<PAGE>
As filed with the Securities and Exchange Commission on July 28, 1999
Registration No. 333-80055
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
POWERIZE.COM, INC.
(Exact name of registrant as specified in its charter)
901 Elkridge Landing Road, Suite 350
Linthicum, Maryland 21090
(410) 684-3800
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Delaware 7375 52-2073361
(State or other (Primary standard (I.R.S. employer
jurisdiction of industrial identification number)
incorporation or classification code
organization) number)
Edwin R. Addison
Chairman of the Board and Chief Executive Officer
Powerize.com, Inc.
901 Elkridge Landing Road, Suite 350
Linthicum, Maryland 21090
(410) 684-3800
(Name, address, including zip code and telephone number, including area code,
of agent for service)
--------------
Copies to:
<TABLE>
<S> <C>
Earl S. Wellschlager, Esquire Robert E. Spicer, Jr., Esquire
Wm. David Chalk, Esquire Williams, Mullen, Clark & Dobbins
Piper & Marbury L.L.P. 1021 East Cary Street
36 South Charles Street P.O. Box 1320
Baltimore, Maryland 21201 Richmond, Virginia 23218-1320
(410) 539-2530 (804) 643-1991
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
Title of each Class of To Be Offering Price Offering Registration
Securities to be Registered Registered Per Unit Price(1) Fee(2)
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<S> <C> <C> <C> <C>
Shares of Common Stock, par value $.0001.... 2,875,000 shares $12.00 $34,500,000 $9,591
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act.
(2) A registration fee of $7,993 was previously paid in connection with this
registration statement.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act, or until the registration statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus. Although we +
+are permitted by U.S. federal securities laws to offer these securities using +
+this prospectus, we may not sell them or accept your offer to buy them until +
+the registration statement filed with the SEC relating to these securities +
+has been declared effective by the SEC. This prospectus is not an offer to +
+sell these securities or our solicitation of your offer to buy these +
+securities in any jurisdiction where that would not be permitted or legal. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion--July 28, 1999
[LOGO OF POWERIZE.COM APPEARS HERE]
2,500,000 Shares of Common Stock
We are offering 2,500,000 shares of our common stock. We are selling all of
the shares offered under this prospectus.
This is our initial public offering. No public market currently exists for
our shares. We anticipate that the initial public offering price for our shares
will be between $10.00 and $12.00 per share.
We have filed an application to qualify our common stock for quotation on the
Nasdaq National Market under the symbol "POWZ."
This investment involves risks. See "Risk Factors" beginning on page 6.
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price (estimated).................... $ $
Underwriting fees.................................... $ $
Proceeds to Powerize.com (after expenses)............ $ $
</TABLE>
We have granted the underwriters the right to purchase an additional 375,000
shares of common stock from us at the initial public offering price, less
underwriting fees, to cover over-allotments. See "Underwriting."
Neither the Securities and Exchange Commission nor any state securities
commission has determined whether this prospectus is truthful or complete.
Nor have they made, nor will they make, any determination as to whether
anyone should buy these securities. Any representation to the contrary is
a criminal offense.
Ferris, Baker Watts Ryan, Lee & Company
Incorporated Incorporated
The date of this prospectus is , 1999
<PAGE>
ART
The inside front cover contains a screen shot from Powerize.com's Web site
showing the site's general search screen.
<PAGE>
TABLE OF CONTENTS
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Page
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<S> <C>
Prospectus Summary.................. 2
Risk Factors........................ 6
Use of Proceeds..................... 18
Dividend Policy..................... 18
Capitalization...................... 19
Dilution............................ 20
Selected Financial Data............. 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Business............................ 29
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Management........................ 41
Related Transactions and
Relationships.................... 48
Principal Stockholders............ 49
Description of our Capital Stock.. 50
Shares Eligible for Future Sale... 54
Underwriting...................... 56
Validity of the Shares............ 58
Experts........................... 58
Additional Information............ 58
Index to Financial Statements..... F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
This summary highlights important information regarding our business and this
offering. You should read this entire prospectus, including the "Risk Factors"
and the financial statements and all related notes before deciding to purchase
our common stock. Information in this prospectus has been adjusted to reflect a
one-for-two reverse stock split of our common stock effected on July 26, 1999.
Except as otherwise indicated, the information in this prospectus assumes that:
. our common stock will be sold at $11.00 per share, which is the mid-
point of the range shown on the cover page of this prospectus; and
. the underwriters will not exercise their over-allotment option.
POWERIZE.COM, INC.
Our Business
Powerize.com is a leading Internet aggregator and distributor of business and
financial information. We offer "one-stop shopping" using our directed search
and advanced filtering technology to provide users concise, relevant and
organized search results according to user-selected criteria. We believe we
provide the largest single source of business and financial content available
on the Internet, including company profiles, news articles, research reports,
market and industry analyses and other documents from thousands of publishers
of more than 10,000 sources worldwide. We obtained our initial content
collection from IBM Corporation, which developed this content over a period of
several years. Our content collection has grown to include over 32 million
documents, all of which are available through our Web site: www.powerize.com.
We offer free access to a large portion of our content collection, most of
which has been traditionally available only for a fee. Over 12 million
documents in our collection are free to all of our users and over 15 million
are free to our registered business users who conduct a minimum of 30 searches
per month using our Web site. Our fee-based documents are available on a pay-
per-view basis. Detailed summaries of over 3.5 million of our fee-based
documents are available free of charge. We believe that free content builds our
brand, increases Web site traffic and creates opportunities for substantial
advertising revenue. To capitalize on these opportunities, we have recently
formed several distribution relationships with high traffic Internet services,
including Inktomi Corporation, Netscape Communications Corporation and
VerticalNet, Inc. Inktomi will market our content collection to its Internet
customers, including America Online, Yahoo! and HotBot. Netscape will offer its
users access to a portion of our content from specified industry segments
through its "Business" channel, which users can access from Netscape's portal
sites "Netcenter" and "My Netscape." VerticalNet will provide access to our
content from all of its trade community Web sites.
We have generated revenue from royalties from the sale of subscriptions to
electronic publications, from pay-per-view access to our content and from
consulting services. We currently deliver electronic publications through paid
subscriptions to more than 88,000 users. We expect our overall number of users
to increase significantly as we market our free services and secure additional
distribution relationships. As our number of users grows, we expect to generate
additional revenue from advertising and electronic commerce. We believe our Web
site will attract an increasing number of business users who are a desirable
audience for advertisers and electronic commerce vendors.
Currently, we offer our content through the following two types of service,
each directed to the business user:
. Powerize.com Internet Services. Our Powerize.com Internet services
provide users with the ability to search our content collection free of
charge. These services allow users to search our content collection as
well as conduct a conventional Internet search using their selected
search engine with a
2
<PAGE>
single search directive. Our Web site serves business users,
professionals, investors and others who use specialized business and
financial information.
. Powerize.com Intranet Services. Our Powerize.com Intranet services
consist of an enhanced version of our Powerize.com Internet services
that allows users to search our content collection and at the same time
search our customers' internal proprietary information residing on its
own Intranet. Our Intranet services are supported by our award-winning
search technology.
Business-to-business usage of the Internet is growing rapidly, as businesses
are increasingly using the Internet's ability to reach customers globally,
deliver personalized content and open new distribution channels. The Yankee
Group, a technology and Internet research firm, projects business to business
electronic commerce transaction volume will grow from $138 billion in 1999 to
more than $541 billion in 2003.
Our Strategy
We seek to be the dominant Internet aggregator and distributor of business
and financial information by providing a growing amount of information to an
increasing number of users free of charge. The core elements of our strategy
include:
. Expanding Our Business and Financial Content. We plan to continue to
expand our content collection and continue to increase significantly the
portion of our content that is available free of charge.
. Enhancing Brand Awareness. We intend to build a strong Internet brand
that is synonymous with free quality business and financial information.
We intend to enhance our brand awareness through an extensive public
relations campaign.
. Building Web Site Traffic and User Loyalty. We believe that our plans
for significantly increased marketing activities will provide us with
increased visibility among Web users and companies advertising and
engaging in commerce over the Internet.
. Developing and Expanding Strategic and Distribution Relationships. We
plan to continue to develop strategic and distribution relationships
which we believe will increase traffic and advertising revenue.
. Capitalizing on Our Proprietary Search Technology. We plan to capitalize
on our proprietary search technology which provides concise, relevant
and organized search results in order to differentiate ourselves from
our competitors.
----------------
Our management team has significant experience in the Internet and computer
software industries. We have 44 employees including 21 engineers, three
librarians, six customer support representatives and 14 sales and marketing and
support personnel. We are a Delaware corporation. We are located at 901
Elkridge Road, Suite 350, Linthicum, Maryland 21090. Our telephone number is
(410) 684-3800. Our Web site is www.powerize.com. The information on our Web
site is not part of this prospectus.
We have filed applications for Federal registration and claim rights in the
following trade and service marks, among others: Powerize.com(TM), Powerize.com
plus design (Lightning Bolt logo)(TM), Powerize.com plus design (without
Lightning Bolt logo)(TM), Powerize Your Search For the Right Information(TM),
Powerize Server(TM), Power Links(TM) and Powerize.com Your Search for the Right
Information plus design(TM). We also claim rights in the trade and service mark
Hidden Web(TM). We also refer in this prospectus to trade names and trademarks
of other companies.
3
<PAGE>
THE OFFERING
We present below a summary of this offering. Up to five percent of the shares
being offered have been reserved for purchase by our directors, officers,
employees and members of their families and others associated with us.
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<C> <S>
Common stock offered................................ 2,500,000 shares
Common stock to be outstanding after this offering.. 8,735,370 shares
Use of proceeds..................................... We intend to use the
proceeds from this
offering, after
expenses, to expand the
amount of business and
financial information to
be offered to our users
free of charge, for
sales and marketing
activities, to establish
additional distribution
relationships and for
working capital and
general corporate
purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.............. "POWZ"
</TABLE>
The number of shares of common stock to be outstanding after this offering is
based on shares outstanding on June 30, 1999. This number excludes:
. 831,320 shares of our common stock, issuable upon the exercise of stock
options outstanding on June 30, 1999, with a weighted average exercise
price of $1.54 per share;
. 517,999 shares of our common stock issuable upon the exercise of
warrants outstanding on June 30, 1999, with a weighted average exercise
price of $3.41 per share; and
. 43,680 shares of our common stock reserved for issuance under our 1998
Stock Incentive Plan.
4
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SUMMARY FINANCIAL DATA
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<CAPTION>
March 17, 1997 Six Months Ended June 30,
(date of inception) to Year Ended -------------------------
December 31, 1997 December 31, 1998 1998 1999
---------------------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ 24,458 $ 330,660 $ 11,155 $ 658,794
Expenses:
Cost of revenue....... 2,868 520,219 99,424 511,529
Sales and marketing... 132,953 919,094 269,144 951,250
Product development... 352,621 1,654,859 522,712 1,398,912
General and
administrative....... 88,580 439,703 149,548 989,909
---------- ----------- ------------ ------------
Operating loss.......... (552,564) (3,203,215) (1,029,673) (3,192,806)
Interest income
(expense), net......... (5,867) (31,278) (6,736) 6,303
---------- ----------- ------------ ------------
Net loss................ $ (558,431) $(3,234,493) $ (1,036,409) $ (3,186,503)
========== =========== ============ ============
Basic and diluted net
loss per common
share.................. $ (0.39) $ (1.36) $ (0.50) $ (0.82)
========== =========== ============ ============
Weighted average number
of common shares
outstanding............ 1,420,773 2,382,801 2,063,077 3,891,145
========== =========== ============ ============
<CAPTION>
December 31, June 30, 1999
---------------------------------------- -----------------------------
1997 1998 Actual As Adjusted
---------------------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash.................... $ 78,534 $ 57,609 $ 6,774,000 $ 30,949,000
Total assets............ 198,808 1,539,527 9,892,670 34,531,305
Total debt, including
current portion ....... 50,000 1,009,812 21,313 21,313
Total stockholder's
equity (deficit)....... (12,681) (932,337) 7,436,436 32,075,071
</TABLE>
In the As Adjusted column, we have adjusted the Actual numbers to give effect
to:
. the issuance of a warrant to purchase 113,636 shares of common stock, at
an exercise price equal to the initial public offering price. This
issuance will occur immediately prior to the closing of this offering.
See "Business--Strategic Relationships"; and
. the sale of the shares of common stock in this offering at the initial
public offering price and to our receipt and application of the
estimated net proceeds of this offering. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
You should consider carefully the following risks, together with all other
information included in this prospectus before you decide to buy our common
stock. Please keep these risks in mind when reading any forward-looking
statements appearing elsewhere in this prospectus. If any of the following
risks actually occur, our business would likely suffer. The trading price of
our common stock may decline, and you could lose all or part of the money you
paid to buy our common stock.
We have limited operating history, so it is difficult to evaluate whether we
will be successful
We commenced operations in March 1997 and launched our first product in May
1998. Accordingly, we have a limited operating history upon which you may
evaluate whether we will be successful. In addition, our revenue sources are
evolving. Currently, our revenue is primarily generated from the sale of
subscriptions to electronic publications and pay-per-view access to content as
well as software and consulting fees. In the future, we expect to generate
revenue from advertising and electronic commerce. We may not be able to sustain
our current revenue or successfully generate advertising or electronic commerce
revenue. If we do not increase revenue from existing sources and generate
additional revenue from advertising and electronic commerce, our operating
results will be negatively affected.
We anticipate we will incur continued losses and negative operating cash flows
for the foreseeable future
From inception on March 17, 1997 through June 30, 1999, we have reported
operating losses and operating cash flow deficits as we organized and launched
our business operations. During this period, we incurred significant operating
expenses and made significant investments in our business without an
established source of revenue. These operating expenses and investments, as
well as our working capital needs, were funded primarily from private sales of
common stock and loans from Edwin R. Addison, our Chairman of the Board and
Chief Executive Officer. Despite such cash infusions, the continued costs of
implementing our business plan has placed severe pressure on our capital
resources and liquidity position. We incurred a net loss of $3.2 million for
the year ended December 31, 1998 and a net loss of $3.2 million for the six
months ended June 30, 1999. As of June 30, 1999, our accumulated deficit was
$7.0 million. We expect to continue to incur significant losses and negative
operating cash flows for the foreseeable future as we continue to incur
significant and growing operating expenses to develop our business. A large
portion of the proceeds of this offering will be used to fund these operating
expenses. There can be no assurance that our business plan, when fully
implemented, will generate sufficient revenue to make us profitable.
We expect our operating expenses to increase, which may not be offset by
increases in our revenue
Some of our operating expenses are fixed, including non-cancelable
agreements, equipment leases and real estate leases. In addition, we plan to
increase significantly our operating expenses to:
. expand the amount of content available to our users free of charge;
. increase our sales and marketing operations;
. broaden our customer support capabilities;
. establish additional marketing and distribution relationships; and
. enhance our technology.
Additionally, leading Web sites, browser providers and others may begin to
charge us for providing access to our products and services from their Web
sites. If any of these expenses are not accompanied by increased revenue, our
operating results would be negatively affected.
6
<PAGE>
We plan to rely heavily on advertising revenue and if this revenue does not
develop as we expect our business will be hurt
The success of our business plan is dependent on our ability to generate a
substantial amount of revenue from advertisements on our Web site. If we do not
develop advertising and other sources of revenue our business will be
materially and adversely affected. Our ability to increase our advertising
revenue will depend on many factors, including:
. advertisers' acceptance of the Internet as a legitimate advertising
medium;
. the development of a large base of users on our Web site who possess
demographic characteristics attractive to advertisers;
. the expansion of our sales force and business development staff; and
. advertising rates.
We are an early stage company in a new and rapidly evolving market, subject to
a number of risks that could limit our revenue growth
If we fail to address the risks, expenses and difficulties we may encounter
as we expand our business, including those frequently encountered by early
stage companies in new and rapidly evolving markets, our revenue growth may be
limited. To overcome these risks, we must, among other things:
. attract and retain a large base of users;
. increase awareness of our services;
. respond to competitive developments;
. continue to attract, retain and motivate qualified employees;
. continue to upgrade our technologies;
. introduce and develop new technology for our services; and
. effectively manage our expanding operations.
If we fail to manage future growth, it will strain our resources and could
impair the expansion of our business
We plan to continue to expand our operations significantly. We have
experienced rapid growth in our operations. As of June 30, 1999, we had grown
to a total of 44 full-time employees, from seven full-time employees on March
31, 1997. We expect that the number of our employees will continue to increase
for the foreseeable future. This rapid growth will place a significant strain
on our management, financial controls, operations systems, personnel and other
resources. If we fail to manage this growth effectively, the expansion of our
business could be materially and adversely affected. We may be unable to
implement successfully our business plan and strategy or meet our customers'
need for services and technical support or provide the customer service they
expect. To manage our growth effectively, we must:
. improve existing and implement new operational, financial and management
information controls, reporting systems and procedures;
. hire, train and manage sufficient additional qualified personnel;
. expand and upgrade our technologies; and
. manage multiple relationships with our users, vendors and other third
parties.
7
<PAGE>
Our quarterly operating results are likely to fluctuate significantly, which
may cause our stock price to be volatile or to decline
Our quarterly operating results, and therefore our stock price, are likely to
fluctuate significantly in the future because of a number of factors,
including:
. the rate at which we are able to attract and retain users;
. the frequency and duration of user visits to our Web site;
. changes in advertising rates;
. the prices our customers are willing to pay;
. the amount and timing of expenditures relating to the expansion of our
services and infrastructure;
. the ability of our equipment and service suppliers to meet our needs;
. the success of our relationships with our content providers and
distributors;
. introduction of new services or technologies by our competitors;
. regulatory developments governing our industry; and
. technical difficulties or network downtime.
Many of these factors are beyond our control. As a result, our operating
results in one or more future periods could fail to meet or exceed the
expectations of securities analysts or investors. If this happens, the trading
price of our common stock would likely decline.
If we borrow significant amounts of money in the future, it could limit our
flexibility
Debt financing may not be available to us on favorable terms or at all. If
debt financing is available and we decide to borrow significant amounts of
money in the future to fund our business, the terms of those borrowings would
likely contain restrictive covenants that limit our ability to incur additional
indebtedness and pay dividends. These instruments could also require us to
pledge assets as security for the borrowings. If we were to leverage our
business by incurring significant debt, we may be required to devote a
substantial portion of our cash flow to service that indebtedness. This could
require us to modify our business plan, for example, by delaying the expansion
of our business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
If we are unable to track and measure the delivery of advertisements, our
business may be hurt
It is important to our advertisers that we accurately measure the
demographics of our user base and the delivery of advertisements on our Web
site. No standards have been widely accepted to measure the effectiveness of
Internet advertising. If such standards do not develop, existing advertisers
may not continue their current levels of Internet advertising and advertisers
who are not currently advertising on the Internet may be reluctant to do so.
Our business would be materially and adversely affected if the market for
Internet advertising fails to develop or develops slower than expected. We will
depend on third parties to provide these measurement services. If they are
unable to provide these services in the future, we would be required to perform
them ourselves. This could cause us to incur additional costs or cause
interruptions in our business during the time we are replacing these services.
Companies may not advertise on our Web site or may pay less for advertising if
they do not perceive these measurements to be reliable.
If we are not successful in increasing brand awareness of, and regular and
repeated visits to, Powerize.com, our business would be materially and
adversely affected
The future success of Powerize.com will depend, in part, on our ability to
increase our brand awareness. In order to build brand awareness and increase
regular and repeated visits to Powerize.com, we must succeed in
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<PAGE>
our marketing efforts and provide high-quality services. As part of our brand-
building efforts, we have substantially increased our marketing budget. Our
ability to increase advertising, subscription royalties and electronic commerce
revenue will depend in part on the success of this marketing campaign and our
ability to increase the number of regular users of our Web site. If our
marketing efforts are unsuccessful or if we cannot increase our brand awareness
and traffic to our Web site, our business would be materially and adversely
affected.
We may not develop significant revenue from advertising and electronic commerce
which could adversely affect our future growth
Our long-term success depends on widespread market acceptance of advertising
and electronic commerce over the Internet. Acceptance of the Internet as an
effective advertising and electronic commerce medium is uncertain. If
widespread commercial use of the Internet does not develop, or if the Internet
does not develop as an effective and measurable medium for advertising and
electronic commerce, our business would be materially and adversely affected. A
number of factors could prevent such acceptance, including the following:
. advertising and electronic commerce over the Internet is at an early
stage and may not develop as quickly as we expect;
. the necessary network infrastructure for substantial growth in usage of
the Internet may not be adequately developed;
. increased government regulation or taxation may adversely affect the
viability of electronic commerce;
. insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times; and
. adverse publicity and consumer concern about the security of electronic
commerce transactions could discourage acceptance and growth of the
Internet.
Internet advertising rates and pricing models are subject to changes which
could adversely affect our revenue
Different pricing models are used to sell advertising on the Web. It is
difficult to predict which, if any, will emerge as the industry standard for
advertisers to business end users. This makes it difficult to project our
future advertising rates and revenue. Changes in industry pricing practices for
advertising rates could materially and adversely affect our revenue in the
future. Our advertising revenue could be adversely affected if we are unable to
adapt to new forms of Web advertising. Moreover, software programs that limit
or prevent advertising from being delivered to a Web user's computer are
available. Widespread adoption of this software could adversely affect the
commercial viability of Web advertising, which could materially and adversely
affect our advertising revenue.
The market for the Internet products and services that we offer is highly
competitive, and we may be unable to compete effectively against established
industry competitors
The market for Internet and intranet products and services is highly
competitive. Many Web sites compete for the attention and spending of business
people and advertisers, particularly in the business and financial information
area. We expect that the level of competition will continue to intensify and
may include competition from content providers and distributors with whom we
currently have cooperative relationships. We compete for users, advertisers and
content providers with many types of companies including:
. free or low-cost Web sites focused on business, such as The Wall Street
Journal Interactive Edition, Hoovers.com, Marketwatch.com,
TheStreet.com, Dowjones.com, and Office.com;
. providers of company information, such as MarketGuide and Standard &
Poor's, many of whom are also our content providers;
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. providers of proprietary business and financial information, such as
Bloomberg Business News, Dow Jones Interactive and Reuters News Service;
. business and financial information aggregators, such as Dialog, LEXIS-
NEXIS, Northern Light, and OneSource, many of whom have introduced or
will introduce Web-based offerings; and
. Internet portal companies and other free or low cost mass market on-line
services, such as Excite, Infoseek, Lycos, Yahoo! and Netscape.
Our ability to compete depends on many factors, including:
. the timeliness, comprehensiveness and trustworthiness of our content and
that of our competitors;
. the cost of our services compared to our competitors;
. the ease of use of services developed either by us or our competitors;
. the usefulness of our technology and tools;
. the attractiveness of the demographic characteristics of our audience;
and
. the effectiveness of our sales and marketing efforts.
We cannot assure you that we will be able to compete successfully. Many of
our existing competitors, as well as a number of potential new competitors,
have longer operating histories, greater name recognition, larger customer
bases and significantly greater financial, technical and marketing resources
than we do. This may allow them to devote greater resources than we can to the
development and promotion of products and services. These competitors may also
undertake more far-reaching marketing campaigns, adopt more aggressive pricing
policies, including offering their business and financial information for free,
and make more attractive offers to existing and potential new employees,
strategic partners and advertisers. Our competitors may develop content that is
equal or superior to ours or that achieves greater market acceptance than ours.
In addition, the market in which we compete is fluid and subject to rapid
change such that new and potentially unidentified competitors could emerge. If
we are unable to compete successfully, our business would be materially and
adversely affected.
Concerns regarding security of transactions and transmitting confidential
information over the Internet may negatively impact the acceptance of our
products and services
We believe that concerns regarding the security of confidential information
transmitted over the Internet, such as credit card numbers, prevent many
potential customers from engaging in online transactions. If we do not add
sufficient security features to future product releases, our products may not
gain market acceptance or there may be additional legal exposure to us.
Our infrastructure is potentially vulnerable to physical or electronic break-
ins, viruses or similar problems. If a person circumvents our security
measures, he or she could misappropriate proprietary information or cause
interruptions in our operations.
Security breaches that result in access to confidential information could
damage our reputation and expose us to a risk of loss or liability. We may be
required to make significant investments and efforts to protect against or
remedy security breaches. Additionally, as electronic commerce becomes more
prevalent, our customers and users will become more concerned about security.
If we do not adequately address these concerns, this could materially and
adversely affect the acceptance of our products and services.
10
<PAGE>
We are dependent on strategic relationships and our business would be
materially and adversely affected if we were to lose our existing, or fail to
gain additional, strategic relationships
We depend on the following strategic relationships:
. Content Provider Relationships--We do not own or create the content
distributed through our products. We rely on our relationships and
agreements with numerous content providers to enable our users to gain
access to comprehensive business and financial content. Many of our
content providers compete with one another and, in some cases, with us,
for users. We do not have exclusive distribution arrangements with any
of our information providers. Accordingly, all of our content providers
can distribute their content themselves directly or through our
competitors. Business decisions made by our content providers could
adversely affect the availability or pricing of their content to us. Our
agreements with our content providers generally extend for one to two
years and automatically renew unless terminated by notice given at least
three months prior to the end of the term. In the event of a breach by
us, the contracts can be terminated on short notice. If the fees we pay
to our existing or future content providers increase, it could
materially and adversely affect our operating results. A content
provider may be difficult to replace and the loss of one or more
significant content providers could decrease the quality, quantity or
mix of the information distributed through our products. This could make
our products less competitive. If content providers terminate their
relationships with us, delivery of our products may be disrupted. This
could result in a loss of customers and have a material adverse effect
on our operating results and business.
. Marketing and Distribution Relationships--We have marketing and
distribution relationships with other Internet companies to create
traffic on our Web site to generate revenue. The success of these
relationships depends on the amount of increased traffic we receive from
the alliance partners' web sites. These arrangements may not generate
the expected number of new customers. We also cannot assure you that we
will be able to renew these marketing and distribution alliance
agreements. If any of these agreements are terminated, our site visits
and advertising revenue could decrease.
Many companies that we may approach for a strategic relationship may have
conflicting relationships with others. As a result, these companies may be
reluctant to enter into strategic relationships with us. Our business,
operating results and financial condition could be materially and adversely
affected if we do not establish additional, and maintain existing, strategic
relationships on commercially reasonable terms or if any of our strategic
relationships do not result in an increase in the number of users of our Web
site. In addition, strategic relationships may be difficult to implement and
may not provide the benefits we anticipate.
We depend on the continued growth in use and efficient operation of the
Internet, which is uncertain
The Internet-based information market is new and rapidly evolving. Our
business would be materially and adversely affected if Internet usage does not
continue to grow or grows more slowly than anticipated. Internet usage may be
inhibited by a number of factors, including:
. inadequate network infrastructure;
. security concerns;
. inconsistent quality of service; and
. unavailability of cost-effective, high-speed access to the Internet.
Users of our Web site depend on Internet service providers, online service
providers and other Web site operators for access to Powerize.com. Many of
these services have experienced significant service outages in the past and
could experience service outages, delays and other difficulties due to system
failures unrelated to our systems. These occurrences could cause our visitors
to perceive the Internet in general or our Web site in particular as unreliable
and, therefore, cause them to use other media to obtain their business and
financial information. We also depend on third-party content providers to
deliver information and data feeds to us on an
11
<PAGE>
accurate and timely basis. Our Web site could experience disruptions or
interruptions in service due to the
failure or delay in the transmission or receipt of this information, which
could have a material adverse effect on our business.
Our Internet content may not attract users with demographic characteristics
valuable to our advertisers
Our future success depends upon our ability to deliver Internet content that
will attract business users with demographic characteristics valuable to our
advertising customers. If we are unable to develop Internet content that
attracts a loyal user base possessing demographic characteristics attractive to
advertisers, it could have a material adverse effect on our advertising
revenue, and therefore our operating results. In addition, we may be unable to
anticipate or respond to rapidly changing buyer preferences to attract enough
users to our Web site. Internet users can freely navigate and instantly switch
among a large number of Web sites. Many of these Internet sites offer business
and financial content. Thus, it may be difficult for us to distinguish our
content and attract users.
We may be subject to legal claims in connection with the content we distribute
over the Internet, which may materially and adversely affect our business
We may be subject to legal claims relating to the content we make available
to our users, or the downloading and distribution of such content. For example,
persons may bring claims against us if material that is inappropriate for
viewing by young children can be accessed from our Web site. Claims could also
involve matters such as defamation, invasion of privacy, and copyright
infringement. Providers of Internet products and services have been sued in the
past, sometimes successfully, based on the content of material. In addition,
the content provided on our Web site is drawn from data compiled by other
parties and it may have errors. If our content is improperly used or if we
supply incorrect information, it could result in unexpected liability. Our
insurance may not cover claims of this type, or may not provide sufficient
coverage. Our operating results could suffer a material adverse effect if costs
resulting from these claims are not covered by our insurance or exceed our
coverage.
Our computer and communications hardware systems may fail, which would
materially and adversely affect our users and our business
Our business depends on the efficient and uninterrupted operation of our
computer and communications hardware systems. Any system interruptions that
cause our Web site to be unavailable to web browsers may reduce the
attractiveness of our Web site to advertisers and could materially and
adversely affect our business, financial condition and operating results. We
maintain most of our computer systems in Interliant, Inc.'s Web-hosting
facilities in McLean, Virginia. Our systems and operations are vulnerable to
damage or interruption from human error, natural disasters, power loss,
telecommunication failures, break-ins, sabotage, computer viruses, intentional
acts of vandalism and similar events. We currently do not have redundant
servers, and we do not have alternative providers of hosting services that are
available on short term notice. We have not yet developed a formal disaster
recovery plan. We cannot assure you that any plan we adopt will be sufficient.
We do not carry sufficient business interruption insurance to compensate for
losses that could occur.
We may be unable to project capacity limits on our technology, transaction
processing system or network hardware or software and may be unable to expand
and upgrade our systems to meet increased use which may materially and
adversely affect our business
As traffic on our Web site continues to increase, we must expand and upgrade
our technology, transaction processing systems and network hardware and
software. We may not be able to accurately project the rate of increase in our
Web site traffic. In addition, we may not be able to expand and upgrade our
systems and network hardware and software capabilities to accommodate increased
use of our Web site. If we do not appropriately upgrade our systems and network
hardware and software, our business, financial condition and operating results
will be materially and adversely affected.
12
<PAGE>
If we cannot keep pace with rapidly changing technology and demands of our
customers, we may be unable to enhance our existing services or introduce new
services, which may materially and adversely affect our business
The market in which we operate is characterized by rapidly changing
technology, evolving industry standards, frequent new service announcements,
introductions and enhancements and evolving customer demands. These market
characteristics are exacerbated by the emerging nature of the Internet and the
electronic distribution of business and financial information. Accordingly, our
future success will depend on our ability to adapt to rapidly changing
technologies and industry standards, and our ability to continually improve the
performance, features and reliability of our services in response to both
evolving customer demands and competitive service offerings. Our inability to
adapt successfully to these changes in a timely manner could have a material
adverse effect on our business, operating results and financial condition.
Furthermore, we may experience difficulties that could delay or prevent the
successful design, development, testing, introduction or marketing of new
services. If we are unable, for technological or other reasons, to develop and
introduce new services or enhancements to existing services in a timely manner
or in response to changing market conditions or customer requirements, or if
our services or enhancements contain defects or do not achieve a significant
degree of market acceptance, our business would be materially and adversely
affected.
Our business depends on the Internet, which is subject to uncertain and
evolving laws and regulations
The laws governing the Internet remain largely unsettled, even in areas where
there has been some legislative action. It may take years to determine whether
and how existing laws, including those governing intellectual property,
privacy, libel and taxation, apply to the Internet generally and the electronic
distribution of business information in particular. Legislation could reduce
the growth in the use of the Internet generally and decrease the acceptance of
the Internet as a communications and commercial medium, which could have a
material and adverse effect on our business, operating results and financial
condition. In addition, the growing popularity and use of the Internet has
burdened the existing telecommunications infrastructure and many areas with
high Internet usage have begun to experience interruptions in phone service. As
a result, some telephone carriers have petitioned governmental agencies to
regulate Internet service providers and online service providers in a manner
similar to long distance telephone carriers and to impose access fees on
Internet service providers and online service providers. If any of these
petitions or the relief that they seek is granted, the costs of communicating
on the Internet could increase substantially, potentially adversely affecting
the growth in the Internet. Federal and state government agencies may also
place restrictions on companies such as ours from providing their users access
to information on government agency Web sites. Further, due to the global
nature of the Internet, it is possible that governments of other states, the
United States or foreign countries might attempt to regulate our service or
levy sales or other taxes on our activities. We cannot assure you that
violations of local or other laws will not be alleged or charged by
governmental authorities, that we might not unintentionally violate these laws
or that in the future these laws will not be modified or new laws enacted. Any
of these developments could have a material and adverse effect on our business.
If we are unable to retain our key personnel, our business will suffer
Given our stage of development, we depend on our ability to retain and
motivate high quality personnel, especially our management. Our success depends
on our executive officers and key employees. Members of our senior management
team have worked together for only a short period of time. We do not have "key
person" life insurance policies on any of our employees. Generally, members of
our senior management team can terminate their employment agreements with us on
thirty days notice. Any of our other employees may terminate his or her
employment with us at any time. Our future success depends on our continuing
ability to identify, hire, train and retain highly qualified management,
technical, sales, marketing and customer service personnel. The industry in
which we compete has a high level of employee mobility and aggressive
recruiting of skilled personnel. In particular, we face intense competition for
qualified personnel, particularly in software development, network engineering
and product management. We may be unable to continue to employ our key
personnel or to attract and retain qualified personnel in the future. See
"Business--Employees" and "Management."
13
<PAGE>
Our failure or the failure of third parties to be year 2000 compliant could
negatively impact our business
Many computer programs have been written using two digits rather than four to
define the applicable year. This poses a problem at the end of the century
because these computer programs may recognize a date using "00" as the year
1900 rather than the year 2000. This, in turn, could result in major system
failures or miscalculations, and is generally referred to as the "Year 2000
issue." The Year 2000 issue could result in system failures or miscalculations,
causing disruptions in our operations. To the extent that third parties
experience Year 2000 problems, our services could be materially and adversely
affected. For example, in the event that Interliant's Web-hosting facilities or
Inktomi's indexing facilities are not Year 2000 compliant, we would not be able
to deliver services to our users. Furthermore, the purchasing patterns of our
customers may be affected by Year 2000 issues as they expend significant
resources to correct their current systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase our services.
Any of these developments could have a material and adverse effect on our
business, operating results and financial condition. We have not fully
determined the risks associated with the reasonably worst-case scenario and
have not yet formulated a contingency plan to address Year 2000 issues. We do
not expect to have a specific worst-case scenario contingency plan in place in
the future. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Impact of the Year 2000 Issue."
Laws defining Internet-related intellectual property rights are currently
unsettled and may change in a way that would materially and adversely affect
our business
The growth and development of the Internet has raised new issues with respect
to the intellectual property rights of parties who conduct business on the
Internet. These issues include, but are not limited to, the following:
. the risk of infringing on patented Internet-based technologies and
business processes, notwithstanding good faith efforts to avoid such
infringements, and the resulting inability to continue the use of
infringing technologies or processes;
. the potential difficulty in obtaining and enforcing patent rights on
Internet-related technologies and processes;
. the authority necessary to republish information available from Web
sites and other portals on the Internet;
. the right to collect, use, exploit or disseminate personal information
and data concerning users;
. the authority of parties to activate Web browser functions that cause
the content on one party's Web site to be superimposed on the content of
another without the other party's consent;
. the extent of protection of intellectual property rights in foreign
jurisdictions; and
. the authority to link or hyperlink to a third party's Web site or
particular elements of the site without specific authorization from the
third party.
The laws applicable to these and other issues are, to varying extents,
developing and unsettled. Future laws and legal precedents defining the rights
and obligations of parties with respect to Internet-related intellectual
property rights may impact how we conduct certain aspects of our business and
could have a material and adverse effect on our business.
Our intellectual property protection may be inadequate to protect our
proprietary rights and we may be subject to infringement claims which could
materially and adversely affect our business
We believe that our success depends, in part, on protecting our technology
and other intellectual property. The steps we have taken to protect our
technology and other intellectual property may be inadequate. We have filed two
patent applications with respect to systems, methods and apparatus related to
the Powerize Server and pricing of information delivered to our users. We
currently have no issued patents or other applications pending. We must make
additional filings with the United States Patent and Trademark Office with
respect to
14
<PAGE>
the currently pending applications. We cannot assure you that these
applications will issue as patents, or that the scope of claims that may
ultimately be contained in any issued patents will be adequate to protect our
intellectual property. We currently have no patent applications on file in
countries other than the United States and therefore our technology and other
intellectual property may be unprotected in foreign countries. We have the
right to apply for registration of our copyrights in works of authorship
representing computer programs and other materials we use in our business, but
we have not yet applied for such registration, either in the United States or
in any foreign countries. We cannot assure you that we will obtain any
significant copyright protection for our works of authorship that would protect
our intellectual property from competitors. Competitors may independently be
able to develop systems without copying our works of authorship. We also rely
on unpatented trade secrets and know-how to maintain our competitive position.
We seek to protect this information by confidentiality agreements with
employees, consultants and others. These agreements may be breached or
terminated, leaving us with inadequate remedies. Our competitors may learn or
discover our trade secrets. Our competitors may independently develop
technologies that are substantially equivalent or superior to ours. Third
parties, including our competitors, may assert infringement claims against us
and, in the event of an unfavorable ruling on any claim, we may be unable to
obtain a license or similar agreement to use technology we need to conduct our
business. Our management personnel were previously employees of other
technology companies. In many cases, these individuals are conducting
activities for us in areas similar to those in which they were involved prior
to joining us. As a result, we or our employees could be subject to allegations
of violation of trade secrets and other similar claims. If we are unable to
protect adequately our technology and other intellectual property, our business
could be materially and adversely affected.
Ourprincipal stockholders and management own a significant percentage of our
common stock and will be able to exercise significant influence over our
company, which could have a material adverse effect on the market price of our
common stock
Our executive officers, directors and principal stockholders together will
beneficially own 37.9% of our common stock after this offering, or 36.3% if the
underwriters exercise their over-allotment option in full. They may also
purchase additional shares of common stock in this offering. These stockholders
will continue to have significant influence over our affairs and may be able to
determine the composition of our board of directors and approve matters
requiring stockholder approval, including any merger or sale of Powerize.com.
This concentration of ownership could have the effect of delaying or
preventing a change in our control or otherwise discouraging a potential
acquirer from attempting to obtain control of Powerize.com, which in turn could
have a material and adverse effect on the market price of our common stock or
prevent you from realizing a premium over the market price for your shares of
common stock. See "Principal Stockholders" for information about the ownership
of common stock by our executive officers, directors and principal
stockholders.
The failure of an active trading market to develop for our common stock could
materially adversely affect your investment in our common stock
Our common stock has not been traded in the public market before this
offering. We have applied to the Nasdaq National Market to list our common
stock, but we do not know whether active trading in our common stock will
develop or continue after this offering. We will determine the price you will
pay for our common stock through negotiations with the underwriters. The public
market may value your shares differently. You may not be able to resell your
shares at or above the price you will pay for our common stock. For a
description of the factors that will be taken into account to determine the
offering price, see "Underwriting--Pricing of this Offering."
15
<PAGE>
As an Internet-related company, the market price of our shares may experience
extreme price and volume fluctuations which would increase the likelihood of us
becoming subject to securities litigation
The stock market has, from time to time, experienced extreme price and volume
fluctuations. The market prices of the securities of Internet-related companies
have been especially volatile, including fluctuations that are often unrelated
to the operating performance of the affected companies. Broad market
fluctuations of this type may adversely affect the market price of our common
stock.
The market price of our common stock could be subject to significant
fluctuations due to a variety of factors, including:
. public announcements concerning us or our competitors, or the Internet
industry;
. fluctuations in our operating results;
. introductions of new products or services by us or our competitors;
. changes in analysts' earnings estimates; and
. announcements of technological innovations.
In the past, companies that have experienced volatility in the market price
of their stock have been the target of securities class action litigation. If
we were sued in a securities class action, we could incur substantial costs and
suffer from a diversion of our management's attention and resources,
potentially resulting in a material adverse effect on our business, operating
results and financial condition.
You will suffer immediate and substantial dilution of approximately $7.40 per
share
The initial public offering price is substantially higher than the net
tangible book value of our outstanding common stock immediately after this
offering. Accordingly, if you purchase common stock in this offering, you will
incur immediate and substantial dilution of $7.40 in the net tangible book
value per share of the common stock in this offering. To the extent outstanding
options and warrants to purchase our common stock are exercised, you will incur
further dilution. This dilution may cause the value of your investment to
decline. See "Dilution."
Future sales of our common stock in the public market could depress our stock
price
Sales of substantial amounts of common stock in the public market following
this offering, or the appearance that a large number of shares is available for
sale, could adversely affect the market price for our common stock. The number
of shares of common stock available for sale in the public market will be
limited by lock-up agreements and other restrictions under which the holders of
over 95% of our outstanding shares of common stock on a fully diluted basis
after this offering either will agree not to sell or otherwise dispose of any
of their shares for a period of 180 days after the date of this prospectus
without the prior written consent of the managing underwriters or will be
unable to sell any of their shares within such 180 day period due to federal
securities law restrictions. However, the managing underwriters may, in their
sole discretion and at any time without notice, release all or any portion of
the shares subject to lock-up agreements. In addition to the adverse effect a
price decline could have on holders of common stock, that decline would likely
impede our ability to raise capital through the issuance of additional shares
of common stock or other equity securities.
Within approximately 180 days after this offering, we intend to file a
registration statement under the Securities Act to register 875,000 shares of
common stock subject to outstanding stock options or reserved for issuance
under our omnibus stock incentive plan. The sale of these shares into the
public market may further adversely affect the market price of our common
stock. See "Management--1998 Stock Incentive Plan" and "Shares Eligible for
Future Sale."
16
<PAGE>
Our certificate of incorporation and bylaws and Delaware law contain provisions
that could delay or prevent a change in control and therefore could hurt our
stockholders
Provisions of our certificate of incorporation and bylaws and Delaware law
could make it more difficult for a third party to acquire control of our
company, even if a change in control would be beneficial to stockholders. Our
certificate of incorporation provides for a classified board of directors and
allows our board to issue, without stockholder approval, preferred stock with
terms set by the board. The preferred stock could be issued quickly with terms
that delay or prevent the change in control of our company or make removal of
management more difficult. The issuance of preferred stock may cause the market
price of our common stock to decrease. See "Description of our Capital Stock"
for more information.
This prospectus contains forward-looking statements which may not prove to be
accurate
This prospectus contains forward-looking statements and information relating
to our Company that involves substantial risks and uncertainties. We generally
identify these forward-looking statements by using words such as "believe,"
"intend," "expect," "may," "will," "should," "plan," "estimate," "continue,"
"project," "contemplate," "anticipate" or similar statements. These statements
are based on our beliefs as well as assumptions we made using information
currently available to us. Because these statements reflect our current views
concerning future events, these statements involve risks, uncertainties and
assumptions. Actual results may differ significantly from the results expressed
or implied in these forward-looking statements. The factors listed in the
sections captioned "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," as well as any cautionary
language in this prospectus, provide examples of risks, uncertainties and
events that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements. Before you invest
in our common stock, you should be aware that the occurrence of the events
described in the "Risk Factors" section and the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section and
elsewhere in this prospectus could have a material adverse effect on our
business, operating results and financial condition.
17
<PAGE>
USE OF PROCEEDS
We estimate that we will receive approximately $24.2 million in net proceeds
from this offering based upon an assumed initial public offering price of
$11.00 per share. This amount reflects deductions from the gross proceeds of
the offering of:
. approximately $1.9 million, which will be retained by the underwriters
as discounts and commissions; and
. approximately $1.4 million, representing our estimated expenses for this
offering.
We expect to use the net proceeds from this offering to expand the amount of
business and financial content offered to our users free of charge, to expand
our sales and marketing activities, to establish additional distribution
relationships and for working capital and general corporate purposes. We may
also use a portion of the net proceeds to acquire or develop complementary
products and technologies. While we engage from time to time in discussions
with respect to potential acquisitions, we have no present plans, commitments
or agreements with respect to such acquisitions. The actual amount of net
proceeds we spend on a particular use will depend on many factors, including:
. our future revenue growth;
. our future capital expenditures;
. the amount of cash generated by our operations; and
. the development and success of our business plan.
We have not yet determined the amount of net proceeds to allocate
specifically to each of these purposes. As a result, we will retain broad
discretion in the use of the net proceeds.
This use of proceeds does not reflect the underwriters' exercise of their
over-allotment option. We estimate that we will receive approximately $3.8
million in additional net proceeds if the underwriters exercise their over-
allotment option in full.
Until we use the net proceeds of this offering, we intend to invest the net
proceeds in short-term investment-grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid dividends. We do not anticipate declaring or
paying dividends for the foreseeable future. Instead, we will retain our
earnings, if any, for the future operation and expansion of our business. We
may incur indebtedness in the future which may prohibit or effectively restrict
the payment of dividends, although we have no current plans to do so.
18
<PAGE>
CAPITALIZATION
The following table shows our capitalization as of June 30, 1999. You should
also refer to our financial statements and the related notes included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
June 30, 1999
------------------------
Actual As Adjusted
----------- -----------
<S> <C> <C>
Short-term debt....................................... $ 21,313 $ 21,313
=========== ===========
Stockholders' equity:
Preferred stock; $0.0001 par value, 15,000,000
shares authorized, no shares issued and
outstanding........................................ -- --
Common stock; $0.0001 par value, 50,000,000 shares
authorized, 6,235,370 shares issued and outstanding
(actual); and 8,735,370 shares issued and
outstanding (on an as adjusted basis).............. 624 874
Additional paid-in capital.......................... 15,950,474 40,588,859
Deferred compensation............................... (1,535,235) (1,535,235)
Accumulated deficit................................. (6,979,427) (6,979,427)
----------- -----------
Total stockholders' equity and capitalization..... $ 7,436,436 $32,075,071
=========== ===========
</TABLE>
The number of shares of common stock shown in the above table excludes:
. 831,320 shares of our common stock issuable upon the exercise of stock
options outstanding on June 30, 1999, with a weighted average exercise
price of $1.54 per share;
. 517,999 shares of our common stock issuable upon the exercise of
warrants outstanding on June 30, 1999, with a weighted average exercise
price of $3.41 per share; and
. 43,680 shares reserved for issuance under our 1998 Stock Incentive Plan
as of June 30, 1999.
In the As Adjusted column, we have adjusted the Actual numbers to give effect
to:
. the issuance of a warrant to purchase 113,636 shares of common stock at
an exercise price equal to the initial public offering price. This
issuance will occur immediately prior to the closing of this offering.
See "Business--Strategic Relationships"; and
. the sale of the shares of common stock in this offering at the initial
public offering price and to our receipt and application of the
estimated net proceeds of this offering. See "Use of Proceeds."
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<PAGE>
DILUTION
Our net tangible book value as of June 30, 1999 was $6,845,144, or $1.10 per
share of common stock. Net tangible book value per share is the amount of our
total tangible assets less the amount of our total liabilities, divided by the
number of shares of common stock outstanding. After giving effect to our sale
of 2,500,000 shares of common stock in this offering at an assumed initial
public offering price of $11.00 per share and after deducting underwriting
discounts and commissions and estimated offering expenses payable by us, and
application of the net proceeds therefrom, our net tangible book value at June
30, 1999 would have been approximately $31,483,779 million, or $3.60 per share.
This represents an immediate increase in net tangible book value of $2.50 per
share to our existing stockholders and an immediate dilution of $7.40 per share
to new investors purchasing shares of common stock in this offering. The
following table illustrates the per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per common share............. $11.00
Net tangible book value per common share at June 30, 1999........ $1.10
Increase per share attributable to new investors................. 2.50
-----
Net tangible book value per common share after this offering....... 3.60
------
Dilution per common share to new investors......................... $ 7.40
======
</TABLE>
The following table sets forth at June 30, 1999:
. the number of shares of our common stock purchased by existing
stockholders, the total consideration and the average price per share
paid to us for these shares;
. the number of shares of our common stock to be purchased by new
investors, the total consideration and the price per share paid by them
for these shares; and
. the percentage of shares of our common stock purchased by the existing
stockholders and new investors and the percentage of consideration paid
to us for these shares.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
----------------- ------------------- Price Per
Number Percent Amount Percent Common Share
--------- ------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 6,235,370 71.4% $13,484,808 32.9% $ 2.16
New investors................ 2,500,000 28.6 27,500,000 67.1 11.00
--------- ----- ----------- -----
Total...................... 8,735,370 100.0% $40,984,808 100.0%
========= ===== =========== =====
</TABLE>
The foregoing table and discussion assumes that none of the stock options or
warrants outstanding at the closing of this offering will be exercised. As of
June 30, 1999, 831,320 shares of common stock were issuable upon the exercise
of outstanding stock options, with a weighted average exercise price of $1.54
per share, and 517,999 shares of common stock were issuable upon the exercise
of outstanding warrants, with a weighted average exercise price of $3.41 per
share. To the extent these stock options and warrants are exercised, new
investors will experience further dilution.
