlord's consent or
approval respecting any subsequent action. Acceptance of Rent by Landlord
directly or through any agent or lock-box arrangement shall not constitute a
waiver of any breach by Tenant of any term or provision of this Lease (and
Landlord reserves the right to return or refund any untimely payments if
necessary to preserve Landlord's remedies). No acceptance of a lesser amount of
Rent shall be deemed a waiver of Landlord's right to receive the full amount
due, nor shall any endorsement or statement on any
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check or payment or any letter accompanying such check or payment be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the full amount due. The acceptance of
Rent or of the performance of any other term or provision from, or providing
directory listings or services for, any Person other than Tenant shall not
constitute a waiver of Landlord's right to approve any Transfer. No delivery to,
or acceptance by, Landlord or its agents or employees of keys, nor any other act
or omission of Tenant or Landlord or their agents or employees, shall be deemed
a surrender, or acceptance of a surrender, of the Premises or a termination of
this Lease, unless stated expressly in writing by Landlord.
ARTICLE 28: TELECOMMUNICATION LINES
A. Telecommunication Lines. Subject to Landlord's continuing right of
supervision and approval, which approval shall not be unreasonably withheld,
conditioned or delayed and the other provisions hereof, Tenant may: (i) install
telecommunication lines ("Lines") connecting the Premises to any Property
terminal block already serving or available to serve the Premises, or (ii) use
such Lines as may currently exist and already connect the Premises to such
terminal block. Such terminal block may comprise, or be connected through riser
or other Lines with, a main distribution frame ("MDF") for the Property.
Landlord disclaims any representations, warranties or understandings concerning
the capacity, design or suitability of any such terminal or MDF, Property riser
Lines, or related equipment. If there is, or will be, more than one tenant in
the Property, at any time, Landlord may allocate, and periodically reallocate,
connections to the terminal blocks and MDF based on the proportion of rentable
area each tenant leases, or the type of business operations or requirements of
such tenants, in Landlord's reasonable discretion. Landlord may arrange for an
independent contractor to review Tenant's requests for approval hereunder,
monitor or supervise Tenant's installation, connection and disconnection of
Lines, and provide other such services, or Landlord may provide the same. In
each case, Tenant shall pay Landlord's fees and costs therefor as provided in
Article 9.
B. Installation. Tenant may install and use Tenant's Lines and make
connections and disconnections at the terminal blocks as described above,
provided Tenant shall: (i) obtain Landlord's prior written approval of all
aspects thereof, (ii) use an experienced and qualified contractor designated or
approved in writing in advance by Landlord (whom Landlord may require to enter
an access and indemnity agreement on Landlord's then-standard form of agreement
therefor), (iii) comply with such inside wire standards as Landlord may adopt
from time to time, and all other provisions of this Lease, including Article 9
respecting Work, and the Rules respecting access to the wire closets, (iv) not
install Lines in the same sleeve, chaseway or other enclosure in close proximity
with electrical wire, and not install PVC-coated Lines under any circumstances,
(v) thoroughly test any riser Lines to which Tenant intends to connect any Lines
to ensure that such riser Lines are available and are not then connected to or
used for telephone, data transmission or any other purpose by any other party
(whether or not Landlord has previously approved such connections), and not
connect to any such unavailable or connected riser Lines, and (vi) not connect
any equipment to the Lines which may create an electromagnetic field exceeding
the normal insulation ratings of ordinary twisted pair riser cable or cause
radiation higher than normal background radiation, unless the Lines therefor
(including riser Lines) are appropriately insulated to prevent such excessive
electromagnetic fields or radiation (and such insulation shall not be provided
by the use of additional unused twisted pair Lines). As a condition to
permitting installation of new Lines, Landlord may require that Tenant remove
any existing Lines located in or serving the Premises which are not being used.
C. Limitation of Liability. Except to the extent due to Landlord's
intentional misconduct or grossly negligent acts, Landlord shall have no
liability for damages arising, and Landlord does not warrant that the Tenant's
use of the Lines will be free, from the following (collectively called "Line
Problems"): (i) any eavesdropping, wire-tapping or theft of long distance access
codes by unauthorized parties, (ii) any failure of the Lines to satisfy Tenant's
requirements, or (iii) any capacitance, attenuation, cross-talk or other
problems with the Lines, any misdesignation of the Lines in the MDF room or wire
closets, or any shortages, failures, variations, interruptions, disconnections,
loss or damage caused by or in connection with the installation, maintenance,
replacement, use or removal of any other Lines or equipment at the Property by
or for other tenants at the Property, by any failure of the environmental
conditions at or the power supply for the Property to conform to any
requirements of the Lines or any other problems associated with any Lines or by
any other cause. Under no circumstances shall any Line Problems be deemed an
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actual or constructive eviction of Tenant, render Landlord liable to Tenant for
abatement of any Rent or other charges under the Lease, or relieve Tenant from
performance of Tenant's obligations under the Lease as amended herein. Landlord
in no event shall be liable for damages by reason of loss of profits, business
interruption or other consequential damage arising from any Line Problems.
ARTICLE 29: HAZARDOUS MATERIALS
A. Hazardous Materials Generally Prohibited. Except as provided herein,
Tenant shall not transport, use, store, maintain, generate, manufacture, handle,
dispose, release, discharge, spill or leak any "Hazardous Material" (as defined
in Article 30), or permit Tenant's employees, agents, contractors, or other
occupants of the Premises to engage in such activities on or about the Property.
However, the foregoing provisions shall not prohibit the transportation to and
from, and use, storage, maintenance and handling within, the Premises of
substances customarily and lawfully used in the business which Tenant is
permitted to conduct in the Premises under this Lease, as an incidental and
minor part of such business, and provided: (i) such substances shall be properly
labeled, contained, used and stored only in small quantities reasonably
necessary for such permitted use of the Premises and the ordinary course of
Tenant's business therein, strictly in accordance with applicable Laws, highest
prevailing standards, and the manufacturers' instructions therefor, (ii) such
substances shall not be disposed of, released, discharged or permitted to spill
or leak in or about the Premises or the Property (and under no circumstances
shall any Hazardous Material be disposed of within the drains or plumbing
facilities in or serving the Premises or Property or in any other public or
private drain or sewer, regardless of quantity or concentration), (iii) if any
applicable Law or Landlord's trash removal contractor requires that any such
substances be disposed of separately from ordinary trash, Tenant shall make
arrangements at Tenant's expense for such disposal in approved containers
directly with a qualified and licensed disposal company at a lawful disposal
site, (iv) any remaining such substances shall be completely, properly and
lawfully removed from the Property upon expiration or earlier termination of
this Lease, and (v) for purposes of removal and disposal of any such substances,
Tenant shall be named as the owner, operator and generator, shall obtain a waste
generator identification number, and shall execute all permit applications,
manifests, waste characterization documents and any other required forms.
B. Clean Up Responsibility. If any Hazardous Material is released,
discharged or disposed of, or permitted to spill or leak, in violation of the
foregoing provisions, Tenant shall immediately and properly clean up and remove
the Hazardous Materials from the Premises, Property and any other affected
property and clean or replace any affected personal property (whether or not
owned by Landlord) in compliance with applicable Laws and then prevailing
industry practices and standards, at Tenant's expense (without limiting
Landlord's other remedies therefor). Such clean up and removal work ("Tenant
Remedial Work") shall be considered Work under Article 9 and subject to the
provisions thereof, including Landlord's prior written approval (except in
emergencies), and any testing, investigation, feasibility and impact studies,
and the preparation and implementation of any remedial action plan required by
any court or regulatory authority having jurisdiction or reasonably required by
Landlord. In connection therewith, Tenant shall provide documentation evidencing
that all Tenant Remedial Work or other action required hereunder has been
properly and lawfully completed (including a certificate addressed to Landlord
from a environmental consultant reasonably acceptable to Landlord, in such
detail and form as Landlord may reasonably require). If any Hazardous Material
is released, discharged, disposed of, or permitted to spill or leak on or about
the Property and is not caused by Tenant or other occupants of the Premises, or
their agents, employees, Transferees, or contractors, such release, discharge,
disposal, spill or leak shall be deemed casualty damage under Article 11 to the
extent that the Premises and Tenant's use thereof is affected thereby; in such
case, Landlord and Tenant shall have the obligations and rights respecting such
casualty damage provided under this Lease.
C. Miscellaneous. Tenant shall immediately upon written request from
time to time provide Landlord with copies of all material safety data sheets,
permits, approvals, memos, reports, correspondence, complaints, demands, claims,
subpoenas, requests, remediation and cleanup plans, and all papers of any kind
filed with or by any regulatory authority and any other books, records or items
pertaining to Hazardous Materials that are subject to the provisions of this
Article (collectively referred to herein as "Tenant's Hazardous Materials
Records"). Tenant shall pay, prior to delinquency, any and all fees, taxes
(including excise taxes), penalties and fines arising from or based on Tenant's
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activities involving Hazardous Material on or about the Premises or Property,
and shall not allow such obligations to become a lien or charge against the
Property or Landlord. If Tenant violates any provision of this Article with
respect to any Hazardous Materials, Landlord may: (i) require that Tenant
immediately remove all Hazardous Materials from the Premises and discontinue
using, storing and handling Hazardous Materials in the Premises, and/or (ii)
pursue such other remedies as may be available to Landlord under this Lease or
applicable Law.
ARTICLE 30: DEFINITIONS
(A) "Building" shall mean the structure (or the portion thereof owned
by Landlord) identified in Article 1.
(B) "Building Hours" shall mean 8:00 A.M. to 6:00 P.M. Monday through
Friday, and 8:00 A.M. to 12:00 P.M. on Saturday (if comparable buildings in the
area have standard Saturday hours), excluding Holidays. "Holidays" shall mean
New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day, and any other state or federal holidays observed by majority of
businesses in the Durham area.
(C) "Default Rate" shall mean the rate of interest announced from time
to time by the main Chicago office of Bank of America or its successor ("Bank")
as its published Prime Rate plus four percent (4%) per annum, unless a lesser
rate shall then be the maximum rate permissible by law, in which event the said
lesser rate shall be charged. The term "Prime Rate" means the rate of interest
announced by Bank from time to time as its "Prime Rate" Rate or "Corporate Base
Rate" (or other such designation as determined by Landlord), of interest,
changing automatically and simultaneously with each change in the Prime Rate
made by Bank from time to time. Any publication issued or published by Bank or a
certificate signed by an officer of Bank stating its Prime Rate as of a date
shall be conclusive evidence of the Prime Rate on that date. If during the Term
hereof, Bank should not issue or publish the Prime Rate, then Landlord shall
designate a similar rate published by any national banking association.