20
<PAGE>
SELECTED FINANCIAL DATA
We were incorporated in Delaware on January 3, 1997, but did not begin
operations until March 17, 1997. We present below selected financial data for
Powerize.com. The selected balance sheet data as of December 31, 1997 and 1998
and the selected statement of operations data for the period from March 17,
1997 (date of inception) to December 31, 1997 and for the year ended December
31, 1998 have been derived from our audited financial statements that are
included elsewhere in this prospectus. PricewaterhouseCoopers LLP has audited
the financial statements as of December 31, 1997 and 1998 and for the period
from March 17, 1997 (date of inception) to December 31, 1997 and the year ended
December 31, 1998. The selected financial data as of June 30, 1999 and for the
six months ended June 30, 1998 and 1999 have been derived from our unaudited
financial statements that are included elsewhere in this prospectus. In our
opinion, the unaudited financial statements include all adjustments, consisting
of normal, recurring adjustments, necessary for a fair presentation of the
information shown below. You should refer to "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the more
complete financial information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
March 17, 1997 Six Months Ended June 30,
(date of inception) to Year Ended --------------------------
December 31, 1997 December 31, 1998 1998 1999
----------------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ 24,458 $ 330,660 $ 11,155 $ 658,794
Expenses:
Cost of revenue....... 2,868 520,219 99,424 511,529
Sales and marketing... 132,953 919,094 269,144 951,250
Product development... 352,621 1,654,859 522,712 1,398,912
General and
administrative....... 88,580 439,703 149,548 989,909
---------- ----------- ------------ ------------
Operating loss.......... (552,564) (3,203,215) (1,029,673) (3,192,806)
Interest income
(expense), net......... (5,867) (31,278) (6,736) 6,303
---------- ----------- ------------ ------------
Net loss................ $ (558,431) $(3,234,493) $ (1,036,409) $ (3,186,503)
========== =========== ============ ============
Basic and diluted net
loss per common share.. $ (0.39) $ (1.36) $ (0.50) $ (0.82)
========== =========== ============ ============
Weighted average number
of common shares
outstanding............ 1,420,773 2,382,801 2,063,077 3,891,145
========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1998 June 30, 1999
-------- ---------- -------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash....................................... $ 78,534 $ 57,609 $ 6,774,000
Total assets............................... 198,808 1,539,527 9,892,670
Total debt, including current portion...... 50,000 1,009,812 21,313
Total stockholders' equity (deficit)....... (12,681) (932,337) 7,436,436
</TABLE>
21
<PAGE>
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 the notes thereto of Powerize.com which appear elsewhere in this
Prospectus. The following discussion contains forward-looking statements that
reflect Powerize.com's plans, estimates and beliefs. Our actual results could
differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below and elsewhere in this Prospectus,
particularly in "Risk Factors." In July 1999, our board of directors and
stockholders approved, and we effected, a one-for-two reverse stock split of
our common stock.
Overview
Powerize.com was formed in January 1997 and commenced operations in March
1997 as a software development company. After obtaining our initial collection
of business and financial content from IBM Corporation in April 1998, we
continued to increase the amount of content available to our users and
developed our directed search and advanced filtering technology to make our
content more accessible to our users. Our content collection has grown to
include over 32 million documents. In early 1999 we shifted our business
strategy to an advertising driven model based on offering free access to a
large portion of our content collection, most of which has been traditionally
available on a fee basis. Over 12 million documents in our collection are free
to all of our users and over 15 million are free to our registered business
users who conduct a minimum of 30 searches per month using our Web site. Our
fee-based documents are available on a pay-per-view basis. Detailed summaries
of over 3.5 million of our fee-based documents are available free of charge.
We have generated revenue from subscriptions to electronic publications, from
pay-per-view access to our content and from consulting services. We currently
deliver electronic publications through paid subscriptions to more than 88,000
users. We expect our overall number of users to increase significantly as we
market our free services and secure additional distribution relationships. As
the number of users on our Web site grows, we expect most of our revenue to
come from advertising and electronic commerce. Accordingly, our past sources
and levels of revenue are not expected to be indicative of future sources and
levels of revenue.
We have yet to achieve significant revenue and our ability to generate
significantly increased revenue is uncertain. Further, in view of the rapidly
evolving nature of our business and our very limited operating history, we have
little experience forecasting our revenue. Therefore, we believe that period-
to-period comparisons of our financial results are not necessarily meaningful
and you should not rely upon them as an indication of our future performance.
To date, we have incurred substantial costs to create, introduce and enhance
our technology and services, to develop content, to build brand awareness and
to implement our business plan. As a result, we have incurred significant
losses since our inception. We expect to continue to incur significant and
growing operating expenses to expand and enhance our content, significantly
increase our marketing efforts and implement our business plan. We will need to
generate substantial revenue to achieve profitability, which may not occur.
Revenue
Through June 30, 1999, our revenue was derived primarily from subscriptions
to electronic publications and from consulting fees. Since that time we have
also received limited revenue from pay-per-view access to our content. In the
future, we expect to generate additional revenue from advertising, electronic
commerce and software license fees. We anticipate that the most significant
source of future revenue for the Company will be from advertising. Each of
these sources of revenue is described below:
. Subscription Royalty Revenue. We receive royalty revenue from publishers
relating to the sale of subscriptions to electronic publications.
Royalty revenue is recognized ratably over the subscription period. The
subscription period is generally 12 months and the subscription prices
are set by the publishers. Customers are frequently given a 30- to 60-
day trial period during which there is no charge for the use of the
subscription.
22
<PAGE>
. Consulting Revenue. We receive consulting revenue relating to the
installation and customization of our technology. Revenue is recognized
as the services are performed.
. Pay-Per-View Content Revenue. We collect fees from the sale of fee-based
documents on a pay-per-view basis. The document prices to users are set
by the publishers and generally range from $0.50 to over $10.00 per
document with the typical document costing on average approximately
$2.50. We pay a royalty to the publishers for each document ordered by
the user. The royalties paid by the Company are typically 50% of the
document price. Revenue is recognized at the time the user purchases the
document.
. Advertising Revenue. We expect to generate advertising revenue from
sponsorship arrangements and from the sale of banner and e-mail
advertisements on our Web site. We anticipate that these will generally
be sold under short-term contracts and priced based on a per thousand
impressions basis. We believe our pricing per thousand impressions will
vary depending on our level of traffic, the length of the contract and
the position of the advertisement on the Web site. Revenue will be
recognized as the impressions are delivered.
. Electronic Commerce Revenue. We expect to generate electronic commerce
revenue from businesses who pay either a fee per transaction or a
percentage of sales generated from our Web site. Revenue will be
recognized as the transactions occur.
. Software License Fees. We expect to generate software license revenue
from organizations that license our technology for use in corporate
intranets.
For additional information on our present and expected sources of revenue,
see "Business--Advertising and Sales."
Cost of Revenue and Operating Expenses
Cost of revenue includes distribution and content licensing fees paid to
content providers and direct expenses associated with our Web site, such as
hosting and other service fees and distribution and content costs. We
anticipate that cost of revenue will increase in the near term because of
increased distribution and content costs, but it is expected to decrease as a
percentage of revenue as advertising, electronic commerce and other sources of
revenue increase.
Our operating expenses consist of:
. Sales and Marketing Expenses. Sales and marketing expenses consist
primarily of the cost of promotional materials, expenses related to
trade shows, compensation, benefits and sales commissions to our sales
force and fees paid to public relations firms. We anticipate hiring
additional sales and marketing staff and incurring additional costs
related to advertising and promotion on television, online and in print.
As a result, our sales and marketing expenses are expected to increase
significantly in 1999 and 2000.
. Product Development Expenses. Product development expenses include
compensation and benefits paid to software developers, expenses for
contract programmers and developers, and the cost of communications
lines, computer equipment and other technology costs. All product
development costs are expensed as incurred. We intend to increase our
product development expenditures in 1999 and 2000 to further enhance the
programming on our Web site and intranet services.
. General and Administrative Expenses. General and administrative expenses
consist primarily of compensation and benefits for general management,
finance and administrative personnel, occupancy costs, professional
fees, depreciation and other office expenses. We anticipate hiring
additional personnel and incurring additional costs related to our being
a public company, including introducing investor relations programs,
increasing professional service fees and increasing directors and
officers liability insurance premiums. Accordingly, our general and
administrative expenses are expected to increase in 1999 and 2000.
23
<PAGE>
. Interest Expense, Net. Interest expense consists primarily of interest
on loans to Powerize.com from Mr. Addison that were converted into
equity in March 1999. Interest income consists primarily of interest
income from excess cash balances invested in certificates of deposit.
Results of Operations
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Revenue. We recognized $659,000 in revenue for the six months ended June 30,
1999, as compared to $11,000 for the six months ended June 30, 1998. Revenue
increased during 1999 primarily as a result of a full six months of
subscription royalties earned from our online publication delivery service.
Whereas in the first six months of 1998, the service was only available for two
months.
Cost of Revenue. Cost of revenue was $512,000 for the six months ended June
30, 1999, as compared to $99,000 for the six months ended June 30, 1998. The
increase was attributable to the amortization of the prepaid licenses which
were purchased from IBM in April 1998 and charges for the utilization of a
third party's Internet hosting service.
Sales and Marketing Expenses. Sales and marketing expenses were $951,000 for
the six months ended June 30, 1999, as compared to $269,000 for the six months
ended June 30, 1998, an increase of $682,000. The increase was primarily
attributable to increases in fees paid to public relations firms, expenses
related to trade shows and the addition of sales and marketing personnel.
Product Development Expenses. Product development expenses were $1.4 million
for the six months ended June 30, 1999, as compared to $523,000 for the six
months ended June 30, 1998, an increase of $877,000. Product development
expenses increased primarily as a result of an increase in our technology
personnel from the second quarter of 1998 to the second quarter of 1999
together with an increase in compensation and benefits to our technology
personnel.
General and Administrative Expenses. General and administrative expenses were
$990,000 for the six months ended June 30, 1999, as compared to $150,000 for
the six months ended June 30, 1998, an increase of $840,000. General and
administrative expenses increased primarily as a result of the addition of
finance and accounting personnel, the payment of a finder's fee relating to our
private placement in May 1999, and the amortization of the fair value of
warrants issued to non-employees and options granted to employees for which the
fair value of the underlying common stock on the date of grant was in excess of
the exercise price of the options.
Interest Income (Expense), Net. Interest income, net was $6,000 for the six
months ended June 30, 1999 compared to interest expense of $(7,000) for the six
months ended June 30, 1998, an increase of $13,000. The increase was primarily
attributable to the interest income received on the proceeds of the private
placements in the six months ended June 30, 1999. Whereas in the first six
months of 1998, the Company had debt outstanding for the entire period.
Net Loss. We incurred a net loss of $3.2 million for the six months ended
June 30, 1999, as compared to a net loss of $1.0 million for the six months
ended June 30, 1998. The increase was primarily due to increased compensation
expenses, Internet hosting fees and amortization of prepaid license fees.
Year Ended December 31, 1998 Compared to Period From March 17, 1997 (Date of
Inception) to December 31, 1997
Revenue. We recognized $331,000 in revenue for the year ended December 31,
1998, as compared to $24,000 for the period from March 17, 1997 (date of
inception) to December 31, 1997 (the "Inception Period"), an increase of
$307,000. Revenue increased primarily as a result of subscription royalties
generated from the worldwide, perpetual and nonexclusive license to use and/or
modify the source code relating to an online publication delivery service and
the assignment of certain agreements with third party content providers which
were purchased from IBM in April 1998.
24
<PAGE>
Cost of Revenue. Cost of revenue was $520,000 for the year ended December 31,
1998, as compared to $3,000 for the Inception Period. The increase was
attributable to the amortization of the prepaid licenses which were purchased
from IBM in April 1998 and charges for the utilization of a third party's
Internet hosting service.
Sales and Marketing Expenses. Sales and marketing expenses were $919,000 for
the year ended December 31, 1998, as compared to $133,000 for the Inception
Period, an increase of $786,000. The increase was attributable primarily to
increases in fees paid to public relations firms and expenses related to trade
shows.
Product Development Expenses. Product development expenses were $1.7 million
for the year ended December 31, 1998, as compared to $353,000 for the Inception
Period, an increase of $1.3 million. Product development expenses increased
primarily as a result of an increase in our technology personnel from six
persons in the Inception Period to 27 persons for the year ended December 31,
1998.
General and Administrative Expenses. General and administrative expenses were
$440,000 for the year ended December 31, 1998, as compared to $89,000 for the
Inception Period, an increase of $351,000. General and administrative expenses
increased primarily as a result of the addition of three finance and accounting
personnel and increased rent expense associated with the Company's expansion
into a new facility.
Interest Expense, Net. Interest expense, net was $31,000 for the year ended
December 31, 1998, as compared to $6,000 for the Inception Period, an increase
of $25,000. The increase was primarily attributable to the increase in the
outstanding loans from Mr. Addison.
Net Loss. We incurred a net loss of $3.2 million for the year ended December
31, 1998, as compared to a net loss of $558,000 for the Inception Period. The
increase was primarily due to increased compensation expenses, Internet hosting
fees and expenses related to the transaction with IBM.
Income Taxes
No benefit for Federal and state income taxes is reported in the financial
statements, as we had elected to be taxed as a partnership prior to December
31, 1997, at which time we converted from a limited liability company to a C
corporation. Therefore, for the periods presented through December 31, 1997,
the Federal and state tax effects of tax losses were recorded by the members of
the limited liability company in their respective income tax returns.
Subsequent to our conversion to a C corporation, we have accounted for income
taxes in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Had we applied the provisions of SFAS 109 for
the period from inception, the deferred tax asset generated, primarily from net
operating loss carryforwards, would have been offset by a full valuation
allowance.
Liquidity and Capital Resources
From inception on March 17, 1997 through June 30, 1999, we have reported
operating losses as we organized and launched our business operations. During
this period, we made significant investments in our business, including the
worldwide, perpetual, nonexclusive license to use and/or modify the source code
relating to an online publication delivery service and a premium content search
service purchased from IBM in April 1998. These operating losses and
investments, as well as our working capital needs, were funded primarily from
private sales of common stock and loans from Mr. Addison. Despite such cash
infusions, the continued costs of implementing our business plan have placed
severe pressure on our capital resources and liquidity position.
During the second quarter of 1999, our capital position improved
substantially as stockholders' equity increased to $7.4 million at June 30,
1999 from a stockholders' deficit of $932,000 at December 31, 1998. This
improvement was primarily the result of private placements of our common stock
with net proceeds totaling $9.6 million. In addition, a related party converted
a $788,000 note payable into shares of common stock. Stockholders' equity
(deficit) also increased based on the issuance of certain warrants to purchase
shares of the Company's common stock to certain non-employees advisors and a
strategic partner. The fair value of these
25
<PAGE>
warrants was determined based on the Black-Scholes valuation model and recorded
in stockholders' equity (deficit). Our capital position strengthened as these
additions to our stockholders' equity (deficit) more than offset our net loss
of $3.2 million for the first half of 1999.
For the six months ended June 30, 1999, the Company used $2.6 million in cash
for operating activities. The impact of our $3.2 million net loss was reduced
by $936,000 of non-cash expenses. Most prominent of these non-cash expenses
were depreciation and amortization, and expenses related to warrants issued to
non-employees and common stock issued in exchange for services. These non-cash
items were supplemented by a $1.0 million increase in accounts payable,
relating primarily to future payments due Inktomi and Bell and Howell under
agreements entered into in May 1999. The increase in accounts payable
substantially offset $1.3 million of prepaid expenses and other assets,
consisting primarily of prepaid royalties to content providers and deferred
costs incurred in connection with this offering. We funded our operating cash
deficit, our fixed asset purchases of $142,000 relating primarily to computer
equipment, our repayment of a note payable to a related party in the amount
$162,000 and the costs incurred in connection with our private placements of
$352,000 with the gross proceeds of private sales of common stock totaling $9.9
million. Net cash for the six months ended June 30, 1999 increased $6.7 million
to $6.8 million.
For the year ended December 31, 1998, our net loss of $3.2 million was
partially offset by $273,000 of depreciation and amortization. Additions of
$417,000 and $926,000 in accounts receivable and prepaid license fees,
respectively, were effectively funded by increased accounts payable and accrued
expenses, and, most significantly, a $696,000 increase in deferred revenue
relating to royalties on prepaid subscriptions. Our cash used for operating
activities of $2.9 million, as well as $238,000 of fixed asset purchases, were
financed by private sales of common stock totaling $2.2 million and loans from
Mr. Addison aggregating $910,000. Net cash at the end of the period decreased
$21,000 to $58,000.
For our first partial year of operation (March 17, 1997 to December 31,
1997), our net loss of $558,000 was partially offset by increases in accounts
payable and accrued expenses, resulting in a net operating cash deficit of
$445,000. This deficit, along with the purchase of $73,000 of fixed assets, was
funded primarily from private sales of common stock totaling $546,000. Net cash
at year end was approximately $79,000.
We expect to continue to incur significant operating expenses and capital
expenditures to expand and enhance our content, significantly increase our
marketing efforts and implement our business plan. For example, during the
first half of 1999, we entered into several strategic relationships, including
arrangements with Inktomi and Bell & Howell. The remaining aggregate future
minimum payments under these strategic relationships are $1.2 million in 1999,
$2.3 million in 2000, $1.2 million in 2001 and $527,000 in 2002. As a result,
we expect to continue to report increasing net losses and net operating cash
flow deficits for the foreseeable future. Our capital requirements may vary
based upon the timing and success of our business, as a result of regulatory,
technological and competitive developments or if:
. demand for our services or cash flow from operations is more or less
than expected;
. our development plans or projections change or prove to be inaccurate;
or
. we engage in any acquisitions.
During the first half of 1999, we received net proceeds of approximately $9.6
million from private sales of common stock. We believe that the net proceeds
from this offering and our existing cash will be sufficient to fund our
operating losses, capital expenditures, lease payments and working capital
requirements through June 2000. In the event additional capital resources are
required, we may attempt to secure such resources through a combination of
commercial bank borrowings or the private or public sale of equity or debt
securities. Equity or debt financing may not be available to us on favorable
terms or at all. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our then-current stockholders would be
reduced. Furthermore, such equity securities might have rights, preferences or
privileges senior to those of the common stock.
26
<PAGE>
Impact of the Year 2000 Issue
Many computer programs have been written using two digits rather than four
to define the applicable year. This poses a problem at the end of the century
because these computer programs would not properly recognize a year that
begins with "20" instead of "19." This, in turn, could result in major system
failures or miscalculations, and is generally referred to as the "Year 2000
issue." We have formulated and, to a large extent, effected a plan to address
the Year 2000 issue. Because we are a young company, we believe we have been
able to build or acquire our business systems with the Year 2000 issue in mind
in a more effective manner than many older companies. Therefore, there have
been few Year 2000 changes required to our existing systems and applications.
We have substantially completed the process of determining the Year 2000
readiness of our information technology, or information technology systems,
which include the hardware and software necessary to provide and deliver our
service, and of our non-information technology systems. Our assessment plan
consists of the following steps:
. evaluating our date dependent code, software and hardware and evaluating
external dependencies;
. quality assurance testing of our internally-developed proprietary
software and systems;
. obtaining assurances or warranties from third-party vendors and
licensors of material hardware, software and services that are related
to the delivery of our services; and
. developing a contingency plan.
To date, our assessment has determined that our material internally
developed software and systems are Year 2000 compliant and our material
hardware, software and service vendors have informed us that the products we
are using to support our services are Year 2000 compliant. Our hosting
service, Interliant, has represented to us that its systems are Year 2000
compliant. All material commercial software on which we depend is either Year
2000 compliant or will be upgraded to be compliant in the normal course of
business through upgrades or installation of software patches. Substantially
all hardware used in our operations has been certified as Year 2000 compliant
by our vendors.
We have incurred approximately $3,000 in costs in connection with our Year
2000 compliance efforts since inception through June 30, 1999. We expect to
incur approximately $25,000 in additional costs to make our systems Year 2000
compliant by 1999, which will be expensed as incurred.
We are not currently aware of any material operational issues or costs
associated with preparing our systems for the Year 2000. Nonetheless, we may
experience material unexpected costs caused by undetected errors or defects in
the technology used in our systems or because of the failure of a material
vendor to be Year 2000 compliant. Notwithstanding our Year 2000 compliance
efforts, the failure of a material system or vendor, or the Internet
generally, to be Year 2000 compliant could harm the operation of our systems
or prevent or delay the delivery of our services being offered through us, or
have other unforeseen, material adverse consequences to us.
We are also subject to external Year 2000-related failures or disruptions
that might generally affect industry and commerce, such as utility Year 2000
compliance failures and related service interruptions. All of these factors
could materially and adversely affect our business, results of operations and
financial condition.
We have not yet developed a contingency plan to address situations that may
result if we are unable to achieve Year 2000 compliance. The cost of
developing and implementing such a plan, if necessary, could be material.
Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants, AICPA
issued Statement of Position, or SOP, 98-1, Accounting for Costs of Computer
Software Developed or Obtained for Internal Use.
27
<PAGE>
This SOP is effective for fiscal years beginning after December 15, 1998. This
SOP requires capitalization of certain costs of computer software developed or
obtained for internal use. Management does not believe that SOP 98-1 will have
a material impact on our results of operations or financial condition.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS 133 is effective for fiscal years beginning after
June 15, 1999, January 1, 2000 for us. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction.
Currently we do not utilize derivative instruments, therefore the adoption of
SFAS 133 is not expected to have significant effect on our results of
operations or financial position. We will adopt SFAS 133 for the year ending
December 31, 2000.
In December 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition. With respect to certain transactions. SOP 98-9
modifies SOP 97-2 by requiring revenue to be recognized using the "residual
method" if certain conditions are met. SOP 98-9 will be effective for our 2000
financial statements. Our management is assessing the impact that SOP 98-9 will
have on our future software revenue.
Quantitative and Qualitative Disclosures about Market Risk
To date, market risk is considered by management to be immaterial.
28
<PAGE>
BUSINESS
Market Opportunity
We are an aggregator and distributor of business and financial information to
business users. Because of the convergence of the following factors, we are
pursuing the distribution of this content over the Internet free of charge:
Growth in Size and Use of the Internet. The Internet has become a principal
global medium for communications, news, information and commerce. International
Data Corporation, an information technology research firm, projects that the
number of Internet users will grow from approximately 100 million at the end of
1998 to approximately 320 million at the end of 2002.
Increase in Advertising and Electronic Commerce on the Internet. The Internet
has features and functions unavailable in traditional media, which enable
online merchants to communicate effectively with customers and advertisers to
target users with specific needs and interests. As a result, the Internet has
emerged as an attractive medium for advertising and electronic commerce. By
advertising on the Internet, advertisers have the ability to gather demographic
information and target their messages to specific groups of consumers as well
as change their advertisements frequently in response to market factors,
current events and consumer feedback. According to Simba Information, an
Internet research firm, $2.1 billion was spent on Web advertisements in 1998.
Simba Information projects that Internet advertising expenditures will be $5.5
billion in 1999 and will reach $7.1 billion by 2002.
Increase in Business Usage of the Internet. Business-to-business usage of the
Internet is also growing rapidly, as businesses are increasingly using the
Internet's ability to reach customers globally, deliver personalized content
and open new distribution channels. The Yankee Group, a technology and Internet
research firm, projects business to business electronic commerce transaction
volume will grow from $138 billion in 1999 to more than $541 billion in 2003.
Increase in Need for Electronic Business Information. The Internet allows
content providers to deliver information and programming in a manner not
possible in the traditional broadcast and print media. Although these
traditional media can have large audiences, they are generally limited to a
specific geography, can deliver only limited content or are not effective in a
real-time environment. Print media is limited by the significant time delays
involved in its production and distribution and its inability to be updated on
a real-time basis. Broadcast media is limited by the relatively small number of
available frequencies or channels, the rigidity of its schedules and its
inherent capacity constraints, with each channel or frequency carrying only a
limited amount of information. By comparison, the Internet allows users to
access, search and interact with a large body of content, regardless of their
location. The increased use of the Internet and the amount of information
available through that medium has increased the need for software products and
services that enable simultaneous searches of multiple sources and produce
useful, targeted results.
Numerous traditional and online information sources such as newspapers,
magazines, broadcasters and specialized Web sites are seeking to address the
demand for timely and relevant business and financial information. However, we
believe that most Web sites offering business and financial data suffer from a
number of limitations. Frequently, these Web sites do not offer high quality
content comparable to that available from traditional media sources and do not
offer technologies that filter and organize data. These sites provide large,
undifferentiated collections of information that require users to undertake
time-consuming and multi-site searches to obtain all of the information they
need.
We believe that a significant opportunity exists to provide easy access to
comprehensive business and financial information over the Internet free of
charge. By integrating high quality content with advanced search and analytical
tools, a Web-based service can enable its audience to keep abreast of current
business developments and track industry and competitive trends. We believe
that by assembling a loyal base of business
29
<PAGE>
users who need to conduct business and investment research, we can create a
targeted audience that is attractive to advertisers and electronic commerce
vendors.
The Powerize.com Solution
We are a leading Internet aggregator and distributor of business and
financial information. We offer "one-stop shopping" using our directed search
and advanced filtering technology to provide users concise, relevant and
organized search results according to user-selected criteria. We believe we
provide the largest single source of business and financial content available
on the Internet. Our products and services find, access and prioritize large
data indices and commercial information sources compiled from thousands of
publishers of more than 10,000 sources worldwide.
We host much of this content directly. We also link to content hosted by
selected third parties through our proprietary PowerLink technology. This
enables Powerize.com to access the "hidden" Web, valuable information sources
on the Web that most Internet search engines do not index. We also provide
research agents or software that enable users to track information on specific
subjects of interest to them. Our search technology allows a user to establish
specific search criteria, and to simultaneously apply that criteria to the
user's own intranet databases and our information sources. We have created a
number of pre-programmed search templates known as "search wizards" which
provide user-selected filtering of information and automatically link a user's
search request to the most logical information available in order to provide a
better, more responsive search result. We believe our search technology
provides the user a superior and efficient search methodology.
We plan to meet the typical Internet user's desire for free information.
Thus, we:
. offer large quantities of business and financial information without
charge to our users;
. link to hundreds of free "hidden" Web sites and, through our search
technology, provide accurate navigation to the content for our users;
and
. offer detailed free summaries of documents that are not yet available
free of charge.
To offer our service to the largest possible number of users, we deliver
content to business end users through the Internet as well as through corporate
Intranets. We also provide the tools necessary to reach the end user through
these networks and distribute information to the end users. Our tools include
search interfaces that can be placed on desktops or Web sites to enable
Internet partners to build their own interface to our service, and custom
search pages for corporate intranets. Our technology connects our service to
Intranets and enables corporations and solution providers to build their own
enterprise information portals. We also connect to third party online services
such as Dialog, NewsEdge, Infonautics and Bell & Howell. We access corporate
information through popular databases and software products such as Lotus
Notes, Documentum, Verity and Excalibur.
The following table shows the services and number of documents available on
our Web site to our users:
<TABLE>
<CAPTION>
Number of
Service Documents
------- ---------
<S> <C>
Free searching on our Web site......................... Unlimited
Access to free content by unregistered users........... Over 12 million
Access to free content by registered users............. Over 15 million
Access to fee-based content on subscription or pay-per-
view bases............................................ Over 20 million
Access to free summaries of fee-based documents........ Over 3.5 million
</TABLE>
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Our Strategy
We seek to be the dominant Internet aggregator and distributor of business
and financial information by providing a growing amount of information to an
increasing number of users free of charge. The core elements of our strategy
include:
. Expanding Our Business and Financial Content. We plan to continue to
expand our content collection and continue to increase significantly the
portion of business and financial information that is available free of
charge. This includes expanding the number of database-driven Web sites
such as the U.S. Patent & Trademark Office, EDGAR and others that Web-
based search sites other than Powerize cannot directly search.
. Enhancing Brand Awareness. We intend to build a strong Internet brand
that is synonymous with free quality business and financial information.
We intend to enhance our brand awareness through an extensive public
relations campaign. We believe that increased brand awareness helps us
attract additional traffic, subscribers, strategic partners and
advertisers.
. Building Web Site Traffic and Audience Loyalty. We believe that our
plans for significantly increased marketing activities will provide us
with increased visibility among Web users and companies advertising and
engaging in commerce over the Internet.
. Developing and Expanding Strategic and Distribution Relationships. We
plan to continue to develop strategic and distribution relationships
which we believe will increase traffic and advertising revenue. These
and other relationships are designed to allow others to sell
Powerize.com products and services and to incorporate our products and
services into the products and services they provide. We expect that
these relationships will enhance the market acceptance and increase the
visibility of our Web site.
. Capitalizing on Our Proprietary Search Technology. We plan to capitalize
on our proprietary search technology which provides concise, relevant
and organized search results in order to differentiate ourselves from
our competitors. Our PowerLink technology translates information
requests into the language used by the source and extracts it. Our
technology also is able to search multiple databases simultaneously and
can search a large number of information-rich Web sites that the major
search engines are unable to search because the information on the site
is hidden in a database.
Products and Services
Currently, we offer our content through two types of service, each directed
to the business user: Powerize.com Internet and Powerize.com Intranet.
Powerize.com Internet Services
Our Powerize.com Internet services provide users with the ability to search
our content collection free of charge. Our Web site serves business users at
large and small enterprises, professionals, investors, and others who use
specialized business and financial information. We offer free access to a large
portion of our content collection. Over 12 million documents in our collection
are free to all of our users and over 15 million are free to our frequent
business users who conduct a minimum of 30 searches per month using our Web
site. Our fee-based documents are available on a pay-per-view basis. Detailed
summaries of over 3.5 million of our fee-based documents are available free of
charge.
Our technology is able to search multiple databases simultaneously. It also
is able to search quickly a large number of information-rich Web sites that are
not directly searchable through the major search engines such as Yahoo! and
Lycos. Examples of these "hidden" sites include the U.S. Patent & Trademark
Office, the U.S. SEC's EDGAR database, and many industry-specific sites, such
as Biospace, CMPnet and Manufacturing Marketplace.
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Our Powerize.com Internet services provide users with the ability to search
our content collection free of charge and conduct a conventional Internet
search using their selected search engine with a single search directive.
Alternatively, the user may choose to download our free software program called
Powerize that offers the convenience of performing the same dual search
function from their desktop without having to go to the Powerize.com Web site.
This free software program is available for download from our Web site and is
also distributed at trade shows. We plan to add additional features to this
software program later this year. For example, we plan to enhance the software
program currently used in our Internet service to provide users with the
ability to create dynamic research "agents" that constantly monitor information
sources for new content about the subjects of interest to the user. We have
recently acquired the technology to enable our users to establish contact and
"chat" with users performing similar searches, thus forming Internet
communities of users sharing common interests.
Powerize.com Intranet Services
Our Powerize.com Intranet services consist of an enhanced version of our
Powerize.com Internet services that allows users to search simultaneously our
content and our customers' own internal proprietary information or Intranet
with a single search directive. Our Powerize.com Intranet services also offer
subscriptions to more than 200 business and professional subscription-based
publications delivered in electronic format to the user's desktop via the
Internet or through an intranet using Lotus Notes. Our Powerize.com Intranet
services currently deliver electronic publications through paid subscriptions
to more than 88,000 users at more than 800 corporations and government
agencies, including over half of the companies in the Fortune 500.
Our technology enables the user to simultaneously search multiple sources of
information, both inside and outside the organization, without having to learn
the particular search requirements of each source. Our technology has received
industry recognition by winning, among others, the "Hot Shot" award for the
best customized information service from the Software & Information Industry
Association in 1998. Our technology links to products produced by intranet
search engine vendors such as Documentum, Excalibur Technologies, Lotus
Development Corporation and Verity enable communication automatically to their
search engines. Our technology also enables the user to search professional
subscription services such as Dialog and NewsEdge and automatically handles the
login to those systems on behalf of the user. Finally, our technology gives the
user the ability to create dynamic research "agents" that constantly monitor
information sources for new content about the subjects of interest to the user.
Content Providers
We believe we provide the largest single source of business and financial
content available on the Internet. Our content collection includes over 32
million documents, including company profiles, news articles, research reports,
market and industry analyses, and other documents from more than 10,000 sources
worldwide. We obtained our initial content collection from IBM Corporation,
which developed this content over a period of several years. Since that time,
we have enhanced our content by:
. obtaining the rights to free summaries;
. adding new sources;
. developing an advertising-driven model;
. redesigning the search interface and Web site;
. adding access to the "hidden" Web; and
. adding Intranet capability.
We offer free access to a large portion of our content collection. Over 12
million documents in our collection are free to all of our users and over 15
million are free to our registered business users who conduct a minimum of 30
searches per month using our Web site. Our fee-based documents are available on
a pay-per-view basis. Detailed summaries of over 3.5 million of our fee-based
documents are available free of charge. We
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continue to expand the amount of content available to our users. All of our
content partners update their content on a regular basis and we receive content
feeds from many of our content providers several times a day.
Our current content providers include, among others:
. Adis International publishes a wide range of medical information
journals, advanced information database solutions for the pharmaceutical
industry, and customized communications for distribution to healthcare
professionals worldwide.
. Bell & Howell Information and Learning Company, formerly UMI, is a large
aggregator of information from over 8,000 publishers. Our relationship
with Bell & Howell enables us to offer our users access to more than
1,700 newspapers, periodicals, journals and newsletters.
. The Bureau of National Affairs, Inc. is a leading publisher of print and
electronic news and information, reporting on developments in health
care, business, labor relations, law, economics, taxation, environmental
protection, safety and other public policy regulatory issues. BNA
produces more than 200 news and information services.
. Comtex Scientific Corporation provides real-time COMTEX customwire
products. Our relationship with COMTEX allows us to offer information
from more than 33 real-time newswires.
. Ebsco Industries, Inc. provides databases, journals and periodical
publications to the education and library marketplace.
. First Call provides information on over 15,000 U.S. companies, including
historical earnings, consensus earnings estimates and recommendations,
price to earnings ratios and earnings reporting dates.
. FOI Services, Inc. provides a database offering access to Food and Drug
Administration information.
. Gale Group/Information Access Company is a large aggregator of business
and professional information offering access to over 3,500 newspapers,
periodicals, trade journals and newsletters.
. Graham & Whiteside provides information on the largest companies in
Western Europe, Eastern Europe and the Commonwealth of Independent
States, the Far East and Australia, Sub-Saharan Africa, the Arab World,
South West Asia and Latin America and the Caribbean.
. Hoover's provides profiles and other information on approximately 14,000
U.S. and foreign companies, covering both public and private companies.
. Infousa provides business and consumer marketing information products
and data processing services throughout the United States and Canada.
. International Data Corporation is an industry research firm that
provides research reports on technology trends, such as knowledge
management.
. Investext provides a large collection of investment research reports,
including industry, product and country analyses. Its research reports
are written by more than 500 investment banks, 70 market research firms
and 200 trade associations.
. Marketguide provides a database containing financial information on over
12,000 publicly-traded companies.
. Nelson provides analyst coverage, consensus earnings estimates,
recommendations and research reports. Nelson provides descriptions of
over 20,000 public companies in over 50 countries. Investment banks and
market research firms contribute their research data to Nelson.
. Nikkei is the publisher of the world's largest financial daily, The
Nihon Keizai Shimbun, which has a circulation of over 4.7 million
readers.
. ORS Polling of Nations provides a collection of international public
opinion data complied from more than 12,000 surveys conducted in the
U.S. and over 60 other countries.
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. Phillips Publishing provides business news, market research and
competitive analysis on the telecommunications industry. In addition to
offering its content to our users, we also host, deliver and resell
Phillips media, satellite and technical electronic publications.
. Primark, formerly Disclosure, Inc., provides business and financial
information covering over 50,000 public and private companies worldwide.
For U.S. public companies, annual financial data is available from 1985
to the present while quarterly data is available for the most recent
three years.
. Windover Information provides information concerning the health care
industry. In addition to offering its content to our users, we also,
host, deliver and resell Windover's electronic publications.
. Zacks Investment Research maintains a database derived from more than
300,000 research reports produced by investment banks.
We do not own or create any of the content we distribute. We rely on our
relationships and agreements with our content providers to enable our users to
gain access to a broad range of business and financial content. Our content
providers generally grant us a worldwide, non-exclusive right and license to
use their content to provide information services. Our arrangements with our
content providers generally extend for one to three years and automatically
renew unless terminated by notice given at least three months prior to the end
of the term. In the event of a breach by us, the contracts can be terminated on
short notice. Many of our content providers compete with one another and, in
some cases, with us, for users. We do not have exclusive distribution
arrangements with any of our content providers. Accordingly, all of our content
providers can distribute their content themselves directly or through our
competitors. Business decisions made by our content providers could adversely
affect the availability or pricing of their content to us.
Powerize is able to search multiple databases simultaneously. Thus, it is
also able to quickly search a large number of free, information-rich Web sites
on the Internet that are not directly searchable through the major search
engines such as Yahoo! and Lycos. Examples of these "hidden" sites include:
. Businesswire . Wired News
. Cnn.Com . U.S. Patent & Trademark Office
. Commerce Business Daily . Auto.Com
. Forbes . Manufacturing Marketplace
. SEC Edgar Databases . Biospace
. National Technical Information Service. Hospitality.net
. PR Newswire . Media Central
. State Legislative Web Sites . Cmpnet
Powerize.com also links to several major professional online services through
our technology. This gives our users the convenience of being able to search
the information sources that are important to them from one place. The services
we link to include, among others:
. Dialog Corporation, which provides access to more than 900 online
databases for business, scientific and technical information and serves
over 20,000 corporate customers in more than 120 countries.
. Infonautics, Inc., which is a leading Internet information company that
provides online information services to schools, libraries, consumers
and businesses. It provides a wide selection of full text magazines,
scholarly journals, current newspapers and newswires, television and
radio transcripts, photographs and maps, reference and historical
sources and online brokerage reports.
. Newsedge Corporation, which is a large independent news integrator with
over 1,000 sources of news and information.
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Advertising and Sales
We have generated revenue from subscriptions to electronic publications, from
pay-per-view access to our content and from consulting services. We currently
deliver electronic publications through paid subscriptions to more than 88,000
users. We expect our overall number of users to increase significantly as we
market our free services and secure additional distribution relationships. As
our number of users grows, we expect to generate additional revenue from
advertising and electronic commerce. We believe our Web site will attract
business users who are a desirable audience for advertisers and electronic
commerce vendors.
Advertising Revenue
We anticipate that the most significant source of future revenue for us will
be from advertising. We expect to generate advertising revenue from sponsorship
arrangements and from the sale of banner and e-mail advertisements on our Web
site. These will generally be sold under short-term contracts and priced based
on a per thousand impressions basis. Our pricing per thousand impressions will
vary depending on the contract, the type of audience on the Web site and
whether we sell the ad directly or indirectly. We have recently contracted with
a leading Internet advertising agency to sell Internet advertising on our
behalf. Advertising revenue would be adversely affected if we were unable to
secure new advertising contracts from existing customers or obtain new
customers. The market for Web advertising is intensely competitive and
advertising rates could be subject to pricing pressure in the future.
Advertisements will be displayed throughout our Web site when a user enters
the service or conducts a search. We currently use a third-party service to
sell advertising on our Web site. As our Web site's user base grows, we expect
to build an internal advertising sales force to allow us to better understand
and meet advertisers' needs, increase our access to potential advertisers and
maintain strong relationships with our existing advertisers. We intend to offer
a variety of advertising options that may be purchased individually or in
packages such as "run of site," targeted advertising, sponsorships and content
sidebars.
Subscriptions to Electronic Publications
We receive royalty revenue from the publishers of electronic publications we
offer on a subscription basis. The subscription period is generally 12 months
and the subscription prices are set by the publishers. Customers are frequently
given a 30- to 60-day trial period during which there is no charge for the use
of the subscription.
Pay-Per-View Revenue
We receive revenue from the sale of documents on a pay-per-view basis. The
document prices are set by the publishers and generally range from $0.50 to
$10.00 per document and average about $2.50 per document. We pay a royalty to
the publishers for each document ordered by the user. The royalty rates are
typically 50% of the document price.
Consulting Revenue
We receive revenue from consulting services relating to our Powerize.com
Intranet services. We also sell our products and services in targeted markets
to large enterprises who have a need for our Powerize.com Internet services and
our Powerize.com Intranet services on an enterprise-wide basis.
Electronic Commerce
We expect to generate electronic commerce revenue from advertisers who pay
either a fee per transaction or a percentage of sales generated directly from
their advertisement on our Web site. For example, in May 1999, we entered into
an electronic commerce agreement with barnesandnoble.com through which we
enable our users to search for books at the barnesandnoble.com Web site. We
will earn a percentage of the revenue generated from each transaction we
initiate for them.
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Software License Fees
We expect to generate software license revenue from organizations that
license our technology for use in corporate intranets.
Strategic Relationships
We plan to continue to develop strategic relationships to increase site
visits and advertising revenue. These relationships are designed to allow
others to sell Powerize.com products and services and to incorporate our
products and services into their products and services. We expect that these
relationships will enhance the market acceptance and increase the visibility of
our Web site. Our current strategic relationships include the following:
INKTOMI Corporation provides search and indexing services to America Online,
HotBot, Yahoo! and other leading sites on the Internet. In order to accommodate
a large number of simultaneous users and provide for rapid access to our
content, in May 1999, we entered into a three year agreement with Inktomi that
provides that:
. Inktomi will host and serve our index of documents on a dedicated
cluster of its servers; and
. Inktomi will market our content as a blended search option to its
present and future customer base.
In exchange for these commitments, Inktomi received warrants to purchase
233,200 shares of our common stock at an exercise price of $3.50 per share, 50%
which vest immediately and are non-forfeitable and 50% which vest only upon
Inktomi's success in marketing our content to Inktomi's customer base. The
warrants are exercisable for a 10 year period.
Bell & Howell Information and Learning Company, formerly UMI, is one of our
major content providers. In May 1999, we entered into a 14 month content
distribution agreement with Bell & Howell Information and Learning that enables
us to provide access to up to 1,700 information sources to business end users
free of charge. We are required to share our advertising revenue with Bell &
Howell and the publishers that are Bell & Howell's suppliers. This content
includes journals, magazines, newspapers and newsletters that have not
previously been provided free of charge. As a part of the agreement, we have
agreed that immediately prior to the closing of this offering, Bell & Howell
will be issued a warrant to purchase 113,636 shares of our common stock at the
initial public offering price. This warrant will be exercisable for a one year
period.
Lotus Development Corporation is currently embedding components of our
technology into the next version of Lotus's Domino Extended Search product. In
May 1999, we entered into a three year agreement with Lotus Development
Corporation that provides that:
. Lotus will embed portions of our technology into its Domino Extended
Search Version 2.0, scheduled to be released in the summer of 1999;
. we will be the primary source of external business content provided to
the Lotus Domino Extended Search user base. Thus, Lotus users will have
direct access to our content when they conduct searches;
. Lotus will provide certain marketing support to us; and
. Lotus will pay us a development fee and a royalty on the software sales
of Domino Extended Search.
Marketing and Distribution
We are seeking to establish the Powerize.com brand as the leading aggregator
and distributor of business and financial information on the Internet. To this
end, we have launched a national brand building campaign and intend to make
substantial expenditures to advertise our brand and the Powerize.com Web site
in traditional and on-line media. We are developing an Internet marketing
program to reach end users electronically via Web advertising, e-mail
campaigns, hyperlinks from prominent Web sites and electronic delivery via
electronic commerce systems.
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In addition to the distribution channels developed through the strategic
relationships described above, we intend to focus our distribution efforts
through aggressively pursuing additional relationships to enhance our brand
name recognition and audience reach. For example, we are establishing
distribution relationships that compensate other Web sites for driving traffic
and transactions through our Web site. We provide our distribution partners
with a programming interface toolkit that enables them to create their own
interfaces and establish a gateway to Powerize.com. Several major Internet
companies and high traffic Web sites with whom we currently have important
distribution relationships include:
Verticalnet, Inc., a creator and operator of Web-based trade communities,
entered into a one year revenue sharing agreement with us in June 1999 pursuant
to which Powerize.com will be the exclusive provider of business information to
the "Business Information Category" within the "Business Services Center" on
all of the VerticalNet trade community Web sites. The agreement also provides
for VerticalNet to advertise our services on its Web site.
Netscape Communications Corporation, a major Web portal company, entered into
a two year agreement with us in June 1999 that provides that Netscape will
offer its users access to a portion of our content from specified industry
segments through its "Business" channel, which users can access from Netscape's
portal sites "Netcenter" and "My Netscape." Netscape will advertise our
services on "Netcenter" and "My Netscape" and we will share revenue.
Commerce Corporation, an Internet business to business content provider that
serves the estimated 11 million small businesses in the U.S., entered into a
two year agreement with us in May 1999 to permit Commerce to deliver
Powerize.com's content to Commerce's users.
Interliant, Inc., a major Web hosting company, entered into a one year
agreement with us in May 1999 to permit Interliant to deliver Powerize.com's
content to Interliant's customers and share advertising and content revenue.
Isyndicate, a Web-based venture that syndicates content to Web sites, entered
into a six month agreement with us in May 1999 enabling it to market our
services to third party Web sites in exchange for a share of the resulting
revenue.
NVST.Com, a private equity network with more than 50,000 registered advisors,
company and investor users, entered into an agreement with us to provide co-
branded access to our service through their Web site in exchange for a share of
the resulting revenue. The agreement will remain in effect until terminated by
either party with a thirty day notice.
Upside Magazine, a business publication, entered into a two year revenue
sharing agreement with us to provide a co-branded version of our search
interface on its Web site.
Technology and Infrastructure
We plan to capitalize on our proprietary search technology which provides
users with concise, relevant and organized search results in order to
differentiate ourselves from our competitors. As of June 30, 1999, we had 30
employees dedicated to product and content development, and for the year ended
December 31, 1998, our product development expenditures were approximately $1.7
million. This staff includes librarians dedicated to writing pre-programmed
search templates known as "search wizards" which provide user-selected
filtering of information and automatically link a user's search request to the
most logical information available to provide a better, more responsive search
result. Our engineering staff has created our PowerLink technology which
expands the reach of our searches to include numerous third-party Web site
sources. Our engineers also build and maintain our technology to connect our
products and services to our corporate intranet customers.
Using our search wizard and PowerLink technology, Powerize can be linked and
incorporated into multiple search tools, information management systems and
content sources. This technology gathers
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information from numerous free and paid sites on the Internet, including
"hidden" Web sites that are not directly searchable through the major search
engines. It also brings together information stored on corporate intranets
stored in a wide variety of formats throughout the enterprise, including Lotus
Notes databases, any object-oriented database and any document collection
indexed by Documentum, Excalibur or Verity products. In addition, the
technology can access real-time and archived newsfeeds from providers such as
NewsEdge, and professional online services including Bell & Howell, Dialog and
Infonautics and our own Powerize content platform. We have licensed various
technology components from various providers for information filtering and data
management.
Interliant currently hosts our index and we currently use the PLS search
engine, which is owned by America Online. In order to accommodate a large
number of simultaneous users and provide for rapid access to our content, in
May 1999 we entered into an agreement with Inktomi to begin using Inktomi to
host an index of our documents and provide the search engine to search that
index. We expect this agreement to be implemented in 1999. The Powerize.com Web
site and content is hosted at, and all of its network operations are controlled
from, Interliant's facilities in McLean, Virginia. Interliant provides multiple
Web servers which run Microsoft Windows, Microsoft NT and IBM's AIX operating
systems. The computer equipment used to operate the Powerize.com Web site at
Interliant's facilities is powered by multiple redundant power supplies.
Customers and Users
We currently deliver electronic publications through paid subscriptions to
more than 88,000 users at more than 800 corporations and government agencies,
including over half of the companies in the Fortune 500. Some of the
corporations and government agencies to whom we currently deliver electronic
publications include:
Banking/Financial Services Pharmaceuticals
. The Allstate Corporation . Bristol-Myers Squibb Company
. American Express Company . Eli Lilly Company
. Citigroup Inc. . Johnson & Johnson
. Massachusetts Mutual Life Insurance Company
. Merck & Co.
. Bank of America . Pfizer, Inc.
Energy Telecommunications
. B.P. Amoco p.l.c. . Lucent Technologies, Inc.
. Chevron Corporation . MCI WorldCom, Inc.
. Exxon Corporation . SBC Communications, Inc.
. Mobil Corporation
. Texaco Corporation Other
Government/Defense . The Boeing Company
. E.I. du Pont de Nemours and Company
. U.S. Congress . Ernst & Young International
. U.S. Dept. of Housing & Urban Development
. Ford Motor Company
. U.S. Department of Labor . General Electric Company
. U.S. Environmental Protection Agency . General Motors Corporation
. U.S. Navy . Lockheed Martin Corporation
. PepsiCo, Inc.
Information Technology . Philip Morris Companies
. United Technologies Corporation
. Hewlett-Packard Company
. International Business Machines Corporation
. Intel Corporation
. Microsoft Corporation
. Oracle Corporation
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For the year ended December 31, 1998, two of our customers, The Bureau of
National Affairs, Inc. and Adis International, accounted for 53% and 25% of our
revenue, respectively. No other customer accounted for more than 10% of our
revenue in 1998.
User Service and Support
We provide user service and support in response to inquiries from users who
contact us primarily by e-mail and telephone. Our support staff generally
responds to inquiries within 24 hours. We currently have six employees
dedicated to user support. We believe that providing a high level of support
free of charge is necessary to retain our current user and to acquire new ones.
Competition
The market for Internet and intranet products and services is highly
competitive. Many Web sites compete for the attention and spending of business
people and advertisers, particularly in the business and financial information
area. We expect that the level of competition will continue to intensify. We
compete for traffic, advertisers and content providers with many types of
companies including:
. free or low-cost Web sites focused on business, such as The Wall Street
Journal Interactive Edition, Hoovers.com, Marketwatch.com,
TheStreet.com, Dowjones.com, and Office.com;
. providers of company information, such as MarketGuide and Standard &
Poor's, many of whom are also our content providers;
. providers of proprietary business and financial information, such as
Bloomberg Business News, Dow Jones Interactive and Reuters News Service;
. business and financial information aggregators, such as Dialog, Lexis-
Nexis, Northern Light, and OneSource, many of whom have introduced or
will introduce Web-based offerings; and
. Internet portal companies and other free or low cost mass market on-line
services, such as Excite, Infoseek, Lycos, Yahoo! and Netscape.
Our ability to compete depends on many factors, including:
. the timeliness, comprehensiveness and trustworthiness of our content and
that of our competitors;
. the cost of our services compared to our competitors;
. the ease of use of services developed either by us or our competitors;
. the usefulness of our technology and tools;
. the attractiveness of the demographic characteristics of our audience;
and
. the effectiveness of our sales and marketing efforts.
We cannot assure you that we will be able to compete successfully. Some of
our existing and potential distribution and marketing partners and content
providers could compete with us in certain areas. In addition, the market in
which we compete is fluid and subject to rapid change such that new and
potentially unidentified competitors could emerge. Many of our existing
competitors, as well as a number of potential new competitors, have longer
operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
This may allow them to devote greater resources than we can to the development
and promotion of their services. These competitors may also undertake more far-
reaching marketing campaigns, adopt more aggressive pricing policies, including
offering their business and financial information for free, and make more
attractive offers to existing and potential new employees, strategic partners
and advertisers. Our competitors may develop content that is equal or superior
to ours or that achieves greater market acceptance than ours. If we are unable
to compete successfully, our business, operating results and financial
condition would be materially and adversely affected.