(D) "Expenses" shall mean all expenses, costs and amounts (other than
Taxes) of every kind and nature relating to the ownership, management, repair,
maintenance, replacement, insurance and operation of the Property, including,
without limitation (except as expressly set forth herein), any amounts paid for:
(i) Utility Costs, (ii) complying with Laws (but subject to the exclusions set
forth below), (iii) insurance, not limited to that required under this Lease,
and which may include flood, earthquake, boiler, rent loss, workers'
compensation and employers' liability, builders' risk, automobile and other
coverages, including a reasonable allocation of costs under any blanket
policies, (iv) supplies, materials, tools, equipment, uniforms, and vehicles
used in the operation, repair, maintenance, security, and other services for the
Property, including rental, installment purchase and financing agreements
therefor and interest thereunder, (v) accounting, alarm monitoring, security,
janitorial, trash removal, snow and ice removal, and other services, (vi)
customary management fees, not to exceed four percent (4%) of gross revenues of
the Property (vii) compensation and benefits for any personnel to the extent
such persons are engaged in the operation, repair, maintenance, security or
other services for the Property at or below the level of senior property
manager, and employer's FICA contributions, unemployment taxes or insurance, any
other taxes which may be levied on such compensation and benefits, and data or
payroll processing expenses relating thereto (if personnel handle other
properties, the foregoing expenses shall be allocated appropriately between the
Property and such other properties), (viii) payments under any easement, cross
or reciprocal easement, operating agreement, declaration, covenant, or other
agreement or instrument pertaining to the sharing of costs for common areas or
other matters in a development or complex of which the Property is a part, (ix)
sales, use, value-added or other taxes on supplies or services for the Property,
(x) the costs of operating and maintaining any on-site office at the Property or
an adjoining property (such costs to be appropriately allocated between the
Property and any such adjoining property served by such office), including the
fair rental value thereof, (xi) operation, maintenance, repair, installation,
replacement, inspection, testing, painting, decorating and cleaning of the
Property, and any items located off-site but installed for the benefit of the
Property, including Property identification and pylon signs, directional signs,
traffic signals and markers, flagpoles and canopies, sidewalks, curbs,
stairways, parking structures, lots, loading and service areas and driveways,
storm and sanitary drainage systems, irrigation systems, elevators, escalators,
trash compactors, and Systems and Equipment, landscaping, and all other aspects
of the Property, including common area fixtures, equipment and other items
therein or thereon, doors, locks and hardware, windows, gutters, downspouts,
roof flashings and roofs.
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The foregoing provision is for definitional purposes only and shall not be
construed to impose any obligation upon Landlord to incur such expenses, nor as
a limitation as to other Expenses that Landlord may incur with respect to the
Property. Landlord may retain independent contractors (or affiliated contractors
at market rates) to provide any services or perform any work, in which case the
costs thereof shall be deemed Expenses. Expenses shall, however, exclude:
(1) the following items: (a) interest and amortization on
Mortgages, and other debt costs or ground lease payments, if any, except as
provided herein, (b) depreciation of buildings and other improvements (except
permitted amortization of certain capital expenditures as provided below), (c)
legal fees in connection with leasing, tenant disputes or enforcement of leases,
(d) real estate brokers' commissions or marketing costs, (e) improvements or
alterations to tenant spaces, (f) the cost of providing any service directly to,
and paid directly by, any tenant, (g) costs of any items to the extent Landlord
receives reimbursement from insurance proceeds or from a warranty or other such
third party (such proceeds to be deducted from Expenses in the year in which
received); (h) items charged as Taxes under this Lease, (i) Mortgage principal,
interest or penalties or any other costs associated with the financing of the
Property, (j) leasing commissions, finder's fees and all other leasing expenses
incurred in procuring tenants in the Property, including marketing, promotion
and advertising expenses in connection with leasing of space, (k) the cost of
constructing tenant improvements or installations for any tenant in the
Property, including any relocation costs, (l) expenditures for repairing and/or
replacing any defect in any tenant improvement work performed by Landlord
pursuant to the provisions of any lease for space in the Property, (m) lease
takeover or termination costs incurred by Landlord in connection with any lease
in the Property, including any tax payments required to be made in connection
therewith, (n) any amount (other than management fees) paid to any affiliate of
Landlord to the extent that such payments materially exceed competitive charges
from an equivalent quality provider that would have been paid at arms-length for
comparable services and goods, (o) expenses, fines, interest or penalties
payable by Landlord resulting from non-compliance with any Laws or late payment
of Taxes, unless caused by Tenant (in which case, Tenant shall pay the same as a
separate obligation of Tenant and not as part of Expenses), (p) attorneys' fees
and disbursements incurred in connection with the leasing of space or
enforcement of leases in the Property (including without limitation the
enforcement of any lease or the surrender, termination or modification of any
lease of space in the Property), (q) attorneys' fees and disbursements and other
costs in connection with any judgment, settlement or arbitration award
(including arbitration fees and expenses) resulting from any tort or contract
liability on the part of Landlord and the amount of such settlement, judgment or
award, except for business related tort or contract liabilities where Tenant is
contributorily liable (in which case, Tenant shall pay its share of the same as
a separate obligation and not as part of Expenses), (r) Landlord's cost of any
utilities or services supplied to any tenant or occupant in the Property and for
which Landlord is directly reimbursed (other than through Expenses) as an
additional charge (provided Landlord may characterize payments received from a
tenant in connection with any lease surrender or cancellation as Landlord deems
appropriate without causing any such items to be excluded from Expenses), (s)
costs of acquiring, leasing or restoring any items in the nature of "fine art,"
(rather than decorative art work and seasonal decorations), (t) the cost of
repairs and replacements incurred by reason of fire or other casualty or
condemnation, to the extent Landlord is reimbursed therefor by insurance
proceeds or condemnation award, (u) rent paid under any ground lease or
underlying lease of the land beneath the Property (but including charges such as
Taxes and Expenses under this Lease), (v) any costs that duplicate costs for
which Landlord is reimbursed by Tenant under other provisions of this Lease, (w)
expenses (including, without limitation, attorneys' fees and overtime pay)
incurred in curing a default by Landlord under this Lease or any other lease of
space in the Property, including, without limitation, a contract for services at
the Property, or under any mortgage or insurance policy affecting the Property,
but only to the extent that such expenses are greater than the expenses Landlord
would have incurred had Landlord timely performed such obligation, (x) to the
extent any costs that are otherwise permitted to be included in Expenses are
incurred with respect to both the Property and other properties (including,
without limitation, salaries, fringe benefits and other compensation of
Landlord's personnel who provide services to both the Property and such other
properties), there shall be excluded from Expenses a fair and reasonable
percentage thereof that is properly allocable to such other properties, (y) the
cost of installing a cafeteria, auditorium, conference room, telecommunications
facility (such as a microwave dish or antenna) or other such facility and the
cost of operating and maintaining any such facility, if such facility is
operated by Landlord and not leased to a third party (except to the extent that
Landlord elects to credit revenues, if any, derived from such facilities against
Expenses), (z) any compensation paid to clerks, attendants or other persons in
commercial concessions operated by Landlord or any affiliate (except to the
extent that Landlord elects to credit revenues, if any, derived from such
concessions against Expenses), (aa) Landlord's general
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corporate overhead and general and administrative expenses to the extent same
are not specifically incurred in connection with the ownership, management,
repair, maintenance, replacement, insurance and operation of the Property, and
(bb) the costs of curing or repairing any defects in the initial construction of
the Building.
(2) capital expenditures, except those: (a) made primarily to
reduce Expenses or increases therein, or to comply with Laws or insurance
requirements (excluding capital expenditures to cure violations of Laws or
insurance requirements that existed prior to the Commencement Date or which
relate to the initial construction of the Building or the Property), or (b) for
replacements (as opposed to additions or new improvements) of roofs, parking
areas, and nonstructural items located in the common areas of the Property
required to keep such areas in good condition; provided, any such permitted
capital expenditure shall be amortized for purposes of this Lease (with interest
at the prevailing loan rate available to Landlord when the cost was incurred)
over: (x) the period during which the reasonably estimated savings in Expenses
equals the expenditure, if applicable, or (y) the useful life of the item as
reasonably determined by Landlord, but in no event less than five (5) years.
(E) "Hazardous Material" shall include, but not be limited to: (i) any
flammable, explosive, toxic, radioactive, biological, corrosive or otherwise
hazardous chemical, substance, liquid, gas, device, form of energy, material or
waste or component thereof, (ii) petroleum-based products, diesel fuel, paints,
solvents, lead, radioactive materials, cyanide, biohazards, infectious or
medical waste and "sharps", printing inks, acids, DDT, pesticides, ammonia
compounds, and any other items which now or subsequently are found to have an
adverse effect on the environment or the health and safety of persons or animals
or the presence of which require investigation or remediation under any Law or
governmental policy, and (iii) any item defined as a "hazardous substance",
"hazardous material", "hazardous waste", "regulated substance" or "toxic
substance" under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. ss.9601, et seq., Hazardous
Materials Transportation Act, 49 U.S.C. ss.1801, et seq., Resource Conservation
and Recovery Act of 1976, 42 U.S.C. ss.6901 et seq., Clean Water Act, 33 U.S.C.
ss.1251, et seq., Safe Drinking Water Act, 14 U.S.C. ss.300f, et seq., Toxic
Substances Control Act, 15 U.S.C. ss.2601, et seq., Atomic Energy Act of 1954,
42 U.S.C. ss.2014 et seq., and any similar federal, state or local Laws, and all
regulations, guidelines, directives and other requirements thereunder, all as
may be amended or supplemented from time to time.
(F) "Landlord" shall mean only the landlord from time to time, except
that for purposes of any provisions defending, indemnifying and holding Landlord
harmless hereunder, "Landlord" shall include past, present and future landlords
and their respective partners, beneficiaries, trustees, officers, directors,
employees, shareholders, principals, agents, affiliates, successors and assigns.
(G) "Law" or "Laws" shall mean all federal, state, county and local
governmental and municipal laws, statutes, ordinances, rules, regulations,
codes, decrees, orders and other such requirements, applicable equitable
remedies and decisions by courts in cases where such decisions are considered
binding precedents in the State in which the Property is located, and decisions
of federal courts applying the Laws of such State, at the time in question. This
Lease shall be interpreted and governed by the Laws of the State in which the
Property is located.
(H) "Lender" shall mean the holder of any Mortgage at the time in
question, and where such Mortgage is a ground lease, such term shall refer to
the ground lessor (and the term "ground lease" although not capitalized is
intended throughout this Lease to include any superior or master lease).
(I) "Mortgage" shall mean all mortgages, deeds of trust, ground leases
and other such encumbrances now or hereafter placed upon the Property or
Building, or any part thereof, and all renewals, modifications, consolidations,
replacements or extensions thereof, and all indebtedness now or hereafter
secured thereby and all interest thereon.
(J) "Person" shall mean an individual, trust, partnership, limited
liability company, joint venture, association, corporation and any other entity.
(K) "Premises" shall mean the area within the Building identified in
Article 1 and Exhibit A. Possession of
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areas necessary for utilities, services, safety and operation of the Property,
including the Systems and Equipment, fire stairways, perimeter walls, space
between the finished ceiling of the Premises and the slab of the floor or roof
of the Property thereabove, and the use thereof together with the right to
install, maintain, operate, repair and replace the Systems and Equipment,
including any of the same in, through, under or above the Premises in locations
that will not materially interfere with Tenant's use of the Premises, are hereby
excepted and reserved by Landlord, and not demised to Tenant.
(L) "Property" shall mean the Building, and any common or public areas
or facilities, easements, corridors, lobbies, sidewalks, loading areas,
driveways, landscaped areas, skywalks, parking rights, garages and lots, and any
and all other rights, structures or facilities operated or maintained in
connection with or for the benefit of the Building, and all parcels or tracts of
land on which all or any portion of the Building or any of the other foregoing
items are located, and any fixtures, machinery, apparatus, Systems and
Equipment, furniture and other personal property located thereon or therein and
used in connection in connection with the operation thereof. If the Building
shall be part of a development or complex of buildings or structures
collectively owned by Landlord or its affiliates, the Property shall, at
Landlord's option, also be deemed to include such other of those buildings or
structures as Landlord shall from time to time designate, and shall initially
include such buildings and structures (and related facilities and parcels on
which the same are located) as Landlord shall have incorporated by reference to
the total rentable area of the Property in Article 1.
(M) "Rent" shall have the meaning specified therefor in Article 3.
(N) "Systems and Equipment" shall mean any plant, machinery,
transformers, duct work, cable, wires, and other equipment, facilities, and
systems designed to supply light, heat, ventilation, air conditioning and
humidity or any other services or utilities, or comprising or serving as any
component or portion of the electrical, gas, steam, plumbing, sprinkler,
communications, alarm, security, or fire/life/safety systems or equipment, or
any elevators, escalators or other mechanical, electrical, electronic, computer
or other systems or equipment for the Property, except to the extent that any of
the same serves particular tenants exclusively (and "systems and equipment"
without capitalization shall refer to such of the foregoing items serving
particular tenants exclusively).
(O) "Taxes" shall mean all amounts (unless required by Landlord to be
paid under Article 14) for federal, state, county, or local governmental,
special district, improvement district, municipal or other political subdivision
taxes, fees, levies, assessments, charges or other impositions of every kind and
nature in connection with the ownership, leasing and operation of the Property,
whether foreseen or unforeseen, general, special, ordinary or extraordinary
(including real estate and ad valorem taxes, general and special assessments
(provided, if special assessments are payable in installments, Landlord shall
include in Taxes the minimum amount payable each year, with any required
interest thereon), transit taxes, water and sewer rents, license and business
license fees, use or occupancy taxes, taxes based upon the receipt of rent
including gross receipts or sales taxes applicable to the receipt of rent or
service or value added taxes, personal property taxes, taxes on fees paid by
Landlord for property management services, and taxes or charges for fire
protection, streets, sidewalks, road maintenance, refuse or other services). If
the method of taxation of real estate prevailing at the time of execution hereof
shall be, or has been, altered so as to cause the whole or any part of the Taxes
now, hereafter or heretofore levied, assessed or imposed on real estate to be
levied, assessed or imposed on Landlord, wholly or partially, as a capital stock
levy or otherwise, or on or measured by the rents, income or gross receipts
received therefrom, then such new or altered taxes attributable to the Property
shall be included within the term "Taxes," except that the same shall not
include any portion of such tax attributable to other income of Landlord not
relating to the Property. Tenant shall pay Tenant's Share of increased Taxes
whether Taxes are increased as a result of increases in the assessment or
valuation of the Property (whether based on a sale, change in ownership or
refinancing of the Property or otherwise), increases in tax rates, reduction or
elimination of any rollbacks or other deductions available under current law,
scheduled reductions of any tax abatement, as a result of the elimination,
invalidity or withdrawal of any tax abatement, or for any other cause
whatsoever. Notwithstanding the foregoing, there shall be excluded from Taxes
all excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income taxes,
and other taxes to the extent applicable to Landlord's general or net income (as
opposed to rents, receipts or income attributable to operations at the
Property).
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(P) "Tenant" shall be applicable to one or more Persons as the case may
be, the singular shall include the plural, and if there be more than one Tenant,
the obligations thereof shall be joint and several. When used in the lower case,
"tenant" shall mean any other tenant, subtenant or occupant of the Property.
(Q) "Tenant's Share" of Taxes and Expenses shall be the percentage set
forth in Article 1, but if the rentable area of the Premises changes due to the
addition or subtraction of space under this Lease or by amendment, Tenant's
Share shall thereupon become the rentable area of the Premises divided by the
rentable area of the Property, excluding any parking facilities, subject at all
times to adjustment under Article 3. Tenant acknowledges that the "rentable area
of the Premises" under this Lease includes the so-called "usable area," without
deduction for columns or projections, multiplied by a load or conversion factor
pursuant to BOMA/ANSI standard as of June 7, 1996, to reflect a share of certain
areas, which may include lobbies, corridors, mechanical, utility, janitorial,
boiler and service rooms and closets, restrooms, and other public, common and
service areas. Except as provided expressly to the contrary herein, the
"rentable area of the Property" shall include all rentable area of all space
leased or available for lease at the Property, which Landlord may reasonably
re-determine from time to time, to reflect remeasurements, re-configurations,
additions or modifications to the Property; provided, however, that Tenant's
Share shall not increase beyond the percentage set forth in Article 1 except due
to the addition of space to the Premises as set forth above. If the Property, or
any development or complex of which it is a part, shall contain non-office uses
during any period, Landlord may determine, in accordance with sound accounting
and management practices, Tenant's Share of Taxes and Expenses for only the
office portion of the Property or of such development or complex; in such event,
Tenant's Share shall be based on the ratio of the rentable area of the Premises
to the rentable area of such office portion for such period.
R. "Utility Costs" shall include costs for electricity, power, gas,
steam, oil or other fuel, water, sewer and other such services for the Property,
including sales or other taxes thereon.
ARTICLE 31: OFFER
The submission and negotiation of this Lease shall not be deemed an
offer to enter the same by Landlord (nor an option or reservation for the
Premises), but the solicitation of such an offer by Tenant. Tenant agrees that
its execution of this Lease constitutes a firm offer to enter the same which may
not be withdrawn for a period of five (5) business days after delivery to
Landlord. During such period and in reliance on the foregoing, Landlord may, at
Landlord's option, deposit any Security Deposit and Rent, proceed with any
plans, specifications, alterations or improvements, and permit Tenant to enter
the Premises, but such acts shall not be deemed an acceptance of Tenant's offer
to enter this Lease, and such acceptance shall be evidenced only by Landlord
signing and delivering this Lease to Tenant.
ARTICLE 32: MISCELLANEOUS
A. Captions and Interpretation. The captions of the Articles and
Paragraphs of this Lease are for convenience of reference only and shall not be
considered or referred to in resolving questions of interpretation. Tenant
acknowledges that it has read this Lease and that it has had the opportunity to
confer with counsel in negotiating this Lease; accordingly, this Lease shall be
construed neither for nor against Landlord or Tenant, but shall be given a fair
and reasonable interpretation in accordance with the meaning of its terms. The
neuter shall include the masculine and feminine, and the singular shall include
the plural. The term "including" shall be interpreted to mean "including, but
not limited to."
B. Survival of Provisions. All obligations (including indemnity, Rent
and other payment obligations) or rights of either party arising during or
attributable to the period prior to expiration or earlier termination of this
Lease shall survive such expiration or earlier termination.
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C. Severability. If any term or provision of this Lease or portion
thereof shall be found invalid, void, illegal, or unenforceable generally, or
with respect to any particular party, by a court of competent jurisdiction, it
shall not affect, impair or invalidate any other terms or provisions or the
remaining portion thereof, or its or their enforceability with respect to any
other party.
D. Intentionally Omitted.
E. Memorandum of Lease. Either party or any Lender shall have the right
to record a memorandum of lease with respect to this Lease. The party desiring
such recordation shall (i) prepare a memorandum of lease (in a form which shall
be reasonably acceptable to the other party) and furnish it to the other party
for execution, and (ii) record the memorandum of lease at its sole expense and
furnish the other party with a date-stamped copy of such recorded memorandum. If
requested by Landlord, Tenant shall execute and deposit with Landlord a
Discharge of Lease (in a form which shall be reasonably acceptable to Tenant) to
be held by Landlord in escrow until the Lease has been terminated or has expired
in accordance with its terms. Upon such termination or expiration, Landlord
shall have the right, at its expense, to record such Discharge of Lease.
F. Light, Air and Other Interests. This Lease does not grant any legal
rights to "light and air" outside the Premises nor any particular view visible
from the Premises, nor any easements, licenses or other interests unless
expressly contained in this Lease.
G. Authority. If Tenant is any form of corporation, partnership,
limited liability company or partnership, association or other organization,
Tenant and all Persons signing for Tenant below hereby represent that this Lease
has been fully authorized and no further approvals are required, and Tenant is
duly organized, in good standing and legally qualified to do business in the
Premises (and has any required certificates, licenses, permits and other such
items).
H. Partnership Tenant. If Tenant is a partnership, all current and new
general partners shall be jointly and severally liable for all obligations of
Tenant hereunder and as this Lease may hereafter be modified, whether such
obligations accrue before or after admission of future partners or after any
partners die or leave the partnership. Tenant shall cause each new partner to
sign and deliver to Landlord written confirmation of such liability, in form and
content satisfactory to Landlord, but failure to do so shall not avoid such
liability.
I. Successors and Assigns; Transfer of Property and Security Deposit.
Each of the terms and provisions of this Lease shall be binding upon and inure
to the benefit of the parties' respective heirs, executors, administrators,
guardians, custodians, successors and assigns, subject to Article 13 respecting
Transfers and Article 18 respecting rights of Lenders. Subject to Article 18, if
Landlord shall convey or transfer the Property or any portion thereof in which
the Premises are contained to another party, such party shall thereupon be and
become landlord hereunder, shall be deemed to have fully assumed all of
Landlord's obligations under this Lease accruing during such party's ownership,
including the return of any Security Deposit, and Landlord shall be free of all
such obligations accruing from and after the date of conveyance or transfer.
J. Limitation of Landlord's Liability. Tenant agrees to look solely to
Landlord's interest in the Property for the enforcement of any judgment, award,
order or other remedy under or in connection with this Lease or any related
agreement, instrument or document or for any other matter whatsoever relating
thereto or to the Property or Premises. Under no circumstances shall any present
or future, direct or indirect, principals or investors, general or limited
partners, officers, directors, shareholders, trustees, beneficiaries,
participants, advisors, managers, employees, agents or affiliates of Landlord,
or of any of the other foregoing parties, or any of their heirs, successors or
assigns have any liability for any of the foregoing matters. In no event shall
either party be liable to the other party hereunder for any consequential
damages.
K. Confidentiality. Tenant shall keep the content and all copies of
this Lease, related documents or amendments now or hereafter entered, and all
proposals, materials, information and matters relating thereto, including the
results of any review of Landlord's records under Article 3, strictly
confidential, and shall not disclose,
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disseminate or distribute any of the same, or permit the same to occur, except
on an "as needed" basis to the extent reasonably required for proper business
purposes by Tenant's employees, attorneys, insurers, auditors, lenders, brokers
and Transferees (and Tenant shall obligate any such parties to whom disclosure
is permitted to honor the confidentiality provisions hereof), and except as may
be required by Law or court proceedings.
Landlord shall keep the content and all copies of any financial
statements or other financial information given to Landlord by Tenant strictly
confidential, and shall not disclose, disseminate or distribute any of the same,
or permit the same to occur, except on an "as needed" basis to the extent
reasonably required for proper business purposes by Landlord's employees,
attorneys, insurers, auditors, lenders, brokers and transferees (and Landlord
shall obligate any such parties to whom disclosure is permitted to honor the
confidentiality provisions hereof), and except as may be required by Law or
court proceedings.
ARTICLE 33: ENTIRE AGREEMENT
This Lease, together with the Exhibits and other documents listed in
Article 1 (WHICH ARE HEREBY COLLECTIVELY INCORPORATED HEREIN AND MADE A PART
HEREOF AS THOUGH FULLY SET FORTH), contains all the terms and provisions between
Landlord and Tenant relating to the matters set forth herein and no prior or
contemporaneous agreement or understanding pertaining to the same shall be of
any force or effect, except for any such contemporaneous agreement specifically
referring to and modifying this Lease and signed by both parties. Without
limitation as to the generality of the foregoing, Tenant hereby acknowledges and
agrees that Landlord's leasing agents and field personnel are only authorized to
show the Premises and negotiate terms and conditions for leases subject to
Landlord's final approval, and are not authorized to make any agreements,
representations, understandings or obligations binding upon Landlord respecting
the condition of the Premises or Property, suitability of the same for Tenant's
business, the current or future amount of Taxes or Expenses or any component
thereof, the amount of rent or other terms applicable under other leases at the
Property, whether Landlord is furnishing the same utilities or services to other
tenants at all, on the same level or on the same basis, or any other matter, and
no such agreements, representations, understandings or obligations not expressly
contained herein or in such contemporaneous agreement shall be of any force or
effect. TENANT HAS RELIED ON TENANT'S INSPECTIONS AND DUE DILIGENCE IN ENTERING
THIS LEASE, AND NOT ON ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED,
CONCERNING THE HABITABILITY, CONDITION OR SUITABILITY OF THE PREMISES OR
PROPERTY FOR ANY PARTICULAR PURPOSE OR ANY OTHER MATTER NOT EXPRESSLY CONTAINED
HEREIN. This Lease, including the Exhibits referred to above, may not be
modified, except in writing signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first set forth above.