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Intellectual Property
We regard our products, services, and technology as proprietary and attempt
to protect them with copyrights, trademarks, trade secret laws, patents,
restrictions on disclosure and other methods. We cannot assure you that these
methods will be sufficient to protect our technology and other intellectual
property.
We have filed two patent applications with respect to systems, methods and
apparatus related to Powerize Server and pricing of information delivered to
our users. We intend to file further applications for letters patent to the
extent possible. We currently have no issued patents or other applications
pending. We must make additional filings with the United States Patent and
Trademark Office with respect to our currently pending applications. We cannot
assure you that these applications will issue as patents, or that the scope of
claims that may ultimately be contained in any issued patents will be adequate
to protest our intellectual property. We currently have no patent applications
on file in countries other than the United States and therefore our technology
and other intellectual property may be unprotected in foreign countries. We
cannot assure you that we will obtain any patents that would protect our
intellectual property from our competitors, who could seek to design around or
invalidate such patents. In addition, certain foreign countries' laws and the
global nature of the Internet make it virtually impossible to control the
ultimate destination of our proprietary information.
We have the right to apply for registration of our copyrights in works of
authorship representing computer programs and other materials we use in our
business, but we have not yet applied for such registration, either in the
United States or in any foreign countries. We expect to apply to register our
copyrights in the United States to the extent possible, and to rely on
international treaties and conventions governing copyrights to the extent
possible to secure our rights in foreign countries. We cannot assure you that
we will obtain any significant copyright protection for our works of authorship
that would protect our intellectual property from competition. Competitors may
independently be able to develop systems without copying our works of
authorship.
We have filed applications for Federal registration and claim rights in the
following trade and service marks, among others: Powerize.com(TM), Powerize.com
plus design (Lightning Bolt logo)(TM), Powerize.com plus design (without
Lightning Bolt logo)(TM), Powerize Your Search For the Right Information(TM),
Powerize Server(TM), Power Links(TM) and Powerize.com Your Search for the Right
Information plus design(TM). We also claim rights in the trade and service mark
Hidden Web(TM).
We also rely on unpatented trade secrets and know-how to maintain our
competitive position. We seek to protect this information by confidentiality
agreements with employees, consultants and others. These agreements may be
breached or terminated, leaving us with inadequate remedies. Our competitors
may learn or discover our trade secrets. Our competitors may independently
develop technologies that are substantially equivalent or superior to ours.
Employees
As of June 30, 1999, we employed 44 individuals. None of these employees is
represented by a labor union, and we consider our relations with our employees
to be good. Our management team has significant experience in the Internet and
computer software industries. Our staff includes 21 engineers, three
librarians, six customer support representatives and 14 sales and marketing and
support personnel.
Facilities
Our headquarters are in Linthicum, Maryland in facilities consisting of
approximately 5,000 square feet under a lease that will expire in March 2000.
We lease additional space in Reston, Virginia consisting of approximately 8,200
square feet under a lease that will expire in December 2000. Our communications
and network infrastructure is hosted by Interliant in McLean, Virginia.
Legal Proceedings
We are not currently involved in any material legal proceedings.
40
<PAGE>
MANAGEMENT
Our Directors and Executive Officers
The following table shows information about our directors and executive
officers:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Edwin R. Addison................. 42 Chairman of the Board, Chief Executive Officer and Director
Mark A. Gaertner................. 41 President, Chief Operating Officer and Director
Ted S. Bagheri................... 41 Executive Vice President, Chief Financial Officer and Director
J. Robert Kaminski............... 59 Executive Vice President--Sales
Michael Gallagher................ 42 Senior Vice President--Marketing and Product Development
John McGrath..................... 46 Executive Vice President--Strategic Development
Jeffrey Crigler.................. 42 Director
James G. Groninger............... 55 Director
Dr. Francis J. Harvey............ 56 Director
Jay S. Levine.................... 42 Director
</TABLE>
Edwin R. Addison has been our Chairman of the Board, Chief Executive Officer
and a Director since founding the Company in January 1997. In 1989, Mr. Addison
founded ConQuest Software Inc., a text search engine company, and served as its
Chief Executive Officer until ConQuest was sold to Excalibur Technologies, Inc.
in July 1995. From July 1995 to October 1996, Mr. Addison managed three
business units for Excalibur. From 1987 to 1988, Mr. Addison was the Director
of the Artificial Intelligence lab at Booz, Allen & Hamilton. From 1978 to
1987, Mr. Addison served as a senior engineer and business development manager
at Westinghouse Electric Corporation.
Mark A. Gaertner has been our President, Chief Operating Officer and a
Director since May 1998. From December 1997 to April 1998, Mr. Gaertner was the
Director for Strategic Marketing and Deputy for Strategy of the Systems
Development and Technology Center of the Electronic Sensors and Systems
Division of Northrop Grumman Corporation. From 1980 to December 1997, Mr.
Gaertner held various marketing, engineering and product management positions
in the commercial and defense sections of Westinghouse Electric Corporation.
Ted S. Bagheri has been our Executive Vice President, Chief Financial Officer
and a Director since March 1997. From December 1995 to July 1997, Mr. Bagheri
was the Vice President of Finance for HTR, Inc., a national computer training,
consulting and publishing organization. From August 1994 to October 1995, Mr.
Bagheri was the Director of Finance for ConQuest Software, Inc. From June 1992
to June 1994, Mr. Bagheri was Controller and Director of Finance of HTR.
J. Robert Kaminski has been our Executive Vice President--Sales since January
1997. From December 1995 to July 1996, Mr. Kaminski was the Vice President of
Sales for the Investment Software Services division of Automatic Data
Processing, Inc. From April 1992 to November 1995, Mr. Kaminski was a Sales
Executive with Excalibur Technologies, Inc. From 1992 to 1994, Mr. Kaminski was
a Sales Executive for ConQuest Software, Inc.
Michael Gallagher has been our Senior Vice President--Marketing and Product
Development since September 1998. From October 1997 to September 1998, Mr.
Gallagher was the Senior Vice President--Sales of Imark Technologies, Inc. From
May 1997 to October 1997, Mr. Gallagher was the Director of National Sales of
Up Inc. From February 1995 to May 1997, Mr. Gallagher was the Director of
Commercial Sales and
41
<PAGE>
Marketing for AERA, Inc. From August 1993 to March 1995, Mr. Gallagher was the
Director of Marketing and Business Development for National Trade Production.
John McGrath has been our Executive Vice President--Strategic Development
since March 1999. From July 1995 to March 1998, Mr. McGrath was the Vice
President of New Business Development of Excalibur Technologies, Inc. Mr.
McGrath was the Senior Vice President--Sales and Marketing of ConQuest
Software, Inc. from March 1993 until July 1995 when ConQuest Software, Inc. was
acquired by Excalibur Technologies, Inc.
Jeffrey Crigler has been a Director of Powerize.com since May 1999. Mr.
Crigler is and has been the President and Chief Executive Officer of Engenia
Software, Inc. since September 1998. From November 1997 to July 1998, Mr.
Crigler was the Vice President of Knowledge Management Tools for Lotus
Development Corporation. From 1994 to November 1997, Mr. Crigler was a Vice
President for IBM Corporation.
James G. Groninger has been a Director of Powerize.com since May 1999. Mr.
Groninger is the founder of The BaySouth Company and has been its President
since January 1995. From April 1988 to December 1994, Mr. Groninger was a
Managing Director, Corporate Finance for PaineWebber Inc. Mr. Groninger serves
on the board of directors of Cygene Designs, Inc., Layton BioScience, Inc., NPS
Pharmaceuticals and The Chataqua Foundation.
Dr. Francis J. Harvey has been a Director of Powerize.com since May 1999. Dr.
Harvey retired from Westinghouse Electric Corporation in June 1997. From April
1996 to June 1997, Dr. Harvey was the Chief Operating Officer of Westinghouse's
Industries and Technology Group. From March 1995 to April 1996, Dr. Harvey was
the President of Westinghouse's Defense and Electronics business. From January
1994 to March 1995, Dr. Harvey was the President of Westinghouse's Government
and Environmental Services Group. From July 1993 to January 1994, Dr. Harvey
was Vice President of Science and Technology for Westinghouse. Dr. Harvey
serves on the board of directors of GTS Duratek, Timolin Corporation and the IT
Group and on the Board of Regents of the University of Santa Clara.
Jay S. Levine has been a Director of Powerize.com since May 1999. Mr. Levine
has served as the Senior Director of Architecture and Program Management for
Publishing Technologies at West Group since April 1999. Mr. Levine was Vice
President and Chief Technology Officer of Information Access Company from May
1997 to December 1998. From April 1995 to April 1997, Mr. Levine was the Senior
Vice President and a founding director of Thomson Technology Labs. West Group,
Information Access Company and Thompson Technology Labs are all units of the
Thompson Corporation. From April 1992 to April 1995, Mr. Levine was the Manager
of The Analytic Science Corporation's refinery lab.
Some of our other key employees include the following individuals:
Walter J. Hilton has been our Chief Engineer since May 1997. From 1995 to
April 1997, Mr. Hilton was a Senior Software Engineer for Beckton Dickinson
Diagnostic Information Systems. From 1993 to 1995, Mr. Hilton was a Software
Engineer for Motorola Corporation.
David O'Dell has been our Vice President--Engineering since April 1999 and
our Director of Information Services since May 1998. From June 1997 to April
1998, Mr. O'Dell was the Manager of Service Delivery at Lotus Notes Newsstand.
From July 1994 to May 1996, Mr. O'Dell was the Manager of Service delivery at
IBM Corporation's infoSage Division.
Steven Wooley has been our Director of Content since May 1998. From April
1996 to April 1998, Mr. Wooley was the Manager of Consulting Services at
Infodata Services, Inc. From 1993 to March 1996, Mr. Wooley was a Program
Manager for Vantage Technology, Inc.
Executive officers of Powerize.com are elected annually by the board of
directors and serve until the next annual meeting of the board of directors and
until their successors have been duly elected and qualified.
42
<PAGE>
Board of Directors and Committees
Our board of directors is comprised of seven directors and is divided into
three classes as nearly equal in number as possible. The current members of
each of the classes are as follows:
. Messrs. Crigler, Groninger and Levine are classified as Class I
directors and will serve until our 2000 annual meeting of stockholders;
. Messrs. Bagheri and Harvey are classified as Class II directors and will
serve until our 2001 annual meeting of stockholders; and
. Messrs. Addison and Gaertner are classified as Class III directors and
will serve until our 2002 annual meeting of stockholders.
Each successor to a director whose term expires at an annual meeting of
stockholders will be elected to serve until the third annual meeting after his
election and until his or her successors has been duly elected and qualified.
The term of a director elected to fill a newly created directorship or other
vacancy shall expire at the same time as the terms of the other directors of
the class for which the new directorship is created or in which the vacancy
occurred. Any vacancy on the board of directors resulting from an increase in
the number of directors or otherwise may be filled by a majority of the
directors then in office. Any director so elected by the board of directors to
fill a vacancy shall hold office for a term that shall coincide with the term
of the class to which such director shall have been elected. Directors may be
removed only by the stockholders and only with cause.
Mr. Groninger was nominated by and appointed to the board at the request of
Sevenson Environmental Services, Inc., one of our principal stockholders,
pursuant to an agreement with Sevenson which entitles it to require the board
to cause Sevenson's designee to be nominated or renominated, as the case may
be, as a Class I member of the board, for successive terms until the first to
occur of:
. 18 months after the date of this offering;
. the time at which Sevenson owns less than 5.0% of our outstanding shares
of common stock; or
. a sale or merger after which our stockholders immediately before the
transaction do not own or control a majority of the outstanding shares
of our common stock, the surviving company or the acquiring entity. See
"Related Transactions and Relationships--Sevenson Investment."
Our board of directors established a compensation committee in May 1999. The
compensation committee consists of Mr. Crigler and Dr. Harvey. The compensation
committee determines the compensation of our Chief Executive Officer,
administers our Stock Incentive Plan and generally reviews our compensation
plans to ensure that they meet our objectives. Our board of directors also
established an audit committee in May 1999. The audit committee consists of
Messrs. Groninger and Levine. The responsibilities of the audit committee
include:
. recommending to our board of directors the independent public
accountants to conduct the annual audit of our books and records;
. reviewing the proposed scope of the audit;
. approving the audit fees to be paid;
. reviewing accounting and financial controls with the independent public
accountants and our financial and accounting staff; and
. reviewing and approving transactions between us and our directors,
officers and affiliates.
Directors' Compensation
In May 1999, each of our non-employee directors, other than Mr. Groninger,
received a warrant to purchase 5,000 shares of common stock at an exercise
price of $0.02 per share. In future years, our non-employee directors will
receive compensation for serving as directors as determined by the board of
directors.
43
<PAGE>
We reimburse our directors for reasonable expenses they incur to attend board
and committee meetings. Our non-employee directors are eligible to receive
grants of options to acquire our common stock under our Omnibus Stock Incentive
Plan. See "--1998 Stock Incentive Plan."
Limitation of Liability and Indemnification Matters
Our bylaws provide for mandatory indemnification of directors and officers to
the fullest extent permitted by Delaware law. Prior to consummation of this
offering, we intend to obtain additional directors' and officers' liability
insurance and expect to enter into indemnification agreements with all of our
directors and executive officers. In addition, our certificate of incorporation
limits the liability of our directors to us or our stockholders for breaches of
the directors' fiduciary duties to the fullest extent permitted by Delaware
law.
Compensation Committee Interlocks and Insider Participation
The compensation committee of the board of directors was formed in May 1999.
No member of our compensation committee serves as one of our officers or
employees. In addition, no member of the compensation committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of
directors or its compensation committee.
Executive Compensation
The following table summarizes the compensation paid to our Chief Executive
Officer and our other five most highly compensated executive officers in 1998,
whom we identify as "named executive officers":
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation (1) Compensation
----------------------- ------------
Securities
Underlying
Name and Principal Positions Salary Bonus Options (#)
- ---------------------------- ------------- -----------------------
<S> <C> <C> <C>
Edwin R. Addison......................... $ 75,000 $ -- --
Chairman of the Board and Chief Executive
Officer
Mark A. Gaertner......................... 80,000 -- 60,000
President and Chief Operating Officer
Ted S. Bagheri........................... 90,607 -- 50,000
Executive Vice President and Chief
Financial Officer
J. Robert Kaminski....................... 87,500 -- 50,000
Executive Vice President--Sales
John McGrath(2).......................... -- -- --
Executive Vice President--Strategic
Development
</TABLE>
- --------
(1) The column "Other Annual Compensation" has been omitted because there is no
information that needs to be reported.
(2) Mr. McGrath joined us in March 1999. His current salary is $100,000 per
year.
No compensation intended to serve as incentive for performance to occur over
a period longer than one year was paid pursuant to a long-term incentive plan
during the last year to any of the named executive officers named above.
44
<PAGE>
Options Grants During 1998
The following table shows information about our grants of options to purchase
our common stock made to the named executive officers during 1998:
<TABLE>
<CAPTION>
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (4)
--------------------------------------------------------- -----------------------
Number of Percent of
Securities Total Options Exercise Market
Underlying Granted to or Base Price at
Options Employees in Price Grant Date Expiration
Name Granted (1) 1998 (2) ($/share) ($/share) Date (3) 0% 5% 10%
- ---- ----------- ------------- --------- ---------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edwin R. Addison........ -- --% $-- $-- -- $ -- $ -- $ --
Mark A. Gaertner........ 60,000 12 0.02 2.50 03/31/08 148,800 243,134 387,861
Ted S. Bagheri.......... 50,000 10 0.02 2.50 03/31/08 124,000 305,612 323,218
J. Robert Kaminski...... 50,000 10 1.00 2.50 02/08/08 75,000 153,612 274,218
John McGrath............ -- -- -- -- -- -- -- --
</TABLE>
- --------
(1) All options were granted under our 1998 Stock Incentive Plan. Generally,
these options vest in monthly installments over three years. All of these
options immediately vest in the event of a change in control of our
company. If a majority of our stockholders elect to sell all or part of our
company, then the option holder is required to sell an equivalent
percentage of the shares underlying the option.
(2) Based on options to purchase 501,250 shares of our common stock granted to
employees in 1998.
(3) The options have ten year terms, subject to earlier termination upon death,
disability or termination of employment.
(4) We recommend caution in interpreting the financial significance of the
figures representing the potential realizable value of the stock options.
They are calculated by multiplying the number of options granted by the
difference between a future hypothetical stock price and the option
exercise price and are shown pursuant to rules of the SEC. They assume the
fair value of common stock appreciates 5% or 10% each year, compounded
annually, for ten years (the term of each option). They are not intended to
forecast possible future appreciation, if any, of our stock price or to
establish a present value of options. Also, if appreciation does occur at
the 5% or 10% per year rate, the amounts shown would not be realized by the
recipients until the year 2008. Depending on inflation rates, these amounts
may be worth significantly less in 2008, in real terms, than their value
today.
Year-End Option Values
The following table shows information about unexercised options held by each
of the named executive officers on December 31, 1998. No named executive
officer exercised any stock options during 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1998 December 31, 1998(1)
------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Edwin R. Addison............ -- -- $ -- $ --
Mark A. Gaertner............ 13,333 46,667 146,396 512,404
Ted S. Bagheri.............. 16,666 33,334 182,993 366,007
J. Robert Kaminski.......... 16,666 33,334 166,660 333,340
John McGrath................ -- -- -- --
</TABLE>
- --------
(1) Calculated on the basis of $11.00 per share, the assumed initial public
offering price of our common stock, less the exercise price payable for
those shares, multiplied by the number of shares underlying the option.
45
<PAGE>
Executive Employment Agreements
We have entered into an executive employment agreement with certain of our
named executive officers. Each agreement has an initial term of three years,
subject to earlier termination upon 60 days prior notice. The term of each
agreement is automatically extended for additional one year terms unless we or
the executive elects to terminate the agreement within 60 days before the end
of the current term. Under these agreements, these executives receive an
initial annual base salary subject to normal periodic reviews. These executives
also are entitled to annual bonuses in the discretion of the compensation
committee of the board of directors. The executives have received options to
acquire shares of our common stock which vest in monthly installments over
three years from the date of grant. The following table shows information about
the compensation arrangements we have with our executive officers:
<TABLE>
<CAPTION>
Current Annual Maximum
Base Salary Annual Bonus
-------------- ------------
<S> <C> <C>
Edwin R. Addison................................. $120,000 $80,000
Mark A. Gaertner................................. 150,000 75,000
Ted S. Bagheri................................... 125,000 62,500
</TABLE>
If, during the term of one of these agreements, we terminate the executive's
employment without cause or the executive terminates his employment for good
reason, then the executive will be entitled to receive his base salary, bonus
and all employee benefits for a period of two years from the date of the
termination of employment.
Under the terms of these agreements, these executives have agreed to preserve
the confidentiality and the proprietary nature of all information relating to
our business during the term of the agreement and for a period of two years
following the date of the executive's termination of employment. In addition,
each of these executives has agreed to non-competition and non-solicitation
provisions that will be in effect during the term of his agreement and for one
year after the agreement ends.
We require all of our other employees to sign agreements which prohibit the
employee from directly or indirectly competing with us while they are employed
by us and generally for a period of one year. We require all of our employees
to sign agreements which prohibit the disclosure of our confidential or
proprietary information.
1998 Stock Incentive Plan
Our stock incentive plan authorizes the grant of the following types of
awards to employees, directors, officers and consultants:
. stock options;
. stock appreciation rights;
. stock awards;
. phantom stock; and
. performance awards.
The compensation committee of our board of directors administers our stock
incentive plan. The committee has sole power and authority, consistent with the
provisions of our stock incentive plan, to determine which eligible
participants will receive awards, the form of the awards and the number of
shares of our common stock covered by each award. The committee may impose
terms, limits, restrictions and conditions upon awards, and may modify awards
in any manner, including to accelerate or change the exercise timing of awards,
to extend or renew awards or to waive any restrictions or conditions to an
award.
46
<PAGE>
The maximum number of shares available for issuance under our stock incentive
plan is 875,000. As of June 30, 1999, we had issued 694 shares of our common
stock in connection with awards, we had outstanding awards with respect to
831,320 shares of our common stock and 43,680 shares remained available for us
to grant under our stock incentive plan.
Stock Options. Our stock incentive plan permits the granting of both options
to purchase shares of our common stock intended to qualify as incentive stock
options under the Internal Revenue Code and stock options that do not qualify
as incentive options. The option exercise price of each option will be
determined by the committee. The term of each option will be fixed by the
committee. The committee will determine at what time or times each option may
be exercised and the period of time, if any, after retirement, death,
disability or termination of employment during which options may be exercised.
Stock Appreciation Rights. The committee may grant a right to receive a
number of shares or, in the discretion of the committee, an amount in cash or a
combination of shares and cash, based on the increase in the fair market value
of the shares underlying the right during a stated period specified by the
committee.
Stock Awards. The committee may award shares of our common stock to
participants at no cost or for a purchase price. These stock awards may be
subject to restrictions or may be free from any restrictions under our stock
incentive plan. The committee will determine the applicable restrictions, if
any. The purchase price for shares of our common stock will be determined by
the committee.
Phantom Stock. The committee may grant stock equivalent rights, or phantom
stock, which entitle the recipient to receive credits which are ultimately
payable in the form of cash, shares of our common stock or a combination of
both. Phantom stock does not entitle the holder to any rights as a stockholder.
Performance Awards. The committee may grant performance awards to
participants entitling the participants to receive cash, shares of our common
stock, or a combination of both, upon the achievement of performance goals and
other conditions determined by the committee. The performance goals may be
based on our operating income or on one or more other business criteria
selected by the committee.
47
<PAGE>
RELATED TRANSACTIONS AND RELATIONSHIPS
Loans by Mr. Addison
During 1998, Mr. Addison, our Chairman of the Board and Chief Executive
Officer, loaned us a total of $910,000. In December 1998, we evidenced $750,000
of the loans by issuing Mr. Addison a convertible promissory note. The note
accrued interest at a rate of 8.5% per annum and was payable in eight quarterly
installments of principal plus interest. In March 1999, Mr. Addison converted
the note into 250,000 shares of our common stock at a conversion price of $3.00
per share. In accordance with the terms of the note, no interest was deemed to
have been accrued, due or payable on this note because of the conversion. In
May 1999, we repaid the remaining $160,000 in loans that Mr. Addison had made
to us.
Sevenson Investment
In May 1999, we entered into an agreement with Sevenson, pursuant to which
Sevenson purchased 1,128,571 shares of common stock for an aggregate purchase
price of approximately $5.0 million. Pursuant to the agreement, Sevenson may
require the board to cause Sevenson's designee to be nominated or renominated,
as the case may be, as a Class I member of our board of directors, for
successive terms until the first to occur of
. 18 months after the date of our initial public offering;
. the time at which Sevenson owns less than 5.0% of our outstanding shares
of common stock, or
. a sale or merger after which our stockholders immediately before the
transaction do not own or control a majority of the outstanding shares
of our common stock, the surviving company or the acquiring entity.
The agreement also provides Sevenson with certain piggy-back registration
rights for its shares. See "Description of Our Capital Stock--Registration
Rights."
In May 1999, Mr. Groninger, one of our directors and the current Sevenson
designee, invested $300,000 in our common stock. In connection therewith, we
issued Mr. Groninger 85,714 shares of common stock. In connection with Mr.
Groninger assisting Sevenson in making its investment in us, Sevenson
transferred 6,771 of its shares of common stock to Mr. Groninger.
Employment Agreements
We have entered into employment agreements with each of our senior executive
officers. For details of these agreements, see "Management--Executive
Employment Agreements."
We believe that the transactions discussed above were made on terms no less
favorable to us than would have been obtained from unaffiliated third parties.
We have adopted a policy that requires all future transactions between us and
our officers, directors and affiliates to be on terms no less favorable than
could be obtained from unrelated third parties. These transactions must be
approved by a majority of the disinterested members of our board of directors.
48
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table shows the number and percentage of outstanding shares of
our common stock that were owned as of June 30, 1999 and that will be owned
after this offering by:
. all persons known to us to beneficially own more that 5% of our common
stock;
. each director and named executive officer; and
. all directors and executive officers as a group.
As of June 30, 1999 there were 6,235,370 shares of our common stock
outstanding. After this offering, 8,735,370 shares of our common stock will be
outstanding or 9,110,370 shares if the underwriters exercise their over-
allotment option in full.
<TABLE>
<CAPTION>
Shares Percent Percent
Beneficially Before After
Name of Beneficial Owner Owned(1) Offering Offering
- ------------------------ ------------ -------- --------
<S> <C> <C> <C>
Edwin R. Addison (2)(3)........................ 1,500,000 24.0% 17.2%
Mark A. Gaertner (3)(4)........................ 243,776 3.9 3.3
Ted S. Bagheri (5)............................. 244,491 3.9 3.1
J. Robert Kaminski (3)(6)...................... 51,763 * *
John McGrath (7)............................... 21,679 * *
Jeffrey Crigler (8)............................ 833 * *
James G. Groninger (9)......................... 1,335,952 21.4 15.3
Dr. Francis J. Harvey (8)...................... 833 * *
Jay S. Levine (8).............................. 833 * *
Sevenson Environmental Services, Inc. (9)...... 1,335,952 21.4 15.3
All directors and executive officers as a group
(9 persons) (10).............................. 3,350,163 52.9% 37.9%
</TABLE>
- --------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Except as indicated in the footnotes of
this table, to our knowledge, each stockholder identified in the table
possesses sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by the stockholder. The number of
shares beneficially owned by a person includes shares of common stock
subject to options and warrants held by that person that are currently
exercisable within 60 days of June 30, 1999. Shares issuable pursuant to
options and warrants are deemed outstanding for computing the percentage
ownership of the person holding the options and warrants but are not deemed
outstanding for the purposes of computing the percentage ownership of any
other person.
(2) Includes 280,000 shares of common stock held by the Edwin R. Addison
Grantor Retained Annuity Trust for the benefit of Mr. Addison's children.
Mr. Addison is the sole trustee of that trust.
(3) Mr. Addison has entered into a private stock option grant agreement with
each of Messrs. Gaertner and Kaminski. The agreements entitle Messrs.
Gaertner and Kaminski to each purchase 50,000 shares of Mr. Addison's
common stock subject to a three year vesting schedule. The totals shown for
Messrs. Gaertner and Kaminski include 25,000 shares of common stock
underlying these options excercisable within 60 days of June 30, 1999.
(4) In addition to the options disclosed in footnote (3), includes 24,999
shares of common stock underlying options excercisable within 60 days of
June 30, 1999.
(5) Includes 26,389 shares of common stock underlying options excercisable
within 60 days of June 30, 1999.
(6) In addition to the options disclosed in footnote (3), includes 26,389
shares of common stock underlying options excercisable within 60 days of
June 30, 1999.
(7) Includes 9,429 shares of common stock underlying options exercisable within
60 days of June 30, 1999.
(8) Represents shares of common stock underlying warrants excercisable within
60 days of June 30, 1999.
(9) Mr. Groninger is a nominee of Sevenson and, therefore, beneficial ownership
of the shares of our common stock owned by Sevenson is attributed to Mr.
Groninger and beneficial ownership of the shares of our common stock owned
by Mr. Groninger is attributed to Sevenson. Mr. Groninger owns 92,485
shares of common stock directly.
(10) Includes shares of common stock underlying options and warrants
excercisable within 60 days of June 30, 1999 as disclosed elsewhere in
this table.
The address of Mr. Addison is 901 Elkridge Landing Road, Suite 350,
Linthicum, Maryland 21090. The address of Mr. Groninger and Sevenson
Environmental Services, Inc. is 2749 Lockport Road, Niagara Falls, New York
14302.
49
<PAGE>
DESCRIPTION OF OUR CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $0.0001 per share, and 15,000,000 shares of preferred stock, par
value $0.0001 per share. As of June 30, 1999, there were 6,235,370 shares of
our common stock outstanding, held by 179 holders of record. We have issued no
shares of our preferred stock.
After this offering, we will have outstanding 8,735,370 shares of common
stock if the underwriters do not exercise their over-allotment option, or
9,110,370 shares of common stock if the underwriters exercise their over-
allotment option in full.
The following description of our capital stock is qualified in its entirety
by reference to our certificate of incorporation and bylaws, copies of which
are filed as exhibits to the registration statement of which this prospectus is
a part.
Common Stock
We are authorized to issue 50,000,000 shares of common stock. Each
stockholder of record will be entitled to one vote for each outstanding share
of our common stock owned by that stockholder on every matter properly
submitted to the stockholders for their vote. After satisfaction of the
dividend rights of holders of preferred stock, holders of common stock are
entitled to any dividend as and if declared by the board of directors, in its
sole discretion, out of funds legally available for this purpose. After the
payment of liquidation preferences to holders of any outstanding preferred
stock, holders of our common stock are entitled to receive, on a pro rata
basis, all our remaining assets available for distribution to the stockholders
in the event of our liquidation, dissolution, or winding up. Holders of our
common stock do not have any preemptive right to become subscribers or
purchasers of additional shares of any class of our capital stock. The rights,
preferences and privileges of holders of our common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock that we may designate and issue in the future.
Preferred Stock
At June 30, 1999, we had no shares of our preferred stock outstanding. Our
certificate of incorporation will allow us to issue without stockholder
approval preferred stock having rights senior to those of our common stock. Our
board of directors will be authorized, without further stockholder approval, to
issue up to 15,000,000 shares of preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of redemption and
liquidation preferences, and to fix the number of shares constituting any
series and the designations of these series.
Our issuance of preferred stock may have the effect of delaying or preventing
a change in control. Our issuance of preferred stock could decrease the amount
of earnings and assets available for distribution to the holders of our common
stock or could adversely affect the rights and powers, including voting rights,
of the holders of our common stock. The issuance of preferred stock could have
the effect of decreasing the market price of our common stock.
Warrants
At June 30, 1999, we had warrants outstanding for the purchase of 517,999
shares of our common stock with a weighted average exercise price of $3.41 per
share. Warrants may be partially exercised or exercised in full upon payment to
us of the exercise price stated on the face of the warrant. Warrants are
adjusted for any stock dividend, stock split or reverse stock split that we may
effect. If we undertake a reorganization, recapitalization, consolidation or
merger, warrant holders will have the right to purchase the number of
securities that the warrant holder would have been able to receive had the
warrant holder been a common stock holder immediately prior to the
reorganization, recapitalization, consolidation or merger.
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<PAGE>
Registration Rights
In May 1999, we entered into an agreement with Sevenson Environmental
Services, Inc, pursuant to which Sevenson purchased 1,128,571 shares of common
stock for an aggregate purchase price of approximately $5.0 million. Pursuant
to the agreement, we granted Sevenson certain piggy-back registration rights.
If we propose to register any of our securities under the Securities Act,
Sevenson is entitled to notice of such registration and we have agreed to use
reasonable efforts to include Sevenson's shares in that registration. These
registration rights are subject to conditions and limitations, including the
right of the underwriters of an offering to limit the number of shares included
in the registration. We must pay all expenses in connection with these
registrations, other than underwriters' discounts and commissions.
Indemnification and Limitation of Liability
As permitted by the Delaware General Corporation Law, our certificate of
incorporation provides that our directors shall not be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
. for any breach of 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;
. under Section 174 of the Delaware General Corporation Law, relating to
unlawful payment of dividends or unlawful stock purchase or redemption
of stock; or
. for any transaction from which the director derives an improper personal
benefit.
As a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Our certificate of incorporation and bylaws provide for the indemnification
of our directors and officers to the fullest extent authorized by the Delaware
General Corporation Law, except that we will indemnify a director or officer in
connection with an action initiated by that person only if the action was
authorized by our board of directors. The indemnification provided under our
certificate of incorporation and bylaws includes the right to be paid expenses
in advance of any proceeding for which indemnification may be had, provided
that the payment of these expenses incurred by a director or officer in advance
of the final disposition of a proceeding may be made only upon delivery to us
of an undertaking by or on behalf of the director or officer to repay all
amounts so paid in advance if it is ultimately determined that the director or
officer is not entitled to be indemnified. If we do not pay a claim for
indemnification within 60 days after we have received a written claim, the
claimant may at any time thereafter bring an action to recover the unpaid
amount of the claim and, if successful the director or officer will be entitled
to be paid the expense of prosecuting the action to recover these unpaid
amounts.
Under our bylaws, we have the power to purchase and maintain insurance on
behalf of any person who is or was one of our directors, officers, employees or
agents, or is or was serving at our request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against the person or incurred by the
person in any of these capacities, or arising out of the person's fulfilling
one of these capacities, and related expenses, whether or not we would have the
power to indemnify the person against the claim under the provisions of the
Delaware General Corporation Law. We intend to purchase additional director and
officer liability insurance on behalf of our directors and officers.
Possible Anti-Takeover Effects
Our certificate of incorporation and bylaws contain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of our board of directors and in the policies formulated by our
board of directors. In addition, provisions of Delaware law may hinder or delay
an attempted takeover of our
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<PAGE>
company other than through negotiation with our board of directors. These
provisions could have the effect of discouraging attempts to acquire us or
remove incumbent management even if some or a majority of our stockholders
believe this action to be in their best interest, including attempts that might
result in the stockholders' receiving a premium over the market price for the
shares of our common stock held by the stockholders.
Classified Board of Directors; Removal, Vacancies. Our certificate of
incorporation provides that our board of directors will be divided into three
classes of directors serving staggered three-year terms. The classification of
directors has the effect of making it more difficult for stockholders to change
the composition of the board of directors in a relatively short period of time.
Our certificate of incorporation provides that directors may be removed only
for cause. In addition, vacancies and newly created directorships resulting
from any increase in the size of our board of directors may be filled only by
the affirmative vote of a majority of the directors then in office, a quorum,
or by a sole remaining director. These provisions would prevent stockholders
from removing incumbent directors without cause and filling the resulting
vacancies with their own nominees.
Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. Our bylaws establish an advance notice procedure with
regard to the nomination, other than by the board of directors, of candidates
for election to our board of directors and with regard to certain matters to be
brought before an annual meeting of our stockholders. For nominations and other
business to be brought properly before an annual meeting by a stockholder, the
stockholder must deliver notice to us not less than 45 days nor more than 60
days prior to the anniversary date of the mailing of the proxy materials for
the immediately preceding annual meeting. Separate provisions based on public
notice by us specify how this advance notice requirement operates if the date
of the annual meeting is advanced or delayed by more than 30 days from the
anniversary date. The stockholder's notice must set forth specified information
regarding the stockholder and its holdings, as well as certain background
information regarding any director nominee, together with the person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected, and a brief description of any business desired to be
brought before the meeting, the reasons for conducting the business at the
meeting and any material interest of the stockholder in the business proposed.
In the case of a special meeting of stockholders called for the purpose of
electing directors, nominations by a stockholder may be made only by delivery
to us, no later than 10 days after the day on which notice was mailed or public
announcement of the special meeting is made, whichever first occurs, of a
notice that complies with the above requirements. Although our bylaws do not
give our board of directors any power to approve or disapprove stockholder
nominations for the election of directors or any other business desired by
stockholders to be conducted at an annual meeting, our bylaws:
. may have the effect of precluding a nomination for the election of
directors or precluding the conduct of certain business at a particular
annual meeting if the proper procedures are not followed; or
. may discourage or deter a third party from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to
obtain control of Powerize.com, even if the conduct of this solicitation
or such attempt might be beneficial to Powerize.com and our
stockholders.
Special Stockholders' Meetings. Our certificate of incorporation and bylaws
provide that, special meetings of stockholders, unless otherwise prescribed by
statute, may be called by the chief executive officer or by our chairman or
president.
Prohibition on Stockholder Action by Written Consent. Our certificate of
incorporation and bylaws prohibit stockholders from taking action by written
consent. By requiring stockholders to take actions at an annual or special
meeting, rather than by written consent, our certificate of incorporation and
bylaws may discourage stockholder actions that are opposed by our board of
directors.
Section 203 of Delaware Law. In addition to these provisions of our
certificate of incorporation and bylaws, we are subject to the provisions of
Section 203 of the Delaware General Corporation Law. Section 203 prohibits
publicly held Delaware corporations from engaging in a "business combination"
with an "interested
52
<PAGE>
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Generally, an "interested stockholder"
is a person who, together with affiliates and associates, owns, or within three
years did own, 15% or more of a corporation's voting stock. These provisions
could have the effect of delaying, deferring or preventing a change in control
of our company or reducing the price that certain investors might be willing to
pay in the future for shares of our common stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company, New York, New York.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
After this offering, we will have 8,735,370 shares of common stock
outstanding. If the underwriters exercise their over-allotment option in full,
we will have 9,110,370 shares of common stock outstanding. All of the shares we
sell in this offering will be freely tradeable without restriction or further
registration under the Securities Act, except that any shares purchased by our
affiliates, as that term is defined in Rule 144, may generally only be sold in
compliance with the limitations of Rule 144 described below.
The remaining shares of common stock outstanding after this offering will not
be freely tradeable under the terms of the Securities Act. Certain shares will
be further limited by lock-up agreements as described below.
Before this offering, there has been no public market for our common stock,
and we cannot predict what effect, if any, that market sales of shares of our
common stock or the availability of shares of our common stock for sale will
have on the market price of our common stock prevailing from time to time.
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices and could impair our future ability
to raise capital through the sale of our equity securities.
Rule 144
In general, under Rule 144, a stockholder who owns restricted shares that
have been outstanding for at least one year is entitled to sell, within any
three-month period, a number of these restricted shares that does not exceed
the greater of:
. one percent of the then outstanding shares of our common stock, or
approximately 87,354 shares immediately after this offering; or
. the average weekly trading volume in our common stock on the Nasdaq
National Market during the four calendar weeks preceding the sale.
In addition, our affiliates must comply with the restrictions and
requirements of Rule 144, other than the one year holding period requirement,
to sell shares of common stock which are not restricted securities.
Under Rule 144(k), a stockholder who is not currently, and who has not been
for at least three months before the sale, an affiliate of ours who owns
restricted shares that have been outstanding for at least two years may resell
these restricted shares without compliance with the above requirements. The one
and two year holding periods described above do not begin to run until the full
purchase price is paid by the person acquiring the restricted shares from us or
an affiliate of ours.
Registration Rights
One of our stockholders has certain registration rights. See "Description of
Our Capital Stock--Registration Rights."
Common Stock and Options Issuable under our Stock Incentive Plan
We intend to file one or more registration statements under the Securities
Act within 180 days after this offering to register up to 875,000 shares of our
common stock underlying outstanding stock options or reserved for issuance
under our 1998 stock incentive plan. We expect these registration statements
will become effective upon filing, and shares covered by these registration
statements will be eligible for sale in the public market immediately after the
effective dates of these registration statements, subject to the lock-up
agreements with the managing underwriters.
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<PAGE>
Lock-up Agreements
Our officers, directors and stockholders, who will hold an aggregate of over
95% of our outstanding common stock on a fully diluted basis after this
offering, either will agree that they will not, without the prior written
consent of the managing underwriters, offer, sell, pledge or otherwise dispose
of any shares of our capital stock or any securities convertible into or
exercisable or exchangeable for, or any rights to acquire or purchase, any of
our capital stock or publicly announce an intention to effect any of these
transactions, for a period of 180 days after the date of this prospectus or
will be unable to sell their shares within such 180 day period due to federal
securities law restrictions. The managing underwriters have advised us that
they have no current intention to consent to any disposition of shares covered
by these lock-up agreements, but will consider each request for consent at the
time and under the circumstances of the request.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement,
dated 1999, the underwriters named below, who are represented by Ferris,
Baker Watts, Incorporated and Ryan, Lee & Company Incorporated, have severally
agreed to purchase the number of shares of our common stock shown opposite
their names below:
<TABLE>
<CAPTION>
Underwriters: Number of Shares
------------- ----------------
<S> <C>
Ferris, Baker Watts, Incorporated...........................
Ryan, Lee & Company Incorporated............................
---------
Total..................................................... 2,500,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of legal matters by their counsel and to
customary conditions, including the effectiveness of the registration
statement, the continuing correctness of our representations, the receipt of a
"comfort letter" from our accountants, the listing of our common stock on the
Nasdaq National Market and no occurrence of an event that would have a material
adverse effect on us. The underwriters are obligated to purchase and accept
delivery of all the shares, other than those covered by the over-allotment
option described below, if they purchase any of our shares.
The underwriters propose to initially offer some of our shares directly to
the public at the initial public offering price shown on the cover page of this
prospectus and some of the shares to dealers at the initial public offering
price less a concession not in excess of $ per share. The underwriters may
allow, and such dealers may re-allow, a concession not in excess of $ per
share on sales to other dealers. After the initial offering of the shares to
the public, the representatives of the underwriters may change the public
offering price and such concessions. The underwriters do not intend to confirm
sales to any accounts over which they exercise discretionary authority.
The following table shows the underwriting fees we will pay to the
underwriters in connection with this offering and the expenses we will pay.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of our common stock.
<TABLE>
<CAPTION>
Without With
Per Share Over-Allotment Over-Allotment
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
payable by Powerize.com.............. $ $ $
Expenses payable by Powerize.com...... $ $ $
</TABLE>
We will pay the offering expenses, estimated to be $1.4 million.
We have agreed to issue warrants to the representatives to purchase shares of
our common stock, representing approximately 10% of the total number of shares
to be sold in the offering, at an exercise price per share equal to 110% of the
initial public offering price per share. The representatives' warrants are
exercisable for a period of four years, commencing one year from the effective
date of the registration statement of which this prospectus is a part. We have
granted to the representatives certain rights to require us to register the
shares of common stock underlying the representatives' warrants for resale
under the Securities Act of 1933 and to include such shares in other registered
offerings that we may make. We have agreed to pay the representatives a non-
accountable expense allowance estimated to be approximately $825,000.
We have granted to the representatives a right of first refusal to serve as
managing underwriters for any subsequent public offerings that we may undertake
within the first year following the initial closing of this offering. Such
right of first refusal is subject to the completion of this offering, and the
terms and conditions of any subsequent underwriting arrangement being the same
as or more advantageous to us than competing offers from other underwriters and
consistent with industry standards for similarly sized offerings.
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<PAGE>
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to additional shares at the initial
public offering price less the underwriting fees. The underwriters may exercise
their option solely to cover over-allotments, if any, made in connection with
this offering. To the extent that the underwriters exercise their option, each
underwriter will become obligated, subject to conditions, to purchase a number
of additional shares approximately proportionate to that underwriter's initial
purchase commitment.
We have agreed to indemnify the underwriters against certain civil
liabilities, including liabilities under the Securities Act or to contribute to
payments that the underwriters may be required to make in respect of those
liabilities.
Powerize.com, our executive officers, directors and certain stockholders have
agreed that, for a period of 180 days from the date of this prospectus, we and
they will not, without the prior written consent of the representatives, do any
of the following:
. offer, pledge, sell, 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 or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position, or
otherwise transfer or dispose of, directly or indirectly, any shares of
our capital stock or any securities convertible into or exercisable or
exchangeable for our capital stock; or
. enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of our
capital stock; or
. publicly announce an intention to effect any of the transactions
described above.
The foregoing transaction restrictions will apply regardless of whether a
covered transaction is to be settled by the delivery of common stock or such
other securities, in cash or otherwise.
At our request, the underwriters have reserved up to five percent of the
shares offered by this prospectus for sale at the initial public offering price
to our directors, officers and employees and members of their families and
others associated with us. The number of shares of common stock available for
sale to the general public will be reduced to the extent these individuals
purchase or confirm for purchase, orally or in writing, such reserved shares.
Any reserved shares not purchased or confirmed for purchase will be offered by
the underwriters to the general public on the same basis as the other shares
offered by this prospectus.
Application has been made to list the common stock on the Nasdaq National
Market under the symbol "POWZ." In order to meet the requirements for listing
the common stock on the Nasdaq National Market, the underwriters have
undertaken to sell lots of 100 or more shares to a minimum of 400 beneficial
owners.
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction where action for that purpose is
required. The shares included in this offering may not be offered or sold,
directly or indirectly, nor may this prospectus or any other offering material
or advertisement in connection with the offer and sale of any such shares be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of such
jurisdiction.
Persons who receive this prospectus are advised to inform themselves about
and to observe any restrictions relating to the offering of the common stock
and the distribution of this prospectus. This prospectus is not an offer to
sell or a solicitation of an offer to buy any shares of common stock included
in this offering in any jurisdiction where that would not be permitted or
legal.
In March 1999, we retained Ryan, Lee & Company Incorporated to act as our
financial advisor with respect to the private placements of common stock
concluded in May 1999. For such services, Ryan, Lee & Company Incorporated
received compensation which included 48,543 shares of our common stock and
warrants to purchase 193,549 additional shares of our common stock.
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<PAGE>
Stabilization
In connection with this offering, any of the underwriters may decide to
engage in transactions that stabilize, maintain or otherwise affect the price
of our common stock. Specifically, the underwriters may overallot this
offering, creating a syndicate short position. In addition, the underwriters
may bid for and purchase shares of our common stock in the open market to cover
syndicate short positions or to stabilize the price of our common stock. These
activities may stabilize or maintain the market price of our common stock above
independent market levels. The underwriters are not required to engage in these
activities and may end any of these activities at any time.
Pricing of this Offering
Prior to this offering, there has been no established public market for our
common stock. The initial public offering price for the shares of our common
stock offered by this prospectus will be determined by negotiation between us
and the representatives of the underwriters. The factors to be considered in
determining the initial public offering price include:
. our history of and the prospects for the industry in which we compete;
. our past and present operations;
. our historical results of operations;
. our prospects for future earnings;
. the recent market prices of securities of generally comparable
companies; and
. the general conditions of the securities market at the time of the
offering.
VALIDITY OF THE SHARES
Piper & Marbury L.L.P., Baltimore, Maryland, will pass upon the validity of
the shares of common stock on our behalf. Williams, Mullen, Clark & Dobbins,
Richmond, Virginia, will pass upon legal matters for the underwriters.
EXPERTS
The financial statements as of December 31, 1997 and 1998 and for the period
from March 17, 1997 (date of inception) to December 31, 1997 and for the year
ended December 31, 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.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1, including
exhibits, schedules and amendments. This prospectus is a part of the
registration statement and includes all of the information which we believe is
material to an investor considering whether to make an investment in our common
stock. We refer you to the registration statement for additional information
about Powerize.com, our common stock and this offering, including the full
texts of the exhibits, some of which have been summarized in this prospectus.
After this offering, we will be subject to the informational requirements of
the Securities Exchange Act. We will be required to file annual and quarterly
reports, proxy statements and other information with the SEC.
You can inspect and copy our registration statement, reports and other
information at the SEC Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information about the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the
SEC maintains an Internet site that contains our registration statement,
reports and other information. The address of the SEC Internet site is
"http://www.sec.gov."
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent accountants, and make available
to our stockholders quarterly reports for the first three quarters of each year
containing unaudited interim financial information. You will be able to obtain
copies of our annual and quarterly reports and proxy statements from our Web
site at www.powerize.com.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants......................................... F-2
Balance Sheets as of December 31, 1997 and 1998 and for the six months
ended June 30, 1999 (unaudited).......................................... F-3
Statements of Operations for the period from March 17, 1997 (date of
inception) to December 31, 1997, for the year ended December 31, 1998 and
for the six months ended June 30, 1998 and 1999 (unaudited).............. F-4
Statements of Changes in Stockholders' Equity (Deficit) for the period
from March 17, 1997 (date of inception) to December 31, 1997, for the
year ended December 31, 1998 and for the six months ended June 30, 1999
(unaudited).............................................................. F-5
Statements of Cash Flows for the period from March 17, 1997 (date of
inception) to December 31, 1997, for the year ended December 31, 1998 and
for the six months ended June 30, 1998 and 1999 (unaudited).............. F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Powerize.com, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, of changes in stockholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of
Powerize.com, Inc. at December 31, 1997 and 1998, and the results of its
operations and its cash flows for the period from March 17, 1997 (date of
inception) to December 31, 1997 and for the year ended December 31, 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
McLean, Virginia
June 2, 1999, except for
the thirteenth paragraph
of Note 14 which is as of
June 30, 1999 and the
second paragraph of Note 1
which is as of July 26,
1999
F-2
<PAGE>
POWERIZE.COM, INC.
BALANCE SHEETS
----------------
<TABLE>
<CAPTION>
December 31,
---------------------- June 30,
1997 1998 1999
--------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................... $ 78,534 $ 57,609 $ 6,774,000
Accounts receivable, net of allowances
of $0, $0 and $15,000.................. -- 417,094 364,548
Prepaid expenses and other current
assets................................. 21,350 20,039 1,126,626
--------- ----------- -----------
Total current assets.................. 99,884 494,742 8,265,174
Property and equipment, net............. 61,772 232,608 307,645
Prepaid license fees, net............... 36,724 757,224 591,292
Other assets............................ 428 54,953 728,559
--------- ----------- -----------
Total assets.......................... $ 198,808 $ 1,539,527 $ 9,892,670
========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEF-
ICIT)
Current liabilities:
Line of credit.......................... $ -- $ 24,560 $ 21,313
Note payable--related party............. -- 185,252 --
Accounts payable........................ 89,369 493,400 1,513,816
Accrued expenses........................ 72,120 139,850 128,267
Accrued compensation.................... -- 132,439 150,028
Deferred revenue........................ -- 696,363 642,810
--------- ----------- -----------
Total current liabilities............. 161,489 1,671,864 2,456,234
Note payable............................ 50,000 50,000 --
Convertible promissory note--related
party.................................. -- 750,000 --
--------- ----------- -----------
Total liabilities..................... 211,489 2,471,864 2,456,234
--------- ----------- -----------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock; $0.0001 par value,
15,000,000 shares authorized, no shares
issued and outstanding................. -- -- --
Common stock; $0.0001 par value,
50,000,000 shares authorized,
2,437,500, 3,254,833 and 6,235,370
(unaudited) shares issued and
outstanding, respectively.............. 244 326 624
Additional paid-in capital.............. 545,506 3,133,522 15,950,474
Deferred compensation................... -- (273,261) (1,535,235)
Accumulated deficit..................... (558,431) (3,792,924) (6,979,427)
--------- ----------- -----------
Total stockholders' equity (deficit).. (12,681) (932,337) 7,436,436
--------- ----------- -----------
Total liabilities and stockholders'
equity (deficit)..................... $ 198,808 $ 1,539,527 $ 9,892,670
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
POWERIZE.COM, INC.