LANDLORD: CMD PROPERTIES, INC., an Illinois corporation,
By: /s/ Allen D. Aldridge
-------------------------------------
Allen D. Aldridge, Vice-President
TENANT: OpenSite Technologies, Inc. [SEAL]
A Delaware corporation
By: /s/ James R. Ford
Name:
Its:
CERTIFICATE
I, _________________________, as ______________________ of the
aforesaid
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Tenant, hereby certify that the individual(s) executing the foregoing Lease on
behalf of Tenant was/were duly authorized to act in his/their capacities as set
forth above, and his/their action(s) are the action of Tenant.
(Corporate Seal) __________________________________________
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EXHIBIT A: PREMISES
(Floor Plate Showing Premises Cross-Hatched)
<PAGE> 39
EXHIBIT B: RULES
(1) Access to Property. Before or after Building Hours, or such other
hours as Landlord shall determine from time to time, access to and within the
Property and/or to the passageways, lobbies, entrances, exits, loading areas,
corridors, elevators or stairways and other areas in the Property may be
restricted and access gained by use of a key to the outside doors of the
Property, or pursuant to such reasonable security procedures Landlord may from
time to time impose. Landlord shall in all cases retain the right to control and
prevent access to such areas by Persons engaged in activities which are illegal
or violate these Rules, or whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation and interests of the Property
and its tenants (and Landlord shall have no liability in damages for such
actions taken in good faith). No Tenant and no employee or invitee of Tenant
shall enter areas reserved for the exclusive use of Landlord, its employees or
invitees or other Persons. Tenant shall keep doors to corridors and lobbies
closed except when persons are entering or leaving.
(2) Signs. Landlord, at its expense, shall cause building standard
suite identification signage to be placed on or adjacent to the main entrance
door of the Premises, and shall provide directory strips for any Property
directory consistent with Landlord's standard practices at the Property. Tenant
shall not paint, display, inscribe, maintain or affix any sign, placard,
picture, advertisement, name, notice, lettering or direction on any part of the
outside or inside of the Property, or on any part of the inside of the Premises
which can be seen from the outside of the Premises, without the prior consent of
Landlord, and then only such name or names or matter and in such color, size,
style, character and material, and with professional designers, fabricators and
installers as may be first approved or designated by Landlord in writing.
Landlord shall prescribe the suite number and identification sign for the
Premises (which shall be prepared and installed by Landlord at its expense).
Landlord reserves the right, without notice to Tenant, to remove at Tenant's
expense all matter not so installed or approved.
(3) Window and Door Treatments Tenant shall not place anything or allow
anything to be placed in the Premises near the glass of any door, partition,
wall or window which may be unsightly from outside the Premises, and Tenant
shall not place or permit to be placed any article of any kind on any window
ledge or on the exterior walls. Blinds, shades, awnings or other forms of inside
or outside window devices shall not be placed in or about the outside windows or
doors in the Premises except to the extent, if any, that the design, character,
shape, color, material and make thereof is first approved or designated by
Landlord. Tenant shall not install or remove any solar tint film from the
windows.
(4) Balconies and Patios. If the Premises has access to a patio or
balcony, Tenant shall have a license to enter such area, subject to the
following provisions: (i) Tenant's access to such area shall be limited to the
area immediately adjoining the Premises (and bounded by an extension of the
demising lines of the Premises), and Landlord reserves the right to install
materials separating Tenant's area from the area adjoining other tenants'
premises, (ii) Tenant shall use such area only in a manner that is quiet and
compatible with the nature of the Building as an office building, which only
involves the use of benches or outdoor furniture approved by Landlord in
writing, and which will not bother, disturb or annoy any other occupants of the
Property, and (iii) Tenant's use thereof shall be subject to the other
provisions of this Lease, including the other Rules.
(5) Lighting and General Appearance of Premises. Landlord reserves the
right to designate and/or approve in writing all internal lighting that may be
visible from the public, common or exterior areas. The design, arrangement,
style, color, character, quality and general appearance of the portion of the
Premises visible from public, common and exterior areas, and contents of such
portion of the Premises, including furniture, fixtures, signs, art work, wall
coverings, carpet and decorations, and all changes, additions and replacements
thereto shall at all times have a neat, professional, attractive, first class
office appearance.
(6) Property Tradename, Likeness, Trademarks. Tenant shall not in any
manner use the name of the Property for any purpose other than as Tenant's
business address, or use any tradenames or trademarks of Landlord, any other
tenant, or their affiliates, or any picture or likeness of the Property, for any
purpose, in any letterheads, circulars, notices, advertisements or other
material whatsoever.
(7) Deliveries and Removals. Furniture, freight and other large or
heavy articles, and all other deliveries may be brought into the Property only
at times and in the manner designated by Landlord, and always at the Tenant's
sole responsibility and risk. Landlord may inspect items brought into the
Property or Premises with respect to weight or dangerous nature or compliance
with this Lease or Laws. Landlord may (but shall have no obligation to) require
that all furniture, equipment, cartons and other articles removed from the
Premises or the Property be listed and a removal permit therefor first be
obtained from Landlord. Tenant shall not take or permit to be taken in or out of
other entrances or elevators of the Property any item normally taken, or which
Landlord otherwise reasonably requires to be taken, in or out through service
doors or on freight elevators. Landlord may impose reasonable charges (not to
exceed Landlord's actual costs) and requirements for the use of loading areas,
and reserves the right to alter schedules upon reasonable notice to Tenant. Any
hand-carts used at the Property shall have rubber wheels and sideguards, and no
other material-handling equipment may be used without Landlord's prior written
approval.
<PAGE> 40
(8) Outside Vendors. Tenant shall not obtain for use upon the Premises
janitor or other services, except from Persons designated or approved by
Landlord. Any Person engaged by Tenant to provide any other services shall be
subject to scheduling and direction by the manager or security personnel of the
Property. Vendors must use freight elevators and service entrances.
(9) Overloading Floors; Vaults. Tenant shall not overload any floor or
part thereof in the Premises or Property, including any public corridors or
elevators therein, by bringing in or removing any large or heavy articles, and
Landlord may prohibit, or direct and control the location and size of, safes and
all other heavy articles and require at Tenant's expense supplementary supports
of such material and dimensions as Landlord may deem necessary to properly
distribute the weight.
(10) Locks and Keys. Tenant shall use such standard key system
designated by Landlord on all keyed doors to and within the Premises, excluding
any permitted vaults or safes (but Landlord's designation shall not be deemed a
representation of adequacy to prevent unlawful entry or criminal acts, and
Tenant shall maintain such additional insurance as Tenant deems advisable for
such events). Tenant shall not attach or permit to be attached additional locks
or similar devices to any door or window, change existing locks or the mechanism
thereof, or make or permit to be made any keys for any door other than those
provided by Landlord. Landlord shall provide to Tenant, at no charge to Tenant,
all keys needed in connection with Tenant's initial occupancy of the Premises,
up to a maximum of 75 keys per lock. If more than 75 keys for one lock are
desired, Landlord will provide them upon payment of Landlord's charges. In the
event of loss of any keys furnished by Landlord, Tenant shall pay Landlord's
reasonable charges therefor. The term "key" shall include mechanical, electronic
or other keys, cards and passes.
(11) Safety And Security Devices, Services And Programs. Safety and
security devices, services and programs provided by Landlord, if any, while
intended to deter crime and ensure safety, may not in given instances prevent
theft or other criminal acts, or ensure safety of persons or property. The risk
that any safety or security device, service or program may not be effective, or
may malfunction, or be circumvented by a criminal, is assumed by Tenant with
respect to Tenant's property and interests, and Tenant shall obtain insurance
coverage to the extent Tenant desires protection against such criminal acts and
other losses, as further described in Article 10. Tenant agrees to cooperate in
any reasonable safety or security program developed by Landlord or required by
Law.
(12) Utility Closets and Connections. Landlord reserves the right to
control access to and use of, and monitor and supervise any work in or
affecting, the "wire" or telephone, electrical, plumbing or other utility
closets, the Systems and Equipment, and any changes, connections, new
installations, and wiring work relating thereto (or Landlord may engage or
designate an independent contractor to provide such services). Tenant shall
obtain Landlord's prior written consent for any such access, use and work in
each instance, and shall comply with such requirements as Landlord may impose,
and the other provisions of Article 6 respecting electric installations and
connections, Article 28 respecting telephone Lines and connections, and Article
9 respecting Work in general. Tenant shall have no right to use any broom
closets, storage closets, janitorial closets, or other such closets, rooms and
areas whatsoever. Tenant shall not install in or for the Premises any equipment
which requires more electric current than Landlord is required to provide under
this Lease, without Landlord's prior written approval, and Tenant shall
ascertain from Landlord the maximum amount of load or demand for or use of
electrical current which can safely be permitted in and for the Premises, taking
into account the capacity of electric wiring in the Property and the Premises
and the needs of tenants of the Property, and shall not in any event connect a
greater load than such safe capacity.
(13) Plumbing Equipment. The toilet rooms, urinals, wash bowls, drains,
sewers and other plumbing fixtures, equipment and lines shall not be misused or
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein.
(14) Trash. All garbage, refuse, trash and other waste shall be kept in
the kind of container, placed in the areas, and prepared for collection in the
manner and at the times and places specified by Landlord, subject to Article 29
respecting Hazardous Materials. Landlord reserves the right to require that
Tenant participate in any recycling program designated by Landlord.
(15) Alcohol, Drugs, Food and Smoking. Landlord reserves the right to
exclude or expel from the Property any person who, in the judgment of Landlord,
is intoxicated or under the influence of liquor or drugs, or who shall in any
manner do any act in violation of any of these Rules. Tenant shall not at any
time manufacture, sell, use or give away, any spirituous, fermented,
intoxicating or alcoholic liquors on the Premises, nor permit any of the same to
occur (except in connection with occasional client or business events, including
cocktail parties, conducted in the Premises, provided: (i) the same shall not
violate any Laws or other provisions of these Rules or the Lease, and shall in
no event disturb or bother any other occupant of the Property, (ii) the same
shall be in the ordinary course of Tenant's business (e.g. excluding a New
Year's Eve party), (iii) Tenant shall have for each such event "host liquor
liability insurance" if no such items are sold, and full liquor liability
insurance if any such items are sold, in each case in the amount of Tenant's CGL
policy required under this Lease and naming the same Additional Insureds
required with respect to such CGL policy under this Lease, and (iv) if Landlord
so requests in writing, Tenant shall thereafter provide reasonable advance
notice of such events to Landlord, which notices shall include a certificate of
insurance evidencing the coverage required herein). Tenant shall not at any time
cook, sell, purchase or give away, food in any form by or to any of Tenant's
agents or employees or any other parties on the Premises, nor permit any of the
same to occur (other than in microwave ovens and coffee makers properly
maintained in good and safe working order and repair in lunch rooms or kitchens
for employees as may be permitted or installed by Landlord, and which do not
violate any Laws or bother or annoy any other tenant). Tenant and its employees
shall not smoke tobacco on any interior part of the Property except those areas,
if any, that are designated or approved as smoking areas by Landlord.