STATEMENTS OF OPERATIONS
---------------------
<TABLE>
<CAPTION>
Six Months Ended
March 17, 1997 June 30,
(date of inception) to Year Ended ------------------------
December 31, 1997 December 31, 1998 1998 1999
---------------------- ----------------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Revenue:
Subscription
royalties............ $ -- $ 308,340 $ 11,155 $ 538,034
Consulting and other.. 24,458 22,320 -- 120,760
---------- ------------ ----------- -----------
Total revenue....... 24,458 330,660 11,155 658,794
---------- ------------ ----------- -----------
Cost of revenue:
Subscription
royalties............ -- 515,913 99,424 407,929
Consulting and other
..................... 2,868 4,306 -- 103,600
---------- ------------ ----------- -----------
Total cost of
revenue............ 2,868 520,219 99,424 511,529
---------- ------------ ----------- -----------
Gross profit (loss)..... 21,590 (189,559) (88,269) 147,265
---------- ------------ ----------- -----------
Operating expenses:
Sales and marketing... 132,953 919,094 269,144 951,250
Product development... 352,621 1,654,859 522,712 1,398,912
General and
administrative....... 88,580 439,703 149,548 989,909
---------- ------------ ----------- -----------
Total operating
expenses........... 574,154 3,013,656 941,404 3,340,071
---------- ------------ ----------- -----------
Operating loss.......... (552,564) (3,203,215) (1,029,673) (3,192,806)
Interest income
(expense), net......... (5,867) (31,278) (6,736) 6,303
---------- ------------ ----------- -----------
Net loss................ $ (558,431) $ (3,234,493) $(1,036,409) $(3,186,503)
========== ============ =========== ===========
Basic and diluted net
loss per common share.. $ (0.39) $ (1.36) $ (0.50) $ (0.82)
========== ============ =========== ===========
Weighted average number
of common shares
outstanding............ 1,420,773 2,382,801 2,063,077 3,891,145
========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
POWERIZE.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For The Period From March 17, 1997 (date of inception) to December 31, 1997,
the Year Ended December 31, 1998 and the Six Months Ended June 30, 1999
(unaudited)
---------------------
<TABLE>
<CAPTION>
Common Stock Additional Deferred Accumu- Treasury Stock
----------------- Paid-in Compen- lated ----------------
Shares Amount Capital sation Deficit Shares Amount Total
--------- ------ ----------- ----------- ----------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance March 17, 1997
(date of inception).... -- $-- $ -- $ -- $ -- -- $ -- $ --
Issuance of common stock
to founders............ 2,437,500 244 545,506 -- -- -- -- 545,750
Net loss................ -- -- -- -- (558,431) -- -- (558,431)
--------- ---- ----------- ----------- ----------- -------- ----- ----------
Balance at December 31,
1997................... 2,437,500 244 545,506 -- (558,431) -- -- (12,681)
Issuance of common stock
at $2.50............... 779,000 78 1,947,422 -- -- -- -- 1,947,500
Issuance of common stock
at $3.00............... 85,833 9 257,489 -- -- -- -- 257,498
Purchase of common
stock.................. -- -- -- -- -- 47,500 (950) (950)
Retirement of treasury
stock.................. (47,500) (5) (945) -- -- (47,500) 950 --
Deferred compensation on
employee stock
options................ -- -- 384,050 (384,050) -- -- -- --
Amortization of deferred
compensation on
employee stock
options................ -- -- -- 110,789 -- -- -- 110,789
Net loss................ -- -- -- -- (3,234,493) -- -- (3,234,493)
--------- ---- ----------- ----------- ----------- -------- ----- ----------
Balance at December 31,
1998................... 3,254,833 326 3,133,522 (273,261) (3,792,924) -- -- (932,337)
Issuance of common stock
at $3.00, net
(unaudited)............ 358,779 36 1,056,946 -- -- -- -- 1,056,982
Issuance of common stock
at $3.50, net
(unaudited)............ 1,552,854 154 5,022,599 -- -- -- -- 5,022,753
Issuance of common stock
at $5.00, net
(unaudited)............ 728,000 73 3,499,920 -- -- -- -- 3,499,993
Exercise of stock
options (unaudited).... 25,694 3 2,089 -- -- -- -- 2,092
Issuance of common stock
in exchange for
services............... 48,543 5 210,252 -- -- -- -- 210,257
Conversion of note
payable to common stock
(unaudited)............ 16,667 2 49,998 -- -- -- -- 50,000
Conversion of note
payable-related party
to common stock
(unaudited)............ 250,000 25 787,490 -- -- -- -- 787,515
Deferred compensation on
employee stock options
(unaudited)............ -- -- 1,586,670 (1,586,670) -- -- -- --
Amortization of deferred
compensation on
employee stock options
(unaudited)............ -- -- -- 324,696 -- -- -- 324,696
Fair value of warrants
issued to non-employees
(unaudited)............ -- -- 600,988 -- -- -- -- 600,988
Net loss (unaudited).... -- -- -- -- (3,186,503) -- -- (3,186,503)
--------- ---- ----------- ----------- ----------- -------- ----- ----------
Balance at June 30, 1999
(unaudited)............ 6,235,370 $624 $15,950,474 $(1,535,235) $(6,979,427) -- $ -- $7,436,436
========= ==== =========== =========== =========== ======== ===== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
POWERIZE.COM, INC.
STATEMENTS OF CASH FLOWS
---------------------
<TABLE>
<CAPTION>
Six Months
March 17, 1997 Ended June 30,
(date of inception) to Year Ended ------------------------
December 31, 1997 December 31, 1998 1998 1999
---------------------- ----------------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating ac-
tivities:
Net loss................... $ (558,431) $ (3,234,493) $(1,036,409) $(3,186,503)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Bad debt expense........... -- -- -- 15,000
Depreciation and
amortization.............. 16,109 273,098 75,425 233,214
Amortization of deferred
compensation on employee
stock options............. -- 110,789 46,781 324,696
Expense related to fair
value of warrants issued
to non-employees.......... -- -- -- 153,029
Issuance of common stock in
exchange for services..... -- -- -- 210,257
Changes in assets and
liabilities:
Accounts receivable....... -- (417,094) (196,683) 37,546
Prepaid expenses and other
assets................... (21,778) (53,214) (50,544) (1,332,234)
Prepaid license fees...... (41,968) (926,139) (826,140) --
Accounts payable.......... 89,369 404,031 91,731 1,020,416
Accrued expenses.......... 72,120 92,982 (37,126) 3,057
Accrued compensation...... -- 132,439 25,693 17,589
Deferred revenue.......... -- 696,363 185,528 (53,553)
---------- ------------ ----------- -----------
Net cash used in
operating activities... (444,579) (2,921,238) (1,721,744) (2,557,486)
---------- ------------ ----------- -----------
Cash flows from investing ac-
tivities:
Purchase of property and
equipment................. (72,637) (238,295) (162,192) (142,319)
---------- ------------ ----------- -----------
Net cash used in
investing activities... (72,637) (238,295) (162,192) (142,319)
---------- ------------ ----------- -----------
Cash flows from financing ac-
tivities:
Proceeds from the issuance
of common stock........... 545,750 2,204,998 1,947,500 9,931,968
Costs incurred in
connection with the
issuance of common stock.. -- -- -- (352,240)
Proceeds from the exercise
of stock option........... -- -- -- 2,092
Proceeds from note
payable................... 50,000 -- -- --
Proceeds from note payable-
related party............. -- 910,000 155,136 --
Repayment of note payable-
related party............. -- -- -- (162,377)
Repurchase of common
shares.................... -- (950) (950) --
Net borrowings (repayments)
under line of credit
agreement................. -- 24,560 -- (3,247)
---------- ------------ ----------- -----------
Net cash provided by
financing activities... 595,750 3,138,608 2,101,686 9,416,196
---------- ------------ ----------- -----------
Net increase (decrease) in
cash........................ 78,534 (20,925) 217,750 6,716,391
Cash at beginning of period.. -- 78,534 78,534 57,609
========== ============ =========== ===========
Cash at end of period........ $ 78,534 $ 57,609 $ 296,284 $ 6,774,000
========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
---------------------
1. Business
The Company
Powerize.com, Inc., formerly KnowledgeLink L.L.C., (the "Company") was
founded in Delaware as a limited liability corporation on January 3, 1997,
commenced operations on March 17, 1997 and was converted to a C-corporation in
Delaware on January 1, 1998. Each existing LLC member unit held at the time of
the reorganization was converted to one share of the Company's common stock.
For presentation purposes, all LLC member units are presented as common stock
for the period from March 17, 1997 (date of inception) to December 31, 1997.
In July 1999, the Board of Directors and the stockholders approved a one-for-
two reverse split of the Company's common stock. All share and per share
amounts in the financial statements have been adjusted to give retroactive
effect to this reverse stock split.
The Company is an Internet aggregator and distributor of business and
financial information. It offers "one-stop shopping" using directed search and
advanced filtering technology to provide users concise, relevant and organized
search results according to user-selected criteria. The Company offers free
access to a large portion of its content collection, most of which has
traditionally only been available for a fee.
The Company's operations are subject to certain risks and uncertainties
including, among others, actual and potential competition by entities with
greater financial resources; rapid technological changes; the success of the
Company's product marketing and product distribution strategies; the need to
manage growth; the need to retain key personnel and protect intellectual
property; and the availability of additional capital financing on terms
acceptable to the Company.
As of December 31, 1998 the Company had $57,609 in cash and had incurred
cumulative losses of $3,792,924 from March 17, 1997 (date of inception) to
December 31, 1998. The Company expects to incur significant operating expenses
to expand and enhance its content collection, increase its marketing efforts
and implement its business plan. In addition, subsequent to December 31, 1998,
the Company received net cash proceeds of $9,579,728 from equity financings
with third parties (see Note 14).
During 1999, the Company plans to complete an initial public offering (the
"IPO") in connection with obtaining additional equity financing and to use such
financing to fund the expansion of its business. Should the equity financing
either be delayed or not occur, management has developed a contingent operating
plan which, if ultimately necessary, management believes could involve scaling
back its investments from levels presently budgeted for during 1999. In
management's view, were such contingency actions required and, therefore,
pursued, the Company would have sufficient liquidity to continue in business at
least through June 2000. There can be no assurance, however, that such
contingency actions would be successful.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
The Company has royalty-based relationships with a number of content
providers to sell subscriptions to electronic publications to third parties.
Royalties are generally billed on an annual basis and royalty revenue
F-7
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
from subscription sales is recognized ratably over the subscription period
which is generally 12 months. Customers are frequently given a 30-60 day trial
period where there is no charge for the use of the subscription. The trial
period is individually determined based on the content provider. Subsequent to
the expiration of the trial period and once the customer has accepted the
subscription, revenue is recognized based on the number of days the
subscription is outstanding for the month and the remaining amount is deferred
and recognized ratably over the remaining period of the subscription.
The Company provides software consulting related to the Powerize.com Intranet
services. Services are billed based on rates and actual hours incurred. Revenue
is recognized as services are performed.
Product Development Costs
Product development costs are included in research and development and are
expensed as incurred. Statement of Financial Accounting Standards (SFAS) No.
86, Accounting for the Cost of Computer Software to be Sold, Leased or
Otherwise Marketed, requires the capitalization of certain software development
costs once technological feasibility is established, which the Company
generally defines as completion of a working model. Capitalization ceases when
the products are available for general release to customers, at which time
amortization of the capitalized costs begins on a straight-line basis over the
estimated product life, or on the ratio of current revenue to total projected
product revenue, whichever is greater. To date, the period between achieving
technological feasibility and the general availability of such software has
been short, and software development costs qualifying for capitalization have
been insignificant. Accordingly, the Company has not capitalized any software
development costs.
Advertising Costs
Advertising costs are expensed as incurred. There were no advertising costs
incurred during the periods presented.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the respective assets,
generally 3-5 years. Upon retirement or disposition of property and equipment,
the cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is reflected in operations. Expenditures for normal
repairs and maintenance are charged to operations as incurred.
Other Non-Current Assets
Other non-current assets consist primarily of deferred charges related to
costs incurred in connection with the Company's pending IPO and the unamortized
value ascribed to certain warrants to purchase shares of the Company's common
stock issued to non-employee Company advisors and to a strategic partner
subsequent to December 31, 1998. The value of such warrants is being amortized
over the three-year performance period of the related agreements (see Note 14).
The deferred costs related to the IPO will be offset against the proceeds of
the offering upon the completion of the IPO.
Income Taxes
Income taxes are accounted for utilizing the liability method. Deferred tax
assets are recognized for deductible temporary differences and operating loss
and tax credit carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences
between the reported
F-8
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
amounts of assets and liabilities and their tax basis. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The Company has
provided a full valuation allowance against its net deferred tax assets as of
December 31, 1998. The Company had no deferred tax assets as of December 31,
1997.
Net Loss Per Share
Basic earnings per share is computed based on the weighted average number of
outstanding shares of common stock. Diluted earnings per share adjusts the
weighted average for the potential dilution that could occur if stock options
or warrants or convertible securities were exercised or converted into common
stock. Diluted earnings per share is the same as basic earnings per share for
all periods presented because the effects of such items were anti-dilutive
given the Company's losses. The Company has excluded 801,385, 472,213 and
311,379 (unaudited) shares of non-vested restricted stock issued to the
original founders from the earnings per share calculation for the period from
March 17, 1997 (date of inception) to December 31, 1997, the year ended
December 31, 1998 and the six months ended June 30, 1999, respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of cash and accounts receivable. Management
believes that the Company's current practice limits the Company's exposure to
concentration of credit risk. The Company generates revenue primarily from
large multinational companies. In 1998, two customers individually comprised
over 10% of total revenue and accounts receivable. Revenue from these customers
comprised approximately 53% and 25%, respectively, of total revenue for the
year ended December 31, 1998. As of December 31, 1998 these customers accounted
for 30% and 35%, respectively, of total accounts receivable. For the six months
ended June 30, 1999, revenue from two customers comprised approximately 25% and
50% (unaudited), respectively, of total revenue. As of June 30, 1999, three
customers accounted for 51%, 15%, and 14% (unaudited), respectively, of total
accounts receivable. The Company has not experienced any significant
difficulties with the collection of the accounts receivable.
Fair Value Information
The carrying amount of current assets and current liabilities approximates
fair value because of the short maturity of these instruments.
Impairment of Long-lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets. This evaluation consists of a comparison of the carrying value of the
assets with the assets' expected future cash flows, undiscounted and without
interest costs. Estimates of expected future cash flows represent management's
best estimate based on reasonable and supportable assumptions and projections.
If the expected future cash flow, undiscounted and without interest charges,
exceeds the carrying value of the asset, no impairment is recognized.
Impairment losses are measured as the difference between the carrying value of
long-lived assets and their fair value, based on discounted future cash flows
of the related assets.
F-9
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
Stock-based Compensation
The Company measures compensation expense for its employee stock-based
compensation using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense. Under the intrinsic value method of accounting
for stock-based compensation, when the exercise price of options granted to
employees is less than the fair value of the underlying stock on the date of
grant, compensation expense is recognized over the applicable vesting period.
Segment Reporting
The Company operates as a single segment and will evaluate additional segment
disclosure requirements as it expands its operations.
Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, Accounting for Costs of
Computer Software Developed or Obtained for Internal Use. This SOP is effective
for fiscal years beginning after December 15, 1998 and requires capitalization
of certain costs of computer software developed or obtained for internal use.
The adoption of SOP 98-1 did not have a material impact on the Company's
unaudited results of operations or financial condition for the six months ended
June 30, 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 is effective for fiscal years
beginning after June 15, 1999 (January 1, 2000 for the Company). Currently, the
Company does not utilize derivative instruments, therefore the adoption of SFAS
133 is not expected to have significant effect on the Company's results of
operations or its financial position.
In December 1998, the AICPA issued SOP 98-9 "Modification of SOP 97-2, with
Respect to Certain Transactions." SOP 98-9 modifies SOP 97-2 by requiring
revenue to be recognized on software sales using the "residual method" if
certain conditions are met. SOP 98-9 will be effective for the Company's
financial statements for the year ending December 31, 2000.
Interim Results (Unaudited)
The accompanying balance sheet at June 30, 1999, the statements of operations
and of cash flows for the six months ended June 30, 1998 and 1999 and the
statement of changes in stockholders' equity (deficit) for the six months ended
June 30, 1999 are unaudited. In the opinion of management, these statements
have been prepared on the same basis as the audited financial statements and
include all adjustments, consisting of only normal recurring adjustments,
necessary for the fair presentation of the results of the interim periods. The
data disclosed in the Notes to Financial Statements for these periods is
unaudited. The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year or for any future
period.
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------- June 30,
1997 1998 1999
------- ------- -----------
(unaudited)
<S> <C> <C> <C>
Prepaid content royalties........................ $ -- $ -- $850,000
Other............................................ 21,350 20,039 276,626
------- ------- ----------
$21,350 $20,039 $1,126,626
======= ======= ==========
</TABLE>
F-10
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
----------------
Prepaid content royalties represent amounts paid in connection with certain
agreements entered into subsequent to December 31, 1998 to provide the Company
with additional content for use through its Web site. The payments reflect non-
refundable amounts that enable users of the Company's Web site to access the
content from these relationships through July 2000. The amounts will be
amortized to expense on a straight line basis over the term of the related
agreements.
4. Prepaid License Fees
In April 1998, the Company entered into a license agreement with IBM
Corporation for a worldwide, perpetual, nonexclusive license to use and/or
modify the source code relating to an online publication delivery service and a
premium content search service. In addition, certain agreements between IBM and
third-party content providers were assigned to the Company. The total purchase
price paid by the Company for the license and certain related assets was
$1,100,000. The assets, consisting of accounts receivable and fixed assets,
were reflected at cost, which approximated fair value. The amount assigned to
the license of $816,000 has been recorded as a prepaid license fee and is being
amortized on a straight-line basis over the expected useful life of 36 months.
The Company and a third party also entered into a hosting agreement whereby the
Company's customers will have access to the Web servers and other equipment and
service to provide connectivity and access to the Internet (see Note 12).
Amortization of prepaid license fees was approximately $5,000, $206,000,
$53,000 (unaudited) and $166,000 (unaudited) for the period from March 17, 1997
(date of inception) to December 31, 1997, for the year ended December 31, 1998
and for the six months ended June 30, 1998 and 1999, respectively.
5. Property and Equipment
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
------------------- June 30,
1997 1998 1999
-------- --------- -----------
(unaudited)
<S> <C> <C> <C>
Computer equipment and software............. $ 60,447 $ 237,856 $ 354,918
Office furniture and equipment.............. 12,190 69,076 94,333
Leasehold improvements...................... -- 4,000 4,000
-------- --------- ---------
72,637 310,932 453,251
Less accumulated depreciation............... (10,865) (78,324) (145,606)
-------- --------- ---------
$ 61,772 $ 232,608 $ 307,645
======== ========= =========
</TABLE>
Depreciation expense was approximately $11,000, and $67,000 for the period
from March 17, 1997 (date of inception) to December 31, 1997 and for the year
ended December 31, 1998, respectively, and $22,000 (unaudited) and $67,000
(unaudited) for the six months ended June 30, 1998 and 1999, respectively.
6. Line of Credit and Note Payable
During 1998, the Company entered into a line of credit with a financial
institution which enables the Company to finance unpaid credit card balances
over six equal monthly installments. The line of credit provides for borrowings
up to $60,000 at an interest rate of 15.9% per annum. As of December 31, 1998
and June 30, 1999, the outstanding balance on the line of credit was $24,560
and $21,313 (unaudited), respectively.
F-11
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
In June 1997, the Company and the Maryland Department of Business and
Economic Development ("DBED") entered into an agreement in which DBED advanced
the Company $50,000. This amount was to be repaid based on royalties at
percentages of the Company's revenue as defined in the agreement. The maximum
amount of royalties due by the Company pursuant to this agreement was to be
$150,000. In the first quarter of 1999, the advance was converted into 16,667
(unaudited) shares of common stock (see Note 14) and the existing agreement was
cancelled. No royalties were paid under this agreement prior to the conversion.
7. Related Party Transactions
During 1998, the Company received net advances totaling $910,000 from an
officer who is also a director and major stockholder of the company. In
December 1998, the Company converted $750,000 of the advances into a
Subordinated Convertible Promissory Note (the "Promissory Note"). The
Promissory Note bears interest at a rate of 8.5% per annum and is due in eight
quarterly installments of principal plus interest commencing on April 1, 1999.
After January 1999, the Promissory Note has an optional conversion which gives
the related party the right at his sole option, prior to the repayment of
principal owed, to convert the outstanding amount into common stock at a
conversion price per share of $3.00. If any amount of the principal balance of
the Promissory Note is converted into shares of common stock then no interest
shall have deemed to have been accrued or payable on such amount. In March
1999, the related party converted the Promissory Note into 250,000 (unaudited)
shares of the Company's common stock. The accrued interest related to this
Promissory Note was recorded as additional paid-in capital. The current portion
of the advances, including accrued interest, were repaid in May 1999.
8. Capitalization
The original LLC members and the Company entered into a Restricted Equity
Agreement (the "Equity Agreement") which shall remain in effect until the
earlier of ten years after the effective date or an initial public offering of
the Company with proceeds of at least $5 million to the Company. The
certificates for the restricted shares issued to each individual under the
Equity Agreement are held in escrow by the Company until all shares vest or the
individual terminates his employment. Restricted shares vest monthly on a pro
rata basis over a three-year service period. At December 31, 1997 and 1998 and
June 30, 1999, 801,385, 472,213 and 311,379 (unaudited) restricted shares of
common stock, respectively, were not vested. If a member involuntarily or
voluntarily terminates his employment, the Company has the option to repurchase
the unvested shares at the original issuance price. In addition, the Company
has the first right of refusal to purchase the vested restricted stock at fair
value.
In April 1998, the Company issued through a private placement 659,000 shares
of common stock at a purchase price of $2.50 per share for aggregate proceeds
of $1,647,500.
In June 1998, the Company and DBED entered into an agreement for the sale of
120,000 shares of common stock at $2.50 per share for aggregate proceeds of
$300,000. Under this agreement, DBED has the right to require the Company to
repurchase the shares at a price per share equal to the greater of (i) the fair
market value per share or (ii) the original purchase price appropriately
adjusted for any stock splits, stock dividends, recapitalization and
reclassifications, if the Company relocates its principal place of business
outside the State of Maryland prior to June 30, 2002. The Company has no
intention of relocating outside the State of Maryland prior to June 30, 2002
and, therefore, this amount has been classified within the stockholders' equity
(deficit) caption in the accompanying Balance Sheet.
F-12
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
In November 1998, the Company issued through a second private placement
65,833 shares of common stock at a purchase price of $3.00 per share for
aggregate proceeds of $197,498. In addition, the Company sold 20,000 shares of
common stock in November 1998 at $3.00 share to third parties for aggregate
proceeds of $60,000.
9. Stock-Based Compensation
Employee Stock Options
On February 9, 1998 the Company formally adopted the Company's 1998 Stock
Incentive Plan (the "Plan"). The Plan is administered by a Committee appointed
by the Board of Directors, which has the authority to determine which officers,
directors, employees, and consultants are awarded options pursuant to the Plan
and to determine the terms and exercise prices of the stock options. Under the
Plan, the Company has reserved 500,000 shares of common stock for issuance of
qualified and non-qualified options. Subsequent to December 31, 1998 the number
of shares reserved was increased to 875,000. At December 31, 1998, options to
purchase 473,889 shares were outstanding and 26,111 shares were available for
future grants. At June 30, 1999, 831,320 (unaudited) and 43,680 (unaudited)
shares were outstanding and available for future grants, respectively.
Each qualified incentive stock option granted pursuant to the Plan has an
exercise price equal to the fair value of the underlying common stock at the
date of grant, a ten-year term and typically a three year vesting period. The
Board of Directors determined the fair value of the underlying common stock
based on sales of the Company's common stock to third party investors. A non-
qualified option granted pursuant to the Plan may contain an exercise price
that is below the fair value of the common stock at the date of grant. The term
of non-qualified options is also ten years. The Company records compensation
expense when the estimated fair value of the underlying common stock on the
date of grant is in excess of the exercise price of the options. As a result,
for certain non-qualified stock option grants, the Company recorded deferred
compensation of $384,050 and $1,586,670 (unaudited) during the year ended
December 31, 1998 and the six months ended June 30, 1999, respectively. This
amount was recorded in stockholders' equity (deficit) and is being amortized as
a charge to operations over the vesting period of the related options. For the
year ended December 31, 1998 and the six months ended June 30, 1998 and 1999,
the Company recognized $110,789, $46,781 (unaudited) and $324,696 (unaudited),
respectively, of compensation expense related to these options.
The following table summarizes the Company's activity for all of its stock
option awards:
<TABLE>
<CAPTION>
Weighted-
Number Range of Average
of Exercise Exercise
Options Prices Price
------- ---------- ---------
<S> <C> <C> <C>
Balance at December 31, 1997................... -- $ -- $--
Granted...................................... 501,250 0.02--3.00 1.82
Exercised.................................... -- -- --
Canceled..................................... (27,361) 2.50 2.50
------- ---------- ----
Balance at December 31, 1998................... 473,889 0.02--3.00 1.78
Granted (unaudited).......................... 398,750 0.02--5.00 1.36
Exercised (unaudited)........................ (694) 3.00 3.00
Canceled (unaudited)......................... (40,625) 1.00--3.00 2.54
------- ---------- ----
Balance at June 30, 1999 (unaudited)........... 831,320 0.02--5.00 1.54
======= ========== ====
</TABLE>
F-13
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
At December 31, 1998, options to purchase 104,863 shares of the Company's
common stock were vested and exercisable at December 31, 1998, at a weighted-
average exercise price of $1.52 per share. At June 30, 1999, 181,928 options
(unaudited) were vested and exercisable at a weighted average exercise price of
$1.66 (unaudited) per share.
The following table summarizes additional information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- --------------------------
Weighted-
Average
Range of Remaining Weighted- Weighted-
Exercise Number Contractual Average Number Average
Prices of Options Life Exercise Price Exercisable Exercise Price
- ------------ ---------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.02 110,000 9.1 years $0.02 28,612 $0.02
$1.00 57,500 9.0 years $1.00 19,167 $1.00
$2.00--$3.00 306,389 9.5 years $2.58 57,084 $2.44
------- --------- ----- ------- -----
473,889 9.3 years $1.78 104,863 $1.52
======= =======
</TABLE>
Had compensation expense for the Plan been determined based on the fair value
of the related options at the grant dates, consistent with SFAS No. 123, the
Company's net loss and net loss per share would have been increased to the pro
forma amounts indicated below.
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended
1998 June 30, 1999
------------ -------------
(unaudited)
<S> <C> <C>
Net loss, as reported.......................... $ (3,234,493) $(3,186,503)
Pro forma net loss............................. (3,269,284) (3,229,158)
Basic and diluted net loss per common share, as
reported...................................... $ (1.36) $ (0.82)
Basic and diluted net loss per common share,
pro forma..................................... $ (1.37) $ (0.83)
</TABLE>
The fair value of each option was estimated on the date of grant using the
Black-Scholes valuation model. The following table shows the assumptions used
for the grants that occurred during all periods presented:
<TABLE>
<S> <C>
Expected volatility............................................. 0%
Risk free interest rates........................................ 4.5% to 5.6%
Dividend yield.................................................. None
Expected lives.................................................. 5 years
</TABLE>
The weighted average fair value per share for stock option grants that were
awarded in fiscal year 1998 and for the six months ended June 30, 1999 was
$2.60 and $3.42 (unaudited). The weighted average fair value of non-vested
stock that was converted from LLC member units at December 31, 1997 was $0.02
for fiscal year 1998.
Other Stock Options
In April 1997, the Company entered into an agreement with the University of
Maryland relative to a lease of certain space in connection with a technology
advancement program established by the university. Pursuant to this
arrangement, the Company granted options to purchase 25,000 shares of the
Company's common stock to the University of Maryland. No expense was recorded
relative to this option grant since the Company was in the earliest phases of
development and such options were not believed to have value. Subsequent to
December 31, 1998, these options were exercised by the university.
F-14
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
10. 401(k) Plan
Effective January 1, 1998, the Company adopted the Powerize.com, Inc. 401(k)
Plan (the "401(k) Plan") that qualifies as a deferred salary arrangement under
Section 401 of the Internal Revenue Code. Under the 401(k) Plan, participating
employees may defer a portion of their pretax earnings not to exceed 15% of
their total compensation or $10,000. The Company, at its discretion, may make
matching contributions for the benefit of eligible employees and/or make
additional "profit sharing" contributions to the Plan. To date the Company has
not made any contributions to the 401(k) Plan.
11. Income Taxes
As the Company incurred pretax losses for the years presented herein, there
are no income taxes provided in the accompanying statements of operations. At
December 31, 1998, the Company had net operating loss carryforwards ("NOLs") of
approximately $2,826,000 that expire in 2013. The realization of the benefits
of the NOLs is dependent on sufficient taxable income in future years. Lack of
future earnings, a change in the ownership of the Company, or the application
of the alternative minimum tax rules could adversely affect the Company's
ability to utilize the NOLs. The Company had no temporary differences as of
December 31, 1997 based on its limited operating activity during the period
from March 17, 1997 (date of inception) to December 31, 1997. The Company's net
deferred tax assets at December 31, 1998 were as follows:
<TABLE>
<S> <C>
Net operating loss carryforwards................................ $ 1,087,354
Accrued expense................................................. 32,708
Deferred compensation--stock.................................... 32,708
Depreciation.................................................... 46,086
-----------
1,198,856
-----------
Valuation allowance............................................. (1,198,856)
-----------
Net deferred tax asset.......................................... $ --
===========
</TABLE>
Though management believes that future taxable income of the Company may be
sufficient to utilize a substantial amount of the benefits of the Company's net
operating loss carryforwards and to realize its deferred tax assets, a
valuation allowance has been recorded to completely offset the carrying value
of the deferred tax assets due to the Company's lack of prior earnings and the
size of the accumulated deficit.
12. Commitments
Lease Commitments
The Company conducts its operations using leased office facilities. The
leases terminate at various dates through fiscal year 2000. Future minimum
rental payments under non-cancelable operating leases as of December 31, 1998
are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1999............................................................ $ 263,143
2000............................................................ 205,250
---------
$ 468,393
=========
</TABLE>
F-15
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
Rent expense for the period from March 17, 1997 (date of inception) to
December 31, 1997 and for the year ended December 31, 1998 was approximately
$4,000 and $58,000, respectively, and for the six months ended June 30, 1998
and 1999 was approximately $31,000 (unaudited) and $128,000 (unaudited),
respectively.
Other Commitments
In conjunction with the transaction with IBM (see Note 4), the Company
entered into an agreement with a third party under which the Company must pay a
minimum monthly basic usage charge for the utilization of the third party's
Internet hosting services. Future minimum payments under this non-cancelable
agreement as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Year Ending
December
31,
-----------
<S> <C>
1999............................................................. $ 475,600
2000............................................................. 475,600
2001............................................................. 320,400
-----------
$ 1,271,600
===========
</TABLE>
There was no hosting expense for the period from March 17, 1997 (date of
inception) to December 31, 1997, $240,200 for the year ended December 31, 1998,
$50,000 (unaudited) for the six months ended June 30, 1998 and $239,000
(unaudited) for the six months ended June 30, 1999.
13. Supplemental Disclosure of Cash Flow Information
<TABLE>
<CAPTION>
Six Months Ended
March 17, 1997 June 30,
(Date of inception) to Year Ended -------------------
December 31, 1997 December 31, 1998 1998 1999
---------------------- ----------------- -------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Cash paid for:
Interest................ $1,933 $ 2,296 $ 1,711 $ 6,662
====== ======== ======== ==========
Non-cash investing and
financing activities:
Conversion of notes
payable to common
stock................ $ -- $ -- $ -- $ 837,515
====== ======== ======== ==========
Accrued interest
converted to notes
payable.............. $ -- $ 25,252 $ 5,138 $ 14,640
====== ======== ======== ==========
Deferred compensation
on employee stock
options.............. $ -- $384,050 $384,050 $1,586,670
====== ======== ======== ==========
Fair value of warrants
issued to non-
employees............ $ -- $ -- $ -- $ 600,988
Less: expense related
to fair value of
warrants issued to
non-employees........ -- -- -- (153,029)
------ -------- -------- ----------
$ -- $ -- $ -- $ 447,959
====== ======== ======== ==========
</TABLE>
F-16
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
14. Subsequent Events
During the six months ended June 30, 1999, the Company completed its second
private placement, issuing an additional 258,200 shares of common stock at a
purchase price of $3.00 per share for aggregate gross proceeds of $774,599 and
issued 30,512 shares of common stock to employees for aggregate gross proceeds
of $82,385.
In February 1999, DBED purchased an additional 66,667 shares of the Company's
common stock at $3.00 per share. The Company received cash proceeds of $200,000
in connection with the issuance of these shares. In addition, the $50,000 note
payable issued by the Company in 1997 (see Note 6) was converted into 16,667
shares of common stock.
During the six months ended June 30, 1999, the Company issued warrants to
purchase 76,250 shares of common stock to five advisors for past and future
services. The aggregate fair value of these warrants of $171,900 was determined
using the Black-Scholes valuation model. The Company recorded $135,300 in
expense for the six months ended June 30, 1999 and the remaining $36,600 will
be amortized over the remaining service period, which is twelve months from the
date of issuance.
On March 30, 1999, the Company granted options to purchase 247,500 shares of
common stock to certain employees with an exercise price of $0.02 per share.
The stock option grants are subject to certain performance objectives which
must be achieved in 1999 or the stock option grants will be terminated. Once
the performance objectives are achieved, the stock options generally vest over
a two to three year period. During the six months ended June 30, 1999,
management determined that the likelihood of achievement of the performance
criteria underlying 150,000 of these options was probable. As a result, the
Company recorded deferred compensation of $1,512,000 (unaudited) based on the
difference between the $0.02 exercise price and $10.00 per share, which
represents the fair market value of the Company's common stock on June 30, 1999
as determined by its Board of Directors. The Company amortized $252,000
(unaudited) of this amount to compensation expense for the six months ended
June 30, 1999.
In May 1999, the Company issued, through a third private placement, 1,107,140
shares of common stock at a purchase price of $3.50 per share for aggregate
gross proceeds of $3,875,000. The gross proceeds were offset by commissions of
$341,000 paid to the investment banking firm responsible for placing these
shares and $11,240 in legal and other costs associated with the offering.
In May 1999, the Company issued 428,571 shares of common stock at a price of
$3.50 per share and 700,000 shares of common stock at a price of $5.00 per
share to a third party for aggregate gross proceeds of $5,000,000. If the
Company fails to complete an initial public offering by March 31, 2000 at a
price per share of at least $5.00 and an aggregate offering amount of not less
than $5,000,000 or does not complete an initial public offering by April 30,
2000 of shares which, in any consecutive 10 day trading period up to April 30,
2000 reach an average closing price per share of at least $5.00 per share, then
the Company will issue the third party an additional 300,000 shares of common
stock.
In connection with the issuances of common stock through private placements
during the six months ended June 30, 1999, the Company issued 48,543 shares of
common stock to the investment banking firm and 48,543 shares of common stock
to a third party, representing a finders fee related to this investment. The
value of the common stock issued to the investment banking firm was recorded as
a reduction of the related proceeds. The value of the common stock issued to
the third party as a finders fee was recorded as a period cost with a
corresponding increase to common stock and paid-in capital in the second
quarter of 1999. The Company also issued warrants to purchase 193,549 shares of
the Company's common stock to the investment banking firm. The aggregate fair
value of these warrants of $696,800 was determined using the Black-Scholes
valuation model. The value of these warrants was recorded as a reduction of the
related proceeds.
F-17
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
In May 1999, the Company issued to three of its non-employee directors
warrants to purchase 5,000 shares each of the Company's common stock at an
exercise price of $0.02 per share. These warrants vest over a one year period.
The Company recorded deferred compensation based on the difference between the
exercise price and $5.00 per share which represents the fair value of the
Company's common stock at the date of grant as determined by the Board of
Directors. The Company amortized $9,300 (unaudited) of this amount to
compensation expense for the six months ended June 30, 1999.
In May 1999, the Company entered into strategic relationships with Inktomi
Corporation ("Inktomi"), Bell and Howell Information and Learning Company
("Bell and Howell") and Lotus Development Corporation ("Lotus"). Additionally,
on June 30, 1999 the Company entered into a strategic relationship with
Netscape Communications Corporation ("Netscape").
Inktomi provides its search technology and indexing capability for the
content available on the Company's Web site as well as certain marketing
services through the inclusion of the Company's logo on all documents
distributed by Inktomi to its customers. Additionally, Inktomi markets the
Company's research option to its customers and encourages its customers to
become users of the Company's content. The agreements with Inktomi set forth
minimum annual fees for each of these services, payable on a quarterly basis,
over the three year term of the agreements. The agreements with Inktomi
establish royalties to be paid based upon future revenues generated by the
Company. Royalties will be determined based on revenues derived from users'
access to the content contained in the Company's content collection or from Web
pages originated by the Company. Further, the Company will be required to pay
certain service fees for the use of Inktomi's search technology on a per-query
basis. The agreements also provide that Inktomi's subscribers will have access
to the Company's content collection. The agreements provide that Inktomi will
pay the Company an annual fee payable in quarterly installments over the term
of the agreements as well as royalties based on the number of searches that
Inktomi's subscribers make relative to the Company's available content. In
connection with the Inktomi agreements, the Company issued Inktomi a warrant to
purchase 233,200 shares of common stock at an exercise price of $3.50 per
share. One half, or 116,600 shares, of the common stock underlying the warrant
are non-forfeitable and were exercisable immediately upon execution of the
agreements. The other half, or 116,600 shares, of the common stock underlying
the warrant vest upon the achievement of certain performance criteria, as
defined in the agreements. The fair value of $429,000 attributable to the
portion of the warrant that vests upon the execution of the agreements was
determined using the Black-Scholes valuation model. This fair value will be
amortized to expense over the three year term of the agreements. No value has
been ascribed to the portion of the warrant that vests upon the achievement of
certain performance criteria because such criteria have not been achieved.
Under its agreements with the Company, Bell and Howell will provide the
Company with content from business journals and newspapers. The term of the
Bell & Howell agreement is for one year and expires on July 1, 2000. However,
the Company can terminate this agreement if it does not receive $17 million in
financing from the date of the agreement through October 31, 1999. In addition,
if the Company completes an initial public offering, then a warrant to purchase
that number of shares of the Company's common stock equal to $1.25 million at
the initial public offering price per share will be issued to Bell & Howell.
This warrant will be exercisable, at the initial public offering price per
share, for one year following such initial public offering. No value has been
ascribed to this warrant in the financial statements as the event giving rise
to the issuance of the warrant has not yet occurred. Included in accounts
payable at June 30, 1999 is $750,000 related to non-refundable royalty pre-
payments associated with the content to be provided by Bell and Howell (see
Note 3).
Under a three year agreement with Lotus, 1) Lotus will embed portions of the
Company's technology into its Domino Extended Search version 2.0; 2) the
Company will be the primary source of external business
F-18
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
---------------------
content provided to the Domino Extended Search user base; 3) the Company will
receive certain marketing support from Lotus; and 4) Lotus will pay the Company
a development fee and a royalty on sales of its Domino Extended Search.
The Company has contracted with Netscape to provide content and certain
services related to accessing their content on a customized basis for use by
Netscape Web site users. In return, the Company has received the ability to
display, on the Netscape Web site, direct links to the Company's Web site. This
potential traffic to the Company's Web site is expected to generate future
revenues through advertising and access to the Company's content subscription
service offerings. This agreement provides for a minimum amount payable to
Netscape on a quarterly basis over the two-year term of the agreement.
Additionally, the Company will be required to pay royalties as set forth in the
agreement for revenue generated as a result of this relationship. Further, the
Company will be entitled to receive certain royalties for revenue generated by
Netscape as a result of this relationship.
The remaining aggregate future minimum payments under the strategic
relationships entered into by the Company subsequent to December 31, 1998 to
expand its content base and increase traffic to its Web site are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1999.......................................................... $1,190,000
2000.......................................................... 2,300,000
2001.......................................................... 1,237,000
2002.......................................................... 527,000
----------
Total....................................................... $5,254,000
==========
</TABLE>
F-19
<PAGE>
ART
The inside back cover contains a number of screen shots from Powerize.com's
Web site showing the site's advanced search screen and an abstract of a pay-
per-view document.
<PAGE>
, 1999
[LOGO OF POWERIZE.COM APPEARS HERE]
2,500,000 Shares of Common Stock
----------------
P R O S P E C T U S
----------------
Ferris, Baker Watts Ryan, Lee & Company
Incorporated Incorporated
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as
to matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the
Company have not changed since the date hereof.
Until , 1999 (25 days after the date of this prospectus), all dealers
that effect transactions in these securities may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter in this offering and when selling
previously unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses payable by the Registrant
in connection with the sale and distribution of the securities offered hereby,
other than underwriting discounts and commissions. All of the amounts shown are
estimated except the Securities and Exchange Commission registration fee, the
National Association Securities Dealers, Inc. filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $ 9,591
National Association of Securities Dealers, Inc. filing fee......... 3,950
Nasdaq National Market listing fee.................................. 72,875
Transfer agent's and registrar's fees............................... 10,000
Printing expenses................................................... 100,000
Legal fees and expenses............................................. 150,000
Accounting fees and expenses........................................ 200,000
Underwriters' non-accountable expense allowance..................... 825,000
Blue Sky filing fees and expenses................................... 5,000
Miscellaneous expenses.............................................. 23,584
----------
Total........................................................... $1,400,000
==========
</TABLE>
Item 14. Indemnification of Officers and Directors
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. The
Registrant's Bylaws include provisions to require the Registrant to indemnify
its directors and officers to the fullest extent permitted by Section 145,
including circumstances in which indemnification is otherwise discretionary.
Section 145 also empowers the Registrant to purchase and maintain insurance
that protects its officers, directors, employees and agents against any
liabilities incurred in connection with their service in such positions.
At present, there is no pending litigation or proceeding involving a director
or officer of the Registrant as to which indemnification is being sought nor is
the Registrant aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
The form of Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant
and its directors and officers, and by the Registrant of the Underwriters, for
certain liabilities arising under the Securities Act.
The Registrant has entered into an Indemnification Agreement with each
director and officer of the Registrant, a form of which is filed as Exhibit
10.7 to this Registration Statement. Pursuant to such agreements, the
Registrant will be obligated, to the extent permitted by applicable law, to
indemnify such directors and officers against all expenses, judgments, fines
and penalties incurred.
Item 15. Recent Sales of Unregistered Securities
The following information relates to securities issued or sold by the
Registrant within the last three years. During that time, the Registrant has
issued unregistered securities in the transactions described below. Securities
issued in such transactions were offered and sold in reliance upon the
exemption from registration under Section 4(2) of the Securities Act, relating
to sales by an issuer not involving any public offering, or under Rule 701
under the Securities Act. The sales of securities were made without the use of
an underwriter
II-1
<PAGE>
and the certificates evidencing the shares bear a restrictive legend permitting
the transfer thereof only upon registration of the shares or an exemption under
the Act.
1. In December 1997, we issued and sold 2,437,500 shares of common stock to a
group of investors in exchange for units of limited liability company
interest pursuant to an agreement and plan of merger.
2. In December 1998, we issued and sold a $750,000 note convertible into
shares of common stock to one existing stockholder, which was subsequently
converted into 250,000 shares of common stock in March 1999.
3. In April 1998, we issued and sold 659,000 shares of common stock to a group
of investors for an aggregate purchase price of $1,647,500 in a private
placement.
4. In June 1998, we issued and sold 120,000 shares of common stock to one
investor for an aggregate purchase price of $300,000 in a private
placement.
5. In June 1998, we issued and sold 20,000 shares of common stock to two
investors for an aggregate purchase price of $60,000 in a private
placement.
6. Between November 1998 and March 1999, we issued and sold 437,879 shares of
common stock to a group of stockholders for an aggregate purchase price of
approximately $1,250,000 in a private placement.
7. In March 1999, we issued warrants exercisable for 76,250 shares of common
stock to five advisors.
8. In May 1999 we issued and sold 1,107,141 shares of common stock to a group
of investors for an aggregate purchase price of $3,875,000 in a private
placement.
9. In May 1999 we issued and sold 1,128,571 shares of common stock to one
investor for an aggregate purchase price of $5,000,000 in a private
placement and 97,086 shares of common stock to two investors as a finder's
fee.
10. In March 1999 we issued 25,000 shares of common stock to one stockholder
upon exercise of options to purchase common stock for an aggregate exercise
price of $10.00.
11. In April 1999 we issued 694 shares of common stock to one of our employees
upon exercise of stock options.
12. In May 1999 we issued warrants exercisable for an aggregate of 426,749
shares of common stock.
13. We have from time to time granted stock options to employees. The following
table shows information regarding these grants:
<TABLE>
<CAPTION>
Number of Exercise Price Per
Time Period Shares Share
- ----------- --------- ------------------
<S> <C> <C>
January 1, 1998 to December 31, 1998............... 501,250 $0.02-$3.00
January 1, 1999 to March 31, 1999.................. 355,000 $0.02-$3.00
April 1, 1999 to June 30, 1999..................... 43,750 $3.00-$5.00
</TABLE>
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
3.1.1 Certificate of Amendment to Amended and Restated Certificate of
Incorporation
3.2 Amended and Restated By-Laws
4.1* Specimen stock certificate for shares of Common Stock of the
Company
5.1 Opinion of Piper & Marbury L.L.P.
10.1 Sublease Agreement dated March 20, 1998 by and between the Company
and First Health Strategies, Inc.
10.2 Sublease Agreement dated as of August 17, 1998 by and between the
Company and Stanford Telecommunications, Inc.
10.3* Employment Agreement dated as of May 28, 1999 by and between the
Company and Edwin R. Addison
10.4 Amended and Restated Employment Agreement dated as of May 28, 1999
by and between the Company and Mark A. Gaertner
10.5 Amended and Restated Employment Agreement dated as of May 28, 1999
by and between the Company and Ted S. Bagheri
10.6* 1998 Stock Incentive Plan
10.7* Form of Indemnification Agreement between the Company and each of
its directors and officers
10.8* Incentive Stock Option Grant Agreement dated March 30, 1999 by and
between the Company and John McGrath
10.9* Performance Stock Option Grant Agreement dated March 30, 1999 by
and between the Company and Mark A. Gaertner
10.10* Performance Stock Option Grant Agreement dated March 30, 1999 by
and between the Company and Robert Kaminski
10.11* Performance Stock Option Grant Agreement dated March 30, 1999 by
and between the Company and Ted S. Bagheri
10.12* Stock Option Grant Agreement dated April 1, 1999 by and between
Edwin R. Addison and Mark A. Gaertner
10.13* Stock Option Grant Agreement dated April 1, 1999 by and between
Edwin R. Addison and Robert Kaminski
10.14* Stock Option Grant Agreement dated January 1, 1998 by and between
Edwin R. Addison and Robert Kaminski
10.15* Letter Agreement dated May 19, 1999 by and between the Company and
Sevenson Environmental Services, Inc.
10.16* Registration Rights Agreement dated May 19, 1999 by and between
the Company and Sevenson Environmental Services, Inc.
10.17+* Online Licensed Materials Distribution Agreement dated May 21,
1999 by and between the Company and Bell & Howell Information and
Learning Company
10.18+* Distribution Agreement dated May 14, 1999 by and between the
Company and Inktomi Corporation
10.19+ Information Services Agreement dated May 14, 1999 by and between
the Company and Inktomi Corporation, as amended
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.20+* Warrant Agreement dated May 14, 1999 by and between the Company
and Inktomi Corporation
10.21+ Netcenter Services Agreement dated June 30, 1999 by and between
the Company and Netscape Communications Corporation
21.1* Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Piper & Marbury L.L.P. (included as part of Exhibit 5.1
hereto)
24.1* Power of Attorney
27 Financial Data Schedule
</TABLE>
- --------
* Previously filed.
+ Information has been omitted from this exhibit pursuant to a request for
confidential treatment and filed separately with the Securities and Exchange
Commission.
(b) Financial Statement Schedules:
Schedules have been omitted because the information required to be shown in
the schedules is not applicable or is included elsewhere in our financial
statements or the notes thereto.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriter at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions of its Charter or Bylaws or the Delaware
General Corporation Law 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted form the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, Maryland, on
the 28th day of July, 1999.
POWERIZE.COM, INC.
By: /s/ Edwin R. Addison
---------------------------------
Edwin R. Addison
Chairman of the Board and
Chief Executive Officer
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Edwin R. Addison Chairman of the July 28, 1999
- ------------------------------------- Board, Chief
Edwin R. Addison Executive Officer
and Director
(principal
executive officer)
* President, Chief July 28, 1999
- ------------------------------------- Operating Officer
Mark A. Gaertner and Director
* Executive Vice July 28, 1999
- ------------------------------------- President, Chief
Ted S. Bagheri Financial Officer
and Director
(principal
financial and
accounting officer)
* Director July 28, 1999
- -------------------------------------
Jeffrey Crigler
* Director July 28, 1999
- -------------------------------------
James G. Groninger
* Director July 28, 1999
- -------------------------------------
Dr. Francis J. Harvey
* Director July 28, 1999
- -------------------------------------
Jay S. Levine
* By: /s/ Edwin R. Addison
- -------------------------------------
Edwin R. Addison
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
Certificate of Amendment to Amended and Restated Certificate of
3.1.1 Incorporation
3.2 Amended and Restated By-Laws
Specimen stock certificate for shares of Common Stock of the
4.1* Company
5.1 Opinion of Piper & Marbury L.L.P.
10.1 Sublease Agreement dated March 20, 1998 by and between the Company
and First Health Strategies, Inc.
10.2 Sublease Agreement dated as of August 17, 1998 by and between the
Company and Stanford Telecommunications, Inc.