<PAGE> 41
(16) Use of Common Areas; No Soliciting. Tenant shall not use the
common areas, including areas adjacent to the Premises, for any purpose other
than ingress and egress, and any such use thereof shall be subject to the other
provisions of this Lease, including these Rules. Without limiting the generality
of the foregoing, Tenant shall not allow anything to remain in any passageway,
sidewalk, court, corridor, stairway, entrance, exit, elevator, parking or
shipping area, or other area outside the Premises. Tenant shall not use the
common areas to canvass, solicit business or information from, or distribute any
article or material to, other tenants or invitees of the Property. Tenant shall
not make any room-to-room canvass to solicit business or information or to
distribute any article or material to or from other tenants of the Property and
shall not exhibit, sell or offer to sell, use, rent or exchange any products or
services in or from the Premise unless ordinarily embraced within the Tenant's
use of the Premises expressly permitted in the Lease.
(17) Energy and Utility Conservation. Tenant shall not waste
electricity, water, heat or air conditioning or other utilities or services, and
agrees to cooperate fully with Landlord to assure the most effective and energy
efficient operation of the Property and shall not allow the adjustment (except
by Landlord's authorized Property personnel) of any controls. Tenant shall not
obstruct, alter or impair the efficient operation of the Systems and Equipment,
and shall not place any item so as to interfere with air flow. Tenant shall keep
corridor doors closed and shall not open any windows, except that if the air
circulation shall not be in operation, windows which are openable may be opened
with Landlord's consent. If reasonably requested by Landlord (and as a condition
to claiming any deficiency in the air-conditioning or ventilation services
provided by Landlord), Tenant shall close any blinds or drapes in the Premises
to prevent or minimize direct sunlight.
(18) Landlord Access to Systems and Equipment. Tenant shall not place
partitions, furniture or other obstructions in the Premises which may prevent or
impair Landlord's access to the Systems and Equipment for the Property or the
systems and equipment for the Premises.
(19) Unattended Premises. Before leaving the Premises unattended,
Tenant shall close and securely lock all doors or other means of entry to the
Premises and shut off all lights and water faucets in the Premises (except heat
to the extent necessary to prevent the freezing or bursting of pipes).
(20) Going-Out-Of-Business Sales and Auctions. Tenant shall not use, or
permit any other party to use, the Premises for any distress, fire, bankruptcy,
close-out, "lost our lease" or going-out-of-business sale or auction. Tenant
shall not display any signs advertising the foregoing anywhere in or about the
Premises. This prohibition shall also apply to Tenant's creditors.
(21) Labor Harmony. Tenant shall not use (and upon notice from Landlord
shall cease using) contractors, services, workmen, labor, materials or
equipment, or labor and employment practices that, in Landlord's good faith
judgment, may cause strikes, picketing or boycotts or disturb labor harmony with
the workforce or trades engaged in performing other work, labor or services in
or about the Property.
(22) Prohibited Activities. Tenant shall not: (i) use strobe or
flashing lights in or on the Premises, (ii) install or operate any internal
combustion engine, boiler, machinery, refrigerating (except for a refrigerator
in connection with a kitchen to which Landlord has consented within the
Premises), heating or air conditioning equipment in or about the Premises, (iii)
use the Premises for housing, lodging or sleeping purposes or for the washing of
clothes, (iv) place any radio or television antennae other than inside of the
Premises, (v) operate or permit to be operated any musical or sound producing
instrument or device which may be heard outside the Premises, (vi) use any
source of power other than electricity, (vii) operate any electrical or other
device from which may emanate electrical, electromagnetic, x-ray, magnetic
resonance, energy, microwave, radiation or other waves or fields which may
interfere with or impair radio, television, microwave, or other broadcasting or
reception from or in the Property or elsewhere, or impair or interfere with
computers, faxes or telecommunication lines or equipment at the Property or
elsewhere, or create a health hazard, (viii) bring or permit any bicycle or
other vehicle, or dog (except in the company of a blind person or except where
specifically permitted) or other animal or bird in the Property, (ix) make or
permit objectionable noise, vibration or odor to emanate from the Premises, (x)
do anything in or about the Premises or Property that is illegal, immoral,
obscene, pornographic, or anything that may in Landlord's good faith opinion
create or maintain a nuisance, cause physical damage to the Premises or
Property, interfere with the normal operation of the Systems and Equipment,
impair the appearance, character or reputation of the Premises or Property,
create waste to the Premises or Property, cause demonstrations, protests,
loitering, bomb threats or other events that may require evacuation of the
Building, (xi) advertise or engage in any activities which violate the spirit or
letter of any licensing requirements of any professional or business
organization, (xii) throw or permit to be thrown or dropped any article from any
window or other opening in the Property, (xiii) use the Premises for any
purpose, or permit upon the Premises or Property anything, that may be dangerous
to persons or property (including firearms or other weapons (whether or not
licensed or used by security guards) or any explosive or combustible articles or
materials), (xiv) place vending or game machines in the Premises, except vending
machines for employees, (xv) adversely affect the indoor air quality of the
Premises or Property, or (xvi) do or permit anything to be done upon the
Premises or Property in any way tending to disturb, bother, annoy or interfere
with Landlord or any other tenant at the Property or the tenants of neighboring
property, or otherwise disrupt orderly, quiet use and occupancy of the Property.
<PAGE> 42
(23) Transportation Management. Tenant shall comply with all present or
future programs intended to manage parking, transportation or traffic in and
around the Property, and in connection therewith, Tenant shall take responsible
action for the transportation planning and management of all employees located
at the Premises by working directly with Landlord, any governmental
transportation management organization or any other transportation-related
committees or entities. Such programs may include, without limitation: (i)
restrictions on the number of peak-hour vehicle trips generated by Tenant; (ii)
increased vehicle occupancy; (iii) implementation of an in-house ridesharing
program and an employee transportation coordinator; (iv) working with employees
and any Property or area-wide ridesharing program manager; (v) instituting
employer-sponsored incentives (financial or in-kind) to encourage employees to
rideshare; and (vi) utilizing flexible work shifts for employees.
(24) Parking. If the Property now or hereafter contains, or Landlord
has obtained the right to use for the Property, a parking garage, structure,
facility or area ("Parking Facility"), the following Rules shall apply therein:
(i) Cars must be parked entirely within the stall lines, and only small
or other qualifying cars may be parked in areas reserved for such cars; all
directional signs, arrows and speed limits must be observed; spaces reserved for
disabled persons must be used only by vehicles properly designated; washing,
waxing, cleaning or servicing of any vehicle is prohibited; every parker is
required to park and lock his own car, except to the extent that Landlord adopts
a valet parking system; in areas requiring an attendant or security personnel,
hours shall be reasonably established by Landlord or its parking operator from
time to time; parking is prohibited in areas: (a) not striped or designated for
parking, (b) aisles, (c) where "no parking" signs are posted, (d) on ramps, and
(e) loading areas and other specially designated areas. Delivery trucks and
vehicles shall use only those areas designated therefor.
(ii) Parking stickers, key cards or any other devices or forms of
identification or entry shall remain the property of Landlord. Such devices must
be displayed as requested and may not be mutilated in any manner. Devices are
not transferable and any device in the possession of an unauthorized holder will
be void. Loss or theft of such devices must be reported to Landlord or any
garage manager immediately. Any parking devices reported lost or stolen which
are found on any unauthorized car will be confiscated and the illegal holder
will be subject to prosecution. Lost or stolen devices found by Tenant or its
employees must be reported to Landlord or the office of the garage immediately.
(iii) Except as may be expressly provided to the contrary in any other
Exhibit to this Lease: (a) parking for Tenant and its employees and visitors
shall be in areas designated by Landlord from time to time, on a "first come,
first served," unassigned, unreserved basis, in common with Landlord and other
tenants at the Property, and their employees and visitors, and other Persons to
whom Landlord shall grant the right or who shall otherwise have the right to use
the same, and (b) in no event shall Tenant and Tenant's employees and visitors
use more spaces than the number derived by applying Tenant's Share (as defined
in the Lease) to the total number of unassigned spaces in the area or areas
designated by Landlord from time to time to serve the Premises. In addition,
Landlord reserves the right to: (x) adopt additional requirements or procedures
pertaining to parking, including systems with charges favoring carpooling, and
validation systems, (y) assign specific spaces, and reserve spaces for small and
other size cars, disabled persons, and other tenants, customers of tenants or
other parties, and (z) restrict or prohibit full size vans and other large
vehicles.
(iv) Except for any general unassigned, uncovered surface lot spaces
for which charges would be inconsistent with market practices for comparable
properties, or as may be provided in any other Exhibit to this Lease, Landlord
reserves the right to impose such daily or monthly parking charges as Landlord
may establish from time to time. Any such monthly fees shall be paid in advance
prior to the first of each month. Failure to do so will automatically cancel
such parking privileges, and incur a charge at the posted daily parking rate. No
deductions from the monthly rate will be made for days on which the Parking
Facility is not used by Tenant or its designees. In case of any violation of
these rules, Landlord may also refuse to permit the violator to park, and may
remove the vehicle owned or driven by the violator from the Property without
liability whatsoever, at such violator's risk and expense. Landlord reserves the
right to close all or a portion of the Parking Facility in order to make repairs
or perform maintenance services, or to alter, modify, re-stripe or renovate the
same, or if required by casualty, strike, condemnation, act of God, Law or
governmental requirement or guideline, termination or modification of any lease
or other agreement by which Landlord obtained parking rights, or any other
reason beyond Landlord's reasonable control. In the event access is denied for
any reason, any monthly parking charges shall be abated to the extent access is
denied, as Tenant's sole recourse.
(25) Responsibility for Compliance. Tenant shall be responsible for
ensuring compliance with these Rules, as they may be amended, by Tenant's
employees and as applicable, by Tenant's agents, invitees, contractors,
subcontractors, and suppliers. Tenant shall cooperate with any reasonable
program or requests by Landlord to monitor and enforce the Rules, including
providing vehicle numbers and taking appropriate action against such of the
foregoing parties who violate these provisions.
<PAGE> 43
CMD 108A (8/98)
EXHIBIT C Minor Work
Landlord Performance
WORK LETTER Allowance
This Work Letter is an Exhibit to the foregoing document (referred to
herein for convenience as the "Lease Document").
I. The Work
Landlord shall arrange for the following items of work (the "Work") to
be performed in the Premises, provided that Tenant is not then in violation of
the Lease Document:
See Schedule 1
If any of the items of Work listed above are shown in a plan, then a
copy of such plan is referred to and/or attached hereto as "Schedule 1."
II. Building-Standard Materials and Other Matters
The Work shall consist of Landlord's current building standard
materials and finishes, unless otherwise expressly specified above. If Landlord
requires further choices or plans to be approved by Tenant respecting the above
Work (e.g. color choices or locations respecting the above items), Tenant shall:
(i) choose from such choices, if any, that Landlord makes available to Tenant as
building standard, and (ii) approve/sign/initial any such further plans as
requested by Landlord. If any such further choices or approvals are required,
Tenant shall not unreasonably withhold or delay such choices or approvals. If
Tenant's representative fails to provide such choices or approvals within five
(5) business days after Landlord requests the same from such representative,
Landlord may make such choices and approvals for Tenant and proceed with the
Work. Landlord reserves the right to substitute comparable or better materials
and items for those specified, so long as they do not materially and adversely
affect the appearance of the Premises. Any personal property, trade fixtures or
equipment, including, but not limited to, modular or other furniture, and items
for communications or computer systems (except for cabling), whether or not
shown on any plan, shall be provided by Tenant, at Tenant's sole cost.
III. Costs, Allowance and Administrative Fee.
(a) Landlord shall provide an allowance of $125,163 ("Allowance")
toward the Cost of the Work. The "Cost of the Work" includes, without
limitation, all costs for or relating to the Work, including, but not limited
to, any plans, drawings, reports, studies, tests, contractors' charges, permits,
sales taxes, and any demolition, preparation or other work required in
connection with the Work, including without limitation, modifications to any
building systems and equipment, either within or outside the Premises required
as a result of the layout, design, or construction of the Work or in order to
obtain building permits for the Work to be performed within the Premises (unless
Landlord requires that the Work be revised to eliminate the necessity for such
additional work), and Landlord's administrative fee ("Administrative Fee") equal
to five percent (5%) of all other amounts included in the Cost of the Work. If
all or any portion of the Allowance shall not be used for the items permitted
hereunder, Tenant shall have the right to use such funds for its costs with
respect to the exterior signs pursuant to Exhibits G and H and for permanent
leasehold improvements to the Premises provided that such improvements are made
during the calendar year 1999. Any portion of the Allowance not so used shall
belong to Landlord.
(b) Tenant shall bear any portion of the Cost of the Work exceeding the
Allowance ("Tenant's Cost"). Landlord may reasonably estimate Tenant's Cost, and
reasonably revise any such estimate from time to time. Tenant shall deposit any
such estimated amount of Tenant's Cost (or the increase reflected in any such
revised estimate) with Landlord within five (5) business days after Landlord so
requests. Landlord shall have no obligation to proceed with the Work (or proceed
to seek permits or proceed with any demolition or other preliminary Work) until
Landlord shall have received such deposit from Tenant. If the Work involves
progress payments, Landlord
<PAGE> 44
shall apply the amounts deposited by Tenant first. If, after final completion
and payment for the Cost of the Work, the actual amount of Tenant's Cost exceeds
any amount paid by Tenant as an estimate of Tenant's Cost, Tenant shall pay the
difference to Landlord within five (5) business days after Landlord so requests.
If any such estimated amount exceeds the actual amount of Tenant's Cost,
Landlord shall promptly provide a credit or refund of the difference. Tenant's
Cost shall be deemed "Rent" under the Lease Document (and all remedies for the
non-payment of Rent shall be available to Landlord therefor).
(c) Landlord shall pay for the full cost of the demising wall defined
as the wall separating the Premises from the common area corridor, which cost
shall not be deducted from the Allowance.
IV. Miscellaneous.
(a) If this Work Letter is attached as an Exhibit to an amendment to an
existing lease ("Original Lease"), whether such amendment adds or relocates
space or makes any other modifications, the term "Lease Document" herein shall
refer to such amendment, or the Original Lease as amended, as the context
implies. By way of example, in such case, references to the "Premises" herein
shall refer to such additional or relocated space under such amendment, unless
expressly provided to the contrary herein. Capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Lease Document.
(b) This Exhibit is intended to supplement and be subject to the
provisions of the Lease Document, including, without limitation, those
provisions requiring that any modification or amendment be in writing and signed
by authorized representatives of both parties. This Exhibit shall not apply to
any additional space added to the Premises at any time, whether by any options
or rights under the Lease Document or otherwise, or to any portion of the
Premises in the event of a renewal or extension of the Term of the Lease
Document, whether by any options or rights under the Lease Document or
otherwise, unless expressly so provided in the Lease Document or any amendment
or supplement thereto.
<PAGE> 45
SCHEDULE 1
PLAN
Prepared By: Richard A Gurlitz Architects, P.A.
Dated: Construction Drawings dated June 3, 1999
Revised: n/a
Sheets: Cover page, A-1, A-2, A-3, A-4
<PAGE> 46
EXHIBIT D
JANITORIAL SPECIFICATIONS
PAGE 1 OF 2
TENANT SPACES
Daily
Empty all trash containers and remove to dumpster in parking lot.
Replace trash container liners if soiled or torn.
Vacuum carpet in usage/traffic areas accessible to upright vacuum.
Spot clean carpets.
Mop wood floors using treated dust mops.
Spot clean spills and marks from resilient floors.
Dust all office furniture where accessible.
Spot clean partition glass.
Clean drinking fountains using an approved cleaner.
Turn off lights as instructed by property manager.
Lock all doors as instructed by property manager.
Report any maintenance/repair problems to property manager.
Weekly
Vacuum all carpet areas including edges.
Damp mop all resilient floors.
Dust baseboards and other low dusting.
Dust vertical surfaces.
Dust door louvers and any ventilation louvers within hand reach.
Dust window sills and flat surfaces within hand reach.
Spot clean doors and door frames.
Monthly
Do high dusting (tops of door frames, partitions, picture frames, etc.)
Dust window blinds.
Spot clean wall switch plates.
Quarterly
Strip resilient floors and apply new finish, remove wax accumulation in
corners and around edges.
Dust/vacuum wood panels, air supply/return vents and ceiling tiles
adjacent to air vents.
<PAGE> 47
EXHIBIT D
JANITORIAL SPECIFICATIONS
PAGE 2 OF 2
RESTROOMS
Daily
Clean as required all walls, partitions, ledges, sills, counters and
doors.
Damp wipe partitions adjacent to urinals.
Empty waste containers and remove to dumpster in parking lot.
Clean mirrors.
Wet mop floors using a disinfecting cleaner.
Clean and sanitize toilets, urinals and sanitary napkin receptacles.
Refill all dispensers to include hand towels, toilet tissue, hand soap,
and sanitary napkins.
Dust ledges and partition tops.
Turn off lights.
Report any maintenance/repair problems to property manager.
Monthly
Wash toilet partitions and ceramic tile walls with non-streaking
cleaner.
Machine scrub floors.
Do any dusting as may be needed.
ELEVATOR LOBBIES AND BUILDING HALLWAYS
Daily
Mop floors using treated dust mops/damp mop spillage on resilient
floors.
Spray buff as needed to maintain excellent appearance.
Vacuum carpets.
Spot clean carpets.
Dust any ledges or surfaces within hand reach.
Empty and wipe cigarette urns, clean sand by sifting.
Spot clean walls and doors.
Clean and polish drinking fountains.
<PAGE> 48
EXHIBIT E CMD 116B (8/98)
Market Rates
EXTENSION OPTION
1. Option to Extend. Subject to the other provisions hereof, Landlord
hereby grants Tenant one option ("Extension Option") to extend the current Term
of the Lease for an additional period of five (5) consecutive years from the
expiration of the prior period ("Extension Period"), on the same terms and
conditions then in effect under this Lease immediately prior to the Extension
Period, except as modified by the "Market Rates, Terms and Conditions" further
described below, and except that Tenant shall have no further option to extend.
Tenant may exercise the Extension Option only by giving Landlord written notice
thereof ("Tenant's Exercise Notice") no earlier than fifteen (15), and no later
than twelve (12), full calendar months prior to commencement of the subject
Extension Period. Tenant's Exercise Notice hereunder shall be unconditional and
irrevocable (except as expressly provided herein).
2. Financial Information. Tenant's Exercise Notice shall include
detailed financial information for Tenant's business (including balance sheets,
income/expense statements, federal and state tax returns, bank balances, bank
and credit references for the immediately preceding three (3) years and through
the last full calendar quarter of the current year, certified to be complete and
accurate by Tenant's chief financial officer). If Landlord determines that
Tenant's financial condition is not at least as good as Tenant's financial
condition as of the date of this Lease, based on the financial information
requested and provided, and such additional credit information as Landlord may
obtain independently, Landlord may elect to require reasonable additional
security or other provisions as part of the Extension Documentation, or to
reject Tenant's Exercise Notice by written notice to Tenant.
3. Market Rates, Terms and Conditions. Within thirty (30) days after
receiving Tenant's notice and financial information, Landlord shall provide
Tenant with notice ("Landlord's Notice") of the Market Rates, Terms and
Conditions. The term "Market Rates, Terms and Conditions" herein shall mean
Landlord's good faith determination of the Base Rent and other terms and
conditions that a comparable, ready and willing landlord, and a comparable,
ready and willing tenant, would mutually accept on a negotiated arm's length
basis for a lease extension for the Premises for the subject Extension Period,
taking into account when the Extension Period will commence and expire, the
location, quality and age of the Building, the location, size, configuration and
use of the Premises, the method of determining rentable area, that the Premises
constitutes non-sublease, unencumbered, non-equity space, and any other relevant
term or provision in making such determination, subject to the following: (a)
Landlord shall have no obligation to provide leasehold improvements or an
allowance therefor, except that Landlord may at Landlord's option provide new
building standard carpet and paint or an allowance therefor to replace such
existing items when they become reasonably necessary following commencement of
the Extension Period (in which case, the new Base Rent shall be increased to
reflect the amortization thereof with interest at the loan rate then available
to Landlord), (b) Landlord shall have no obligation to provide any other
economic concessions or incentives, except that Landlord may at Landlord's
option provide such items (in which case, the new Base Rent shall be increased
to reflect the amortization thereof with interest at the loan rate then
available to Landlord), and (c) if Landlord pays any brokerage commissions or
other such fees in connection with Tenant's extension herein, the new Base Rent
shall be increased to reflect the amortization thereof with interest at the loan
rate then available to Landlord.
4. Disagreement Concerning Market Rates Terms and Conditions. If the
Market Rates, Terms and Conditions determined by Landlord are not acceptable to
Tenant, then Tenant may, no later than fifteen (15) days after Landlord's
Notice, either: (a) revoke its exercise of the Extension Option by notice
("Tenant Revocation Notice") to Landlord, in which case the Extension Option and
Tenant's exercise thereof shall thereupon be null, void and of no further
effect, or (b) leave Tenant's Exercise Notice irrevocably and unconditionally in
effect and provide notice ("Arbitration Request Notice") of Tenant's desire to
arbitrate in accordance with this Exhibit. If Tenant fails to provide a Tenant
Revocation Notice or Arbitration Request Notice within the time required herein,
then Tenant shall be deemed to have unconditionally and irrevocably exercised
the Extension Option and accepted the Market Rates, Terms and Conditions
contained in Landlord's Notice.
5. Arbitration. If Tenant provides an Arbitration Request Notice within
the time required herein, each party shall within the next fifteen (15) days, at
its own cost and expense, give notice ("Arbitration Appointment Notice") to the
other party appointing a licensed commercial real estate broker with at least
seven (7) years of full-time experience leasing comparable office space in
comparable buildings in the Raleigh Durham market area to determine
<PAGE> 49
the Base Rent component ("Base Rent Component") of the Market Rates, Terms and
Conditions, including any fixed increases in such Base Rent Component, taking
into account the other provisions of this Exhibit, and the other components of
the Market Rates, Terms and Conditions contained in Landlord's Notice (such as
whether such Market Rates, Terms and Conditions include leasehold improvements
or other economic concessions, or a base year or stop level for Taxes or
Expenses). If a party does not appoint such a broker within such fifteen (15)
day period, and so fails for an additional fifteen (15) day period following
further notice from the other party requesting such appointment, and giving
notice of the name of its broker, the single broker appointed shall be the sole
broker and shall reasonably and in good faith determine the Base Rent Component.
If the two brokers are appointed by the parties as stated herein, they shall
meet promptly and attempt to determine the Base Rent Component. If they are
unable to agree on the Base Rent Component within fifteen (15) days after the
second broker has been appointed, they shall elect a third broker meeting the
standards set forth above, and who has not previously acted in any capacity for
either party, within fifteen (15) days thereafter. Each of the parties hereto
shall bear one-half of the cost of appointing the third broker and of paying the
third broker's fee. The third broker, however selected, shall be a person.