10.3* Employment Agreement dated as of May 28, 1999 by and between the
Company and Edwin R. Addison
10.4 Amended and Restated Employment Agreement dated as of May 28, 1999
by and between the Company and Mark A. Gaertner
10.5 Amended and Restated Employment Agreement dated as of May 28, 1999
by and between the Company and Ted S. Bagheri
10.6* 1998 Stock Incentive Plan
10.7* Form of Indemnification Agreement between the Company and each of
its directors and officers
10.8* Incentive Stock Option Grant Agreement dated March 30, 1999 by and
between the Company and John McGrath
10.9* Performance Stock Option Grant Agreement dated March 30, 1999 by
and between the Company and Mark A. Gaertner
10.10* Performance Stock Option Grant Agreement dated March 30, 1999 by
and between the Company and Robert Kaminski
10.11* Performance Stock Option Grant Agreement dated March 30, 1999 by
and between the Company and Ted S. Bagheri
10.12* Stock Option Grant Agreement dated April 1, 1999 by and between
Edwin R. Addison and Mark A. Gaertner
10.13* Stock Option Grant Agreement dated April 1, 1999 by and between
Edwin R. Addison and Robert Kaminski
10.14* Stock Option Grant Agreement dated January 1, 1998 by and between
Edwin R. Addison and Robert Kaminski
10.15* Letter Agreement dated May 19, 1999 by and between the Company and
Sevenson Environmental Services, Inc.
10.16* Registration Rights Agreement dated May 19, 1999 by and between
the Company and Sevenson Environmental Services, Inc.
10.17+* Online Licensed Materials Distribution Agreement dated May 21,
1999 by and between the Company and Bell & Howell Information and
Learning Company
10.18+* Distribution Agreement dated May 14, 1999 by and between the
Company and Inktomi Corporation
10.19+ Information Services Agreement dated May 14, 1999 by and between
the Company and Inktomi Corporation, as amended
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
Warrant Agreement dated May 14, 1999 by and between the Company
10.20+* and Inktomi Corporation
10.21+ Netcenter Services Agreement dated June 30, 1999 by and between
the Company and Netscape Communications Corporation
21.1* Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers LLP
Consent of Piper & Marbury L.L.P. (included as part of Exhibit 5.1
23.2 hereto)
24.1* Power of Attorney
27 Financial Data Schedule
</TABLE>
- --------
* Previously filed.
+ Information has been omitted from this exhibit pursuant to a request for
confidential treatment and filed separately with the Securities and Exchange
Commission.
<PAGE>
UNDERWRITING AGREEMENT
----------------------
__________ ___, 1999
FERRIS, BAKER WATTS, INCORPORATED
RYAN, LEE & COMPANY INCORPORATED
As Representatives of the
Several Underwriters Identified
In Schedule A Annexed Hereto
c/o Ferris, Baker Watts, Incorporated
100 Light Street
Baltimore, Maryland 21202
Gentlemen:
SECTION 1. INTRODUCTION. Powerize.com, Inc., a Delaware corporation
(the "Company"), has authorized capital stock consisting of 50,000,000 shares of
Common Stock, $0.0001 par value per share (the "Common Stock"). The Company
proposes to sell an aggregate of __________ shares of Common Stock (the "Firm
Shares") to the several underwriters identified in Schedule A annexed hereto
(the "Underwriters"), who are acting severally and not jointly. In addition, the
Company has agreed to grant to the Underwriters an option to purchase up to
__________ additional shares of Common Stock (the "Optional Shares") to cover
over-allotments, as provided in Section 4 hereof. The Firm Shares and, to the
extent such option is exercised, the Optional Shares, are hereinafter
collectively referred to as the "Common Shares."
You, as representatives of the Underwriters (the "Representatives"),
have advised the Company that the Underwriters propose to make a public offering
(the "Offering") of the Common Shares on the effective date of the Registration
Statement, as defined in Section 2(f) hereof, or as soon thereafter as in the
Representatives' reasonable judgment is advisable (but not later than seven (7)
days after such effective date), and that the purchase price of the Common
Shares will be the public offering price of $_____ per share less underwriting
discounts and commissions of seven percent (7 %) or $_____ per share.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of Delaware, with full
corporate power and authority to own and/or lease its properties and
conduct its business as described in the Prospectus (as defined in
Section 2(f) hereof); the Company is duly qualified to do business as a
foreign corporation under the corporation law of, and is in good
standing as such in, each jurisdiction where such qualification is
required; the Company has received no notice of
<PAGE>
any proceeding and, to the Company's knowledge, no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification.
(b) The Company does not own or control any subsidiary and
does not own any interest in any other corporation, joint venture,
proprietorship or other commercial entity or organization except as
described in the Prospectus.
(c) The shares of Common Stock outstanding on the date of this
Agreement and immediately prior to the issuance of the Common Shares
have been duly and validly authorized and are validly issued, fully
paid and nonassessable. There are no preemptive, preferential or other
rights to subscribe for or purchase any of the Common Shares to be sold
by the Company hereunder, and no shares of Common Stock have been
issued in violation of such rights of stockholders. There are no
outstanding rights, warrants or options to acquire or instruments
convertible into or exchangeable for, any shares of Common Stock or
other equity interest in the Company, except as described in the
Prospectus. No holders of securities of the Company have any rights to
the registration of such securities under the Registration Statement,
or such rights have been waived with respect to the Registration
Statement. The statements made in the Prospectus under the caption
"Description of Our Capital Stock" are accurate and complete in all
material respects, and the authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in
the Prospectus.
(d) The Company has the corporate power and authority to
issue, sell and deliver the Common Shares to be sold by it to the
Underwriters as provided herein. The Common Shares to be sold by the
Company have been duly authorized and when issued, delivered and paid
for pursuant to this Agreement, will be validly issued, fully paid and
nonassessable and not subject to any preemptive or similar rights, and
will conform to the description thereof contained in the Prospectus.
Upon consummation of the purchase of the Common Shares by the
Underwriters under this Agreement, the Underwriters will acquire good
and marketable title thereto, free and clear of any claim, security
interest, community property right, or other encumbrance or restriction
on transfer.
(e) The Company has full corporate power and authority to
enter into and perform this Agreement, and the execution and delivery
hereof and the performance of the Company's obligations hereunder have
been duly authorized by all necessary corporate action. This Agreement
has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by each other party hereto,
is, and on each Closing Date referenced in Section 4 hereof will be,
the legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except that rights to
indemnity or contribution may be limited by applicable law and public
policy and enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting the
rights of creditors and by equitable principles limiting the right to
specific performance or other equitable relief. The execution and
performance by the Company of this Agreement, including application of
the net proceeds of the Offering, if and when received, as described in
the Prospectus
2
<PAGE>
under "Prospectus Summary" and "Use of Proceeds," will not: (i) violate
any provisions of the Certificate of Incorporation or Bylaws of the
Company, or any law, rule or regulation applicable to the Company of
any government, court, regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its
businesses or properties, or (ii) result in the breach, or be in
contravention, of any provision of any loan agreement, lease,
franchise, license, note, bond, other evidence of indebtedness,
indenture, mortgage, deed of trust, other instrument, agreement,
contract, permit or other contractual obligation to which the Company
is a party or by which the Company or its property may be bound, or
affected, or any order of any court or governmental agency or authority
entered in any proceeding to which the Company was or is now a party or
by which it is bound, except those, if any, described in the Prospectus
or which would not, individually or in the aggregate, have a Material
Adverse Effect. For purposes of this Agreement, the term "Material
Adverse Effect" means, when used in connection with the Company, any
development, change or effect that is, or reasonably could be expected
to be, materially adverse to the business, management, properties,
assets, net worth, condition (financial or other), results of
operations or prospects of the Company. No consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the
execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated by this
Agreement except for compliance with the Securities Act of 1933, as
amended (the "Act") and the state securities laws (the "Blue Sky Laws")
applicable to the Offering, and the clearance of such Offering with the
National Association of Securities Dealers, Inc. (the "NASD").
(f) (i) The Company has prepared and filed with the Securities
Exchange Commission (the "Commission") in accordance with the
provisions of the Act and the rules and regulations (the "Rules and
Regulations") of the Commission thereunder, a registration statement on
Form S-1, including a prospectus, relating to the Common Shares. The
registration statement, as amended at the time it became effective,
including all exhibits thereto and the information (if any) deemed to
be part of the registration statement at the time of effectiveness
pursuant to Rule 430A under the Act ("Rule 430A Information"), and any
post-effective amendment thereafter filed with the Commission with
respect to such registration statement, is herein referred to as the
"Registration Statement." The form of prospectus first filed by the
Company with the Commission pursuant to Rule 424(b) and Rule 430A under
the Act or, if no such filing is required, the form of prospectus
included in the Registration Statement at the time it became effective,
and any supplement or amendment thereafter filed with the Commission
with respect to such prospectus, is hereinafter referred to as the
"Prospectus." For purposes of this Agreement, "Effective Time" means
the date and time as of which the Registration Statement, or the most
recent post-effective amendment thereto, if any, was or is declared
effective by the Commission. "Preliminary Prospectus" means each
prospectus included in the Registration Statement, or amendments
thereof, before the Registration Statement became effective under the
Act, any prospectus filed with the Commission by the Company pursuant
to Rule 424(a) under the Act and the prospectus included in the
Registration Statement at the Effective Time that omits Rule 430A
Information.
3
<PAGE>
(ii) The Registration Statement has become effective,
and no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending
before or, to the knowledge of the Company, threatened by the
Commission.
(g) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects with the requirements
of the Act and the Rules and Regulations and, as of its date, has not
included any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are
made, not misleading. The Registration Statement and the Prospectus
contain all statements that are required to be stated therein in
accordance with the Act and the Rules and Regulations and in all
material respects conform to the requirements of the Act and the Rules
and Regulations, and neither the Registration Statement nor the
Prospectus includes any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which
they are made, not misleading; provided, however, that the Company
makes no representation or warranty as to information contained in or
omitted from any Preliminary Prospectus, the Registration Statement or
the Prospectus in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter
through the Representatives specifically for use in the preparation
thereof. There are no legal or governmental actions, suits or legal
proceedings, and there are no statutes, regulations, contracts or other
documents, transactions or relationships of or by the Company required
to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement by the Act or by the
Rules and Regulations which have not been described or filed as
required.
(h) PricewaterhouseCoopers LLP, which has expressed its
opinion with respect to certain of the financial statements filed with
the Commission as a part of the Registration Statement and included in
the Prospectus, are independent certified public accountants as
required by the Act and the Rules and Regulations.
(i) The financial statements of the Company for the respective
periods covered thereby, and the related notes and schedules thereto
included in the Registration Statement and the Prospectus, present
fairly the financial position of the Company for the periods covered
thereby as of the respective dates of such financial statements, all in
conformity with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise expressly
noted therein). All adjustments for a fair presentation of results have
been made. The selected financial data included in the Registration
Statement and the Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with the financial
statements presented therein, and the other financial and statistical
information and data with respect to the Company set forth in the
Registration Statement and the Prospectus are, in all material
respects, accurately presented and prepared on a basis consistent with
such financial statements and the books and records of the Company.
The financial statements of the
4
<PAGE>
Company included in the Registration Statement and the Prospectus
conform in all material respects to the applicable requirements of Form
S-1 and Regulation S-X under the Act. No other financial statements,
except the financial statements included in the Registration Statement
and Prospectus, are required by Form S-1 to be included in the
Registration Statement and Prospectus.
(j) The Company is not (i) in violation of its Certificate of
Incorporation or Bylaws, or (ii) in default under any court or
administrative order or decree, or (iii) in default with respect to any
provision of any material loan agreement, lease, franchise, license,
note, bond, other evidence of indebtedness, indenture, mortgage, deed
of trust, other instrument, agreement, contract, permit or other
contractual obligation to which the Company is a party or by which the
Company or any of its properties or businesses may be bound, and, to
the knowledge of the Company, there does not exist any state of facts
which constitutes an event of default as defined in such documents or
which, upon notice or lapse of time or both, would constitute such an
event of default, except those, if any, described in the Prospectus or
which would not, individually or in the aggregate, have a Material
Adverse Effect.
(k) There are no governmental actions, suits or legal
proceedings pending, or to the Company's knowledge, threatened to which
the Company is or could be a party, or to which the business of the
Company or any material property owned or leased by the Company is
subject, or related to product liability, environmental, intellectual
property or discrimination matters which are not disclosed in the
Registration Statement and the Prospectus or which question the
validity of this Agreement or any action taken or to be taken pursuant
hereto except those, if any, described in the Prospectus or which would
not, individually or in the aggregate, have a Material Adverse Effect.
(1) The Company does not own or have title to any real
property. The Company has good and marketable title to all the tangible
properties and assets reflected as owned in the financial statements
hereinabove described (or elsewhere in the Prospectus), subject to no
lien, mortgage, pledge, charge or encumbrance of any kind or nature
whatsoever except those, if any, reflected in such financial statements
(or elsewhere in the Prospectus) or which, in the aggregate, are not
material to the Company and its business and do not materially affect
the value of such property and do not materially interfere with the use
made or proposed to be made of such property; all material tangible
properties held or used by the Company under leases, licenses or other
agreements are held by it under valid, subsisting and enforceable
leases, franchises or other agreements with respect to which it is not
in default, except that rights to indemnity or contribution may be
limited by applicable law and public policy and enforceability of the
rights and remedies of the Company under any such lease, franchise,
license or other agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting the
rights of creditors and by equitable principles limiting the right to
specific performance or other equitable relief.
(m) The Company will not take and has not taken, directly or
indirectly, any action (and does not know of any action by its
directors, officers or stockholders, or
5
<PAGE>
others) designed to or which has constituted or which might reasonably
be expected to cause or result, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or otherwise, in stabilization
or manipulation of the price of the Common Shares to facilitate the
sale or resale of the Common Shares.
(n) Except as reflected in or contemplated by the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), since the respective dates as of which
information is given in the Prospectus:
(i) the Company has not incurred any material
liabilities or obligations, direct or contingent, nor entered
into any material transactions not in the ordinary course of
business;
(ii) the Company has not paid or declared any
dividends or other distributions with respect to its capital
stock and is not delinquent in the payment of principal or
interest on any outstanding debt obligations;
(iii) there has not been any material adverse change
or any development involving a prospective material adverse
change in the capital stock of the Company; and
(vi) there has not occurred with respect to the
Company any Material Adverse Effect or any development which
reasonably could be expected to result in a Material Adverse
Effect.
(o) The Company has filed all necessary federal, state and
foreign income and franchise tax returns and paid all taxes shown as
due thereon; and the Company has no knowledge of any tax deficiency
which has been asserted or threatened against the Company which would
have a Material Adverse Effect.
(p) The Company has the capitalization as set forth under the
caption "Capitalization" in the Prospectus as of the date indicated
therein and there has been no material change therein except as
disclosed in the Prospectus. The financial and numerical information
and data in the Prospectus under "Prospectus Summary," "The Offering,"
"Summary Financial Data," "Risk Factors," "Use of Proceeds," "Dividend
Policy," "Capitalization," "Dilution," "Selected Historical Financial
Data," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business," "Management," "Related Transactions
and Relationships," "Principal Stockholders" and "Description of Our
Capital Stock" are fairly presented and prepared on a basis consistent
with the audited financial statements of the Company.
(q) The Company holds all licenses, permits, approvals,
exemptions, franchises, consents and other government authorizations,
and has made all filings with and notices to, all governmental or
regulatory authorities and self-regulatory organizations and all courts
and other tribunals, as are required for the present and proposed
conduct of its business as described in the Prospectus, except as would
not,
6
<PAGE>
individually or in the aggregate, have a Material Adverse Effect. Such
licenses, permits and other governmental authorizations are in full
force and effect, the Company is in all material respects complying
therewith, and the Company has not received any notice of proceedings
relating to the revocation or modification of any such license, permit,
approval or authorization. The Company is complying in all respects
with all laws, ordinances and regulations applicable to the Company,
its properties and its business, except as would not, individually or
in the aggregate, have a Material Adverse Effect.
(r) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that: (a)
transactions are executed in accordance with management's general or
specific authorizations; (b) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(c) access to assets is permitted only in accordance with management's
general or specific authorization; and (d) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action taken with respect to any differences. The Company
has maintained its books of account in accordance with generally
accepted accounting principles consistently applied in all material
respects, and such books and records are, and during periods covered by
the financial statements included in the Registration Statement and the
Prospectus are, correct and complete in all material respects, and
fairly and accurately reflect, in all material respects, the income,
expenses, assets and liabilities of the Company and provide a fair and
materially accurate basis for the preparation of such financial
statements.
(s) The minute books of the Company are current and contain a
materially correct and complete record of all corporate action taken by
the Board of Directors and the stockholders of the Company and all
signatures contained therein are true signatures of the persons whose
signatures they purport to be.
(t) Except as described in the Prospectus, the Company is
unaware of any loss or threatened loss of any key customer, supplier or
account which is material to the Company.
(u) The Company has uncontested and sufficient legal rights by
ownership or license to all "Intellectual Property" (defined to include
all unregistered, registered or registration-pending patents,
copyrights, trademarks, trade names, service marks, trade secrets,
know-how or similar rights recognized by U.S., foreign and
international statutes, common law or treaties) to permit continued
operation of the Company's business as it is currently operated and
described in the Prospectus, subject only to payment of periodic
license fees consistent with prior practice. Each description of the
Company's rights to Intellectual Property set forth in the Prospectus
(such as a statement in the Prospectus that an asset is subject to
patent, trademark or copyright protection, whether registered, pending
or otherwise) is true, complete and correct in all material respects.
The Company has no knowledge of any infringement or other conflicting
activity by others upon its Intellectual Property rights, and the
Company has no knowledge of any infringements or conflicting activity
by the Company on any Intellectual Property rights
7
<PAGE>
of others. The Company is the named registrant for any and all of the
Company's Intellectual Property that is subject to registration. The
Company is the sole registered holder and sole administrative contact
for the domain name www.powerize.com and the Company has no knowledge
of any pending, threatened or reasonably foreseeable adverse claim to
the Company's exclusive right to use such domain name.
(v) The Company is in compliance with all federal, state or
local laws or ordinances, including orders, rules and regulations
thereunder, regulating or otherwise affecting employee health and
safety or the environment, noncompliance with which could have a
Material Adverse Effect. To its knowledge, the Company has disposed of
all wastes in substantial compliance with applicable laws, and it is
not aware of any existing condition that may form the basis for any
present or future claim, demand or action seeking clean-up of any site,
location or body of water, surface or subsurface.
(w) The provisions of any qualified retirement plans sponsored
by the Company are in compliance with the Employee Retirement Income
Security Act of 1974 ("ERISA"), and the Company is in compliance with
ERISA, including, without limitation, ERISA's fiduciary and prohibited
transaction rules, or the funding requirements with respect to any such
plan, except to the extent such noncompliance would not, individually
or in the aggregate, have a Material Adverse Effect. The Company has
timely filed the reports required to be filed by ERISA in connection
with the maintenance of plans sponsored by the Company and no fact,
including, without limitation, any "reportable event" as defined by
ERISA and the regulations thereunder, exists in connection with any
plan sponsored by the Company which might constitute grounds for the
termination of such plan by the Pension Benefit Guaranty Corporation or
for the appointment by the appropriate United States District Court of
a trustee to administer any such plan. With respect to multiemployer
plans in which the Company participates on behalf of its employees who
are members of collective bargaining units, the Company has no
withdrawal liability except to the extent set forth in the Prospectus.
The provisions of any employee benefit welfare plan, as defined in
ERISA's Section 3(l), sponsored by the Company are in compliance with
ERISA's fiduciary and prohibited transaction rules and reporting and
disclosure requirements with respect to any such plan, except to the
extent such noncompliance would not, individually or in the aggregate,
have a Material Adverse Effect.
(x) No labor dispute with the employees of the Company exists
or, to the knowledge of the Company is imminent, and it is not aware of
any existing or imminent labor disputes by the employees of any of its
principal suppliers, manufacturers or contractors which might be
expected to result in a Material Adverse Effect. There is no: (a)
significant unfair labor practice complaint, grievance or arbitration
proceeding pending or, to the Company's knowledge, threatened against
the Company before the National Labor Relations Board or any state or
local labor relations board; (b) strike, labor dispute, slowdown or
stoppage pending or, to the Company's knowledge, threatened against the
Company; or (c) union representation question pending or, to the
Company's knowledge, proposed with respect to the employees of the
Company. To the
8
<PAGE>
knowledge of the Company, no collective bargaining organizing
activities are taking place with respect to the Company.
(y) The Company has not violated any provision of the Foreign
Corrupt Practice Act, or the rules and regulations promulgated
thereunder.
(z) To the Company's knowledge after due inquiry, no
relationship, direct or indirect, or agreement, arrangement or
understanding (including, without limitation, any voting agreement),
exists between or among the Company or any other person, which is
required by the Act to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration
Statement which is not described or filed as required.
(aa) No part of the proceeds of the sale of the Common Shares
will be used for any purpose that violates the provisions of any of
Regulations G, T or X of the Board of Governors of the Federal Reserve
System or any other regulation of such Board of Governors.
(bb) All offers and sales of the Company's capital stock prior
to the date hereof were at all relevant times exempt from the
registration requirements of the Act and were duly registered with or
the subject of an available exemption from the registration
requirements of the applicable Blue Sky Laws.
(cc) The Company is not, does not intend to conduct its
business in a manner in which it would become, and after giving effect
to the offering and sale of the Common Shares and the application of
the proceeds thereof as described in the Prospectus will not be, an
"investment company" as defined in the Investment Company Act of 1940,
as amended.
A certificate signed by any officer of the Company delivered to you or
to counsel for the Underwriters shall be deemed a representation and warranty of
the Company to you as to the matters covered thereby.
SECTION 3. REPRESENTATION OF UNDERWRITERS. You have been duly
authorized to act and will act as the Representatives for the Underwriters in
connection with this financing, and any action under or in respect of this
Agreement taken by you, as such Representatives, will be binding upon all
Underwriters.
SECTION 4. PURCHASE, SALE AND DELIVERY OF COMMON SHARES. 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
__________ Firm Shares to the Underwriters, and the Underwriters agree,
severally and not jointly, to purchase from the Company the number of Firm
Shares as hereinafter set forth at the price per share set forth in Section 1
hereof. In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriters, severally and
not jointly, to purchase from the Company up
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to __________ Optional Shares at the same purchase price per share to be paid
for the Firm Shares, for use solely in covering any over-allotments made by the
Underwriters in the sale and distribution of the Firm Shares. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of full Optional Shares which (as nearly as practicable in full shares as
determined by the Representatives) bears to __________ the same proportion as
the number of shares set forth opposite the name of such Underwriter in Schedule
A hereto bears to the total number of Firm Shares to be purchased by all the
Underwriters under this Agreement.
At 9:00 a.m., Baltimore, Maryland time, on the third full business day
after the commencement of the Offering, or at such other time not later than
seven (7) full business days after the commencement of the Offering, as the
Representatives and the Company may agree, the Company will deliver to the
Representatives, at the offices of Ferris, Baker Watts, Incorporated, 1700
Pennsylvania Avenue, Suite 700, Washington, D.C., or through the facilities of
The Depository Trust Company, for the accounts of the Underwriters, definitive
certificates representing the Firm Shares to be sold, with all transfer taxes,
if any, with respect to the transfer, sale and delivery of the Firm Shares to
the several Underwriters duly paid by the Company, against payment in
Washington, D.C. of the purchase price therefor by wire transfer of immediately
available funds to an account designated by the Company in respect of the Firm
Shares being sold by the Company. Such time of delivery and payment is referred
to throughout this Agreement as the "First Closing Date." The certificates for
the Firm Shares to be so delivered will be in denominations and registered in
such names as the Representatives request by notice delivered to the Company
prior to 9:00 a.m., Baltimore, Maryland time, no later than the second full
business day preceding, the First Closing Date, and, if the certificates are to
be physically delivered, will be made available for checking and packaging at
9:00 a.m., Baltimore, Maryland time, at least 24 hours prior to the First
Closing Date at a location to be designated by the Representatives.
The over-allotment option granted hereunder may be exercised at any
time (but not more than once) within thirty (30) days after the date the
Registration Statement becomes effective upon written notice by the
Representatives to the Company setting forth the aggregate number of Optional
Shares as to which the Underwriters are exercising the option, the names and
denominations in which the certificates for such shares are to be registered and
the time and place at which such certificates will be delivered. Such time of
delivery (which may not be earlier than the First Closing Date), being herein
referred to as the "Second Closing Date," shall be determined by the
Representatives, but if at any time other than the First Closing Date, shall not
be earlier than three (3) nor later than seven (7) full business days after
delivery of such notice of exercise to the Company. Definitive certificates for
the Optional Shares, with all transfer taxes, if any, with respect to the
transfer, sale and delivery of the Optional Shares to the several Underwriters
duly paid by the Company, will be made available for checking and packaging at
9:00 a.m., Baltimore, Maryland time, at least 24 hours prior to the Second
Closing Date at a location to be designated by the Representative if the
certificates are to be physically delivered. The manner of payment for and
delivery of (including the denominations of and the names in which certificates
are to be registered) the Optional Shares shall be the same as for the Firm
Shares purchased from the Company. As Representatives of the Underwriters, you
may cancel the option at any time prior to its expiration by giving written
notice of such cancellation to the Company.
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The Representatives have advised the Company that each Underwriter has
authorized the Representatives to accept delivery of its Common Shares and to
make payment therefor. You, individually and not as the Representatives of the
Underwriters, may make payment for any Common Shares to be purchased by any
Underwriter whose funds shall not have been received by you by the First Closing
Date or the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any
obligation hereunder.
SECTION 5. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the several Underwriters as follows:
(a) The Company will prepare and timely file with the
Commission pursuant to Rule 424(b) under the Act the Prospectus
containing information previously omitted in reliance on Rule 430A
under the Act. The Company will advise the Representatives and its
counsel promptly of (i) the time when any post-effective amendment to
the Registration Statement becomes effective; (ii) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for
that purpose, or of any notification of the initiation or threatening
of any proceedings for that purpose; (iii) of any request of the
Commission for amendment or supplement of the Registration Statement,
of any Preliminary Prospectus or of the Prospectus, or for additional
information, and will not file or make any amendment or supplement of
the Registration Statement, to any Preliminary Prospectus or to the
Prospectus of which the Representatives have not been furnished with a
copy prior to such filing or to which you object; and (iv) the
happening of any event during the period referred to in Section 5(g)
below which makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or which requires any
additions to or changes in the Registration Statement or the Prospectus
in order to make the statements therein not misleading. If at any time
the Commission shall issue any stop orders suspending the effectiveness
of the Registration Statement, the Company will use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time. The Company will file promptly and will furnish to the
Representatives at or prior to the filing thereof copies of all reports
and any definitive proxy or information statements required to be filed
by the Company with the Commission pursuant to Sections 13, 14 and 15
of the Exchange Act subsequent to the date of the Prospectus, and for
so long as the delivery of a prospectus is required in connection with
the Offering.
(b) If, at any time when a prospectus relating to the Common
Shares is required to be delivered under the Act, any event occurs as a
result of which the Prospectus, including any subsequent amendment or
supplement, would include an untrue statement of a material fact, or
would omit to state any 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 or if it is
necessary at any time to amend or supplement the Prospectus to comply
with the Act, the Rules and Regulations or Blue Sky Laws, the Company
promptly will advise the Representative and its counsel thereof. In
such event, or if during such period any event shall occur or
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condition shall exist as a result of which, in the reasonable judgment
of the Representatives, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if in the reasonable judgment of the Representatives, it
is necessary to amend or supplement the Prospectus to comply with the
Act, the Rules and Regulations or Blue Sky Laws, then the Company will
promptly prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or effect such
compliance and will use its best efforts to cause any post-effective
amendment to the Registration Statement relating thereto to become
promptly effective.
(c) Except as described in the Prospectus, the Company will
not, prior to the Second Closing Date (or the expiration of the thirty
(30) day period within which the Representatives are required to
exercise the over-allotment option pursuant to Section 4 hereof if
there is no Second Closing Date), incur any material liability or
obligation, direct or contingent, or enter into any material
transaction, other than in the ordinary course of business.
(d) The Company will not declare or pay any dividend or make
any other distribution upon its capital stock payable to its holders of
record on a date prior to the Second Closing Date or, if there is no
Second Closing Date, then prior to the First Closing Date.
(e) Until the Underwriters have completed the Offering, the
Company will not take, directly or indirectly, any action designed to
or which might reasonably be expected to cause or result, under the
Exchange Act or otherwise, in stabilization or manipulation of the
price of the Common Shares to facilitate the sale or resale of the
Common Shares.
(f) The Company will make generally available to the
Representatives and to the Company's security holders an earnings
statement (which need not be audited) as soon as practicable, but in no
event later than 15 months after the end of the Company's current
fiscal quarter, covering a period of 12 consecutive calendar months
beginning after the effective date of the Registration Statement, which
will satisfy the provisions of the last paragraph of Section 11(a) of
the Act and Rule 158 promulgated thereunder.
(g) Prior to 10:00 a.m., Baltimore, Maryland time, on the
first business day after the date of this Agreement and from time to
time thereafter as in the opinion of counsel for the Underwriters a
prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, the Company will furnish the
Representatives, at the Company's expense, with copies of the
Registration Statement, the Prospectus and the Preliminary Prospectus
in each case as soon as available and in such quantities as the
Representatives may reasonably request, for the purposes contemplated
by the Act or the Exchange Act.
(h) The Company will cooperate with the Representatives, their
counsel and the Underwriters in qualifying or registering the Common
Shares if and as required for
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sale under the Blue Sky Laws of such jurisdictions within the United
States and its territories as the Representatives shall designate, and
will continue such qualifications or registrations in effect so long as
reasonably requested by the Representatives to effect the distribution
of the Common Shares. The Company will advise you promptly and, if
requested by you, will confirm such advice in writing of the suspension
of qualification of the Common Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes.
The Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified to transact business.
(i) During the period of five years after the date hereof, as
soon as practicable after the end of each fiscal year, the Company will
furnish the Representatives with two copies, and to each of the other
Underwriters who may so request, one copy, of the Annual Report of the
Company containing the balance sheet of the Company as of the close of
such fiscal year and corresponding statements of earnings,
stockholders' equity and cash flows for the year then ended, such
financial statements to be under the certificate or opinion of the
Company's independent certified public accountants. During such period
the Company will also furnish the Representatives with one copy:
(i) as soon as practicable after the filing
thereof, of each report filed by the Company with the Commission; and
(ii) as soon as available, of each report of the
Company mailed to its stockholders.
(j) The Company will use its best efforts to comply or cause
to be complied with the conditions to the obligations of the
Underwriters set forth in Section 7 hereof.
(k) The Company shall use its best efforts to cause (i) the
Common Shares to be listed for trading on the NASDAQ National Market as
soon as practicable after the effectiveness of the Registration
Statement and (ii) the Common Shares to remain so listed for at least
thirty-six (36) months thereafter.
(1) The Company shall promptly prepare and file with the
Commission, from time to time, such reports as may be required to be
filed by the Rules and Regulations.
(m) The Company shall comply in all respects with the
undertakings given by the Company in connection with the qualification
or registration of the Common Shares for offering and sale under the
Blue Sky Laws of one or more jurisdictions.
(n) The Company shall apply the net proceeds from the sale of
the Common Shares to be sold by it hereunder for the purposes set forth
in the Prospectus.
(o) Except for the sale of Common Shares pursuant to this
Agreement, the Company hereby agrees not to (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or
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warrant to purchase, or establish or increase a put equivalent position
or liquidate or decrease a call equivalent position within the meaning
of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder, or otherwise transfer or dispose of, directly
or indirectly, any shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for any
shares of capital stock of the Company or (ii) enter into any swap or
other arrangement that transfers all or a portion of the economic
consequences associated with the ownership of any shares of capital
stock of the Company (regardless of whether any of the transactions
described in clause (i) or (ii) is to be settled by the delivery of
Common Stock, or such other securities, in cash or otherwise), or
publicly announce an intention to effect any of the foregoing
transactions, for a period of 180 days after the date of the Prospectus
without the prior written consent of the Representatives; provided,
however, that notwithstanding the foregoing limitation, the Company may
issue, without the prior consent of the Representatives, (i) options to
purchase up to 200,000 shares of Common Stock to employees under the
Company's employee benefit plans (which options shall not vest or be
exercisable within such 180 day period) and (ii) up to 200,000 shares
of Common Stock for business purposes in connection with establishing
or maintaining commercial relationships with distributors, content
providers or strategic partners (which shares shall be issued as
"restricted securities" within the meaning of Rule 144 under the Act
without registration rights during such 180 day period). Except for a
registration statement on Form S-8 to be filed by the Company to
register the offer and sale of not more than 1.75 million shares of
Common Stock pursuant to employee benefit plans, the Company also
agrees not to file any registration statement with respect to any
shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock for a period of 180 days
after the date of the Prospectus without the prior written consent of
the Representatives. The Company shall, prior to or concurrently with
the execution of this Agreement, deliver an agreement executed by (i)
each of the present officers and directors of the Company and (ii) the
holders and beneficial owners of not less than 95% of the issued and
outstanding shares of Common Stock of the Company (calculated on a
fully diluted basis) as of the effective date of the Registration
Statement, to the effect that such person will not, during the period
commencing on the date such person signed such agreement and ending 180
days after the date of the Prospectus, without the prior consent of the
Representatives, (A) engage in any of the transactions described in the
first sentence of this paragraph or (B) make any demand for, exercise
any right, or file (or participate in the filing of) a registration
statement with respect to the registration of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable
for Common Stock; provided that transfers or other dispositions of
shares of Common Stock for estate planning purposes shall be permitted
without the prior consent of the Representatives if the transferee
first executes and delivers an agreement to the Representatives that
contains all of the terms and conditions of the agreement executed and
delivered by the transferor pursuant to this paragraph; and provided
further, that the Company shall not be required to deliver an agreement
from any holder or beneficial owner of Common Stock that has or, upon
exercise or conversion, will have shares of Common Stock that
constitute "restricted securities" within the meaning of Rule 144 under
the Act and that are subject to the holding period specified in Rule
144(d) for 180 days after the date of the Prospectus, and the number of
shares constituting such
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restricted securities shall be counted for purposes of determining the
Company's compliance with the 95% threshold described above.
(p) Upon the First Closing Date, the Company shall grant and
issue warrants to the Representatives (for themselves and not for or on
behalf of any other Underwriters) to purchase shares of Common Stock
equal in the aggregate to ten percent (10.0%) of the total number of
Common Shares sold in the Offering excluding the Optional Shares (the
"Underwriters Warrants") at an exercise price equal to one hundred ten
percent (110.0%) of the public offering price per share. Prior to the
First Closing Date, the Representatives shall deliver to the Company a
letter instructing the Company as to the percentage of such
Underwriters Warrants to be issued to each of the Representatives. The
Underwriters Warrants will have a five (5) year term commencing on the
effective date of the Offering and expiring on the fifth anniversary
thereof, and shall be exercisable, in whole or in part, by the
Representatives from time to time during such term on or after the
first anniversary of the effective date of the Offering. The
Underwriters Warrants will contain (i) standard anti-dilution
provisions covering any Common Stock split or dividend,
recapitalization or reorganization of the Company, (ii) registration
rights providing one demand registration right and piggyback
registration rights upon any subsequent offering of Common Stock by the
Company and (iii) a net issuance feature.
(q) The Company will furnish to you five (5) signed copies of
the Registration Statement as first filed with the Commission and each
amendment to it, including all exhibits and documents incorporated
therein by reference, if any, and will furnish to you and each
Underwriter designated by you such number of conformed copies of the
Registration Statement as so filed and each amendment to it, without
exhibits, as you may reasonably request.
(r) The Company shall use its best efforts to do and perform
all things required or necessary to be done or performed under this
Agreement by the Company prior to the First Closing Date or the Second
Closing Date, as the case may be, and to satisfy all conditions
precedent to the delivery of the Common Shares.
(s) Subject to the closing of the Offering contemplated by
this Agreement, the Company hereby grants to the Representatives a
right of first refusal to serve as managing underwriters for any
subsequent public offering the Company may undertake within the first
year following the First Closing Date; provided, however, that the
terms and conditions of any such subsequent underwriting engagement
shall be the same or more advantageous to the Company than competing
offers from other underwriters and consistent with industry standards
for similarly sized offerings.
SECTION 6. PAYMENT OF EXPENSES. The Company will pay the following
costs, fees and expenses incurred in connection with the Offering:
(a) All costs, fees and expenses incurred in connection with
the performance of the Company's obligations hereunder, including
without limiting the generality of the foregoing, all costs and
expenses incurred in connection with the preparation, printing,
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filing and distribution of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including all exhibits and financial
statements) and all agreements and supplements provided for herein, and
the Preliminary and, if required, any Supplemental Blue Sky Memorandum.
(b) All costs, fees and expenses, including reasonable legal
fees and disbursements of counsel for the Underwriters, incurred by the
Underwriters in connection with qualifying or registering all or any
part of the Common Shares for offer and sale under the Blue Sky Laws,
if required, including the preparation of the Preliminary and any
Supplemental Blue Sky Memoranda relating to the Common Shares, and the
clearing of such sales with the NASD.
(c) All fees and expenses of the Company's transfer agent,
printing of the certificates for the Common Shares, and all transfer
taxes, if any, with respect to the transfer, sale and delivery of the
Common Shares to the several Underwriters and all fees of the NASD and
NASDAQ.
(d) A non-accountable expense allowance (the "Expense
Allowance"), to be paid by the Company to the Representatives on the
First Closing Date to, among other things, provide the Representatives
with reimbursement of expenses incurred by them on behalf of themselves
and the Underwriters with the respect to the Offering. The Expense
Allowance shall be equal to three percent (3.0%) of the first $20.0
million of gross proceeds of the Offering and one percent (1.0%) of the
gross proceeds of the Offering in excess of such $20.0 million. The
Expense Allowance shall not be payable by the Company if for any reason
the sale to the Underwriters of the Firm Shares is not consummated as
provided herein; provided, however, in such event the Company shall be
liable for reimbursement of the Underwriters' expenses as provided in
Section 8 hereof.
SECTION 7. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase and pay for the Firm Shares on the
First Closing Date and the Optional Shares on the Second Closing Date shall be
subject to the accuracy of the representations and warranties on the part of the
Company herein set forth as of the date hereof and as of the First Closing Date
or the Second Closing Date, as the case may be, to the accuracy of the
statements of Company officers made pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder, and to the following
conditions:
(a) The Registration Statement shall be effective, and no stop
order suspending the effectiveness of the Registration Statement shall
have been instituted or shall be pending or, to the knowledge of the
Company, or the Representatives, shall be contemplated by the
Commission, and any request of the Commission for additional
information shall have been complied with to the Representatives'
reasonable satisfaction.
(b) The Common Shares shall either be "covered securities" as
defined in the Act or shall have been qualified or registered for sale
under the Blue Sky Laws of such states as shall have been specified by
the Representatives prior to the date hereof.
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(c) The legality and sufficiency of the authorization,
issuance and sale of the Common Shares hereunder, the validity and form
of the certificates representing the Common Shares, the execution and
delivery of this Underwriting Agreement, and all corporate proceedings
and other legal matters incident thereto, and the form of the
Registration Statement and the Prospectus (except financial statements
and other financial data included therein) shall have been approved by
Williams, Mullen, Clark & Dobbins, P.C., Richmond, Virginia, counsel
for the Representatives and the Underwriters.
(d) The Registration Statement or Prospectus shall not
contain, in the reasonable judgment of the Representatives, an untrue
statement of material fact or omit to state a material fact which is
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(e) Since the dates as of which information is given in the
Registration Statement and Prospectus:
(i) the Company shall not have sustained any material
loss or interference with its business from any labor dispute,
strike, fire, explosion, flood or other calamity (whether or
not insured), or from any court or governmental action, order
or decree, and
(ii) there shall not have been any change in the
capital stock, or any material change in the short-term debt
or long-term debt of the Company, or a change or a development
involving a prospective change in or affecting the ability of
the Company to conduct its business (whether by reason of any
court, legislative, other governmental action, order, decree,
or otherwise), or in the general affairs, management,
financial position, stockholders' equity or results of the
operations of Company, whether or not arising from
transactions in the ordinary course of business, in each case
other than as set forth in or contemplated by the Registration
Statement and Prospectus,
The effect of which on the Company, in any such case described
in clause (i) or (ii), above, is in the Representatives' opinion
sufficiently material and adverse as to make it impracticable or
inadvisable to proceed with the Offering or the delivery of the Common
Shares on the terms and in the manner contemplated in the Registration
Statement and the Prospectus.
(f) All written voting agreements, understandings and
arrangements with respect to the voting of Common Stock shall have been
terminated and shall be of no further force or effect except as
disclosed in the Prospectus.
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(g) There shall have been furnished to you, as Representatives
of the Underwriters, on each of the First Closing Date and the Second
Closing Date, as applicable:
(i) An opinion of Piper & Marbury, L.L.P., counsel
for the Company, addressed to the Representatives as such and
dated the First Closing Date or the Second Closing Date, as
the case may be, to the effect that:
(1) The Company has been duly incorporated
and is validly existing and in good standing under
the laws of Delaware, with full corporate power and
authority to own and/or lease its properties and
conduct its business as described in the Prospectus;
and the Company is duly qualified to do business as a
foreign corporation under the corporation law of, and
is in good standing as such in, each state where such
qualification is required.
(2) The Company does not own or control any
subsidiary and does not, to such counsel's knowledge
after a review of the Company's minute books and
other corporate records, own any interest in any
other corporation, joint venture, proprietorship or
other commercial entity or organization except as
described in the Prospectus.
(3) The authorized capital stock of the
Company consists of 50,000,000 shares of Common
Stock, $0.0001 par value, and all such capital stock
conforms as to legal matters to the description
thereof under the caption "Description of Our Capital
Stock" in the Registration Statement and Prospectus,
the issued and outstanding shares immediately prior
to the issuance of the Common Shares have been duly
authorized and validly issued and are fully paid and
nonassessable and were issued in compliance with
exemptions from or were registered in accordance with
the registration provisions of Section 5 of the Act;
neither the Company's Certificate of Incorporation or
Bylaws or any statute applicable to the Company
confers any preemptive rights to subscribe for or
purchase any Common Stock of the Company and, to the
knowledge of such counsel, no other preemptive or
other such rights exist with respect to the Common
Stock; except as otherwise stated in the Registration
Statement, to the knowledge of such counsel, there
are no outstanding rights, warrants or options to
acquire, or instruments, securities or obligations of
the Company, convertible into or exchangeable for,
any shares of Common Stock or other equity interests
in the Company, nor to the knowledge of such counsel
are there any obligations of the Company to issue any
of the foregoing. The statements made in the
Prospectus under the section entitled "Description of
Our Capital Stock" are accurate in all material
respects.
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(4) The Common Shares will be duly
authorized and validly issued, fully paid and
nonassessable and, upon consummation of the purchase
by the Underwriters, the Underwriters will acquire
good and marketable title thereto, free and clear of
any claim, security interest, community property
right, or other encumbrance or restriction on
transfer (except for restrictions under the Act and
under the Blue Sky Laws), and the form of the
certificates evidencing the Common Shares complies
with all formal requirements of Maryland law.
(5) The Company has full corporate power and
authority to enter into and perform this Agreement,
and the execution and delivery hereof and the
performance of the Company's obligations hereunder
have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and
delivered by and on behalf of the Company, and,
assuming the due authorization, execution and
delivery by each other party hereto, is a legal,
valid and binding agreement of the Company,
enforceable against the Company in accordance with
its terms, except that rights to indemnity or
contribution may be limited by applicable law and
public policy and enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors and by
equitable principles limiting the right to specific
performance or other equitable relief.
(6) The execution, delivery and performance
of this Agreement by the Company; the valid
authorization, issuance, sale and delivery of the
Common Shares; and the compliance by the Company with
all the provisions hereof and the consummation by the
Company of the transactions contemplated in this
Agreement and the Registration Statement as described
under the headings "Prospectus Summary,"
"Capitalization" and "Use of Proceeds" will not: (A)
conflict with or constitute a breach of any of the
terms or provisions of, or a default under, (x) the
Certificate of Incorporation or Bylaws of the
Company, or (y) any indenture, loan agreement,
mortgage, lease or other material agreement or
instrument (but only to the extent that such counsel
has knowledge of any of the foregoing documents) to
which the Company is a party or by which the Company
or its property is bound; or (B) violate or conflict
with any applicable law or any rule, regulation,
judgment, order or decree of any court or any
governmental body or agency having jurisdiction over
the Company or any of its properties.
(7) No consent, approval, authorization or
other order of any court, regulatory body,
administrative agency or other governmental body is
required for the execution and delivery of this
Agreement by the Company or the consummation by the
Company of the transactions contemplated by this
Agreement, except for compliance with the Act and
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Blue Sky Laws applicable to the Offering and the
clearance of such Offering with the NASD.
(8) Such counsel has been advised by the
Commission that the Registration Statement has become
effective under the Act, and, to the knowledge of
such counsel, no stop order suspending the
effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the
Act; the Registration Statement and the Prospectus
comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations
(except that such counsel need express no opinion as
to the financial statements and other financial and
statistical data included therein); and such counsel
does not know of any statutes, regulations, legal or
governmental proceedings or, after due investigation,
of any contracts or other documents, transactions or
relationships of or by the Company required to be
described in the Registration Statement or to be
filed as exhibits to the Registration Statement by
the Act or the Rules and Regulations which are not
described or filed, as required, and the description
of the terms of any such statutes, regulations, legal
or governmental proceedings or any contracts or other
documents, transactions or relationships contained in
the Registration Statement or the Prospectus are
correct in all material respects.
(9) To the knowledge of such counsel, except
as described in the Prospectus, there are no legal or
governmental actions, suits or legal proceedings
pending or threatened to which the Company is a party
or to which its businesses or material property owned
or leased by the Company is subject, or which
question the validity of this Agreement or any action
taken or to be taken pursuant hereto.
(10) To the knowledge of such counsel, (i)
the Company does not own or have title to any real
property and (ii) the Company has good and marketable
title, except as otherwise stated in the Prospectus,
to all the tangible personal property owned by the
Company as set forth in the Prospectus, subject to no
lien, mortgage, pledge, charge or encumbrance of any
kind or nature whatsoever except those, if any,
referred to in the Prospectus (or reflected in the
financial statements included therein) or which, in
the aggregate, are not material to the Company and
its business and do not materially affect the value
of such property; the real or other properties held
or used by the Company under leases or other
agreements as set forth in the Prospectus are held or
used by it under valid and subsisting leases or other
agreements enforceable against the Company and, to
the knowledge of such counsel, with respect to which
the Company is not in default, except to the extent
that rights to indemnity or contribution may be
limited by applicable law and public policy and the
enforceability of any such lease or other agreement
may be limited by
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bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting the rights of
creditors and by equitable principles limiting the
right to specific performance or other equitable
relief.
(11) (a) The Company possesses all licenses,
permits, approvals and other governmental
authorizations required for the conduct of its
business, as described in the Prospectus, except as
would not have a Material Adverse Effect; (b) such
licenses, permits and other governmental
authorizations are in full force and effect and to
such counsel's knowledge the Company is in all
material respects complying therewith; and (c) to
such counsel's knowledge, the Company is complying in
all respects with all laws, ordinances and
regulations applicable to the Company, its properties
and business, the noncompliance or violation of which
would have a Material Adverse Effect on the Company.
(12) The statements under the captions
"Business - Content Providers," "Strategic
Relationships," "- Marketing and Distribution," "-
Facilities" and "- Legal Proceedings," "Management,"
"Related Transactions and Relationships,"
"Description of Our Capital Stock" and "Shares
Eligible for Future Sale" in the Prospectus and Item
14 of Part II of the Registration Statement, insofar
as such statements constitute a summary of the legal
matters, documents and proceedings referred to
therein, fairly present the information called for
with respect to such legal matters, documents and
proceedings.
(13) The Company is not and, after giving
effect to the Offering and the application of the
proceeds thereof as described in the Prospectus, will
not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as
amended.
(14) To such counsel's knowledge, except as
described in the Prospectus, there are no contracts,
agreements or understandings between the Company and
any person granting such person the right to require
the Company to file a registration statement under
the Act with respect to any securities of the Company
or to require the Company to include such securities
with the Common Shares registered pursuant to the
Registration Statement.
It is understood that the opinion of such counsel may state that such
counsel is relying as to factual matters on certificates of officers of the
Company and of state officials and, as to legal matters in jurisdictions other
than in which they are domiciled, on opinions of local counsel or of other
counsel retained or having rendered legal services with respect to specific
matters, in which case their opinion is to state that they are so doing and they
believe such reliance is reasonable, and copies of said certificates and/or
opinions are to be attached to the opinion. It is further understood that such
counsel shall give no opinion concerning Company Intellectual Property (as
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defined below) or other matters covered by the opinion to be delivered pursuant
to subparagraph (g)(ii) below.
Such counsel shall also state that such counsel has participated in the
preparation of the Registration Statement and the Prospectus, including review
of the contents thereof and conferences with officers and other representatives
of the Company, representatives of the independent accountants of the Company,
and representatives of the Underwriters and their counsel at which the contents
of the Registration Statement and the Prospectus were discussed, and although
such counsel has not independently verified and is not passing upon and does not
assume responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus (except as
specified elsewhere in such counsel's opinion), on the basis of the foregoing,
nothing has come to such counsel's attention that caused them to believe that
the Registration Statement, at the time it became effective, on the date of this
Agreement and as of the date of such opinion, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus, as of its date and as of the date of such opinion, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (except in each case as to the financial statements and other
financial or statistical data included therein as to which no opinion need be
expressed).
(ii) An opinion of Lipton, Weinberger & Husick,
special counsel for the Company with respect to intellectual
property matters, addressed to the Representatives as such and
dated the First Closing Date or the Second Closing Date, as
the case may be, to the effect that:
(1) The Company is the registered holder and
administrative contact with respect to the domain
names www.powerize.com and powerize.com (the "Domain
Names"), and as of the date of such counsel's opinion
there exist no pending or, to such counsel's
knowledge, threatened challenges filed pursuant to
the InterNIC domain name dispute resolution policy.
(2) The Company has not granted any
consensual rights (by license or otherwise) to any
person relating to ownership or use of the Domain
Names.
(3) To the knowledge of such counsel, based
upon actual investigation, there are no pending or
threatened adverse claims or rights to the Company's
exclusive ownership or use of the Domain Names.
(4) To the knowledge of such counsel, based
on commercially reasonable diligence, the Company is
not subject to any adverse claim, pending or
threatened, contesting or asserting rights to use or
ownership of "Company Intellectual Property" (to be
defined as any and all patent,
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<PAGE>
copyright, trademark, trade name, service mark, trade
secret rights, know-how or rights of a similar nature
relating to content (including text in any format,
graphics, layout, visual schemes or other protectible
visible elements), functions (including computer
source and object code, scripts, tools, objects,
modules and similar functional software) and
processes (including all protectible business
methods, techniques and processes), whether or not
registered or subject to registration, used or
to-be-used in the present or future business
operations of the Company).
(5) To the knowledge of such counsel, based
on commercially reasonable diligence, the Company
Intellectual Property does not infringe on the rights
of any other person or entity.
(6) The Company has exercised commercially
reasonable diligence in establishing the Company's
rights to Company Intellectual Property that it has
purchased, licensed or internally developed.
(7) There is no controlling U.S. (federal or
state) case law or statute that would provide or
conclude that the Company's "Web Site Functions"
constitute a basis for "Infringement Claims." For
purposes of the opinion, "Web Site Functions" shall
be defined as: (i) the Company's current use of web
browser "pop-up" windows containing Company content
that are superimposed on the user's primary web
browser desktop in a manner that positions the
"pop-up" window over, and obscuring, content of third
parties, which third party content was accessed
pursuant to clause (iii) below, (ii) the Company's
current use of, or referral to, content or functions
of unaffiliated entities (including, for example and
without limitation, "pull-down" links on the
Company's pages to commercial search engines such as
Excite, and links on the Company's pages to
information sources such as PRNewswire), and (iii)
the performance of searches on third-party search
engines resulting in the presentation to the user of
the product of such searches and specifically
bypassing the initial search page of such third-party
search engines; and "Infringement Claims" shall be
defined as statutory, regulatory or common law claims
asserting (i) infringement on patent, trademark,
copyright, trade secret or other intellectual
property rights of others, and (ii) fraud, improper
trading or trade practices, misrepresentation, unjust
enrichment, trespass or other similar claim relating
to misuse of the property or property rights of
others.
(iii) An opinion of Williams, Mullen, Clark &
Dobbins, P.C. counsel for the Representatives and the
Underwriters, addressed to the Representatives in such
capacity and dated the First Closing Date or the Second
Closing Date, as the case may be, with respect to the validity
of the Common Shares, the Registration Statement and the
Prospectus and other related matters as you may reasonably
require, and the Company shall have furnished to such counsel
such documents
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<PAGE>
and shall have exhibited to them such papers and records as
they request for the purpose of enabling them to pass upon
such matters.
(iv) A certificate of the Chief Executive Officer and
the Chief Financial Officer of the Company dated the First
Closing Date or the Second Closing Date, as the case may be,
to the effect that:
(1) the representations and warranties of
the Company set forth in Section 2 of this Agreement
are true and correct as of the date of this Agreement
and as of the First Closing Date or the Second
Closing Date, as the case may be, as if again made on
and as of such Closing Date and the Company has
complied with all the agreements and satisfied all
the conditions to be performed or satisfied by it at
or prior to such Closing Date.
(2) the Commission has not issued any order
preventing or suspending the use of any Preliminary
Prospectus or the Prospectus filed as a part of the
Registration Statement; no stop order suspending the
effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been
instituted or, to the Company's knowledge, are
pending or contemplated under the Act.
(3) each of the respective signatories of
the certificate for the Company has carefully
examined the Registration Statement and the
Prospectus and, in the opinion of such signatory and
to his knowledge, the Registration Statement and the
Prospectus contain all statements that are required
to be stated therein, and neither the Registration
Statement nor the Prospectus includes any untrue
statement of a material fact or omits to state any
material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances in which they are made, not
misleading, and, since the date on which the
Registration Statement was first filed with the
Commission, there has occurred no event required to
be set forth in an amended or supplemented prospectus
or in an amendment to the Registration Statement
which has not been so set forth.
(4) since the date on which said
Registration Statement was initially filed, there has
not been any material adverse change or a development
involving a prospective material adverse change in
the business, properties, financial condition or
earnings of the Company, whether or not arising from
transactions in the ordinary course of business,
except as disclosed in said Registration Statement as
heretofore amended including the proposed amendment
thereto delivered to the Representatives prior to or
contemporaneously with the execution of this
Agreement or (but only if the Representatives
expressly consent thereto in writing) delivered to
the Representatives thereafter; since such date and
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<PAGE>
except as so disclosed or in the ordinary course of
business, the Company has not incurred any material
liability or obligation, direct or indirect, or
entered into any material transaction since such date
and except as so disclosed there has not been any
change in the capital stock or any material change in
the short-term debt or long-term debt of the Company
and the Company has not acquired any of the Common
Shares nor has the Company declared or paid any
dividend, or made any other distribution, upon its
outstanding shares of Common Stock payable to
stockholders of record on a date prior to the First
Closing Date or Second Closing Date, as the case may
be; since such date and except as so disclosed, the
Company has not incurred any material contingent
obligations, and no material litigation is pending
or, to the Company's knowledge, threatened against
the Company; and, since such date and except as so
disclosed the Company has not sustained a material
loss or interference by strike, labor dispute, fire,
explosion, flood, windstorm, accident or other
calamity (whether or not insured) or from any court
or governmental action, order or decree.
The delivery of the certificate provided for in this subparagraph (iv)
shall be and constitute a representation and warranty of the Company as to the
facts required in the immediately foregoing clauses (1), (2), (3) and (4) of
this subparagraph (iv) to be set forth in said certificate.
(v) At the time this Agreement is executed and also
on the First Closing Date and the Second Closing Date, there
shall be delivered to the Representatives a letter addressed
to the Representatives, as Representatives of the
Underwriters, from PricewaterhouseCoopers, LLP, independent
certified public accountants, the first letter to be dated the
date of this Agreement, the second letter to be dated the
First Closing Date and the third letter (in the event of a
Second Closing) to be dated the Second Closing Date, in form
and substance satisfactory to you containing the information
and statements of the type ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the
financial statements and certain financial information
contained in the Registration Statement and the Prospectus.
There shall not have been any change or decrease specified in
any of the letters referred to in this subparagraph (v) which
makes it impractical or inadvisable in the Representatives'
judgment to proceed with the Offering or the purchase of the
Common Shares as contemplated hereby.
(vi) The Company shall have delivered to you the
lockup agreements specified in Section 5(o) hereof, which
agreements shall be in full force and effect on the Closing
Date.
(vii) The Common Shares shall have been duly
authorized for trading on the NASDAQ National Market System,
subject to notice of issuance.
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<PAGE>
(viii) The NASD shall not have raised any objection
with respect to the fairness and reasonableness of the
underwriting terms and arrangements.
(ix) Upon the First Closing Date, the Company shall
have delivered the Underwriters Warrants pursuant to Section
5(p) hereof.
(x) The amounts payable by the Company pursuant to
Section 6 hereof shall be paid in full or satisfactory
arrangements therefor agreed to by the Representatives.
(xii) Such further certificates and documents as the
Representatives may reasonably request.
All such opinions, certificates, letters and documents shall
be in compliance with the provisions hereof only if they are reasonably
satisfactory to the Representatives and to Williams, Mullen, Clark &
Dobbins, P.C., counsel for the Representatives and the Underwriters.
The Company shall furnish the Representatives with such manually signed
or conformed copies of such opinions, certificates, letters and
documents as the Representatives may reasonably request.
If any condition to the Underwriters' obligations hereunder to
be satisfied prior to or at either Closing Date is not so satisfied,
this Agreement at the Representatives' election will terminate upon
notification to the Company without liability on the part of any
Underwriter (including the Representatives) or the Company, except for
the expenses to be paid by the Company pursuant to Sections 6(a), (b)
and (c) and Section 8 hereof, and except to the extent provided in
Section 10 hereof.
SECTION 8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If for any reason
the sale to the Underwriters of the Firm Shares is not consummated as provided
herein, then, in addition to the payment of costs, fees and expenses to be paid
by the Company pursuant to Sections 6(a), (b) and (c) hereof, the Company agrees
to reimburse the several Underwriters for all reasonable out-of-pocket expenses
(including the fees and disbursements of counsel) incurred by them in connection
with the Offering, all such expenses to be paid by the Company to the
Representatives within ten (10) days of receipt of an invoice therefor. The
Company also agrees to reimburse the several Underwriters for all reasonable
fees and expenses (including, without limitation, the fees and disbursements of
counsel) incurred by them in connection with enforcing their rights under this
Section 8.
SECTION 9. EFFECTIVENESS OF REGISTRATION STATEMENT. The Representatives
and the Company will each use their respective best efforts to cause the
Registration Statement to remain effective, to prevent the issuance of any stop
order suspending the effectiveness of the Registration Statement, and, if such
stop order is issued, to obtain as soon as possible the lifting thereof.
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<PAGE>
SECTION 10. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act or the Exchange Act against any losses,
claims, damages, or liabilities, joint or several, to which such
Underwriter or each such controlling person may become subject under
the Act, the Exchange Act, Blue Sky Laws or other federal or state
securities laws or regulations, at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or in any application filed under any Blue
Sky Law or other document executed by the Company specifically for that
purpose or filed in any state or other jurisdiction in order to qualify
any or all of the Common Shares under the securities laws thereof (any
such application or document being hereinafter referred to as a "Blue
Sky Application") or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading; the Company
agrees to reimburse each Underwriter and each such controlling person
for any legal or other expenses reasonably incurred by such Underwriter
or any such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that:
(i) any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the
Prospectus or in any Blue Sky Application in reliance upon and
in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the
Representatives specifically for use therein; or
(ii) if such statement or omission was contained or
made in any Preliminary Prospectus and corrected in the
Prospectus and (1) any such loss, claim, damage or liability
suffered or incurred by any Underwriter (or person who
controls any Underwriter) based on such statement or omission
resulted from an action, claim or suit by any person who
purchased Common Shares which are the subject thereof from
such Underwriter in the Offering, and (2) such Underwriter
failed to deliver or provide a copy of the Prospectus to such
person at or prior to the confirmation of the sale of such
Common Shares in any case where such delivery is required by
the Act unless such failure was due to failure by the Company
to provide copies of the Prospectus to the Underwriters as
required by this Agreement.
The indemnification obligations of the Company as provided above are in
addition to any liabilities the Company may otherwise have under other
agreements, under common law or otherwise.
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<PAGE>
(b) Each Underwriter will severally and not jointly indemnify
and hold harmless the Company, each of its directors and each of its
officers who sign the Registration Statement, and each person, if any,
who controls the Company within the meaning of the Act or the Exchange
Act, against any losses, claims, damages or liabilities, joint or
several, to which the Company, or any such director, officer or
controlling person may become subject under the Act, the Exchange Act,
Blue Sky Laws or other federal or state statutory laws or regulations,
at common law or otherwise (including in settlement of any litigation,
if such settlement is effected with the written consent of such
Underwriter and the Representatives, which shall not be unreasonably
withheld), insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
in any Blue Sky Application, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or in any Blue Sky Application,
in reliance upon and in conformity with any written information
furnished to the Company by such Underwriter through the
Representatives specifically for use in the preparation thereof; each
Underwriter will severally reimburse any legal or other expenses
reasonably incurred by the Company, or any such director, officer, or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. Notwithstanding the
provisions of this Section, no Underwriter shall be required to
indemnify the Company, or any officer, director or controlling person
of the Company in any amount in excess of the total price at which the
Common Shares purchased by any such Underwriter hereunder were offered
to the public, plus reimbursement for reasonable legal fees and other
reasonable expenses incurred. For all purposes of this Agreement, the
name and number of shares of Common Stock to be purchased by each
Underwriter, and the third paragraph and first sentence of the
thirteenth paragraph (as such sentence relates to the Underwriters)
under the heading "Underwriting" in the Prospectus constitute the only
information furnished in writing by or on behalf of any Underwriter for
inclusion in any Registration Statement, Preliminary Prospectus,
Prospectus or Blue Sky Application. The indemnification obligations of
each Underwriter as provided above are in addition to any liabilities
any such Underwriter may otherwise have under other agreements, under
common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify the indemnifying party in
writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve any indemnifying party from any
liability which it or he may have to any indemnified party otherwise
than under this Section. In case any such action is brought against any
indemnified party and such indemnified party notifies an indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it or he may wish,
jointly with all other
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<PAGE>
indemnifying parties, similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party, provided, however, if the defendants in any such action include
both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be
legal defenses available to it or he and/or other indemnified parties
which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the
right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than
one separate counsel, approved by the Representatives in the event that
one or more of the Underwriters, their directors, officers or
controlling persons, are the indemnified parties). Upon receipt of
notice from the indemnifying party to such indemnified party of its
election to assume the defense of such action and upon approval by the
indemnified party of counsel to the indemnifying party, the
indemnifying party will not be liable to such indemnified party under
this Section for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof, unless:
(i) the indemnified party shall have employed such
counsel in connection with the assumption of legal defenses in
accordance with the proviso to the next preceding sentence;
(ii) the indemnifying party shall not have employed
counsel reasonable satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after
notice of commencement of the action; or
(iii) the indemnifying party has authorized the
employment of counsel at the expense of the indemnifying
party.
(d) If the indemnification provided for in this Section is
unavailable to an indemnified party under subparagraphs (a) or (b)
hereof in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall, subject to the limitations
hereinafter set forth, contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities:
(i) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the
Underwriters from the Offering of the Common Shares; or
(ii) 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 and the Underwriters in connection with the statements
or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable
considerations.
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<PAGE>
The respective relative benefits received by the Company and
the Underwriters shall be deemed to be in such proportion so that the
Underwriters are responsible for the portion of the losses, claims,
damages or liabilities represented by the percentage that the
underwriting discount per share appearing on the cover page of the
Prospectus bears to the public offering price per share appearing
thereon, and the Company is responsible for the remaining portion. The
relative fault of the Company and the Underwriters 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 the information supplied by the
Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above
shall be deemed to include, subject to the limitations set forth in
paragraph (d) of this Section, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section were
determined by pro rata or per capita allocation (even if the
Underwriters were treated as one entity for such purpose) or by any
other method or allocation which does not take into account the
equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section, no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Common Shares underwritten
by it and distributed to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant
to this Section are several in proportion to their respective
underwriting commitments and not joint.
SECTION 11. DEFAULT OF UNDERWRITERS. It shall be a condition to this
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, and of each Underwriter to purchase the Common Shares
hereunder in the manner as described herein, that, except as hereinafter in this
paragraph provided, each of the Underwriters shall purchase and pay for all of
the Common Shares agreed to be purchased by such Underwriter hereunder upon
tender to the Representatives of all such Common Shares in accordance with the
terms hereof. If any Underwriter or Underwriters default in their obligations to
purchase Common Shares hereunder on either the First Closing Date or Second
Closing Date and the aggregate number of Common Shares which such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed ten
percent (10%) of the total number of Common Shares which the Underwriters are
obligated to purchase on such Closing Date, the Representatives may make
arrangements satisfactory to the Company for the purchase of such Common Shares
by other persons, including any of the Underwriters, but if no such arrangements
are made by such Closing Date the non-defaulting Underwriters shall be obligated
severally, in proportion to their
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respective commitments hereunder, to purchase (up to but not in excess of any
limitations provided by law or the rules or other directives of the NASD) the
Common Shares which such defaulting Underwriters agreed but failed to purchase
on such Closing Date. If any Underwriter or Underwriters so default and the
aggregate number of Common Shares with respect to such default or defaults occur
is greater than the above percentage and arrangements satisfactory to the
Representatives and the Company for the purchase of such Common Shares by other
persons are not made with 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company except for the expenses to be paid by the Company pursuant to Section 6
and Section 8 hereof (other than fees and expenses payable to any defaulting
Underwriter) and except to the extent provided in Section 10 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than seven (7) business
days in order that the necessary changes in the Registration Statement,
Prospectus and any other documents, as well as any other arrangements, may be
effected. Nothing herein will relieve a defaulting Underwriter from liability
for its default.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section.
SECTION 12. EFFECTIVE DATE. This Agreement shall become effective upon
the execution and delivery hereof by the parties hereto.
SECTION 13. TERMINATION. This Agreement may be terminated by the
Representatives prior to the First Closing Date, and the option from the Company
referred to in Section 4 hereof, if exercised, may be canceled at any time prior
to the Second Closing Date, if any of the following has occurred:
(a) The suspension or material limitation of trading in
securities or other instruments on the New York Stock Exchange, the
American Stock Exchange, the Chicago Board of Options Exchange, the
Chicago Mercantile Exchange, the Chicago Board of Trade or the NASDAQ
National Market or limitation on prices for securities or other
instruments on any such exchange or the NASDAQ National Market;
(b) The suspension of trading of any securities of the Company
on any exchange or in the over-the-counter market;
(c) The enactment, publication, decree or other promulgation
of any federal or state statute, regulation, rule or order of any court
or other governmental authority which, in the opinion of the
Representatives, has had a Material Adverse Effect, or reasonably could
be expected to have a Material Adverse Effect, on the Company;
(d) The declaration of a banking moratorium by either federal,
Maryland, Delaware or New York state authorities;
31
<PAGE>
(e) The taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which
in the opinion of the Representatives has a material adverse effect on
the financial markets in the United States;
(f) Any event shall have occurred or shall exist which makes
untrue or incorrect in any material respect any statement or
information contained in the Registration Statement or which is not
reflected in the Registration Statement but should be reflected therein
in order to make the statements or information contained therein, in
light of the circumstances in which they are made, not misleading in
any material respect;
(g) An outbreak or escalation of major hostilities or other
national or international emergency or calamity or any substantial
change in political, financial or economic conditions shall have
occurred or shall have accelerated to such extent, as in the judgment
of the Representatives, to have a material adverse effect on the
general securities market or make it impractical or inadvisable to
proceed with completion of the sale of and payment for the Common
Shares; or
(h) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, a Material
Adverse Effect has occurred.
Any termination pursuant to Section 13 shall be without
liability on the part of any Underwriter to the Company or on the part
of the Company to any Underwriter (except for expenses to be paid by
the Company pursuant to Section 6 hereof or reimbursed by the Company
pursuant to Section 8 hereof and except as to indemnification to the
extent provided in Section 10 hereof).
SECTION 14. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties, and other
statements of the Company, of its officers or directors, and of the Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers, directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Common Shares sold hereunder.
SECTION 15. NOTICES. All communications hereunder will be in writing
and, if sent to the Underwriters or the Representatives will be mailed,
delivered or telegraphed and confirmed to you c/o: Ferris, Baker Watts,
Incorporated, 100 Light Street, 8th Floor, Baltimore, Maryland 21202, Attention:
R. Mark Rust, Vice President; and to Ryan, Lee & Company, Incorporated, 7929
West Park Drive, Suite 203, McLean, Virginia 22102, Attention: Wayne M. Lee,
Chairman.
With a copy to:
Williams, Mullen, Clark & Dobbins, P.C.
Two James Center, 16th Floor
1021 East Cary Street
Richmond, Virginia 23219
Attention: Robert E. Spicer, Jr., Esquire
32
<PAGE>
If sent to the Company will be mailed, delivered or telegraphed and
confirmed to the Company at:
Powerize.com, Inc.
901 Elkridge Landing Road, Suite 350
Linthicum, Maryland 21090
Attention: Edwin R. Addison, Chairman of the Board and
Chief Executive Officer
With a copy to:
Piper & Marbury, L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Attention: Earl S. Wellschlager, Esquire
SECTION 16. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement; provided, however, that (i) the obligations (other than
indemnification obligations) of the parties under that certain engagement letter
agreement between the Company and the Representatives dated June 4, 1999 (the
"Engagement Letter") that are expressly stated to survive the termination or
expiration thereof shall not be superseded but shall remain in full force and
effect until the closing of the Firm Shares under this Agreement and (ii) the
indemnification obligations under the Engagement Letter that are expressly
stated to survive the termination or expiration thereof shall not be superseded
but shall remain in full force and effect, except as to matters specifically
addressed by Section 10 hereof.
SECTION 17. SUCCESSORS. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors, personal
representatives and assigns, and to the benefit of the officers and directors
and controlling persons referred to in Section 10, and no other person will have
any right or obligations hereunder. The term "successors" shall not include any
purchaser of the Common Shares as such from any of the Underwriters merely by
reason of such purchase.
SECTION 18. PARTIAL UNENFORCEABILITY. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
SECTION 19. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland.
33
<PAGE>
SECTION 20. COUNTERPARTS. This Agreement may be signed in counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters, including you, all in accordance with its terms.
Very truly yours,
Powerize.com, Inc.
By:
-----------------------
Edwin R. Addison
Chairman of the Board and
Chief Executive Officer
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written by the
undersigned acting as Representatives of
the several Underwriters (including
themselves) named in Schedule A hereto.
FERRIS, BAKER WATTS, INCORPORATED
By:
------------------------------
Title:
---------------------------
RYAN, LEE & COMPANY
By:
------------------------------
Title:
---------------------------
34
<PAGE>
SCHEDULE A
----------
Number of
Name of Underwriter Shares
------------------- ------
Ferris, Baker Watts, Incorporated
Ryan, Lee & Company Incorporated
Total
<PAGE>
Exhibit 3.1.1
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
POWERIZE.COM, INC.
Pursuant to Section 242
of the General Corporation Law
of the State of Delaware
------------------------
Powerize.com, Inc., (hereinafter called the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
FIRST: Transitional Provisions.
A. Pre-Split Shares - Common Stock. Upon the filing of this
Certificate of Amendment to Amended and Restated Certificate of
Incorporation (the "Effective Time"), every two shares of the
Corporation's Common Stock issued and outstanding immediately prior
thereto (the "Pre-Split Shares") shall, ipso facto and without any
action on the part of the holders of the Pre-Split Shares, be changed,
converted and reclassified into one share of Common Stock (the "Reverse
Split"), and the par value of all shares of Common Stock shall continue
to be, as of the Effective Time and thereafter, $0.0001 per share. The
shares of Common Stock into which the Pre-Split Shares will be converted
upon the Effective Time are referred to herein as the "Split Shares."
B. No Fractional Shares. No fractional Split Shares will be issued
as a result of the Reverse Stock Split; in lieu thereof each Pre-Split
Share otherwise entitled to a fractional Split Share will be paid an
amount in cash determined at the rate of $11.00 per Split Share.
C. Delivery of New Certificates.
(1) Exchange of Certificates. Each holder of certificates
representing Pre-Split Shares shall deliver and surrender all of such
certificates to the Corporation for cancellation after the Effective Time,
and shall receive upon such delivery, surrender and cancellation, or as
soon thereafter as is practicable, in place thereof a certificate or
certificates for the number of Split Shares of Common Stock into which
such holder's Pre-Split Shares were converted upon the Effective Time in
accordance with Article FIRST hereof.
<PAGE>
(2) Interim Rights. Until surrendered as provided in paragraph
(C)(1) above, as of the Effective Time, certificates formerly representing
Pre-Split Shares shall be deemed for all purposes, corporate and
otherwise, to represent solely the right to receive the Split Shares into
which such Pre-Split Shares were converted at the Effective Time and the
right to be paid cash for fractional Split Shares, if any, all upon
delivery, surrender, and cancellation of such Pre-Split Share
certificates.
SECOND: In accordance with the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation adopted resolutions pursuant
to Section 242 of the General Corporation Law of the State of Delaware setting
forth an amendment to the Amended and Restated Certificate of Incorporation of
the Corporation and declaring said amendment to be advisable. The stockholders
of the Corporation duly approved the Reverse Split and said proposed amendment
by written consent in accordance with Section 228 of the General Corporation Law
of the State of Delaware. The resolution setting forth the amendment is as
follows:
RESOLVED: That Article EIGHTH of the Certificate of Incorporation be and
hereby is amended by deleting the existing Article EIGHTH and inserting the
following paragraph in lieu thereof:
"EIGHTH: ACTIONS BY STOCKHOLDERS. Upon completion of an underwritten
initial public offering of the Company's Common Stock pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special
meeting of stockholders, and may not be effected by any consent in writing
by such stockholders, unless such consent is unanimous. Meetings of
stockholders may be held within or without the State of Delaware, as the
By-laws may provide."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by the President
this 23rd day of July, 1999.
[Corporate Seal] POWERIZE.COM, INC.
By: /s/ Mark A. Gaertner
---------------------
Mark A. Gaertner
President
<PAGE>
POWERIZE.COM, INC.
Amended and Restated
BY-LAWS
-------
ARTICLE I
OFFICES
Section 1.1 Registered Office and Agent. The address of the registered
office of the Corporation in the State of Delaware is 1209 Orange Street,
Wilmington, Delaware 19801. The name of its registered agent at such address is
The Corporation Trust Company.
Section 1.2 Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1 Time and Place of Meetings. All meetings of the
stockholders shall be held at such time and place, within or without the State
of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2.2 Annual Meeting. A meeting of stockholders shall be held in
each year for the election of directors at such time and place as the Board of
Directors shall determine. Any other proper business, notice of which was given
in the notice of the meeting or in a duly executed waiver of notice thereof, may
be transacted at the annual meeting. Elections of directors shall be by written
ballot, unless otherwise provided in the Certificate of Incorporation.
Section 2.3 Notice of Annual Meetings. Unless otherwise provided by
law, written notice of the annual meeting of stockholders, stating the time,
place and date thereof shall be given to each stockholder entitled to vote
thereat not less than ten nor more than sixty days before the date of the
meeting.
Section 2.4 List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every election of directors, a complete list of the stockholders entitled to
vote at said election, arranged in alphabetical order, showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the election, either at a place within the city,
town or village where the election is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
said meeting is to be held, and the list shall be produced and kept at the time
and place of election during the whole time thereof, and subject to the
inspection of any stockholder who may be present.
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<PAGE>
Section 2.5 Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, the
Chief Executive Officer or the President. Business transacted at any special
meeting of stockholders shall be limited to the purpose or purposes stated in
the notice.
Section 2.6 Notice of Special Meetings. Unless otherwise provided by
law, written notice of a special meeting of stockholders, stating the time,
place, date and purpose or purposes thereof, shall be given to each stockholder
entitled to vote thereat, not less than ten nor more than sixty days before the
date fixed for the meeting.
Section 2.7 Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting except as provided in Section 4.2, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 2.8 Organization. The Chairman of the Board or, in the absence
of the Chairman of the Board, the Chief Executive Officer or, in the absence of
the Chief Executive Officer, the President or, in the absence of the President,
any Executive Vice President, shall preside at meetings of the stockholders. The
Secretary of the Corporation shall act as Secretary, but in the absence of the
Secretary the presiding officer shall appoint a Secretary.
Section 2.9 Stockholder Nominations and Proposals. (a) No proposal for
a stockholder vote (a "Stockholder Proposal") shall be submitted to the
stockholders of the Corporation unless the stockholder submitting such proposal
(the "Proponent") shall have filed a written notice setting forth with
particularity (i) the names and business addresses of the Proponent and all
Persons (as such term is defined in Section 3(a)(9) of the Securities Exchange
Act of 1934, as amended, (the "Exchange Act")) acting in concert with the
Proponent; (ii) the names and addresses of the Proponent and the Persons
identified in clause (i), as they appear on the Corporation's books (if they so
appear); (iii) the class and number of shares of the Corporation beneficially
owned by the Proponent and the Persons identified in clause (i); (iv) a
description of the Stockholder Proposal containing all information material
thereto; (v) a description of all arrangements or understandings between the
Proponent and any other Persons (including the names of such other Persons) in
connection with the Stockholder Proposal and any material interest of the
Proponent or such Persons in such Stockholder Proposal and (vi) such other
information as the Board of Directors reasonably determines is necessary or
appropriate to enable the Board of Directors and stockholders to consider the
Stockholder Proposal. Upon receipt of the Stockholder Proposal and prior to the
stockholders' meeting at which such Stockholder Proposal will be considered, if
the Board of Directors or a designated committee or
<PAGE>
the officer who will preside at the meeting of the stockholders determines that
the information provided in a Stockholder Proposal does not satisfy the
requirements of this Section 2.9 or is otherwise not in accordance with
applicable law, the Secretary of the Corporation shall promptly notify the
Proponent of the deficiency in the notice. Such Proponent shall have the
opportunity to cure the deficiency by providing additional information to the
Secretary within the period of time, not to exceed five days from the date such
deficiency notice is given to the Proponent, determined by the Board of
Directors, such committee or such officer. If the deficiency is not cured within
such period, or if the Board of Directors, such committee or such officer
determines that the additional information provided by the Proponent, together
with the information previously provided, does not satisfy the requirements of
this Section 2.9 or is otherwise not in accordance with applicable law, then
such Stockholder Proposal shall not be presented for action at the stockholders'
meeting in question.
(b) Only persons who are selected and recommended by the Board of
Directors or the nominating committee thereof, or who are nominated by the
stockholders in accordance with the procedures set forth in this Section 2.9,
shall be eligible for election or qualified to serve as directors. Nominations
of individuals for election to the Board of Directors at any annual meeting or
special meeting of the stockholders at which directors are to be elected may be
made by any stockholder of the Corporation entitled to vote for the election of
directors at that meeting by compliance with the procedures set forth in this
Section 2.9 except as may be otherwise provided in the Certificate of
Incorporation with respect to the right of holders of Preferred Stock of the
Corporation to nominate and elect a specified number of directors in certain
circumstances. Nominations by stockholders shall be made by written notice (a
"Nomination Notice"), which shall set forth (i) as to each individual nominated
(A) the name, date of birth, business address and residence address of such
nominee; (B) the business experience during the past five years of such nominee,
including his or her principal occupations or employment during such period, the
name and principal business of any Corporation or other organization in which
such occupations and employment were carried on, and such other information as
to the nature of his or her responsibilities and the level of professional
competence as may be sufficient to permit assessment of his or her prior
business experience; (C) whether the nominee is or has ever been at any time a
director, officer or owner of 5% or more of any class of capital stock,
partnership interests or other equity interest of any Corporation, partnership
or other entity; (D) any directorships held by such nominee in any company with
a class of securities registered pursuant to section 12 of the Exchange Act or
subject to the requirements of section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940, as
amended; (E) whether, in the last five years, such nominee has been convicted in
a criminal proceeding or has been subject to a judgment, order, finding or
decree of any federal, state or other governmental entity, concerning any
violation of federal, state, or other law, or any proceeding in bankruptcy,
which conviction, judgment, order, finding, decree or proceeding may be material
to the evaluation of the ability or integrity of the nominee; and (F) any other
information relating to the nominee that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to section 14 of the
Exchange Act, and the rules and regulations promulgated thereunder; and (ii) as
to the person submitting the Nomination Notice and any Person acting in concert
with such Person, (w) the name and business address of such person and
-3-
<PAGE>
Persons, (x) the name and business address of such person and Persons as they
appear on the books of the Corporation (if they so appear); (y) the class and
number of shares of the Corporation which are beneficially owned by such person
and Persons, and (z) any other information relating to such stockholder that
would be required to be disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for election of directors
pursuant to section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. A written consent to being named in a proxy statement as
a nominee, and to serve as a director if elected, signed by the nominee, shall
be filed with any Nomination Notice. If the presiding officer at any
stockholders' meeting determines that a nomination was not made in accordance
with the procedures prescribed by these By-laws, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(c) Nomination Notices and Stockholder Proposals must be delivered to
the Secretary at the principal executive office of the Corporation or mailed and
received at the principal executive offices of the Corporation (a) in the case
of any annual meeting, not less than 45 days nor more than 60 days prior to the
anniversary date of the mailing of the proxy materials for the immediately
preceding annual meeting of stockholders; provided, however, that (i) in the
event that the annual meeting is called for a date that is not within 30 days
before or after such anniversary date, or (ii) in the case of the annual meeting
of stockholders held during the 1999 fiscal year of the Corporation, notice by
the stockholder in order to be timely must be so received not later than the
close of business on the tenth day following the day on which notice of the date
of the annual meeting was mailed or public disclosure of the date of the annual
meeting was made, whichever first occurs; and (b) in the case of a special
meeting of stockholders called for the purpose of electing directors, not later
than the close of business on the tenth day following the day on which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever first occurs.
Section 2.10 Action by Stockholders. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of these By-laws, applicable law, or of the Certificate of Incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 2.11 Voting; Proxies. Each stockholder shall at every meeting
of the stockholders be entitled to one vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three years from its date, unless the proxy provides for
a longer period, and, except where the transfer books of the Corporation have
been closed or a date has been fixed as a record date for the determination of
its stockholders entitled to vote, no share of stock which has been transferred
on the books of the Corporation within twenty days preceding an election of
directors shall be voted on at such election of directors.
-4-
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 Number and Qualifications. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. Subject to the rights, if any, of holders of Preferred Stock of the
Corporation, the number of, retirement age of, and other restrictions and
qualifications for directors constituting the Board of Directors shall be as
authorized from time to time exclusively by a majority vote of the members of
the Board of Directors then in office, provided that no amendment to the By-laws
decreasing the number of directors shall have the effect of shortening the term
of any incumbent director and provided that the number of directors shall not be
increased by fifty percent (50%) or more in any twelve-month period without the
approval by at least 66 2/3% of the members of the Board of Directors then in
office. Except as provided in Section 3.2 of this Article, directors shall be
elected by a plurality of the votes cast at meetings of stockholders, and each
director so elected shall hold office until his successor is elected and
qualified or until his earlier death, removal or resignation. None of the
directors need be stockholders of the Corporation.
Section 3.2 Vacancies and New Directorships. Vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director. The term of a director
elected to fill a newly created directorship or other vacancy shall continue
until the next annual meeting and until their successors are elected and have
qualified.
Section 3.3 Powers. The business of the Corporation shall be managed by
its Board of Directors, which may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these By-laws directed or required to be
exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3.4 Place of Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 3.5 Notice of Regular Meetings. Regular meetings of the Board
of Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 3.6 Notice of Special Meetings. Special meetings of the Board
may be called by the Chairman of the Board, the Chief Executive Officer, the
President or the Secretary on two
-5-
<PAGE>
days notice to each director, either personally or by mail, telephone or
telegram; special meetings shall be called in like manner and on like notice on
the written request of at least two directors.
Section 3.7 Quorum; Voting. At all meetings of the Board, a majority of
directors shall constitute a quorum for the transaction of business, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by applicable law, the Certificate of Incorporation or
these By-laws. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 3.8 Written Action. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, without prior notice and without a vote, if all
members of the Board or of such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 3.9 Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate such committees as the Board
of Directors deems appropriate, each committee to consist of one or more of the
directors of the Corporation. In the absence or disqualification of a member of
a committee, the member or members thereof 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,
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; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution or amending the By-laws of the Corporation; unless the resolution
expressly so provides, no such committee shall have the power or authority to
declare a dividend, authorize the issuance of stock or adopt a certificate of
ownership pursuant to Section 253 of the General Corporation Law of the State of
Delaware.
Unless otherwise ordered by the Board of Directors, a majority of the
members of any committee appointed by the Board of Directors pursuant to this
section shall constitute a quorum at any meeting thereof, and the act of a
majority of the members present at a meeting at which a quorum is present shall
be the act of such committee. Any such committee shall prescribe its own rules
for calling and holding meetings and its method of procedure, subject to any
rules prescribed by the Board of Directors, and shall keep a written record of
all action taken by it and report the same to the Board of Directors when
required.
-6-
<PAGE>
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when requested by the Board of Directors.
Section 3.10 Compensation Committee. If it desires to do so, the Board
of Directors may by resolution passed by a majority of the whole Board,
designate a Compensation Committee, to which the Board shall delegate the
authority to fix the compensation of the directors.
Section 3.11 Audit Committee. If it desires to do so, the Board of
Directors may, by resolution passed by a majority of the whole Board, designate
an Audit Committee, which shall have duty to recommend to the Board of Directors
the accounting firm to be selected by the Board, or to be recommended by it for
stockholder approval, as independent auditor of the Corporation and to act on
behalf of the Board in meeting and reviewing with the independent auditors, the
chief internal auditor and the appropriate corporate officers, matters relating
to corporate financial reporting and accounting procedures and policies,
adequacy of financial, accounting and operating controls and the scope of the
respective audits of the independent auditors and the internal auditor. The
committee shall review the results of such audits with the respective auditing
agency and shall promptly report to the Board of Directors. The committee shall
additionally submit to the Board of Directors any recommendations it may have
from time to time with respect to financial reporting and accounting practices
and policies and financial, accounting, and operation controls and safeguards.
Section 3.12 Participation In Meeting By Telephone. Members of the
Board of Directors or any committee designated by such Board may participate in
a meeting of the Board or of a committee of the Board by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this subsection shall constitute presence in person at such meeting.
ARTICLE IV
NOTICES
Section 4.1 Generally. Notices to directors and stockholders shall be
in writing and delivered personally or mailed to the directors or stockholders
at their addresses appearing on the books of the Corporation. Notice by mail
shall be deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram or telephone.
Section 4.2 Adjournments. Whenever a meeting of stockholders, annual or
special, is adjourned to another date, time or place, notice need not be given
of the adjourned meeting if the date, time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote thereat. At the adjourned meeting, any business may
be transacted which might have been transacted at the original meeting.
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Section 4.3 Waiver. Whenever any notice is required to be given under
the provisions of the statutes or of the Certificate of Incorporation or by
these By-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular, or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE V
OFFICERS
Section 5.1 Generally. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a Chairman of the Board, Chief Executive
Officer, President, a Chief Operating Officer, a Chief Financial Officer, a
Secretary and a Treasurer. The Board of Directors may also choose one or more
Vice-Presidents (which may include Senior Vice-Presidents and Executive
Vice-Presidents), one or more Assistant Secretaries and Assistant Treasurers and
such other officers or agents as the Board of Directors may from time to time
deem necessary or advisable in the conduct of the business and affairs of the
Corporation. Any number of offices may be held by the same person and any office
may be shared by more than one person unless the Certificate of Incorporation or
these By-laws otherwise provide.
Section 5.2 Compensation. The compensation of all officers and agents
of the Corporation who are also directors of the Corporation shall be fixed by
the Board of Directors. The Board of Directors may delegate the power to fix the
compensation of all other officers and agents of the Corporation to an officer
of the Corporation.
Section 5.3 Succession. The officers of the Corporation shall hold
office until their successors are chosen and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the Corporation shall be filled by the Board of Directors.
Section 5.4 Authorities and Duties. The officers of the Corporation
shall have such authority and shall perform such duties as are customarily
incident to their respective offices, or as may be specified from time to time
by the directors regardless of whether such authority and duties are customarily
incident to such office.
ARTICLE VI
CERTIFICATES OF STOCK
Section 6.1 Certificates. Every owner of stock in the Corporation shall
be entitled to have a certificate signed by, or in the name of the Corporation
by, the Chairman or Vice-Chairman of the Board or Chief Executive Officer, or
President or a Vice-President and the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation.
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Section 6.2 Transfer Agents; Registrars. Where a certificate is signed
(l) by a transfer agent or an assistant transfer agent or (2) by a transfer
clerk acting on behalf of the Corporation and a registrar, the signature of any
such Chairman or Vice-Chairman of the Board of Directors, Chief Executive
Officer, President, Vice-President, Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary may be facsimile. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have been
used thereon had not ceased to be such officer or officers of the Corporation.
Section 6.3 Lost, Destroyed or Mutilated Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, destroyed, or mutilated upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, destroyed or
mutilated. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, destroyed or mutilated
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, destroyed or mutilated upon the issuance of such new
certificate.
Section 6.4 Transfers of Stock. (a) Upon surrender to the Corporation
or the transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transactions upon its books, unless the Corporation has a duty to
inquire as to adverse claims with respect to such transfer and such duty has not
been discharged. The Corporation shall have no duty to inquire into adverse
claims with respect to such transfer unless (i) the Corporation has received a
written notification of an adverse claim at a time and in a manner which affords
the Corporation a reasonable opportunity to act on it prior to the issuance of a
new, reissued or re-registered share certificate and the notification identifies
the claimant, the registered owner and the issue of which the share or shares is
a part and provides an address for communications directed to the claimant; or
(ii) the Corporation has required and obtained, with respect to a fiduciary, a
copy of a will, trust, indenture, articles of co-partnership, By-laws or other
controlling instruments, for a purpose other than to obtain appropriate evidence
of the appointment or incumbency of the fiduciary, and such documents indicate,
upon reasonable inspection, the existence of an adverse claim.
(b) The Corporation may discharge any duty of inquiry by any reasonable
means, including notifying an adverse claimant by registered or certified mail
at the address furnished by him or, if there be no such address, at his
residence or regular place of business that the security has been presented for
registration of transfer by a named person, and that the transfer will be
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registered unless within thirty days from the date of mailing the notification,
either (i) an appropriate restraining order, injunction or other process issues
from a court of competent jurisdiction; or (ii) an indemnity bond, sufficient in
the Corporation's judgment to protect the Corporation and any transfer agent,
registrar or other agent of the Corporation involved from any loss which it or
they may suffer by complying with the adverse claim, is filed with the
Corporation.
Section 6.5 Fixing Record Date. (a) In order that the Corporation may
determine the stockholders entitled to notice or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action.
(b) If no record date is fixed:
(1) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(2) The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed.
(3) 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 thereto.
(c) 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.
Section 6.6 Registered Stockholders. Prior to due presentment for
transfer of any share or shares, the Corporation shall treat the registered
owner thereof as the person exclusively entitled to vote, to receive
notifications and to all other benefits of ownership with respect to such share
or shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by applicable law.
ARTICLE VII
GENERAL PROVISIONS
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Section 7.1 Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 7.3 Annual Statement. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
Section 7.4 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other persons as
the Board of Directors may from time to time designate.
Section 7.5 Fiscal Year. The fiscal year of the Corporation shall be
the calendar year.
Section 7.6 Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE VIII
AMENDMENTS
Section 8.1 Amendments. These By-laws may be altered or repealed or new
By-laws may be adopted, either by the Board of Directors or by the stockholders
of the Corporation upon the affirmative vote of the holders of at least 66-2/3%
of the outstanding capital stock entitled to vote thereon.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Right of Indemnification. (a) The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines
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and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. The Corporation shall
be required to indemnify a person in connection with a proceeding (or part
thereof) initiated by such person only if the proceeding (or part thereof) was
authorized by the Board of Directors.
(b) The Corporation shall indemnify any person who was or is a party,
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless, and only to the extent that,
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to Sections 9.1(a) or 9.1(b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under sections 9.1(a) or 9.1(b) (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in such section. Such determination
shall be made:
(i) By the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, even though less than a quorum, or
(ii) If there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or
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(iii) By the stockholders.
Section 9.2 Undertakings for Advancement of Expenses. Expenses incurred
in defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article. Such expenses incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
Section 9.3 Claims. If a claim for indemnification or payment of
expenses under this Article IX is not paid with 60 days after a written claim
therefor is received by the Corporation, the claimant may recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting the claim. In any such action, the
Corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification or payment of expenses under applicable law.
Section 9.4 Relationship to Other Rights. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office.
Section 9.5 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article.
Section 9.6 Continuation of Rights. The indemnification and advancement
of expenses provided by or granted pursuant to, this Article IX shall, unless
otherwise provided when authorized or ratified, 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, executors and administrators of any such person.
Section 9.7 Amendments. All rights to indemnification under this by-law
shall be deemed to be a contract between the Corporation and each director,
officer, employee or agent of the Corporation who serves or served in such
capacity at any time while this by-law is in effect. No amendment or repeal of
this bylaw or of any relevant provisions of the Delaware General Corporation Law
or any other applicable laws shall adversely affect or deny to any director,
officer, employee or agent of the Corporation any rights to indemnification
which such person may have, or change or release any obligations of the
Corporation, under this by-law with respect to any costs, charges, expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
which arise out of any action, suit or proceeding based in whole or in
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substantial part on any act or failure to act, actual or alleged, which takes
place while or before this by-law is in effect. The provision of this section
shall apply to any such action, suit or proceeding whenever commenced, including
such action, suit or proceeding commenced after any amendment or repeal of this
by-law.
Section 9.8 Severability. In the event that any of the provisions of
this Article IX (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise enforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
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Exhibit 5.1
PIPER & MARBURY
L.L.P.
CHARLES CENTER SOUTH WASHINGTON
36 SOUTH CHARLES STREET NEW YORK
BALTIMORE, MARYLAND 21201-3018 PHILADELPHIA
410-539-2530 RESTON
FAX: 410-539-0489 EASTON
July 28, 1999
Powerize.com, Inc.
901 Elkridge Landing Road, Suite 350
Linthicum, MD 21090
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Powerize.com, Inc., a Delaware corporation
(the "Company"), in the preparation and filing with the Securities and Exchange
Commission of a Registration Statement on Form S-1, file No. 333-80055 (the
"Registration Statement"), relating to 2,875,000 shares (including 375,000
shares to cover over-allotments, if any) (the "Shares") of Common Stock, $.0001
par value per share of the Company to be offered to the public.
In this capacity, we have examined the Company's Amended and Restated
Certificate of Incorporation and Amended and Restated By-Laws, the proceedings
of the Board of Directors of the Company relating to the issuance of the Shares
and such other documents, instruments and matters of law as we have deemed
necessary to the rendering of this opinion. In such examination, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, and the conformity with originals of all documents submitted
to us as copies.
Based upon the foregoing, we are of the opinion and advise you that
each of the Shares has been duly authorized and, upon sale of such Shares as
contemplated by the Registration Statement, will be validly issued, fully paid
and nonassessable.
We hereby consent to (i) the reference to this firm under the caption
"Legal Matters" in the Prospectus forming a part of the Registration Statement
and (ii) the filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Piper & Marbury L.L.P.
<PAGE>
Exhibit 10.1
SUBLEASE AGREEMENT
This Sublease Agreement is made and entered into as of this 20th day
of March, 1998, by and between First Health Strategies, Inc., a Delaware
corporation ("Sublessor") and KnowledgeLink Interactive, Inc., a Delaware
corporation ("Sublessee").
RECITALS
A. Sublessor is the tenant under that certain lease dated February 18,
1997, as amended by that certain Rider Agreement dated February 18, 1997 (the
"Lease") by and between Aetna Life Insurance Company ("Landlord"), as Landlord,
whereby Landlord leased to Sublessor approximately 5,921 net rentable square
feet of office space (the "Leased Premises") located on the 3rd floor of the
building known as 901 Elkridge Landing Road, Linthicum, Maryland (the
"Building"). A copy of the Lease is attached hereto as Exhibit A and made a part
hereof.
B. Sublessor desires to sublet a portion of the Premises, part of the
3rd floor, comprised of approximately 4901 net rentable square feet as more
particularly described in Exhibit "B" attached hereto (inclusive of the slashed
area and exclusive of the cross hatched area) (the "Subleased Premises") to
Sublessee, and Sublessee desires to sublet the Subleased Premises from
Sublessor.
Now, therefore, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. All capitalized terms set forth herein shall have the same meaning
as set forth in the Lease.
2. Sublessor hereby leases to Sublessee for Subleased Premises in its
"as is condition, for a term beginning April 1, 1998, and ending on midnight on
March 31, 2000, unless sooner terminated in accordance with this Sublease
Agreement. Sublessor shall not be required to exercise any renewal or extension
options, contained in the Lease, including but not limited to paragraph 5 of the
Rider Agreement.
3. Notwithstanding Article II of the Lease regarding Rent, Sublessee
agrees to pay to Sublessor as Base Rent the sum of Six Thousand One Hundred
Twenty Six Dollars and Twenty Five Cents ($6126.25) payable to Sublessor in
equal monthly installments in advance on the first day of each month during the
term, commencing on May 1, 1998, for the term of this Sublease Agreement, with
the first months rent due upon Sublease Agreement execution by Sublessee.
Sublessee will have no obligation to pay Base Rent for the month of April, 1998.
Sublessee shall have no obligation to pay for the additional pass through
expenses set forth in the Lease as real estate taxes and Operating Expenses.
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4. Sublessee shall pay to Sublessor the sum of Three Hundred Six
Dollars and Thirty One Cents ($306.31) per month for the Term of this Sublease
Agreement for the purchase of all the office furniture (not including any
computers, telephones, telephone systems or other technology) owned by the
Sublessor which is located in the Subleased Premises, as of the date of
occupancy of the Subleased Premises. Sublessor shall provide Sublessee a bill of
sale for the furniture.
5. Upon execution of this Sublease, Sublessee will deposit with
Sublessor a security deposit of two months Rent ($12,253.00) (the "Deposit") as
security for performance of Sublessee' s obligations under this Sublease. In the
event Sublessee fully complies with all the terms and conditions of this
Sublease Agreement during the first 12 months of the Term of this Sublease
Agreement, Sublessor will return one half of the Deposit to Sublessee. In the
event Sublessee fully complies with all the remaining terms and conditions of
this Sublease Agreement, the remaining amount of the Deposit shall be refunded
to Sublessee, without interest unless otherwise required by law, no later than
30 days after the expiration of this Sublease Agreement.
6. This Sublease Agreement is subject and subordinate to the Lease.
Except as may be inconsistent with the terms of this Sublease Agreement, all of
the terms, covenants and conditions in the Lease shall be applicable to this
Sublease Agreement with the same force and effect as if Sublessor were the
landlord under the Lease and Sublessee were the tenant under the Lease. In case
of any breach by Sublessee, Sublessor shall have all the rights against
Sublessee as would be available to the landlord against the tenant under the
Lease. Sublessee hereby agrees to assume and perform all of the obligations of
Sublessor as tenant/lessee under the Lease.
7. The only services or rights to which Sublessee is entitled are
those to which Sublessor is entitled under the Lease and for all such services
and rights, Sublessee will look to the Landlord under the Lease.
8. Sublessee shall not do or permit anything to be done which would
cause the Lease to be terminated or forfeited. Sublessee shall indemnify and
hold Sublessor harmless from and against all claims of any kind whatsoever by
reason of Sublessee' s use or occupancy of the Subleased Premises or any breach
or default on the part of Sublessee by reason of which the Lease may be
terminated or forfeited.
9. Sublessee shall not assign this Sublease Agreement nor further
sublease the Subleased Premises in whole or in part and shall not permit
Sublessee's interest in this Sublease Agreement to be vested in any third party
by operation of law or otherwise, without the prior written consent of the
Landlord, Sublessor and as provided under the Lease.
10. Sublessee shall procure and maintain during the term of this
Sublease comprehensive general liability insurance with respect to the Subleased
Premises and Sublessee's activities therein from an insurer and with limits of
coverage acceptable to
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Sublessor, which limits will not exceed those required under the Lease. Such
insurance shall name Sublessor as an additional insured.