Within fifteen (15) days after the selection of the third broker, a majority of
the brokers shall determine the Base Rent Component. If a majority of the
brokers are unable to determine the Base Rent Component within such period, each
broker shall thereupon submit his final determination in writing, the three
determinations shall be added together and the total divided by three, and the
resulting quotient shall be the Base Rent Component, subject to the following
provisions. If the low or high determination are more than ten (10) percent
lower and/or higher than the middle determination, the low determination and/or
the high determination shall be disregarded. If only one determination is
disregarded, the remaining two determinations shall be added together and their
total divided by two, and the resulting quotient shall be the Base Rent
Component. If both the low determination and the high determination are
disregarded as provided herein, the middle determination shall be the Base Rent
Component. If, for any reason, the Base Rent Component has not been resolved by
the commencement of the Extension Period, Tenant shall commence paying Base
Rent, Taxes, Expenses and other sums in accordance with Landlord's Notice on the
commencement of the Extension Period, subject to retroactive and prospective
adjustment after the matter is resolved. An arbitration decision made in
accordance with this Exhibit shall be final and binding on the parties. Tenant
and the brokers shall be required to keep all matters pertaining to the
arbitration strictly confidential and shall be required to sign such
confidentiality agreements as Landlord reasonably requires.
6. General Matters. If this Exhibit is attached to an amendment to an
existing lease, the term "Lease" herein shall refer to such amendment, or the
existing lease as amended, as the context reasonably implies. If Tenant validly
exercises the Extension Option, Tenant shall execute an amendment or such other
documentation as Landlord may require to confirm the extension of the Term,
within fifteen (15) days after Landlord so requests. The Extension Option herein
shall, at Landlord's election, be conditioned on: (a) Tenant having faithfully
complied with each and every term and provision of the Lease Document at all
times, and (b) the Lease Document being in full force and effect, and Tenant not
being in default under the Lease Document, at the time Tenant seeks to exercise
the Extension Option, or at any time thereafter and prior to commencement of the
Extension Period. Tenant's exercise of the Extension Option shall not operate to
cure any default by Tenant of any of the terms or provisions in the Lease
Document, nor to extinguish or impair any rights or remedies of Landlord arising
by virtue of such default. If Tenant shall fail to properly and timely exercise
the Extension Option, then the Extension Option shall thereupon terminate.
STRICT COMPLIANCE AND TIMELINESS IN GIVING TENANT'S NOTICES HEREUNDER IS OF THE
ESSENCE OF THIS PROVISION. The Extension Option is personal to Tenant as named
in this Lease Document and its Tenant Affiliates, except that the assignee under
a complete assignment of the Lease Document shall have the right to exercise
this option. Under no circumstances shall a subtenant under a sublease of the
Premises have any right to exercise the Extension Option. Under no circumstances
shall Rent (i.e. Base Rent, Taxes, Expenses and other such amounts payable by
Tenant) during the Extension Period ever be less than 103.5% of the Rent (i.e.
Base Rent, Taxes, Expenses and other such amounts payable by Tenant) scheduled
to be in effect under the Lease Document immediately prior to the commencement
of the Extension Period, regardless of the Market Rates, Terms and Conditions
(and Landlord's Notice may so notify Tenant if such is the case). The Extension
Option shall be subordinate to, and limited by, any rights of any other parties
to expand into or lease the Premises granted prior to full execution and
delivery of this Lease Document.
<PAGE> 50
EXHIBIT F
LETTER OF CREDIT REQUIREMENTS
1. Tenant shall deposit with Landlord, within three (3) days after
Tenant's execution and submission of this Lease, as security for the full and
prompt performance by Tenant of the terms and covenants of this Lease, a clean,
unconditional, stand-by, irrevocable Letter of Credit in favor of Landlord in
the amount of $34,420.38 substantially in the form attached hereto as Exhibit
F-1, issued by any other federally insured national banking association located
in the metropolitan area in which the Property is located with a net worth in
excess of $250,000,000 and reasonably acceptable to Landlord.
2. The Letter of Credit shall: (a) have an expiration date no earlier
than June 30, 2000 (the "Expiration Date"), or (b) shall have an original
expiration date at least one year after issued, and shall be renewed annually
and automatically through said Expiration Date, in which event, if required in
order to effectuate such extension, Tenant shall submit to Landlord original
amendments extending the expiration date (or replacement letters of credit with
extended expiration dates), on an annual basis no later than the date that is
thirty (30) days prior to the expiration date of the Letter of Credit then in
effect. Failure to so extend the expiration date of the Letter of Credit through
said Expiration Date in the foregoing manner shall constitute a Default under
this Lease entitling Landlord, in addition to all other remedies, to draw down
the Letter of Credit without notice to Tenant and to hold or apply the proceeds
thereof as a cash security deposit ("Cash Security Deposit"), as security for
the full and prompt performance by Tenant of the terms and covenants of this
Lease and apply the same as provided herein with respect to the Letter of
Credit.
3. If Tenant commits a Default under this Lease, Landlord may, but
shall not be obligated to, draw upon the Letter of Credit (but only to the
extent necessary to cure the Default) and use or apply the whole or any part of
the proceeds of the Letter of Credit so drawn for the payment of Tenant's
obligations hereunder. If Landlord draws upon the Letter of Credit and any
portion of the proceeds thereof is not required for such purposes, Landlord
shall hold such unused proceeds as a Cash Security Deposit. The use or
application of the proceeds of the Letter of Credit or any portion thereof shall
not prevent Landlord from exercising any other right or remedy provided
hereunder or under any Law and shall not be construed as liquidated damages.
Tenant shall, within ten (10) days after notice from Landlord, deposit with
Landlord in certified funds an amount equal to any portion of the Letter of
Credit or Cash Security Deposit which may be applied by Landlord to the cure of
any violation by Tenant as described hereunder.
4. The parties agree that so long as Tenant has fully and faithfully
complied with all provisions of this Lease, then, to the extent that Landlord
has not applied the Letter of Credit or Cash Security Deposit as described
herein, the Letter of Credit shall be reduced to zero (--0--) within sixty (60)
days after the earlier to occur of (a) the twenty fourth (24th) full calendar
month of the Term, or (b) the date that Tenant completes a public offering of
its stock. Tenant shall not assign, pledge or otherwise transfer any interest in
the Letter of Credit except as part of an assignment of this Lease approved by
Landlord under Article 13, and any attempt to do so shall be null and void.
<PAGE> 51
EXHIBIT F-1
FORM OF LETTER OF CREDIT FOR SECURITY DEPOSIT
(Letterhead and Address of Bank)
___________, 19__
CMD Properties, Inc.
C/o CMD Realty Investors, Inc.
Suite 135
2500 Meridian Parkway
Durham, North Carolina 27713
Re: Clean Irrevocable Standby Letter of Credit
No. _______________________
Ladies and Gentlemen:
We hereby establish our Clean Irrevocable Standby Letter of Credit No.
__________________ in your favor for the account of OpenSite Technologies, Inc.
("Tenant") in the aggregate amount of Thirty-four thousand Four hundred and
Twenty and 38/100 ($34,420.38).
You may draw upon such Letter of Credit at sight at the above address
or any of our other offices on or before June 30, 2000, or such annual
anniversary thereof to which such date may be extended as provided herein. This
Letter of Credit shall be automatically extended without amendment for one (1)
one year period, unless at least thirty (30) days prior to the present or any
future expiration date, we shall notify you by certified mail that we elect not
to renew this Letter of Credit (such notice to be deemed given when received by
you). Upon receipt of such notice, you may draw upon this Letter of Credit as
provided herein.
You may draw upon this Letter of Credit upon the presentation of your draft,
executed by a officer of your company or its general partner, accompanied by
his/her written statement that you are entitled to draw down the same pursuant
to that certain lease between CMD Properties, Inc., as landlord, and OpenSite
Technologies, Inc., as tenant, dated May __, 1999, by reason that the tenant has
breached or defaulted in the performance of a term or condition under the
aforesaid lease and has failed to cure the same after the expiration of any
applicable cure period, and therefore the undersigned is entitled to the amount
set forth in the draft. We will honor the same without requiring anything
further of any party or person and regardless of any contrary claims, demands or
instruction. You may make partial drawings not to exceed in the aggregate the
foregoing amount.
This Letter of Credit is binding upon, and shall inure to the benefit
of, the parties and their successors and assigns (without limitation as to the
number of times this Letter of Credit may be transferred). This Letter of Credit
sets forth our entire undertaking, and shall not be modified, amended or
expanded by reference to any other document, instrument or agreement. Except to
the extent expressly inconsistent therewith, this Letter of Credit is subject to
the Uniform Customs and Practice for Documentary Credits (1993 Revisions),
International Chamber of Commerce Publication 500, and the Uniform Commercial
Code as adopted in the State in which this Bank is located, as the same may be
revised from time to time. In the event of conflict between the Uniform Customs
and Practice and the Uniform Commercial Code, the latter shall govern and
control.
(Name of Bank)
By:_______________________________
Vice President
<PAGE> 52
EXHIBIT G
TENANT EXTERIOR SIGN
1. Sign Space. Landlord hereby grants Tenant a non-exclusive license to
use a portion of the Property ("Sign Space") located in the area described as
the arched entryway over the main entrance to the Building, as shown on Exhibit
G-1, only for the purpose of installing a Sign ("Sign") identifying the name
"OpenSite Technologies" or other name adopted by Tenant (subject to Section 5
below) and for no other purpose, subject to the following provisions.
2. Sign Space Fees. [Intentionally Deleted]
3. Term of License. The term of this license ("License Term") shall
commence on the Commencement Date, and shall continue until the earlier to occur
of the expiration or earlier termination of the Lease or, at Landlord's option,
Tenant's abandonment of the Premises, subject to the other provisions hereof.
However, at Landlord's option by written notice to Tenant, the License Term
shall: (a) not commence until the Commencement Date, and (b) terminate at any
time thereafter that Tenant and its employees cease to occupy at least 10,000
square feet of rentable area in the Building (whether such cessation is due to
Tenant having assigned its rights under the lease or having subleased a portion
or portions of such space, or having actually vacated such space or a portion
thereof, and without limitation as to any other rights available to Landlord to
terminate this license).
4. Access. Landlord shall permit Tenant reasonable access to the Sign
for the purposes permitted hereunder, during normal business hours at the
Property upon reasonable advance notice and scheduling through Landlord's
management and security personnel. Access after normal business hours may be
granted by Landlord in its reasonable discretion, and for such reasonable
charges as Landlord shall impose. Without limiting Landlord's other rights under
the Lease, Landlord reserves the right to add or subtract other signs and
inspect and make repairs, additions or alterations to the Sign Space or area of
the Property where the Sign Space is located. In connection with exercising such
rights, Landlord may temporarily disconnect the Sign and/or move the Sign to
other comparable space. The exercise by Landlord or any of its rights under this
Paragraph shall not be deemed an eviction or disturbance of Tenant's use of the
roof.
5. Design and Installation. Tenant shall not install the Sign, or
thereafter make any alterations, or additions to the Sign without Landlord's
prior written consent, which shall not be unreasonably withheld except as
expressly otherwise set forth herein. Landlord shall approve or reject the
proposed installation of the Sign within a reasonable time after Tenant submits
(a) plans and specifications for the installation of the Sign, (b) copies of all
required governmental and quasi-governmental permits, licenses, and
authorizations which Tenant will obtain at its own expense, and (c) a
certificate of insurance evidencing the coverage required herein. Tenant's Sign
plans must be professionally prepared and shall show all aspects of the design,
including, but not limited to, font of lettering, number of letters, content,
color and finish, type and quality of materials, dimensions of the Sign and of
every detail (including letters), and all other details of the Sign, placement
of the Sign, and whether it will be illuminated. Landlord may withhold approval
of any aspect of the Sign plans affecting the appearance (including, without
limitation, the name to be used in the sign) or image of the Property in
Landlord's sole and absolute discretion, but shall not unreasonably withhold
approval of other aspects of the Sign plans. Landlord may require that any
installation or other work be done in accordance with any Property rules,
standards or other requirements for installations and/or under the supervision
of Landlord's employees or agents, and in a manner so as to avoid damage to the
Property. All installation work shall be performed in a good and workmanlike
manner, in accordance with all governmental requirements and in accordance with
all provisions of the Lease respecting Work to the Premises.