11. Any notices required or permitted to be given by one party to the other
under this Sublease Agreement shall be in writing and served on the parties at
the addresses listed below. Any notice shall be either (i) personally delivered
to the addressee; or (ii) sent by registered or certified mail/return receipt
requested, in which case it shall be deemed delivered 3 business days after
being deposited in the U.S. Mail; (iii) sent by a nationally recognized
overnight courier; or (iv) sent by telecommunication ("Fax") during normal
business hours in which case it shall be deemed delivered on the day sent,
provided an original is received by the addressee after being sent by a
nationally recognized overnight courier within 1 business day of the Fax. The
addresses and Fax numbers listed may be changed by written notice to the other
parties, provided, however, that no notice of a change of address of Fax number
shall be effective until the date of delivery of such notice. Copies of notices
are for informational purposes only and a failure to give or receive copies of
any notices shall not be deemed a failure to give notice.
If to Sublessor: If to Sublessee:
First Health Group Corp. KnowledgeLink Interactive, Inc.
4141 N. Scottsdale Road, Suite 300 901 Elkridge Landing Road, 3rd Floor
Scottsdale, Arizona 85251 Linthicum, MD
Facsimile No. 602-990-6623 Facsimile No. 301-314-9592
Attn: Dennis Taute Attn: Ted Bagheri
12. Submission of this Sublease Agreement for examination or signature
by Sublessee does not constitute an offer to sublease and it is not effective as
a sublease or otherwise until execution and delivery by both Sublessee,
Sublessor, and consent, in writing, by Landlord.
13. As permitted by the Lease and Landlord, Sublessor will provide, at
Sublessor's sole cost, directory and suite entrance signage.
14. Sublessor, at Sublessor's sole cost and expense, shall demise the
Subleased Premises as shown on Exhibit C, attached hereto and incorporated
herein.
15. Sublessor recognizes Colliers Pinkard as the broker and shall pay
Colliers Pinkard a fee of Five Thousand Six Hundred Thirty Six Dollars and
Sixteen Cents within 30 days of an invoice from Colliers Pinkard after the
Sublessee, Sublessor and Landlord have executed the Sublease Agreement.
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In witness whereof, the parties have caused this agreement to be executed the
day and year first above written.
Sublessor Sublessee
First Health Strategies, Inc. KnowledgeLink Interactive, Inc.
By: /s/ Edward L. Wristen By: /s/ Ted. S. Bagheri
--------------------------- -----------------------------
Edward L. Wristen Ted S. Bagheri
Its: Vice President Its: C.F.O.
----------------------------
Date: 4/5/98 Date: 3/30/98
--------------------------- -----------------------------
CONSENTED TO BY:
Landlord
Aetna Life Insurance Company (By: Allegis Realty Investors LLC, its Investment
Advisor and Agent)
By: /s/ Jim Fishman
------------------------------
Its: Senior Vice President
------------------------------
Date: 4/15/98
------------------------------
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Exhibit 10.2
AGREEMENT OF SUBLEASE
THIS AGREEMENT OF SUBLEASE (THIS "SUBLEASE") is made as of the 17th day
of August 1998, by and between STANFORD TELECOMMUNICATIONS, INC., a Delaware
Corporation ("Sublandlord") and KNOWLEDGELINK INTERACTIVE, INC., a Virginia
corporation ("Subtenant").
W I T N E S S E T H:
WHEREAS, Lockheed Martin (successor in interest to Loral Corporation)
("1st Sublandlord") and Stanford Telecommunications, Inc. ("Sublandlord")
entered into a sublease dated August 1994 ("1st Sublease Agreement") for the
premises hereafter described, a copy of which is attached hereto as Exhibit B-1
and whereas Lockheed Martin was assigned the Prime Lease with the Building Owner
May 13, 1991 attached hereto as Exhibit B-2.
WHEREAS, Subtenant and Sublandlord desire to enter into this Sublease
for a portion of the same premises.
NOW, THEREFORE, in consideration of the mutual covenants herein and for
other valuable consideration, the sufficiency and receipt of which is hereby
acknowledged by the parties, Sublandlord and Subtenant mutually agree, and
intend to be legally bound, as follows:
1. PREMISES. Sublandlord leases to Tenant all of Sublandlord's
right, title and interest in that certain premises to be known as
Suite _____ ("Sublease Premises"), attached as Exhibit A, which
Sublandlord has measured preliminarily as approximately Seven
Thousand (7,000) rentable square feet which is a Sub-Sublease
from Sublandlord and Lockheed Martin (1st Sublandlord). Suite
____, the Sublease Premises, is located on the third (3rd) floor
of the building known as Lake Fairfax Business Center Building
Four and having the street address of 1761 Business Center Drive,
Reston, Virginia 20190 (the "Building"). The Sublease Premises
will be measured by the Sublandlord's architect, Greenwell Goetz
Architects, PC, using the Standard Method for Measuring Floor
Areas in Office Buildings, Building Owners and Managers
Association, 1996 edition and upon certification of the actual
measurement an adjustment to the Base Rent (if needed) will be
made via Amendment.
2. SUBLEASE TERM.
A. The "Sublease Term" shall commence (the "Commencement Date")
October 1, 1998, or as soon as space is available for occupancy;
however, in no event shall the occupancy and commencement date be
later then October 15, 1998.
B. The Sublease Term shall expire upon the twenty-fourth month
(24th) of the Lease Term following the Commencement Date (i.e.,
September 31, 2000).
C. Sublandlord shall deliver possession of the Sublease Premises
to Subtenant on the Commencement Date, provided, however, that
after receipt of requisite
<PAGE>
approvals, Subtenant and Subtenant's contractors may access the
Sublease Premises prior to the Commencement Date for the purposes
of renovating and installing improvements to the Sublease
Premises. Sublandlord will repaint, recarpet with selections made
by Sublandlord and demise the Premises, in accordance with code
requirement. In addition Sublandlord shall demolish the existing
SCIF, construct 7 perimeter offices along the windowline and an
interior conference room (to include reasonable electric power to
each office) in the location of existing SCIF, and install one
(1) pair of Building standard wood doors at Subtenant's suite
entry. Any additional scope of work will be at Subtenant's sole
expense.
3. BASE RENT. Beginning with the Commencement Date, Subtenant shall
pay to Sublandlord rent equal to the product of Twenty-Four
Dollars ($24.00) ("Rental Rate") times the number of rentable
square feet in the Sublease Premises, and shall be paid in equal
monthly installments on the first (1st) of each month. Based on
the measurements of the Sublease Premises performed by
Sublandlord (noted in Paragraph 1), the Base Rent shall be One
Hundred Sixty-Eight Thousand Dollars ($168,000.00) per annum, and
each monthly installment of Base Rent shall be Fourteen Thousand
Dollars ($14,000.00). In addition, the Base Rent shall increase
by Three percent (3%) annually, commencing with the second (2nd)
lease year.
4. OPERATING EXPENSES. During the Sublease Term, Subtenant's
contribution to Operating Expenses shall remain fixed at the rate
that is included within the Base Rent.
5. PARKING. Sublandlord shall provide Subtenant with the
non-exclusive use of 3.6 parking spaces for 1,000 square feet of
leased space free of charge.
6. CONDITION OF SUBLEASE PREMISES. Sublandlord represents that as of
the execution date of the Sublease, there is no pre-existing
condition in either the Sublease Premises or the Building that
violates any building, health, environmental or safety law code,
rule or regulation (including ADA). If there is a violation of
such a code, law, rule or regulation, then Sublandlord shall
cause such violation(s) to be corrected prior to the Commencement
Date without expense to Subtenant.
7. IMPROVEMENTS TO ELEVATOR LOBBY. Sublandlord has initiated a
subleasing program for the third floor with the intent to
sublease all or the major portion of the floor. Upon completion
of the subleasing on the third floor, Sublandlord will recarpet
and redo the walls of the common areas with wallcovering and/or
paint appropriate for the area in the Building.
8. USE. Subtenant may use the Sublease Premises in all ways not
prohibited by the Prime Lease.
9. DEFAULT UNDER SUPERIOR LEASES.
2
<PAGE>
A. Sublandlord represents and warrants that the Prime Lease is in full
force and effect as of the date of this Sublease, and that there is no
default by Landlord or Sublandlord under the Prime Lease. Sublandlord
agrees not to terminate the Prime Lease during the Sublease term or to
modify or amend it in a manner, which will reduce Subtenant's rights
under the Sublease.
B. Subtenant shall not act in any manner, which would cause a default
under the terms of the Prime Lease. Within five (5) business days of
Sublandlord's receipt of notice of any default under the Prime Lease
which may jeopardize Subtenant's quiet enjoyment of the Sublease
Premises, Sublandlord shall notify Subtenant of the nature of the
default and of Sublandlord's intention to cure such default. In the
event Subtenant or Sublandlord shall receive a notice of default from
the Landlord as a direct result of Subtenant's actions, then Subtenant
shall have all the rights to cure such event of default that
Sublandlord enjoys under the Prime Lease, however, in the event
Subtenant fails to timely cure any event of default within ten (10)
business days, Sublandlord shall have the right to terminate the lease
and Subtenant shall vacate the premises within thirty (30) days.
Further, Sublandlord shall have the right to recover all damages to
which Sublandlord is entitled including reletting expenses (vacancy,
commissions, improvements, etc.) and any unpaid rent up until the time
of such reletting. Sublandlord, on behalf of Subtenant, shall utilize
its best efforts to enforce all of its rights and remedies available
pursuant to the Prime Lease.
10. INSURANCE. During the Sublease Term, Subtenant shall maintain
insurance in force with a company licensed to do business in Virginia,
with policy limits of at least Two Million Dollars ($2,000,000.00)
general liability and One Million Dollars ($1,000,000.00) property
damage. Sublandlord shall be named as an additional insured thereunder
and Subtenant shall provide Sublandlord with a certificate of such
insurance prior to the Commencement Date. Subtenant and Sublandlord
each hereby waive any and all rights of recovery against the other, or
against the officers employees, agents and representatives of the
other, for loss of or damage to such waiving party or its property or
the property of others under its control to the extent that such loss
or damage is insured against under any insurance policy in force at the
time of such loss or damage and such loss or damage has been paid by
the insurance company. The insuring party shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Sublease.
11. NOTICES. Every notice, approval, consent or other communication
authorized or required by this Sublease ("Notice") shall not be
effective unless same shall be in writing and sent postage prepaid by
United States registered or certified mail, return receipt requested,
or delivered by hand, and a written receipt acknowledging such postal
or hand delivery obtained for each designated recipient (or proof of
refusal), directed to the other party at the following addresses
(indicating the date and to whom delivered), or such other address as
either party may designate by Notice given from time to time in
accordance with this Paragraph:
If to Subtenant: KNOWLEDGELINK Interactive, Inc.
3
<PAGE>
Lake Fairfax Business Center
Building Four
1761 Business Center Drive
Reston, Virginia 20190
Attn: Ted S. Bagheri, CFO
If to Sublandlord: Stanford Telecommunications, Inc.
1761 Business Center Drive
Reston, Virginia 20190
Attn: Joe Daniel, Vice President
Finance/Administration
12. BROKERS. Sublandlord shall be solely responsible for any
commissions due to Smithy Braedon-ONCOR International and
Spaulding & Slye in connection with this Sublease. Otherwise,
Sublandlord and Subtenant represent to each other that neither
has dealt with any broker or agent in connection with this
Sublease and each party represents and warrants that there are no
other claims for brokerage commissions in connection with the
execution of this Sublease. Sublandlord agrees to indemnify and
hold Subtenant harmless from all liabilities arising from any
such claim for commission (including, without limitation, the
cost of legal fees in connection therewith) as a result of
Sublandlord's dealings in connection with this Lease.
13. SECURITY. Upon full execution of the Sublease, Sublandlord shall
deliver to Subtenant a reasonable number of suite entry keys for
the Sublease Premises Building perimeter security access cards,
at no cost to Subtenant.
14. IDENTITY. Sublandlord shall obtain Landlord's consent, if
necessary, for Subtenant's Building Directory strips (3 lines).
15. LANDLORD APPROVAL. In the event the Prime Lease requires the
prior written consent of the Landlord prior to an action by the
Subtenant, then Sublandlord, on behalf of Subtenant, shall
initiate action to gain consent from Landlord within Ten (10)
days of Subtenant's notice to Sublandlord concerning such
proposed action. The preceding sentence notwithstanding, in the
event the Prime Lease specifies the time period in which Landlord
must respond to such a request for consent, then such specified
time period shall control.
16. QUIET ENJOYMENT. Subtenant shall have the peaceful and quiet use
of the Sublease Premises, and all rights, servitude and
privileges belonging or in anywise appertaining thereto or
granted thereby, for the Term of this Sublease, without hindrance
or interruption by Sublandlord. Sublandlord warrants that it has
full right and authority to enter into this Lease for the full
term hereof.
17. SECURITY DEPOSIT. Upon Sublease execution, Subtenant shall post a
Security Deposit equal to four months Base Rent ($56,000). One
month shall be applied to
4
<PAGE>
the first month's Base Rent due and the remaining three (3)
months shall be held as security for the term of the Sublease,
but shall be reduced as follows, provided that Subtenant is not
in default:
Sublandlord shall return an amount equal to one (1) months rent
after six (6) months of occupancy, another one (1) month after
twelve (12) months occupancy. The balance of the Security Deposit
shall be held for the balance of Subtenants Sublease Term and
shall be refunded within ninety (90) days after Sublease
expiration.
18. COMMUNICATIONS. Subtenant agrees that all communications regarding
their tenancy under this Sublease shall be directed only to the
Sublandlord who will in the case of property management issues contact
the Landlord.
19. ENTIRE AGREEMENT. This Sublease, together with the Exhibits
attached hereto, contains and embodies the entire agreement of the
Parties hereto, and no representations, inducements or agreements, oral
or otherwise, between the parties not contained in this Sublease and
the Exhibits, shall be of any force and effect. This Sublease may not
be modified, changed or terminated in whole or in part in any manner
other than by an agreement in writing duly signed by the Parties
hereto.
IN WITNESS WHEREOF, this Agreement of Sublease has been executed by the
parties as of the date first hereinabove written.
SUBLANDLORD: SUBTENANT:
STANFORD KNOWLEDGELINK INTERACTIVE, INC.
TELECOMMUNICATIONS, INC.
By: /s/ Roberta Comer, for By: /s/ Ted. S. Bagheri
----------------------------- ---------------------------
Name: Joseph G. Daniel Name: Ted S. Bagheri
--------------------------- --------------------------
Title: Vice President, Admin. & Finance Title: C.F.O.
---------------------------------- -------------------------
Date: Date: 8/28/98
--------------------------- -------------------------
Attachments: Exhibit A - Floor Plan of Sublease Premises
Exhibit B - Prime Lease - Stanford and Building Owner
Exhibit B-1 - Lockheed Martin/Loral Sublease
Exhibit B-2 - Lockheed Martin/Loral Prime Lease
5
<PAGE>
CONSENT OF LANDLORD
A & A Fairfax Four, L.L.C., as Landlord pursuant to that certain Office
Lease dated July 1, 1986, ("Lease") between A & A Fairfax Four, LLC, as
successor in interest to American General Investment Corporation, ("Landlord")
and Lockheed Martin Corporation, successor in Interest to Loral Corporation
("Tenant"), hereby consents to that certain Sublease Agreement and Amendment One
to Sublease and any and all exhibits referenced therein (collectively,
"Sublease") between Stanford Telecommunications, Inc. ("Subleasee") and
Knowledgelink Interactive, Inc. ("Sublessee's Subtenant"), comprising 7,748
square feet, a copy of which Sublease is attached hereto as Exhibit A, on the
express conditions that:
1. the Sublease is in all respects subject and subordinate to the
Lease; and
2. no further sublease of any portion of the demised premises or
assignment of the Lease or the Sublease shall be made without the
prior written consent of Landlord; and
3. the Tenant remains fully liable for all obligations of Tenant
pursuant to the Lease (without implied modification by reason of
Landlord's consent to the Sublease), including with respect to the
portion of the Premises being subleased to Sublessee.
4. Sublessee acknowledges the obligation to return the Premises to the
Landlord at the expiration of the Lease in the original condition
(referring particularly to the secured space know as the Tempest
areas, the value of which is estimated to be $60,000.00), reasonable
wear and tear excepted, if requested by the Landlord; and
5. the Landlord makes no representation with respect to the compliance
of the intended use of the subleased premises with local law or
compliance of the subleased premises with the requirement of the
Sublease; and
6. notwithstanding anything to the contrary contained in the Sublease,
Landlord has no obligations or liabilities to Sublessee in
connection with the subleased premises and Sublessee has no rights
against Landlord with respect to the sublease premises or any
obligations of Landlord to Tenant or Sublessee pursuant to the
Lease; and
7. the Tenant and Sublessee acknowledge and agree that the Landlord has
no liability for the performance of any convenant of Tenant pursuant
to the Sublease and is not subject to the terms of any other
agreement between Tenant and Subleasee; and
8. any and all improvements made with respect to this sublease shall be
subject to the review and approval of Landlord. SubLessee agrees to
pay construction management fees of seven percent (7%) directly to
Camcon, L.P.; and
9. Tenant agrees that all communication to Landlord regarding this
sublease and Sublessee's occupancy in the building shall be directed
through Tenant; and
10. Tenant agrees that the Sublease may not be renewed or held over for
any period of
6
<PAGE>
time without the Landlord's express, written consent; and
11. Lockheed Martin Corporation, as Lessee under the Prime Lease, and
1st Sublandlord under the Agreement of Sublease hereby consents to
this Sublease. However, Lockheed Martin Corporation shall not
accept any obligations or liabilities that may be created by this
Agreement above those existent through the Prime Lease, except those
matters requiring Lockheed Martin Corporation to communicate certain
request(s) to Prime Lessor on behalf of the Subtenant under this
Agreement. 1st Sublandlord's consent herein shall not modify or
affect the Prime Lease or relieve Stanford Telecommunications, Inc.
from any liability thereunder.
12. Subleasee shall submit a security deposit in the amount $42,000.00,
which shall be addressed in accordance with the terms set forth in
Paragraph 17 Security Deposit of the Agreement Of Sublease; and
13. Sublessee, shall submit specifications to Landlord for approval
prior to commencing any work regarding the third floor common areas.
IN WITNESS WHEREOF, the undersigned have executed this Consent as of
__________ ______, 1998.
LANDLORD:
A&A Fairfax L.L.C., successor in interest
to American General Investment Corporation
By: /s/ Louai Alassar
------------------
Dr. Louai Alassar
Managing Member
TENANT:
Lockheed Martin Corporation, successor in
interest to Loral Corporation
By: LMC Properties, Inc., Attorney In
Fact under irrevocable Power of Attorney,
dated June 5, 1996
By: /s/ John W. Wissmann
---------------------
Print Name: John W. Wissmann
-----------------
Title: Senior Manager; Real Estate
---------------------------
SUBLESSEE
Stanford Telecommunications, Inc.
By: /s/ Roberta Comer, for
-----------------------
Print Name: Joseph G. Daniel
-----------------
Title: Vice President, Admin & Finance
-------------------------------
7
<PAGE>
AMENDMENT ONE TO SUBLEASE
This Amendment One ("Amendment") to Agreement of Sublease ("Sublease") is made
this ____ day of October, 1998, between Stanford Telecommunications, Inc.
("Sublandlord") and Knowledgelink Interactive, Inc. ("Subtenant"). This
Amendment serves to clarify terms and conditions of the Agreement of Sublease
between Stanford Telecommunications, Inc. and Knowledgelink Interactive, Inc.
1 Throughout the document, "Sublandlord" refers to Stanford
Telecommunications, Inc.
2. Clause 1, "Tenant" should read "Subtenant."
3. Second paragraph of Sublease, first line should read: WHEREAS, Lockheed
Martin Corporation ("Lockheed Martin") (successor in interest. . . .
4. The attachments to the Agreement of Sublease labeled Exhibits B, B-1, and
B-2 are included with the Sublease and incorporated into the Sublease by
reference.
5. Add as a first paragraph after "WITNESSETH" on the first page.
"WHEREAS, A&A Fairfax Four, L.L.C. ("Prime Lessor" or "Landlord") as
successor to American General Investment Corporation as successor to,
Paradigm Investment Limited Partnership entered into an Office Lease
dated, July 1, 1986 ("Prime Lease") with Lockheed Martin Corporation
("Prime Lessee" or "1st Sublandlord") as successor in interest to Loral
Corporation, as successor to Goodyear Tire and Rubber Company, attached
hereto as Exhibit B and incorporated herein as reference; and"
[Follow with the paragraph: "WHEREAS, Lockheed Martin. . . ."]
6. Clause 8. Use. Change "not prohibited" to "permitted".
7. Clause 9A, line 2, insert ", to the best of its knowledge," between "and"
and "that".
8. Add to Clause 16: "1st Sublandlord shall not be responsible or liable in
any manner, to Sublandlord or Subtenant in the event Prime Lessor does not
consent to any Subtenant or Sublandlord proposed action. Further, consent by
Prime Lessor shall in no way create any obligation or liability on the part of
1st Sublandlord."
9. Indemnification. Stanford Telecom ("Sublandlord) agrees to indemnify and
hold Lockheed Martin Corporation ("1st Sublandlord) harmless from any
obligation by Landlord to return the Premises to the Landlord at the
expiration of the Lease in the original condition.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment to the Sublease
as of the date first hereinabove written.
SUBLANDLORD: SUBTENANT:
STANFORD TELECOMMUNICATIONS, INC. KNOWLEDGELINK INTERACTIVE, INC.
By: /s/ Roberta Comer, for By: /s/ Ted S. Bagheri
------------------------------------- ----------------------------
Name: Joseph G. Daniel Name: Ted. S. Bagheri
----------------------------------- --------------------------
Title: Vice President, Admin and Finance Title: C.F.O.
---------------------------------- -------------------------
Date: 10/12/98 Date: 10/12/98
------------------------------------ --------------------------
9
<PAGE>
EXHIBIT 10.4
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made this 28th
day of May, 1999 and is effective as of the 31st day of December 1998, by and
between Powerize.com, Inc., a Delaware corporation (the "Company"), and Mark
Gaertner (the "Employee").
EXPLANATORY STATEMENT
WHEREAS, the Company and the Employee had entered into an original
employment agreement dated May 31, 1997 and now desire to amend and restate such
original employment agreement in its entirety; and
WHERAS, the Company desires to employ the Employee on the terms and
conditions herein set forth, and the Employee has agreed to accept employment
with the Company on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
promises made herein, the parties agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee as its
President and Chief Operating Officer, and agrees to continue the Employee in
that position (or in any other position approved by the Employee) during the
term of this Agreement.
2. TERM. This Agreement shall begin December 31, 1998 and shall
continue until December 31, 2001. Thereafter, this Agreement shall renew
automatically from year to year, subject to the right of either party to
terminate this Agreement at any time during the initial term or during any
renewal term upon sixty (60) days' prior written notice to the other party.
3. COMPENSATION.
A. The Employee's compensation under this Agreement shall be as set
forth in Schedule A attached hereto and made a part hereof.
B. Such salary shall be subject to normal periodic reviews based on
the policies and practices of the Company.
4. BONUSES; EQUITY PLANS. In addition to his salary, during the
term of this Agreement, the Employee shall be entitled to participate in any
bonus, stock and option plans, programs, arrangements and practices sponsored by
the Company for the benefit of its employees serving in similar capacities with
the Company (and/or its affiliates) as may be established from time to time by
the Company for the benefit of such employees, in accordance with the terms of
such plans, as amended by the Company from time to time. Bonuses will be paid to
the Employee as described in Schedule A hereto when the Company achieves its
revenues and
<PAGE>
earnings objectives and when the Employee satisfies reasonable performance
standards set by management.
5. OTHER BENEFITS. During the term of this Agreement, the Employee
shall also be entitled to participate in or receive benefits under all of the
Company's benefit plans, programs, arrangements and practices, including
pension, disability, and group life, sickness, accident or health insurance
programs, if any, as may be established from time to time by the Company for the
benefit of employees serving in similar capacities with the Company (and/or its
affiliates), in accordance with the terms of such plans, as amended by the
Company from time to time; it being understood that there is no assurance with
respect to the establishment of such plans or, if established, the continuation
of such plans during the term of this Agreement.
6. DUTIES.
A. During the term of this Agreement, the Employee shall serve as
the President and Chief Operating Officer and shall have such powers and shall
perform such duties as are incident and customary to his office, and shall
perform such other additional duties and functions commensurate with such
position as from time to time shall be assigned to him by the Company. Such
duties shall include but not be limited to managing engineering, customer
support and other staff, development and business functions as needed. The
Employee shall perform such additional duties and functions without separate
compensation, unless otherwise authorized by the Company.
B. The Employee shall devote his full time, attention, skill, and
energy to the performance of his duties under this Agreement, and shall comply
with all reasonable requests of the Company; provided, however, that the
Employee will be permitted to engage in and manage personal investments and to
participate in community and charitable affairs, so long as such activities do
not interfere with his duties under this Agreement.
C. The Employee shall immediately notify the Company of (i) his own
illness and consequent absence from work, or (ii) any intended significant
change in his plans to work for the Company.
7. VACATION AND SICK LEAVE.
A. The Employee shall be entitled to a total of three (3) weeks of
vacation for each year in which he works at least 1,950 hours (including
vacation hours) for the Company. Vacation leave shall accrue during the work
year. Up to one (1) week of unused vacation time shall accumulate from year to
year. The Employee may take his vacation at such time or times as shall not
interfere with the performance of his duties under this Agreement.
B. The Employee shall be entitled to paid sick leave and holidays
in accordance with the Company's announced policy for employees, as in effect
from time to time.
-2-
<PAGE>
8. EXPENSES. The Company shall reimburse the Employee for all
reasonable expenses incurred in connection with his duties on behalf of the
Company, provided that the Employee shall keep, and present to the Company,
records and receipts relating to reimbursable expenses incurred by him. Such
records and receipts shall be maintained and presented in a format, and with
such regularity, as the Company reasonably may require in order to substantiate
the Company's right to claim income tax deductions for such expenses. Without
limiting the generality of the foregoing, the Employee shall be entitled to
reimbursement for any business-related travel, business-related entertainment
whether at his residence or otherwise, and other costs and expenses reasonably
incident to the performance of his duties on behalf of the Company. Reimbursable
business-related expenses incurred at the Employee's home will include telephone
charges and out-of-pocket expenses but shall exclude office space reimbursement.
9. TERMINATION OF EMPLOYMENT FOR CAUSE. Notwithstanding the provisions
of Paragraph 2 of this Agreement, the Employee's employment (and all of his
rights and benefits under this Agreement) shall terminate immediately and
without further notice upon the happening of any one or more of the following
events:
A. The Employee has been or is guilty of (i) a criminal
offense involving moral turpitude, (ii) criminal or dishonest conduct pertaining
to the business or affairs of the Company (including, without limitation, fraud
and misappropriation), (iii) any act or omission the intended or likely
consequence of which is material injury to the Company's business, property or
reputation, which act or omission continues uncured for a period of ten (10)
days after the Employee has received written notice from the Board of Directors,
and (iv) gross negligence or willful misconduct which continues uncured for a
period of ten (10) days after the Employee has received written notice from the
Board of Directors;
B. The Employee persists, for a period of ten (10) days after
written notice from the Board of Directors, in a course of conduct reasonably
determined by the Board of Directors to be in material violation of his duties
to the Company under this Agreement or otherwise in violation of the covenants,
agreements or obligations under the terms of this Agreement;
C. The Employee's death; or
D. The continuous and uninterrupted inability to perform the
Employee's duties on behalf of the Company, by reason of accident, illness, or
disease, for a period of sixty (60) days from the first day of such inability to
perform his duties.
Subsections A, B, C, & D of this Section 9 are hereinafter referred to
collectively and individually as "Cause". In the event of a termination for
Cause, the Company shall pay the Employee his base salary through the effective
date of the employment termination, and the Employee shall immediately
thereafter forfeit all rights and benefits (other than vested benefits),
including but not limited to any right to compensation pursuant to Section 4 or
5 of this
-3-
<PAGE>
Agreement, he would otherwise have been entitled to receive under this
Agreement. The Company and the Employee thereafter shall have no further
obligations under this Agreement except as otherwise provided in Sections 12, 13
and 14 of this Agreement.
10. CHANGE OF CONTROL; TERMINATION OF EMPLOYMENT BY THE COMPANY WITHOUT
CAUSE. Notwithstanding the provisions of Section 2 of this Agreement, the Board
of Directors may terminate the Employee's employment at any time, for reasons
other than for Cause by notifying the Employee in writing of such termination.
If (A) the Employee is terminated pursuant to this Section 10 for reasons other
than for Cause, or (B) if a Change of Control (as defined below) occurs and,
within two (2) years thereafter, the Employee is terminated without Cause, or
the Employee's duties and responsibilities are materially changed and the
Employee determines to terminate his employment, the Company shall pay the
Employee, in a lump sum, (i) an amount equal to two (2) year's worth of his base
salary at the rate in effect immediately prior to the date of termination but,
in the case of item (B), less the amount of base salary the Employee has
received since the Change of Control and (ii) the unpaid balance of any deferred
compensation owed to the Employee. Employee shall immediately thereafter forfeit
all rights and benefits (other than vested benefits), including but not limited
to any right to compensation pursuant to Section 4 or 5 of this Agreement he
would otherwise have been entitled to receive under this Agreement.
Notwithstanding the foregoing, should the Board of Directors terminate the
Employee without cause all unvested options shall immediately accelerate. The
Company and the Employee thereafter shall have no further obligations under this
Agreement except as otherwise provided in Sections 12, 13 and 14 of this
Agreement.
For purposes of this Agreement, a "Change in Control" shall be deemed
to have occurred if, in a single transaction or series of transactions, (a) the
Company merges or consolidates with another entity (other than an affiliated
entity) and the Company is not the surviving entity, (b) the Company sells
substantially all of its assets to any person (other than an to an affiliated
entity) or (c) the Company sells more than fifty percent (50%) of its capital
stock to another person or entity.
11. TERMINATION OF EMPLOYMENT BY THE EMPLOYEE. Notwithstanding the
provisions of Section 2 of this Agreement, the Employee may terminate this
Agreement at any time by giving the Board of Directors written notice of his
intent to terminate, delivered at least sixty (60) days prior to the effective
date of such termination.
Upon expiration of the sixty (60) day notice period (or such earlier
date as may be approved by the Board of Directors), the termination by the
Employee shall become effective. Upon the effective date the Employee shall
immediately thereafter forfeit all rights and benefits (other than vested
benefits), including but not limited to any right to compensation pursuant to
Section 4 or 5 of this Agreement, he would otherwise have been entitled to
receive under this Agreement. The Company and the Employee thereafter shall have
no further obligations under this Agreement except as otherwise provided in
Sections 12, 13 and 14 of this Agreement..
This Section 11 shall not apply to a termination by the Employee
following a Changer of Control, as described in Section 10.
-4-
<PAGE>
12. NON-COMPETITION. The Employee and the Company recognize that due to
the nature of his employment, and his relationship with the Company, the
Employee has had and will have access to, and has acquired and will acquire, and
has assisted and will assist in developing, confidential and proprietary
information relating to the business and operations of the Company including,
without limitation, information with respect to its present and prospective
services, technologies, systems, clients, customers, agents, and sales and
marketing methods. The Employee acknowledges that such information has been and
will be of central importance to the Company's business and that disclosure of
it to or its use by others could cause substantial loss to the Company. The
Employee and the Company also recognize that an important part of the Employee's
duties will be to develop good will for the Company through his personal contact
with the Company's clients, and that there is a danger that this good will, a
proprietary asset of the Company, may follow the Employee if and when his
relationship with the Company is terminated.
A. The Employee agrees that, during the term of his employment
with the Company, and for a period of one (1) year after the termination of his
employment for any reason whatsoever (including the non-renewal of this
Agreement by either party):
(i) The Employee will not directly or indirectly, in
any jurisdiction where the Company is operating on the date of
such termination, whether as a partner, proprietor, employee,
consultant, agent or otherwise, participate or engage in any
business that competes with, restricts, or interferes with the
business of the Company including but not limited to working
with any of the following companies without the prior written
consent of the Company:
a. Northern Light
b. dowjones.com
c. office.com
d. Lexis Nexis
e. Hoovers
f. Excite
(ii) The Employee will not directly or indirectly
(for his own account, or for the account of others) interfere
with, solicit, or accept for himself, his benefit, or for
anyone other than the Company, any of the clients or customers
of the Company, at the time of said termination, or any
potential clients or customers solicited or being solicited by
the
-5-
<PAGE>
Company at the time of such termination or within the period
one (1) year prior thereto, or perform any services of any
competitive nature in connection with said clients or
customers for anyone other than the Company.
(iii) The Employee further agrees that he shall not,
at any time, directly or indirectly, urge any client (or
customer) or potential client (or potential customer) of the
Company to discontinue business, in whole or in part, or not
to do business, with the Company.
(vi) The Employee further agrees that he shall not,
at any time, directly or indirectly, solicit, hire or arrange
to hire any person who at the time of such hire or within six
(6) months prior to the time of such hire was an employee of
the Company, or for himself or for any business entity with
which he may be, or may be planning to be, affiliated or
associated with, or otherwise interfere with the retention of
employees that the Company desires to retain as such.
B. The Employee expressly acknowledges and agrees (i) that the
restrictions set forth herein are reasonable, in terms of scope, duration,
geographic area, and otherwise, (ii) that the protections afforded to the
Company hereunder are necessary to protect its legitimate business interests,
and (iii) that the agreement to observe such restrictions form a material part
of the consideration for this Agreement and the Employee's employment by the
Company.
13. OWNERSHIP OF INFORMATION, IDEAS AND PRODUCTS. The Employee agrees
that, during the term of his employment with the Company, any invention,
modification, discovery, design, development, improvement, process, software
program, work of authorship, documentation, formula, data, technique, know-how,
secret or intellectual property right whatsoever or any interest therein
(whether or not patentable or registrable under copyright or similar statutes or
subject to analogous protection) (herein called "Developments") that he develops
or conceives, individually or in conjunction with others, shall be and remain
the sole and exclusive property of the Company and that immediately upon the
termination of his employment he shall deliver all of the foregoing, and all
copies or reproductions thereof, to the Company, at its main office. If at any
time or times during his employment with the Company the Employee shall (either
alone or with others) make, conceive, discover or reduce to practice any
Development that (a) relates to the business of the Company or any customer of
or supplier to the Company or any of the products or services being developed,
manufactured or sold or developed by the Company or which may be used in
relation therewith, (b) results from tasks assigned to the Employee by the
Company or (c) results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Company, such
Developments and the benefits thereof shall immediately become the sole and
absolute property of the Company and its assigns, and the Employee shall
promptly disclose to the Company (or any persons designated by it) each such
Development and hereby assign any rights Employee
-6-
<PAGE>
may have or acquire in the Developments and benefits and/or rights resulting
therefrom to the Company and its assigns without further compensation and shall
communicate, without cost or delay, and without publishing the same, all
available information relating thereto (with all necessary plans and models) to
the Company.
Upon disclosure of each Development to the Company, Employee
will, during his employment and at any time thereafter, at the request and cost
of the Company, sign, execute, make and do all such deeds, documents, acts and
things as the Company and its duly authorized agents may reasonably require:
(a) to apply for, obtain and vest in the name of the
Company alone (unless the Company otherwise directs) letters
patent, copyrights or other analogous protection in any
country throughout the world and when so obtained or vested to
renew and restore the same; and
(b) to defend any opposition proceedings in respect
of such applications and any opposition proceedings or
petitions or applications for evocation of such letters
patent, copyright or other analogous protection.
If the Company is unable, after reasonable effort, to secure Employee's
signature on any letters, patent, copyright or other analogous protection
relating to a Development, whether because of his physical or mental incapacity
or for any other reason whatsoever, Employee hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as his agent and
attorney-in-fact, to act for and in my behalf and stead to execute and file any
such application or applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent, copyright or other
analogous protection thereon with the same legal force and effect as if executed
by Employee.
14. CONFIDENTIAL INFORMATION. The Employee agrees that, during the term
of his employment with the Company, and for a period of two (2) years after the
termination of his employment for any reason whatsoever, he shall not disclose
to any person or use the same in any way in direct or indirect competition with
the Company, other than in the discharge of his duties under this Agreement in
connection with the business of the Company, any trade secrets or confidential
or proprietary information of the Company, including, without limitation, any
information or knowledge relating to (i) trade secrets, inventions, products,
designs, methods, know-how, techniques, systems, processes, software programs,
works of authorship, projects, plans, proposals, business, finances, operations
or internal structure of the Company, (ii) the clients (or customers) or
potential clients (or potential customers) of the Company, (iii) any method
and/or procedure (such as records, programs, systems, correspondence, or other
documents), relating or pertaining to the foregoing, or (iv) the Company's
business, which information or knowledge the Employee shall have obtained during
the term of this Agreement. Further, upon leaving the employ of the Company for
any reason whatsoever, the Employee shall not take with him, without prior
written consent of the Company, any documents, forms, or other reproductions of
any data or any information relating to or pertaining to the Company, any
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<PAGE>
clients (or customers) or potential clients (or potential customers) of the
Company, or any other confidential information or trade secrets.
15. ENTIRE AGREEMENT; AMENDMENTS, OTHER AGREEMENTS. This Agreement
contains the entire understanding of the Employee and the Company with respect
to employment of the Employee and supersedes any and all prior understandings,
written or oral. This Agreement may not be amended, waived, discharged or
terminated orally, but only by an instrument in writing executed by the Company
and the Employee.
16. MISCELLANEOUS.
A. Any notices required by this Agreement shall (i) be made in
writing and mailed by certified mail, return receipt requested, with adequate
postage prepaid; (ii) be deemed given when so mailed; (iii) be deemed received
by the addressee within ten (10) days after given or when the certified mail
receipt for such mail is executed, whichever if earlier; and (iv) in the case of
the Company, be mailed to its principal office, or in the case of the Employee,
be mailed to the last address that the Employee has given to the Company.
B. This Agreement shall be binding upon and inure to the
benefit of, the parties, their successors, assigns, personal representatives,
distributees, heirs, and legatees.
C. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland, without giving
effect to the principles of conflicts of law thereof. For the purpose of
expediting the resolution of any such claim or dispute, the parties hereby waive
trial by jury.
D. Any failure by the Company to insist upon strict compliance
with any term or provision of this Agreement, to exercise any option, to enforce
any right, or to seek any remedy upon any breach by the Employee shall not
affect, or constitute a waiver of, the Company's right to insist upon such
strict compliance, exercise such option, enforce such right, or seek such remedy
with respect to such breach or any prior, contemporaneous, or subsequent breach.
No custom or practice of the Company at variance with any provision of this
Agreement shall affect or constitute a waiver of, the Company's right to demand
strict compliance with all provisions of this Agreement.
E. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be deemed
severable from the remainder of this Agreement, and the remaining provisions
contained in this Agreement shall be construed to preserve to the maximum
permissible extent the intent and purposes of this Agreement. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
F. In the event that the Employee violates the provisions of
Sections 12, 13 or 14 above, upon notice from the Company informing him of the
nature of such violation, the
-8-
<PAGE>
Employee shall immediately terminate any actions which constitute such
violation. The existence of this right shall not preclude any other rights and
remedies at law or in equity which the Company may have.
G. It is recognized that damages in the event of breach of any
provision of Sections 12, 13 or 14 above by the Employee would be difficult, if
not impossible, to ascertain, and it is therefore agreed that the Company, in
addition to and without limiting any other remedy or right it may have, shall
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach; and the Employee hereby
waives any and all defenses he may have on the ground of the lack of
jurisdiction or competence of the court to grant such an injunction or other
equitable relief. The existence of this right shall not preclude any other
rights and remedies at law or in equity which the Company may have.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first hereinabove written.
ATTEST: POWERIZE.COM, INC.
/s/ Ted S. Bagheri By: /s/ Edwin R. Addison
- -------------------------------- ----------------------------
Ted S. Bagheri Edwin R. Addison
Executive Vice President and Chief Executive Officer
Chief Financial Officer
WITNESS: EMPLOYEE:
/s/ Ted S. Bagheri By: /s/ Mark Gaertner
- -------------------------------- ----------------------------
Mark Gaertner
-9-
<PAGE>
SCHEDULE A
COMPENSATION
MARK GAERTNER, PRESIDENT AND CHIEF OPERATING OFFICER
<TABLE>
TIME PERIOD SALARY PER MONTH ANNUAL BONUS ELIGIBILITY*
<S> <C> <C>
January 1, 1999 and thereafter $12,500 $75,000
(full time)
</TABLE>
*Annual Bonus Eligibility represents amount payable if the Company meets its
revenue budget and the Employee achieves certain objectives established by the
Company. Annual Bonus will be paid 25% each fiscal quarter in which such results
are achieved.
<PAGE>
EXHIBIT 10.5
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made this 28th
day of May, 1999 and is effective as of the 31st day of December 1998, by and
between Powerize.com, Inc., a Delaware corporation (the "Company"), and Ted S.
Bagheri (the "Employee").
EXPLANATORY STATEMENT
WHEREAS, the Company and the Employee had entered into an original
employment agreement dated May 31, 1997 and now desire to amend and restate such
original employment agreement in its entirety; and
WHEREAS, the Company desires to employ the Employee on the terms
and conditions herein set forth, and the Employee has agreed to accept
employment with the Company on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
promises made herein, the parties agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee as its
Executive Vice President and Chief Financial Officer, and agrees to continue the
Employee in that position (or in any other position approved by the Employee)
during the term of this Agreement.
2. TERM. This Agreement shall begin December 31, 1998 and shall
continue until December 31, 2001. Thereafter, this Agreement shall renew
automatically from year to year, subject to the right of either party to
terminate this Agreement at any time during the initial term or during any
renewal term upon sixty (60) days' prior written notice to the other party.
3. COMPENSATION.
A. The Employee's compensation under this Agreement shall be as set
forth in Schedule A attached hereto and made a part hereof.
B. Such salary shall be subject to normal periodic reviews based on
the policies and practices of the Company.
4. BONUSES; EQUITY PLANS. In addition to his salary, during the
term of this Agreement, the Employee shall be entitled to participate in any
bonus, stock and option plans, programs, arrangements and practices sponsored by
the Company for the benefit of its employees serving in similar capacities with
the Company (and/or its affiliates) as may be established from time to time by
the Company for the benefit of such employees, in accordance with the terms of
such plans, as amended by the Company from time to time. Bonuses will be paid to
the Employee as described in Schedule A hereto when the Company achieves its
revenues and
<PAGE>
earnings objectives and when the Employee satisfies reasonable performance
standards set by management.
5. OTHER BENEFITS. During the term of this Agreement, the Employee
shall also be entitled to participate in or receive benefits under all of the
Company's benefit plans, programs, arrangements and practices, including
pension, disability, and group life, sickness, accident or health insurance
programs, if any, as may be established from time to time by the Company for the
benefit of employees serving in similar capacities with the Company (and/or its
affiliates), in accordance with the terms of such plans, as amended by the
Company from time to time; it being understood that there is no assurance with
respect to the establishment of such plans or, if established, the continuation
of such plans during the term of this Agreement.
6. DUTIES.
A. During the term of this Agreement, the Employee shall serve as
the Executive Vice President and Chief Financial Officer and shall have such
powers and shall perform such duties as are incident and customary to his
office, and shall perform such other additional duties and functions
commensurate with such position as from time to time shall be assigned to him by
the Company. Such duties shall include but not be limited to managing
engineering, customer support and other staff, development and business
functions as needed. The Employee shall perform such additional duties and
functions without separate compensation, unless otherwise authorized by the
Company.
B. The Employee shall devote his full time, attention, skill, and
energy to the performance of his duties under this Agreement, and shall comply
with all reasonable requests of the Company; provided, however, that the
Employee will be permitted to engage in and manage personal investments and to
participate in community and charitable affairs, so long as such activities do
not interfere with his duties under this Agreement.
C. The Employee shall immediately notify the Company of (i) his own
illness and consequent absence from work, or (ii) any intended significant
change in his plans to work for the Company.
7. VACATION AND SICK LEAVE.
A. The Employee shall be entitled to a total of three (3) weeks of
vacation for each year in which he works at least 1,950 hours (including
vacation hours) for the Company. Vacation leave shall accrue during the work
year. Up to one (1) week of unused vacation time shall accumulate from year to
year. The Employee may take his vacation at such time or times as shall not
interfere with the performance of his duties under this Agreement.
B. The Employee shall be entitled to paid sick leave and holidays
in accordance with the Company's announced policy for employees, as in effect
from time to time.
-2-
<PAGE>
8. EXPENSES. The Company shall reimburse the Employee for all
reasonable expenses incurred in connection with his duties on behalf of the
Company, provided that the Employee shall keep, and present to the Company,
records and receipts relating to reimbursable expenses incurred by him. Such
records and receipts shall be maintained and presented in a format, and with
such regularity, as the Company reasonably may require in order to substantiate
the Company's right to claim income tax deductions for such expenses. Without
limiting the generality of the foregoing, the Employee shall be entitled to
reimbursement for any business-related travel, business-related entertainment
whether at his residence or otherwise, and other costs and expenses reasonably
incident to the performance of his duties on behalf of the Company. Reimbursable
business-related expenses incurred at the Employee's home will include telephone
charges and out-of-pocket expenses but shall exclude office space reimbursement.
9. TERMINATION OF EMPLOYMENT FOR CAUSE. Notwithstanding the provisions
of Paragraph 2 of this Agreement, the Employee's employment (and all of his
rights and benefits under this Agreement) shall terminate immediately and
without further notice upon the happening of any one or more of the following
events:
A. The Employee has been or is guilty of (i) a criminal
offense involving moral turpitude, (ii) criminal or dishonest conduct pertaining
to the business or affairs of the Company (including, without limitation, fraud
and misappropriation), (iii) any act or omission the intended or likely
consequence of which is material injury to the Company's business, property or
reputation, which act or omission continues uncured for a period of ten (10)
days after the Employee has received written notice from the Board of Directors,
and (iv) gross negligence or willful misconduct which continues uncured for a
period of ten (10) days after the Employee has received written notice from the
Board of Directors;
B. The Employee persists, for a period of ten (10) days after
written notice from the Board of Directors, in a course of conduct reasonably
determined by the Board of Directors to be in material violation of his duties
to the Company under this Agreement or otherwise in violation of the covenants,
agreements or obligations under the terms of this Agreement;
C. The Employee's death; or
D. The continuous and uninterrupted inability to perform the
Employee's duties on behalf of the Company, by reason of accident, illness, or
disease, for a period of sixty (60) days from the first day of such inability to
perform his duties.
Subsections A, B, C, & D of this Section 9 are hereinafter referred to
collectively and individually as "Cause". In the event of a termination for
Cause, the Company shall pay the Employee his base salary through the effective
date of the employment termination, and the Employee shall immediately
thereafter forfeit all rights and benefits (other than vested benefits),
including but not limited to any right to compensation pursuant to Section 4 or
5 of this
-3-
<PAGE>
Agreement, he would otherwise have been entitled to receive under this
Agreement. The Company and the Employee thereafter shall have no further
obligations under this Agreement except as otherwise provided in Sections 12, 13
and 14 of this Agreement.
10. CHANGE OF CONTROL; TERMINATION OF EMPLOYMENT BY THE COMPANY WITHOUT
CAUSE. Notwithstanding the provisions of Section 2 of this Agreement, the Board
of Directors may terminate the Employee's employment at any time, for reasons
other than for Cause by notifying the Employee in writing of such termination.
If (A) the Employee is terminated pursuant to this Section 10 for reasons other
than for Cause, or (B) if a Change of Control (as defined below) occurs and,
within two (2) years thereafter, the Employee is terminated without Cause, or
the Employee's duties and responsibilities are materially changed and the
Employee determines to terminate his employment, the Company shall pay the
Employee, in a lump sum, (i) an amount equal to two (2) year's worth of his base
salary at the rate in effect immediately prior to the date of termination but,
in the case of item (B), less the amount of base salary the Employee has
received since the Change of Control and (ii) the unpaid balance of any deferred
compensation owed to the Employee. Employee shall immediately thereafter forfeit
all rights and benefits (other than vested benefits), including but not limited
to any right to compensation pursuant to Section 4 or 5 of this Agreement he
would otherwise have been entitled to receive under this Agreement.
Notwithstanding the foregoing, should the Board of Directors terminate the
Employee without cause all unvested options shall immediately accelerate. The
Company and the Employee thereafter shall have no further obligations under this
Agreement except as otherwise provided in Sections 12, 13 and 14 of this
Agreement.
For purposes of this Agreement, a "Change in Control" shall be deemed
to have occurred if, in a single transaction or series of transactions, (a) the
Company merges or consolidates with another entity (other than an affiliated
entity) and the Company is not the surviving entity, (b) the Company sells
substantially all of its assets to any person (other than an to an affiliated
entity) or (c) the Company sells more than fifty percent (50%) of its capital
stock to another person or entity.
11. TERMINATION OF EMPLOYMENT BY THE EMPLOYEE. Notwithstanding the
provisions of Section 2 of this Agreement, the Employee may terminate this
Agreement at any time by giving the Board of Directors written notice of his
intent to terminate, delivered at least sixty (60) days prior to the effective
date of such termination.
Upon expiration of the sixty (60) day notice period (or such earlier
date as may be approved by the Board of Directors), the termination by the
Employee shall become effective. Upon the effective date the Employee shall
immediately thereafter forfeit all rights and benefits (other than vested
benefits), including but not limited to any right to compensation pursuant to
Section 4 or 5 of this Agreement, he would otherwise have been entitled to
receive under this Agreement. The Company and the Employee thereafter shall have
no further obligations under this Agreement except as otherwise provided in
Sections 12, 13 and 14 of this Agreement..
This Section 11 shall not apply to a termination by the Employee
following a Changer of Control, as described in Section 10.