6. Removal. Upon termination of the Lease or this License, by
expiration or otherwise, Tenant shall, immediately after written request by
Landlord, disconnect and remove the Sign and fully repair and restore the Sign
Space to the same or better condition than prior to installation of the Sign,
ordinary wear and tear, and damage from fire or other casualty not the fault of
Tenant excepted. Tenant shall promptly and properly repair (or at Landlord's
option, pay Landlord's reasonable charges for repairing) during the License Term
and upon termination of the Lease or this License, any leaks or other damage or
injury to the Property (or contents thereof) caused by Tenant's use of the Sign
Space or the installation, use, maintenance or removal of the Sign. If Tenant
does not immediately repair any such leaks, damage or injury, or does not remove
the Sign when so required, Tenant hereby authorizes Landlord
<PAGE> 53
to make such repairs or remove and dispose of the Sign and Tenant shall promptly
pay Landlord's reasonable charges for doing so.
7. Condition; Permits. As of the Commencement Date of this Lease,
Tenant agrees that Tenant has inspected the Sign Space and agrees to accept the
same hereunder "as is". Landlord does not represent or warrant that Sign or its
placement in the Sign Space will comply with any applicable federal, state,
county or local Laws or ordinances or the regulations of any of their agencies,
nor with any covenants, conditions or restrictions that may apply to the
Property, nor that the Sign Space will be suitable for Tenant's purposes. Tenant
shall at all times comply with any applicable federal, state, county or local
laws or ordinances, and all applicable covenants, conditions and restrictions,
pertaining to Tenant's installation and use of the Sign. Tenant's failure or
inability to obtain any necessary permits, approvals, variances or waivers
respecting the Sign and Sign Space shall not excuse Tenant from any obligations
under this Lease; any variances or waivers shall be subject to Landlord's prior
written approval to determine whether such variances or waivers may limit any
rights to place or maintain other Signs at the Property or otherwise adversely
affect Landlord or the Property.
8. Miscellaneous Sign Provisions.
(a) Tenant shall maintain the Sign in good, sightly and first class
appearance, condition and repair, and so as not to detract from the appearance
or image of the Property.
(b) The Sign shall not be illuminated unless Landlord expressly
approves or requires such illumination in writing. If Landlord approves or
requires illumination, Tenant shall ensure that the Sign is fully and completely
illuminated each night between sunset and midnight (or such other time as
Landlord may require, but not beyond sunrise), at Tenant's sole cost and
expense.
(c) Landlord reserves the right to install or permit other parties to
install other signs on or about the Property.
(d) Landlord reserves the right to take, or to grant others the right
to take, pictures or films of the Property, and to use the same as Landlord
wishes without compensation to Tenant.
(e) If Tenant shall fail to maintain, repair, or illuminate (if
approved or required by Landlord hereunder), the Sign in the condition required
hereunder for 48 hours after written notice by Landlord, Landlord may so repair,
maintain and illuminate the Sign, at Tenant's cost and expense (which Tenant
shall pay to Landlord as additional rent, when billed by Landlord), without
limiting Landlord's other rights and remedies.
(f) Once installation of the Sign has commenced, it shall be completed
as soon as possible, and in no event later than three (3) business days
thereafter.
(g) Notwithstanding anything to the contrary contained herein, Landlord
reserves the right to require, by written notice to Tenant, that Tenant prepare
and submit acceptable Sign plans, obtain permits and any other governmental
approvals, install and illuminate the Sign as soon as possible and in no event
later than three (3) months after the Commencement Date under the Lease.
(h) Tenant shall ensure that the Sign does not interfere with any views
from any windows in the Property, nor interfere in any way with the ability of
Landlord or its tenants and occupants of the Property and neighboring properties
to receive radio, television, telephone, microwave, short-wave, long-wave or
other signals of any sort that are transmitted through the air or atmosphere,
nor interfere with the use of electric, electronic or other facilities,
appliances, personal property and fixtures, nor interfere in any way with the
use of any antennas, satellite dishes or other electronic or electric equipment
or facilities currently or hereafter located on or about the Property or other
property.
<PAGE> 54
9. Other Provisions. Except to the extent expressly inconsistent
herewith, all rights and obligations of the parties respecting the Premises
under the Lease shall apply to the Sign Space, including, without limitation,
obligations respecting compliance with Laws, hazardous materials, repairs,
casualty damage, indemnities and insurance (including waivers of insurers'
subrogation rights). If Tenant shall violate this Exhibit, Landlord shall have
the right to cancel this license on five (5) days' written notice, unless within
such period Tenant cures such violation. In any such events, Landlord may also
take action to discontinue providing utilities to the Sign. In case of
violations with respect to the same term or condition under this Exhibit more
than three (3) times during any twelve (12) month period, the next violation of
such term or condition during the succeeding twelve (12) month period, shall at
Landlord's election constitute an incurable violation. Such remedies shall be
cumulative and in addition to any other rights or remedies available to Landlord
at law or equity or provided under the Lease.
10. Tenant's Personal Rights. This license is personal to the Tenant
entity which has entered into and signed this document and to an assignee of
Tenant's entire interest in the Lease. Under no circumstance whatsoever shall
the assignee under a partial assignment of the Lease, or a subtenant under a
sublease of the Premises, have any right herein.
<PAGE> 55
EXHIBIT G-1
[Location and Description of Sign Space area]
<PAGE> 56
CMD 129A (8/98)
EXHIBIT H
TENANT'S NAME ON LANDLORD'S MONUMENT SIGN
1. Monument Listing. Landlord hereby grants Tenant a non-exclusive
license to have the name "OpenSite Technologies" or other name adopted by Tenant
(subject to Section 5 below) listed (such listing is referred to herein as the
"Monument Listing") on the existing monument sign (i.e., the tenant directory
sign) located in the area of the land adjoining the Building ("Monument") as
shown on Exhibit H-1, subject to the following provisions.
2. Monument Listing Fees. [Intentionally omitted.]
3. Term of License. The term of this license ("License Term") shall
commence on the Commencement Date, and shall continue until the earlier to occur
of the expiration or earlier termination of the Lease or, at Landlord's option,
Tenant's abandonment of the Premises, subject to the other provisions hereof.
However, at Landlord's option by written notice to Tenant, the License Term
shall: (a) not commence until the Commencement Date, and (b) terminate at any
time thereafter that Tenant and its employees cease to occupy at least 10,000
square feet of rentable area in the Building (whether such cessation is due to
Tenant having assigned its rights under the lease or having subleased a portion
or portions of such space, or having actually vacated such space or a portion
thereof, and without limitation as to any other rights available to Landlord to
terminate this license).
4. Landlord Design/Fabrication/Installation. Except as provided below,
Landlord shall install the Monument Listing within a reasonable time after
mutual execution of this document and Tenant's occupancy of the Premises,
subject to delays beyond Landlord's reasonable control, and the other provisions
hereof. Landlord reserves the right to arrange for the fabrication and
installation of the Monument Listing using Landlord's current design criteria or
standard signage. Tenant shall reimburse Landlord for its out-of-pocket costs
for the design, fabrication and installation of the Monument Listing within
fifteen (15) days after Landlord bills the same.
5. Tenant Design/Fabrication/Installation. If Tenant desires to design
and/or fabricate and/or install its own Monument Listing, or desires to make any
alterations to the Monument Listing, and Landlord is willing to consider the
same, Tenant shall first submit for Landlord's written approval: (a) the name
and address of the professional sign designer/fabricator/installer to be used by
Tenant, (b) a professionally prepared plan ("Monument Listing Plan"), showing
all aspects of the design, including, but not limited to, font of lettering,
number of letters, content, color and finish, type and quality of materials,
dimensions of the Monument Listing and of every detail (including letters), and
all other details of the Monument Listing and all components thereof, and (c)
copies of all required governmental and quasi-governmental permits, licenses,
and authorizations which Tenant will obtain at its own expense. Landlord may
withhold or condition approval of the Monument Listing Plan, or any aspect
thereof (including, without limitation, the name to be used in the sign), or
approval of the designer/fabricator/installer in Landlord's sole and absolute
discretion. Landlord shall arrange for installation of any Monument Listing
fabricated by Tenant's sign professional, unless Landlord specifically approves
of, or requires, installation by Tenant's sign professional. If Landlord
approves of, or requires, fabrication or installation of the Monument Listing by
Tenant's sign professional, Tenant shall ensure that such work be done in a good
and workmanlike manner, strictly in accordance with the approved Monument
Listing Plan, and in accordance with the Property rules, standards or other
requirements for such work and/or under the supervision of Landlord's employees
or agents, in a manner so as to avoid damage to any part of the Property.
6. Maintenance and Removal. Tenant shall reimburse Landlord for: (a)
Tenant's pro rata share of the costs of maintaining and repairing the Monument
incurred during any period that Tenant and one or more other parties have
Monument Listings on the Monument (such share to be based on an equal division
of costs between such parties), and (b) all costs of maintaining and repairing
the Monument incurred during any period that Tenant is the only party with a
Monument Listing on the Monument. Upon termination of the Lease or this license,
by expiration or otherwise, Landlord may remove and dispose of the Monument
Listing and repair and restore the Monument to the same condition as prior to
installation of the Monument Listing; Tenant shall pay Landlord's reasonable
charges for doing so. Tenant shall pay any charges hereunder, as additional
Rent, within fifteen (15) days after billing.
7. Landlord's General Rights. Without limiting Landlord's other rights
under the Lease or available at
<PAGE> 57
law, Landlord reserves the right to designate and change the position of
Tenant's Listing on the Monument, add or subtract other tenant names and signs,
and inspect and make repairs, additions or alterations to the Monument or area
of the Property where the Monument is located. In connection with exercising
such rights, Landlord may replace or move the Monument, and may temporarily
remove the Monument Listing in connection therewith. Landlord reserves the right
to take, or to grant others the right to take, pictures or films of the
Property, and to use the same as Landlord wishes without compensation to Tenant.
The exercise by Landlord or any of its rights hereunder shall not be deemed an
eviction or a violation of Tenant's rights.
8. Tenant's Personal Rights. This license is personal to the Tenant
entity which has entered into and signed this document and to an assignee of
Tenant's entire interest in the Lease. Under no circumstance whatsoever shall
the assignee under a partial assignment of the Lease, or a subtenant under a
sublease of the Premises, have any right herein.
<PAGE> 58
EXHIBIT H-1
[Location and Description of Monument Listing]
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated May 25, 1999 relating to the financial statements of OpenSite
Technologies, Inc., which appear in such Registration Statement. We also consent
to the references to us under the headings "Experts" and "Selected Financial
Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
July 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OPENSITE TECHNOLOGY FOR THE SIX MONTHS ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 19,324,090
<SECURITIES> 0
<RECEIVABLES> 1,309,432
<ALLOWANCES> 276,182
<INVENTORY> 0
<CURRENT-ASSETS> 20,525,358
<PP&E> 1,031,879
<DEPRECIATION> (229,306)
<TOTAL-ASSETS> 21,855,798
<CURRENT-LIABILITIES> 3,865,264
<BONDS> 0
69,203,966
0
<COMMON> 44,342
<OTHER-SE> (51,288,133)
<TOTAL-LIABILITY-AND-EQUITY> 21,855,798
<SALES> 2,233,537
<TOTAL-REVENUES> 2,586,119
<CGS> 19,894
<TOTAL-COSTS> 493,496
<OTHER-EXPENSES> 6,489,298
<LOSS-PROVISION> 193,422
<INTEREST-EXPENSE> 4,636
<INCOME-PRETAX> (4,175,696)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,175,696)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,175,696)
<EPS-BASIC> (13.31)
<EPS-DILUTED> (13.31)
</TABLE>