-4-
<PAGE>
12. NON-COMPETITION. The Employee and the Company recognize that due to
the nature of his employment, and his relationship with the Company, the
Employee has had and will have access to, and has acquired and will acquire, and
has assisted and will assist in developing, confidential and proprietary
information relating to the business and operations of the Company including,
without limitation, information with respect to its present and prospective
services, technologies, systems, clients, customers, agents, and sales and
marketing methods. The Employee acknowledges that such information has been and
will be of central importance to the Company's business and that disclosure of
it to or its use by others could cause substantial loss to the Company. The
Employee and the Company also recognize that an important part of the Employee's
duties will be to develop good will for the Company through his personal contact
with the Company's clients, and that there is a danger that this good will, a
proprietary asset of the Company, may follow the Employee if and when his
relationship with the Company is terminated.
A. The Employee agrees that, during the term of his employment
with the Company, and for a period of one (1) year after the termination of his
employment for any reason whatsoever (including the non-renewal of this
Agreement by either party):
(i) The Employee will not directly or indirectly, in
any jurisdiction where the Company is operating on the date of
such termination, whether as a partner, proprietor, employee,
consultant, agent or otherwise, participate or engage in any
business that competes with, restricts, or interferes with the
business of the Company including but not limited to working
with any of the following companies without the prior written
consent of the Company:
a. Northern Light
b. dowjones.com
c. office.com
d. Lexis Nexis
e. Hoovers
f. Excite
(ii) The Employee will not directly or indirectly
(for his own account, or for the account of others) interfere
with, solicit, or accept for himself, his benefit, or for
anyone other than the Company, any of the clients or customers
of the Company, at the time of said termination, or any
potential clients or customers solicited or being solicited by
the
-5-
<PAGE>
Company at the time of such termination or within the
period one (1) year prior thereto, or perform any services of
any competitive nature in connection with said clients or
customers for anyone other than the Company.
(iii) The Employee further agrees that he shall not,
at any time, directly or indirectly, urge any client (or
customer) or potential client (or potential customer) of the
Company to discontinue business, in whole or in part, or not
to do business, with the Company.
(vi) The Employee further agrees that he shall not,
at any time, directly or indirectly, solicit, hire or arrange
to hire any person who at the time of such hire or within six
(6) months prior to the time of such hire was an employee of
the Company, or for himself or for any business entity with
which he may be, or may be planning to be, affiliated or
associated with, or otherwise interfere with the retention of
employees that the Company desires to retain as such.
B. The Employee expressly acknowledges and agrees (i) that the
restrictions set forth herein are reasonable, in terms of scope, duration,
geographic area, and otherwise, (ii) that the protections afforded to the
Company hereunder are necessary to protect its legitimate business interests,
and (iii) that the agreement to observe such restrictions form a material part
of the consideration for this Agreement and the Employee's employment by the
Company.
13. OWNERSHIP OF INFORMATION, IDEAS AND PRODUCTS. The Employee agrees
that, during the term of his employment with the Company, any invention,
modification, discovery, design, development, improvement, process, software
program, work of authorship, documentation, formula, data, technique, know-how,
secret or intellectual property right whatsoever or any interest therein
(whether or not patentable or registrable under copyright or similar statutes or
subject to analogous protection) (herein called "Developments") that he develops
or conceives, individually or in conjunction with others, shall be and remain
the sole and exclusive property of the Company and that immediately upon the
termination of his employment he shall deliver all of the foregoing, and all
copies or reproductions thereof, to the Company, at its main office. If at any
time or times during his employment with the Company the Employee shall (either
alone or with others) make, conceive, discover or reduce to practice any
Development that (a) relates to the business of the Company or any customer of
or supplier to the Company or any of the products or services being developed,
manufactured or sold or developed by the Company or which may be used in
relation therewith, (b) results from tasks assigned to the Employee by the
Company or (c) results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Company, such
Developments and the benefits thereof shall immediately become the sole and
absolute property of the Company and its assigns, and the Employee shall
promptly disclose to the Company (or any persons designated by it) each such
Development and hereby assign any rights Employee
-6-
<PAGE>
may have or acquire in the Developments and benefits and/or rights resulting
therefrom to the Company and its assigns without further compensation and shall
communicate, without cost or delay, and without publishing the same, all
available information relating thereto (with all necessary plans and models) to
the Company.
Upon disclosure of each Development to the Company, Employee
will, during his employment and at any time thereafter, at the request and cost
of the Company, sign, execute, make and do all such deeds, documents, acts and
things as the Company and its duly authorized agents may reasonably require:
(a) to apply for, obtain and vest in the name of the
Company alone (unless the Company otherwise directs) letters
patent, copyrights or other analogous protection in any
country throughout the world and when so obtained or vested to
renew and restore the same; and
(b) to defend any opposition proceedings in respect
of such applications and any opposition proceedings or
petitions or applications for evocation of such letters
patent, copyright or other analogous protection.
If the Company is unable, after reasonable effort, to secure Employee's
signature on any letters, patent, copyright or other analogous protection
relating to a Development, whether because of his physical or mental incapacity
or for any other reason whatsoever, Employee hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as his agent and
attorney-in-fact, to act for and in my behalf and stead to execute and file any
such application or applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent, copyright or other
analogous protection thereon with the same legal force and effect as if executed
by Employee.
14. CONFIDENTIAL INFORMATION. The Employee agrees that, during the term
of his employment with the Company, and for a period of two (2) years after the
termination of his employment for any reason whatsoever, he shall not disclose
to any person or use the same in any way in direct or indirect competition with
the Company, other than in the discharge of his duties under this Agreement in
connection with the business of the Company, any trade secrets or confidential
or proprietary information of the Company, including, without limitation, any
information or knowledge relating to (i) trade secrets, inventions, products,
designs, methods, know-how, techniques, systems, processes, software programs,
works of authorship, projects, plans, proposals, business, finances, operations
or internal structure of the Company, (ii) the clients (or customers) or
potential clients (or potential customers) of the Company, (iii) any method
and/or procedure (such as records, programs, systems, correspondence, or other
documents), relating or pertaining to the foregoing, or (iv) the Company's
business, which information or knowledge the Employee shall have obtained during
the term of this Agreement. Further, upon leaving the employ of the Company for
any reason whatsoever, the Employee shall not take with him, without prior
written consent of the Company, any documents, forms, or other reproductions of
any data or any information relating to or pertaining to the Company, any
-7-
<PAGE>
clients (or customers) or potential clients (or potential customers) of the
Company, or any other confidential information or trade secrets.
15. ENTIRE AGREEMENT; AMENDMENTS, OTHER AGREEMENTS. This Agreement
contains the entire understanding of the Employee and the Company with respect
to employment of the Employee and supersedes any and all prior understandings,
written or oral. This Agreement may not be amended, waived, discharged or
terminated orally, but only by an instrument in writing executed by the Company
and the Employee.
16. MISCELLANEOUS.
A. Any notices required by this Agreement shall (i) be made in
writing and mailed by certified mail, return receipt requested, with adequate
postage prepaid; (ii) be deemed given when so mailed; (iii) be deemed received
by the addressee within ten (10) days after given or when the certified mail
receipt for such mail is executed, whichever if earlier; and (iv) in the case of
the Company, be mailed to its principal office, or in the case of the Employee,
be mailed to the last address that the Employee has given to the Company.
B. This Agreement shall be binding upon and inure to the
benefit of, the parties, their successors, assigns, personal representatives,
distributees, heirs, and legatees.
C. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland, without giving
effect to the principles of conflicts of law thereof. For the purpose of
expediting the resolution of any such claim or dispute, the parties hereby waive
trial by jury.
D. Any failure by the Company to insist upon strict compliance
with any term or provision of this Agreement, to exercise any option, to enforce
any right, or to seek any remedy upon any breach by the Employee shall not
affect, or constitute a waiver of, the Company's right to insist upon such
strict compliance, exercise such option, enforce such right, or seek such remedy
with respect to such breach or any prior, contemporaneous, or subsequent breach.
No custom or practice of the Company at variance with any provision of this
Agreement shall affect or constitute a waiver of, the Company's right to demand
strict compliance with all provisions of this Agreement.
E. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be deemed
severable from the remainder of this Agreement, and the remaining provisions
contained in this Agreement shall be construed to preserve to the maximum
permissible extent the intent and purposes of this Agreement. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
F. In the event that the Employee violates the provisions of
Sections 12, 13 or 14 above, upon notice from the Company informing him of the
nature of such violation, the
-8-
<PAGE>
Employee shall immediately terminate any actions which constitute such
violation. The existence of this right shall not preclude any other rights and
remedies at law or in equity which the Company may have.
G. It is recognized that damages in the event of breach of any
provision of Sections 12, 13 or 14 above by the Employee would be difficult, if
not impossible, to ascertain, and it is therefore agreed that the Company, in
addition to and without limiting any other remedy or right it may have, shall
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach; and the Employee hereby
waives any and all defenses he may have on the ground of the lack of
jurisdiction or competence of the court to grant such an injunction or other
equitable relief. The existence of this right shall not preclude any other
rights and remedies at law or in equity which the Company may have.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first hereinabove written.
ATTEST: POWERIZE.COM, INC.
/s/ Ted S. Bagheri By: /s/ Edwin R. Addison
- ------------------------------ ------------------------------
Ted S. Bagheri Edwin R. Addison
Executive Vice President and Chief Executive Officer
Chief Financial Officer
WITNESS: EMPLOYEE:
/s/ Mark A. Gaertner /s/ Ted S. Bagheri
- ------------------------------ ----------------------------------
Ted S. Bagheri
-9-
<PAGE>
SCHEDULE A
COMPENSATION
TED S. BAGHERI, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
<TABLE>
TIME PERIOD SALARY PER MONTH ANNUAL BONUS ELIGIBILITY*
<S> <C> <C>
January 1, 1999 and thereafter $10,417 $62,500
(full time)
</TABLE>
*Annual Bonus Eligibility represents amount payable if the Company meets its
revenue budget and the Employee achieves certain objectives established by the
Company. Annual Bonus will be paid 25% each fiscal quarter in which such results
are achieved.
<PAGE>
INFORMATION SERVICES AGREEMENT
This Information Services Agreement ("Agreement") is entered into as of
May 14, 1999 (the "Effective Date"), by and between Inktomi Corporation, a
Delaware corporation with its principal place of business at 1900 South Norfolk
Street, Suite 310, San Mateo, California, 94403 ("Inktomi") and powerize.com,
Inc., having its principal place of business at 901 Elkridge Landing Road, Suite
350, Linthicum, Maryland 21090 ("Powerize").
RECITALS
A. Inktomi provides services utilizing certain technology for searching
and indexing the Internet (the "Inktomi Search Engine," as more fully defined
below).
B. Powerize provides its customers the ability to search for and access
business information compiled by Powerize.
C. Powerize wishes Inktomi to provide search engine services using the
Inktomi Search Engine to provide its customers more efficient access to certain
of the Powerize Databases (more fully defined below) in accordance with the
terms and conditions of this Agreement.
D. Inktomi wishes to provide its customers access to the Powerize's
Databases and to further distribute such data to Inktomi's customers in
accordance with the terms and conditions of this Agreement.
AGREEMENT
In consideration of the foregoing and the mutual promises contained
herein the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
will have the indicated meanings:
1.1. "Database" means Inktomi's full text index database of
Web pages accessible by end users of the Site at any given time. The Database is
a database maintained as part of the Premium Content Search Services described
on Exhibit A.
1.2. "Documents" mean collectively Web pages and records
exported from a relational database.
1.3. "Inktomi Data Protocol" means the written specification
on how an Interface communicates and interacts with the Inktomi Search Engine.
1.4. "Inktomi Search Engine" means Inktomi's current Search
Engine as of the Effective Date as the same may be (i) updated as provided on
Exhibit A and (ii) otherwise updated, upgraded, modified, changed, or enhanced
by Inktomi from time to time at its sole discretion. The Inktomi Search Engine
does not and will not include features, options and modules developed and
customized specifically for third parties and provided to such third parties on
an exclusive basis, or features, options, modules and future products which
Inktomi licenses or provides separately.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
1.5. "Inktomi Technology" means the Inktomi Search Engine, the
Inktomi Data Protocol, the Interface Construction Tools and all other computer
software, technology and/or documentation which is supplied by Inktomi for use
in or in connection with delivery of the Services, including without limitation
all source code and object code therefor and all algorithms, ideas and
Intellectual Property Rights therein.
1.6. "Intellectual Property Rights" means any and all rights
existing from time to time under patent law, copyright law, semiconductor chip
protection law, moral rights law, trade secret law, trademark law, unfair
competition law, publicity rights law, privacy rights law, and any and all other
proprietary rights, and any and all applications, renewals, extensions and
restorations thereof, now or hereafter in force and effect worldwide.
1.7. "Interface" means the editorial and graphical content and
design of the Web pages served to end users of the Site, including without
limitation the Search Pages, Results Pages, instruction pages, frequently asked
questions pages and any Site end user terms and guidelines.
1.8. "Interface Construction Tools" means all software tools,
if any, in object code form, provided by Inktomi to assist Powerize to build the
Interface to the Inktomi Search Engine, including without limitation Inktomi's
application server currently known as Forge.
1.9. "Powerize Databases" means those content databases
provided by Powerize to Inktomi from time to time as part of the Premium Content
Search Services described on Exhibit A.
1.10. "Premium Content URL List" means a list of Web sites
specified from time to time by Powerize that will be crawled and indexed as part
of the Premium Content Search Services described on Exhibit A.
1.11. "Results Pages" means all Web pages displaying search
results presented to end-users directly as a result of accessing the query
mechanisms of the Inktomi Search Engine or indirectly through a cache controlled
or influenced by Powerize.
1.12. A "Results Set" means a set of results consisting of
between zero and one hundred records presented (either directly from the Inktomi
Search Engine or indirectly through a cache controlled or influenced by
Powerize) in response to a search query.
1.13. "Search Engine" means computer software which crawls the
Internet, downloads and analyzes text and other data, sorts and organizes the
data, creates an index of accessible data, and, after receiving a particular
search request (in the form of a word query), locates material accessible in the
database, and presents the results of the search.
1.14. "Search Pages" means all Web pages which enable end
users of the Site to initiate and send search queries to the Inktomi Search
Engine.
1.15. "Services" means the Internet search engine services to
be provided by Inktomi for Powerize under this Agreement, as more fully
described on Exhibit A.
1.16. "Site" means a single Web site established and
maintained by Powerize through which end-users may access the Inktomi Search
Engine and run searches against the Database.
1.17. "Term" shall have the meaning indicated in Section 10.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
2
<PAGE>
1.18. "Web" means the so-called World Wide Web, containing,
inter alia, pages written in hypertext markup language (HTML) and/or any similar
successor technology.
1.19. "Web page" means a document on the Internet which may be
viewed in its entirety without leaving the applicable distinct URL address.
1.20. "Web site" means a collection of inter-related Web pages.
2. Provision of Services; Site Implementation.
-------------------------------------------
2.1. Services and Site Implementation. Subject to the terms
and conditions of this Agreement, Inktomi shall provide the Services to Powerize
for use in the Site, such services to be provided substantially in accordance
with the functionality specifications, performance criteria and limitations
specified on Exhibit A. Inktomi, at its own expense, shall provide all data
transmission capacity (bandwidth), disk storage, server capacity and other
hardware and software required to run the Inktomi Search Engine and maintain the
Database and the Powerize Databases. Powerize, at its own expense, shall create
the Interface to the Inktomi Search Engine for the Site, and shall provide all
disk storage, server capacity and other hardware and software required to run
and maintain the Site and the Interface, and to serve advertisements on the
Interface. Inktomi shall provide reasonable assistance (through telephone,
e-mail, the Web, or fax) to Powerize during regular business hours regarding
development of the Interface and integration of the same with the Inktomi Search
Engine. Powerize, at its own expense, shall provide all data transmission
capacity (bandwidth) required to connect to and receive information from the
Inktomi Search Engine.
2.2. Test Cluster. During the development period for the
Interface, Powerize shall only have access through the Inktomi Data Protocol to
a non-production version of the Inktomi Search Engine (the "Test Cluster"). Upon
completion of the Interface and all desired testing against the Test Cluster,
Powerize shall present the Interface to Inktomi for review and testing against
the production version of the Inktomi Search Engine. Inktomi shall promptly
notify Powerize of any problems or issues discovered by Inktomi regarding the
Interface. Once cleared by Inktomi, Inktomi shall provide access to Powerize to
the production version of the Inktomi Search Engine. Powerize may run reasonable
tests against the Test Cluster and the production version of the Inktomi Search
Engine, provided however that Powerize may not conduct any load testing (prior
to commercial launch of its search service) without the prior consent of
Inktomi. Load testing as used herein means the generation and delivery of more
than five queries per second. There shall be no service fee payable by Powerize
for queries run against the Test Cluster.
2.3. Inktomi Data Protocol. Promptly following execution of
this Agreement, Inktomi shall provide the Inktomi Data Protocol and the
Interface Construction Tools to Powerize. Inktomi grants to Powerize a
nontransferable, nonexclusive license during the Term to use the Inktomi Data
Protocol and the Interface Construction Tools solely to create and maintain the
Interface to the Inktomi Search Engine for the Site.
2.4. Other Services. Upon request, and provided that Powerize
is current with service fees due under this Agreement, Inktomi may provide
additional services beyond the services set forth herein. Any such additional
service shall be mutually agreed by the parties and set forth in written work
authorizations signed by both parties, shall be provided at Inktomi's then
applicable consulting rates and charges, and shall be deemed rendered pursuant
to and in accordance with the terms of this Agreement. Work authorizations, if
any, issued under this Agreement shall be sequentially numbered.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
3
<PAGE>
2.5. Inktomi Technology. As between Powerize and Inktomi,
Powerize acknowledges that Inktomi owns all right, title and interest in and to
the Inktomi Technology (except for any software licensed by third parties to
Inktomi), and that Powerize shall not acquire any right, title, and interest in
or to the Inktomi Technology, except as expressly set forth in this Agreement.
Powerize shall not modify, adapt, translate, prepare derivative works from,
decompile, reverse engineer, disassemble or otherwise attempt to derive source
code from any Inktomi software or documentation. Powerize will not remove,
obscure, or alter Inktomi's copyright notice, trademarks, or other proprietary
rights notices affixed to or contained within any Inktomi software or
documentation.
2.6. Interface. As between Inktomi and Powerize, Inktomi
acknowledges that Powerize owns all right, title and interest, including without
limitation all Intellectual Property Rights, in and to the Interface (except for
any software licensed by third parties to Powerize and except for editorial
content regarding the use and functionality of the Inktomi Search Engine
provided by Inktomi to Powerize for incorporation into the Site, which content
shall be and remain Inktomi Technology), and that Inktomi shall not acquire any
right, title or interest in or to the Interface, except as expressly set forth
in this Agreement.
2.7. Nonexclusive Services. Powerize understands that Inktomi will provide the
Services on a nonexclusive basis. Powerize acknowledges that Inktomi has
customized and provided, and will continue to customize and provide, its
software and technology to other parties for use in connection with a variety of
applications, including search engine applications. Nothing in this Agreement
will be deemed to limit or restrict Inktomi from customizing and providing its
software and technology to other parties for any purpose, including in
connection with search engine applications, or in any way affect the rights
granted to such other parties. Inktomi reserves the right to notify other
customers of the signing of this Agreement, but agrees not to provide such
notice earlier than two weeks before a public announcement by Powerize of its
business relationship with Inktomi or two weeks before commercial launch of its
search service, whichever is later.
2.8 Distribution Rights. Powerize may make the Results Sets
available to end-users of third party Web sites subject to the provisions of
this Section and all other terms and conditions of this Agreement. Customer may
make the Results Sets available only in connection with the distribution of
Powerize's search services to such third party sites and may not resell or
distribute the Inktomi Services. No Inktomi Technology may be provided to such
sites, and, unless otherwise agreed in writing by Inktomi, the Results Sets
shall be made available only through Powerize servers or similar means which
prevent direct access to the Inktomi Search Engine by such third party end
users. Powerize will provide such services only pursuant to a written agreement
which is at least as protective of the Inktomi Technology as the terms of this
Agreement and which contains a disclaimer of all warranties and limitations of
liability on behalf of Inktomi. Powerize will notify Inktomi at the end of each
quarter of the distribution relationships it has entered into during such
quarter.
3. Attribution; Trademark License.
-------------------------------
3.1. Attribution. All Search Pages and Results Pages shall
conspicuously display an icon to be provided by Inktomi (the "Inktomi Icon")
that indicates that Inktomi's technology is being used. The Inktomi Icon shall
measure at least 50 x 160 pixels and shall provide a link to a page of Inktomi's
choice on Inktomi's Web site located at www.inktomi.com. The Inktomi Icon shall
be visible "above the fold" (that is, visible when the applicable Web page is
loaded by a browser displaying an active region of 650 x 320 pixels).
3.2. Trademark License. Inktomi hereby grants Powerize a
nontransferable, nonexclusive license under Inktomi's trademarks during the Term
to display the Inktomi Icon on the Site.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
4
<PAGE>
Powerize hereby grants to Inktomi a nontransferable, nonexclusive license under
Powerize's trademarks during the Term to advertise that Powerize is using
Inktomi's services. Promptly following the Effective Date, each party will
provide to the other party its trademark usage guidelines, as such guidelines
may be amended from time to time. All uses of trademarks as set forth above
shall be in accordance with such guidelines. For uses outside of such
guidelines, a party will submit all materials of any kind containing the other
party's nonconforming trademarks to the other party before release to the public
for inspection, and such other party will have the right to approve or
disapprove such material prior to its distribution. Except as set forth in this
Section, nothing in this Agreement shall grant or shall be deemed to grant to
one party any right, title or interest in or to the other party's trademarks.
All use of Powerize trademarks by Inktomi shall inure to the benefit of
Powerize, and all use of Inktomi trademarks by Powerize shall inure to the
benefit of Inktomi. At no time during or after the term of this Agreement shall
one party challenge or assist others to challenge the trademarks of the other
party (except to the extent such restriction is prohibited by applicable law) or
the registration thereof or attempt to register any trademarks, marks or trade
names confusingly similar to those of the other party.
4. Warranties and Disclaimer.
--------------------------
4.1. Inktomi Warranties. Inktomi warrants that (i) it has full
power and authority to enter into this Agreement, (ii) it has not previously and
will not grant any rights in the Inktomi Technology to any third party that are
inconsistent with the rights granted to Powerize hereunder, and (iii) throughout
the Term, the Inktomi Technology and the Services provided for Powerize shall be
free of material errors and defects and shall perform substantially in
accordance with the performance criteria set forth on Exhibit A. Inktomi does
not warrant that the Services will meet all of Powerize's requirements or that
performance of the Services will be uninterrupted or error-free. INKTOMI MAKES
NO OTHER WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR USE, AND NONINFRINGEMENT. IN PARTICULAR, INKTOMI MAKES NO WARRANTIES
WHATSOEVER REGARDING THE NATURE OF THE MATERIAL CONTAINED IN THE DATABASE AND TO
THE MAXIMUM EXTENT PERMITTED BY LAW DISCLAIMS ANY RESPONSIBILITY OR LIABILITY
FOR SUCH MATERIAL.
4.2. Inktomi Obligations. Inktomi's sole obligation under the
foregoing warranties is to use its reasonable best efforts to correct any
portion of the Inktomi Technology or its business practices that does not meet
the foregoing warranties within a reasonable period of time, and if Inktomi
fails to do so, then Powerize shall have the right to immediately terminate this
Agreement and receive as a sole remedy a refund of all amounts paid by Powerize
applicable to Services to be rendered following the date of such termination.
4.3. Powerize Warranties. Powerize warrants that (i) it has
full power and authority to enter into this Agreement, (ii) it will seek all
necessary governmental approvals required to effectuate this Agreement, and
(iii) it shall perform the online services provided by Powerize through the Site
in accordance with all federal, state and local laws, including all professional
registration requirements related thereto. POWERIZE MAKES NO OTHER WARRANTIES OF
ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT
LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR USE, AND
NONINFRINGEMENT.
5. End-User Support. Powerize, at its own expense shall provide first
level Powerize support services to end-users of the Site. Inktomi, at its own
expense, shall provide second level technical support services to Powerize
regarding the operation of the Inktomi Search Engine. Such support services will
be provided as set forth on Exhibit B.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
5
<PAGE>
6. Payments.
---------
6.1. Service Fees. Powerize shall pay Inktomi service fees in
the amount and on terms specified on Exhibit C attached hereto.
6.2. Records. Powerize shall keep complete and accurate
records pertaining to the number of Results Sets served from a cache controlled
or maintained by Powerize. Such records shall be maintained for a two-year
period following the year in which any payments pertaining to such revenue were
due. Inktomi shall have the right to examine Powerize's records from time to
time but no more than once every six (6) months to determine the correctness of
any payment made under this Agreement. Such examination shall be conducted at
reasonable times during Powerize's normal business hours and upon at least ten
(10) business days' advance notice and in a manner so as not to interfere
unreasonably with the conduct of Powerize's business. If any such examination
indicates that Powerize has underpaid by more than five percent (5%) of the
aggregate payments due for the period subject to such examination, Powerize
shall reimburse Inktomi for reasonable costs of such examination.
6.3. Taxes. Powerize shall be responsible for all sales taxes,
use taxes, withholding taxes, value added taxes and any other similar taxes
imposed by any federal, state, provincial or local governmental entity on the
transactions contemplated by this Agreement, excluding taxes based upon
Inktomi's net income. When Inktomi has the legal obligation to pay or collect
such taxes, the appropriate amount shall be invoiced to and paid by Powerize
unless Powerize provides Inktomi with a valid tax exemption certificate
authorized by the appropriate taxing authority.
6.4. Payment. All fees quoted and payments made hereunder
shall be in U.S. Dollars. Powerize shall pay all amounts due under this
Agreement to Inktomi at the address indicated at the beginning of this Agreement
or such other location as Inktomi designated in writing.
7. Confidentiality.
----------------
7.1. Definition of Confidential Information. All information
and documents disclosed or produced by either party in the course of this
Agreement which are disclosed in written form and identified by a marking
thereon as proprietary, or oral information which is defined at the time of
disclosure, shall be deemed the "Confidential Information" of the disclosing
party. Notwithstanding the above, the parties agree that any information (in any
form, whether in tangible or intangible) relating to the Inktomi Technology is
considered Confidential Information of Inktomi.
7.2. Treatment of Confidential Information. Each party agrees
to protect the other party's Confidential Information in the same manner as such
party protects its own Confidential Information of substantially similar
proprietary value, but in no case less than reasonable care. Each party agrees
that it will use the Confidential Information of the other party only for the
purposes of this Agreement and that it will not divulge, transfer, sell,
license, lease, or otherwise disclose or release any such information or
documents to third parties, with the exception of (i) its employees or
subcontractors who require access to such for purposes of carrying out such
party's obligation hereunder and (ii) persons who are employed as auditors by a
public accounting firm or by a federal or state agency. Each party will use
reasonable efforts to advise any person obtaining Confidential Information that
such information is proprietary and to obtain a written agreement obligating
such person to maintain the confidentiality of any Confidential Information
belonging to the party or its suppliers.
7.3. No Other Confidential Information. Neither party shall
have any obligation under this Section 7 for information of the other party
which the receiving party can substantiate with
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
6
<PAGE>
documentary evidence that has been or is (i) developed by the receiving party
independently and without the benefit of information disclosed hereunder by the
disclosing party; (ii) lawfully obtained by the receiving party from a third
party without restriction and without breach of this Agreement; (iii) publicly
available without breach of this Agreement; (iv) disclosed without restriction
by the disclosing party to a third party; or (v) known to the receiving party
prior to its receipt from the disclosing party.
8. Indemnification.
----------------
8.1. Inktomi Indemnification. Inktomi shall defend and/or
settle, and pay damages awarded pursuant to, any third party claim brought
against Powerize alleging the software comprising the Inktomi Search Engine
improperly includes any third party copyrighted subject matter, third party
patented subject matter or third party trade secrets; provided that Powerize
promptly notifies Inktomi in writing of any such claim and promptly tenders the
control of the defense and settlement of any such claim to Inktomi at Inktomi's
expense and with Inktomi's choice of counsel. Powerize shall cooperate with
Inktomi, at Inktomi's expense, in defending or settling such claim and Powerize
may join in defense with counsel of its choice at its own expense. Inktomi shall
not reimburse Powerize for any expenses incurred by Powerize without the prior
written approval of Inktomi.
8.2. Powerize Indemnification. Powerize shall defend and/or
settle, and pay damages awarded pursuant to, any third party claim brought
against Inktomi (i) related to the services provided by Powerize through the
Site or representations, claims or statements pertaining thereto, and (ii)
which, if true, would constitute a breach of any warranty, representation or
covenant made by Powerize under Section 4.3 of this Agreement; provided that
Inktomi promptly notifies Powerize in writing of any such claim and promptly
tenders the control of the defense and settlement of any such claim to Powerize
at Powerize's expense and with Powerize's choice of counsel. Inktomi shall
cooperate with Powerize, at Powerize's expense, in defending or settling such
claim and Inktomi may join in defense with counsel of its choice at its own
expense. Powerize shall not reimburse Inktomi for any expenses incurred by
Inktomi without the prior written approval of Powerize.
9. Limitation of Liability. IN NO EVENT WILL THE LIABILITY OF INKTOMI
AND ITS LICENSORS AND SUPPLIERS ARISING OUT OF THIS AGREEMENT EXCEED THE NET
AMOUNT INKTOMI HAS ACTUALLY RECEIVED FROM POWERIZE UNDER THIS AGREEMENT. INKTOMI
AND ITS LICENSORS AND SUPPLIERS SHALL NOT BE LIABLE FOR ANY LOST PROFITS OR
COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING DAMAGES FOR LOST DATA,
HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY, INCLUDING BUT NOT LIMITED TO
CONTRACT, PRODUCTS LIABILITY, STRICT LIABILITY AND NEGLIGENCE, AND WHETHER OR
NOT IT WAS OR SHOULD HAVE BEEN AWARE OR ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY.
10. Term and Termination.
---------------------
10.1. Term. The term of this Agreement (the "Term") shall
commence on the Effective Date and shall continue in force for a period of three
(3) years, unless earlier terminated as provided herein.
10.2. Termination for Breach. Either party may suspend
performance and/or terminate this Agreement if the other party materially
breaches any term or condition of this Agreement and fails to cure that breach
within thirty (30) days after receiving written notice of the breach.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
7
<PAGE>
10.3. Termination due to Warranty. Powerize may terminate this
Agreement in accordance with the provisions of Section 4.2.
10.4. Termination due to Insolvency. Either party may suspend
performance and/or terminate this Agreement if the other party becomes insolvent
or makes any assignment for the benefit of creditors or similar transfer
evidencing insolvency, or suffers or permits the commencement of any form of
insolvency or receivership proceeding, or has any petition under bankruptcy law
filed against it, which petition is not dismissed within sixty (60) days of such
filing, or has a trustee or receiver appointed for its business or assets or any
party thereof.
10.5. Effect of Termination. Upon the termination of this
Agreement for any reason (i) all license rights granted herein shall terminate,
(ii) Powerize shall immediately pay to Inktomi all amounts due and outstanding
as of the date of such termination and (iii) each party shall return to the
other party, or destroy and certify the destruction of, all Confidential
Information of the other party.
10.6. Survival. In the event of any termination or expiration
of this Agreement for any reason, Sections 1, 2.5, 2.6, 4, 6, 7, 8, 9, 10 and 11
shall survive termination. Neither party shall be liable to the other party for
damages of any sort resulting solely from terminating this Agreement in
accordance with its terms.
10.7. Remedies. Each party acknowledges that its breach of the
confidentiality or service/license restrictions contained herein may cause
irreparable harm to the other party, the extent of which would be difficult to
ascertain. Accordingly, each party agrees that, in addition to any other
remedies to which the other party may be legally entitled, such party shall have
the right to seek immediately injunctive relief in the event of a breach of such
sections by the other party or any of its officers, employees, consultants or
other agents.
11. Miscellaneous.
--------------
11.1. Capacity. Each party warrants that it has full power to
enter into and perform this Agreement, and the person signing this Agreement on
either party's behalf has been duly authorized and empowered to enter in such
agreement. Each party further acknowledges that it has read this Agreement,
understands it and agrees to be bound by it. Each party acknowledges that such
party has not been induced to enter into such agreements by any representations
or statements, oral or written, not expressly contained herein or expressly
incorporated by reference.
11.2. Notice. Any notice required for or permitted by this
Agreement shall be in writing and shall be delivered as follows with notice
deemed given as indicated: (i) by personal delivery when delivered personally,
(ii) by overnight courier upon written verification of receipt, (iii) by
telecopy or facsimile transmission when confirmed by telecopier or facsimile
transmission report, or (iv) by certified or registered mail, return receipt
requested, upon verification of receipt. All notices must be sent to the
addresses first described above or to such other address that the receiving
party may have provided for the purpose of notice in accordance with this
Section.
11.3. Assignment. Neither party may assign its rights or
delegate its obligations under this Agreement without the other party's prior
written consent, except to the surviving entity in a merger or consolidation in
which it participates or to a purchaser of all or substantially all of its
assets, so long as such surviving entity or purchaser shall expressly assume in
writing the performance of all of the terms of this Agreement.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
8
<PAGE>
11.4. No Third Party Beneficiaries. All rights and obligations
of the parties hereunder are personal to them. This Agreement is not intended to
benefit, nor shall it be deemed to give rise to, any rights in any third party.
11.5. Governing Law. This Agreement will be governed and
construed, to the extent applicable, in accordance with United States law, and
otherwise, in accordance with California law, without regard to conflict of law
principles. Any dispute or claim arising out of or in connection with this
Agreement shall be finally settled by binding arbitration in San Mateo County,
California under the Commercial Rules of the American Arbitration Association by
one arbitrator appointed in accordance with said rules. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
11.6. Independent Contractors. The parties are independent
contractors. Neither party shall be deemed to be an employee, agent, partner or
legal representative of the other for any purpose and neither shall have any
right, power or authority to create any obligation or responsibility on behalf
of the other.
11.7. Force Majeure. Neither party shall be liable hereunder
by reason of any failure or delay in the performance of its obligations
hereunder (except for the payment of money) on account of strikes, shortages,
riots, insurrection, fires, flood, storm, explosions, earthquakes,
telecommunications outages, acts of God, war, governmental action, or any other
cause which is beyond the reasonable control of such party.
11.8. Compliance with Law. Each party shall be responsible for
compliance with all applicable laws, rules and regulations, if any, related to
the performance of its obligations under this Agreement.
11.9. Waiver. The failure of either party to require
performance by the other party of any provision shall not affect the full right
to require such performance at any time thereafter; nor shall the waiver by
either party of a breach of any provision hereof be taken or held to be a waiver
of the provision itself.
11.10. Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be contrary to law, such provision
shall be changed and interpreted so as to best accomplish the objectives of the
original provision to the fullest extent allowed by law and the remaining
provisions of this Agreement shall remain in full force and effect.
11.11. Headings. The section headings appearing in this
Agreement are inserted only as a matter of convenience and in no way define,
limit, construe or describe the scope or extent of such paragraph, or in any way
affect such agreements.
11.12. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts and by facsimile, each of which will
be considered an original, but all of which together will constitute one and the
same instrument.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
9
<PAGE>
11.13. Entire Agreement. This Agreement, and the Exhibits
hereto, constitute the entire agreement between the parties with respect to the
subject matter hereof. This Agreement supersedes, and the terms of this
Agreement govern, any other prior or collateral agreements with respect to the
subject matter hereof. Any amendments to this Agreement must be in writing and
executed by an officer of the parties.
IN WITNESS WHEREOF, the parties have caused this Information Services
Agreement to be signed by their duly authorized representatives.
POWERIZE.COM, INC. INKTOMI CORPORATION
By:/s/ Edwin R. Addison By:/s/ Jerry Kennelly
-------------------- ------------------
Name: Edwin R. Addison Name: Jerry Kennelly
------------------ ----------------
Title: CEO Title: CEO
----------------- ---------------
5/14/99
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
10
<PAGE>
EXHIBIT A
SERVICES
Premium Content Search Services:
- --------------------------------
Inktomi will use the Inktomi Search Engine to crawl the Premium Content
URL List, download and analyze text and other data (both from information
collected through crawling the Premium Content URL List and from Powerize
Databases), sort and organize the data, create an index of accessible data, and,
after receiving a particular search request from an end user (in the form of a
word query), locate material accessible in the Database and the Powerize
Databases and present the results of the search to the end user. The
functionality and performance criteria applicable to such services are as
follows:
1. Database Capacity. Inktomi will provision sufficient hardware,
software and other equipment that can provide query access to a Database
containing up to 32,000,000 Documents. The Documents included in the Database
shall be compiled by collecting records provided by Powerize to Inktomi from
time to time hereunder from the Powerize Databases. Powerize may request
additional database capacity, provided however that Powerize shall pay the
additional capacity expansion service fees set forth on Exhibit C.
2. [Indexing. Inktomi will index the content from the Powerize Database
and the Premium Content URL List as follows:
(a) Inktomi will crawl and index the Web pages associated with
the Web sites listed on the Premium Content URL List at least monthly. Inktomi
will crawl and index up to 1,000,000 Web pages specified by Powerize (either Web
pages in Web sites already on the Premium Content URL List or Web pages in Web
sites added to the Premium Content URL List by Powerize) on a weekly basis.
Powerize may delete Web sites from the Premium Content URL List by submitting
changes to Inktomi, and Inktomi will remove the associated Web pages within two
weeks of receipt of such changes.
(b) Inktomi will index all records contained in the Powerize
Database on a bi-weekly basis. Inktomi will index additional or changed records
within one day of receipt from Powerize, up to a maximum quantity of [*].(1)
3. Queries and Response Time. Inktomi will provision sufficient
hardware, software and other equipment to [*] service up to from Powerize and
its end users with an average response time of one second or faster measured
over daily windows. Specific query functionality shall be as set forth below.
o Ability to search by keyword, file type, domain, document
title, modification dates, document contents, depth and
metaword
o Ability to search by full text and phrase, and search with
Boolean operators (including AND, NOT and OR). Default search,
barring user modification at query time by the end user, will
be AND.
o Search on included object, covering the following objects:
Acrobat, java applets, active x controls, audio, plugins,
Flash, form, frame, image, script, Shockwave, table, video and
- --------
1 Entire bracketed section under review by Inktomi and subject to modification
based on Inktomi review of Powerize's requirements.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
vrml
o Search on included file type, by file extension
o Search on specific script language, covering Javascript and Vbscript
o Limit search to pages containing links to a specified domain
o Limit search to words in the HTML "title" field
o Grammatical stemming
o Search by language
o Case sensitivity support
o Pornography filtration
o Ability to selectively control the size of each set of results served
(0-10 records, 11-20 records, 21-30 records, 31-50 records, 51-75
records, 76-100 records)
4. Uptime/Downtime. The Inktomi Search Engine running the Premium
Content Search Services will have a minimum uptime operation of [*] over monthly
windows. Downtime shall mean any one minute interval in which the Inktomi Search
Engine is unable to process search requests.
Production Schedule
- -------------------
Powerize will begin work on constructing the Interface and identifying
the Premium Content URL List and the Powerize Database, and Inktomi will begin
work on tuning its Search Engine to provide the services set forth herein
promptly upon execution of this Agreement. Both parties will use commercially
reasonable efforts so that the Premium Search Services are available to Powerize
for use in the Site are available within 90 days following the Effective Date.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
EXHIBIT B
SUPPORT GUIDELINES
1. Definitions.
o Hours of Operation. Inktomi will provide Powerize with 7 x 24 support as
set forth herein.
o Problem. Any error, bug, or malfunction that makes any feature of the
Inktomi Search Engine perform unpredictably or to otherwise become
intermittently unavailable, or that causes the Inktomi Search Engine to
have a material degradation in response time performance.
o Severe Problem. Any error, bug, or malfunction that causes the Inktomi
Search Engine to become inaccessible to Powerize and its Site end users, or
that causes any feature of the Inktomi Search Engine to become continuously
unavailable.
o Enhancement Request. A request by Powerize to incorporate a new feature or
enhance an existing feature of the Inktomi Search Engine.
o Fix. A correction, fix, alteration or workaround that solves a Problem or a
Severe Problem.
2. Contact points.
o Powerize Technical Support Personnel. Powerize will designate no more than
three Powerize employees as qualified to contact Inktomi for technical
support.
o Inktomi Technical Support Personnel. Inktomi will ensure that its Technical
Support Personnel are adequately trained to provide technical support to
Powerize. Inktomi will provide Powerize with a web interface or an email
address (the "Support Address"), as well as an email pager address (the
"Support Pager") for contacting the Inktomi Technical Support Personnel.
Inktomi may change its designated Technical Support Personnel and executive
escalation personnel at its discretion with reasonable notice to Powerize.
3. Support procedures.
o All Problems reported by Powerize Technical Support Personnel to Inktomi
must be submitted via web site or email to the Support Address.
o If Powerize believes it is reporting a Severe Problem, Powerize will
accompany its email request with a page via the Support Pager.
o Upon receiving a report from Powerize, Inktomi will determine whether the
request is a Problem, a Severe Problem, or an Enhancement Request. Inktomi
will respond to the request and use reasonable commercial efforts to
provide a Fix as described in the support table set forth below.
o Inktomi will use commercially reasonable efforts to inform Powerize
Technical Support Personnel of Fixes.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
4. Support levels.
o Powerize will provide technical support to end users of the Sites who email
or otherwise contact Powerize directly with questions about the Sites.
Powerize will use its commercially reasonable efforts to Fix any Problems
without escalation to Inktomi.
o Inktomi will provide the following technical support solely to Powerize
Technical Support Personnel:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TYPE OF EMAIL TARGET RESPONSE TIME
RECEIPT OF EMAIL REQUEST REQUEST FROM EMAIL RECEIPT TARGET FIX TIME AND REPORTING
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
During business hours or Commercially reasonable best efforts with
other times Problem [*] weekly status reports to Powerize
- ---------------------------------------------------------------------------------------------------------------------
During the hours
between 6:00 a.m. and Commercially reasonable best efforts with
9:00 p.m. Pacific time Severe Problem [*] daily status reports to Powerize
- ---------------------------------------------------------------------------------------------------------------------
Commercially reasonable best efforts with
During other times Severe Problem [*] daily status reports to Powerize
- ---------------------------------------------------------------------------------------------------------------------
During business hours or Enhancement
other times Requests [*] At Inktomi's discretion
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(c) In the event Inktomi does not respond to Powerize within the
target response time from email receipt set forth above, then
Powerize may contact the following Inktomi executive
escalation personnel in order:
Steve Crusenberry - Search Engine Technical Operations
Troy Toman - Director of Partner Services
Alex Edelstein - General Manager, Search Business Unit
Dick Pierce - Vice President Marketing
Dave Peterschmidt - CEO
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
EXHIBIT C
SERVICE FEES
1. Information Service Fee. Powerize shall pay Inktomi a base
information services fee of [*]. For subsequent years, the base information
services fee shall be paid in equal monthly installments on the last day of each
month. To the extent that the Term of the Agreement is for a portion of a year,
Powerize shall pay Inktomi a monthly information services fee equal to
one-twelfth of the annual base information services fee. This fee covers the
provisioning and maintenance of the dedicated search service for Powerize.
2. Capacity Expansion Fee. In addition to fees set forth above, if
Powerize explicitly requests database capacity of greater than [*}. For the
first year, the capacity expansion fee shall be paid within thirty (30) days
following the first day such additional capacity is available. For subsequent
years, the capacity expansion fee shall be added to and paid as part of the base
information services fee.
3. Per Query Service Fee. In addition to the fees set forth above,
Powerize shall pay Inktomi monthly per-query service fees based on the total
number of Results Sets served during the month. During the first twelve (12)
months of the Agreement, the initial queries equivalent [*]. Thereafter, the
fees equal:
(A) the total number of Results Sets served during the month
divided by the total number of days in such month ("Average
Daily Results Sets Served"),
(B) multiplied and added in accordance with the following graduated
schedule
[*]
(C) multiplied by the total number of days in such month,
(D) plus an amount for each Results Sets served during the month
containing more than ten records as follows:
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
Size of Results Set Incremental Pricing
------------------- -------------------
[*]
Monthly service fees shall be paid in arrears within thirty (30)
calendar days following the end of each month.
The total per-query service fees payable by Powerize shall not be less
[*]
4. All Services. The service fees set forth above are for all Services
provided by Inktomi as set forth on Exhibit A. In the event Inktomi and Powerize
mutually agree to modify the specifications on Exhibit A, additional charges may
apply.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
AMENDMENT
TO THE
INFORMATION SERVICES AGREEMENT
This Amendment to the Information Services Agreement ("Amendment") is
entered into as of May 22, 1999 (the "Effective Date"), by and between Inktomi
Corporation, a Delaware corporation with its principal place of business at 1900
South Norfolk Street, Suite 310, San Mateo, California, 94403 ("Inktomi") and
Powerize.com, Inc., a Delaware corporation with its principal place of business
at 901 Elkridge Landing Road, Suite 350, Linthicum, Maryland 21090 ("Powerize")
and amends the Information Services Agreement entered into by the parties as of
May 14, 1999 (the "Original Agreement").
RECITALS
A. The parties entered into the Original Agreement.
B. The parties desire to amend the Original Agreement to correct
certain provisions of the Original Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual promises
contained herein the parties agree as follows:
AGREEMENT
1. Modification to Exhibit C.
1.1. Section 3. The second sentence of Exhibit C, Section 3 is
deleted and replaced with the following:
During the first twelve (12) months of the Agreement, the initial
queries equivalent [*]. During the second and third twelve (12) month
periods, the initial queries for each such period equivalent [*].
1.2 Section 3, Last Paragraph.The last paragraph of Exhibit C,
Section 3 is deleted in its entirety.
2. Effect. Except as amended by this Amendment, the Original Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed
by their duly authorized representatives.
INKTOMI CORPORATION POWERIZE, INC.
By: /s/ Jerry Kennelly By: /s/ Edwin R. Addison
--------------------------- ---------------------
Name: Jerry Kennelly Name: Edwin R. Addison
--------------------------- ---------------------
Title: CFO Title: CEO
--------------------------- ---------------------
6/6/99
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
Exhibit 10.21
-------------
NETCENTER SERVICES AGREEMENT
COVER SHEET
This Netcenter Services Agreement, of which this page is a cover sheet ("Cover
Sheet"), is entered into between Netscape Communications Corporation, a Delaware
corporation and wholly owned subsidiary of America Online, Inc. ("Netscape"),
and Powerize.com, Inc., a Delaware corporation Participant"), effective as of
the date of Netscape's signature below ("Effective Date").
Brief Description of Service: co-branded service offering on the Netcenter
Business Channel and My Netscape that offers users the ability to perform in-
depth industry research for the following industries: Healthcare,
Pharmaceuticals, Financial Services, Insurance and Telecom.
Territory: North America Netcenter
Local Language: U.S. English
Service Period: 2 years from the Effective Date, except as otherwise extended as
set forth in the Agreement.
Addresses for Notice:
Powerize.com, Inc. Netscape Communications Corporation
901 Elkridge Landing Road, Suite 350 501 East Middlefield Road, MV-002
Linthicum, MD 21090 Mountain View, CA 94043
USA USA
Fax: 410 684-2834 Fax: (650) 528-4123
email: [email protected] Attn: General Counsel
Attn: Edwin Addison - CEO
POWERIZE.COM, INC. NETSCAPE COMMUNICATIONS
CORPORATION
By: /s/ Edwin R. Addison By: /s/ Kent Wakeford
-------------------------------- -------------------------------
Name: Edwin R. Addison Name: Kent Wakeford
------------------------------ -----------------------------
Title: CEO Title: Director-Business Affairs
----------------------------- ----------------------------
Date: 6/30/99 Effective Date: 6/30/99
------------------------------ -------------------
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
1
<PAGE>
NETCENTER SERVICES AGREEMENT
In consideration of the mutual covenants contained herein, the parties agree as
follows:
1. LICENSE GRANT
1.1 Participant License. Participant hereby grants Netscape a non-exclusive,
-------------------
worldwide and royalty-free right to store, display, perform, frame, reproduce,
distribute, re- distribute, transmit, re-transmit and otherwise use the: (a)
Service and (b) Licensed Content, including any data, information, content and
other intellectual property included in the Licensed Content within the Netscape
Network or Netscape's "My Netscape" or "Custom Netcenter" programs (or
successors thereof). Each copy of the Licensed Content produced as part of the
Service shall carry appropriate copyright notices which Participant will supply
to Netscape.
2. THE SERVICE
2.1 Description of Service. Participant will provide Netscape with the Licensed
----------------------
Content and other technology and services as may be required under this Section
2 and Exhibit A (the "Service") for inclusion in the Netscape Network and as
otherwise set forth in Exhibit A. The Service does not include the Index Pages.
Traffic on all Service Pages and Index Pages shall be considered to be Netscape
traffic. The specifications for the Service are set forth within the mock-ups
and site map, if any, provided as part of Exhibit A.
2.2 Index Pages. The Index Pages will be produced, hosted, served and
-----------
maintained on Netscape's servers. Each such page will include areas for
advertising, content, and sponsorships. Participant will provide to Netscape,
without limitation, the following content for use on the Index Pages: Headline
news feeds for the default settings, as specified by Netscape, and customized
content based on user
selected preferences for the following: Healthcare, Pharmaceuticals, Financial
Services, Telecommunications, and Insurance. Netscape may add additional
sections and services to the Service Index Page from time to time.
2.3 Service Pages. Netscape shall provide the specifications and production
-------------
schedule (if any) for the navigation, templates (including headers and footers),
architecture, and look and feel of the Service Pages in accordance with the
mock-ups and site map provided, if any. Netscape will have complete design and
content approval over all Service Pages and pages within the Service. Netscape
may amend the content required on the Service Pages and/or the mock-ups or site
maps provided as part of Exhibit A from time to time upon reasonable notice to
Participant and, if Participant is unable to provide any such amended content,
then Netscape may supplement the Service accordingly. The Service Pages shall:
(i) be served, produced and managed by Participant, including but not limited to
hiring and managing creative, technical, customer support, and general staff as
needed; (ii) be hosted and maintained solely on Participant's servers; (iii)
have a "Netscape.com" domain name; (iv) include a field providing search
functionality to Netscape's Net Search link; (v) be co- branded in accordance
with Section 2.4 and (vi) at Netscape's option, include links to third party
content in order to supplement the Service. Notwithstanding Section 2.3(i)-(ii)
above, Participant may have a third party host and maintain the Service Pages,
provided that Participant ensures that such third party agrees to meet all of
the applicable requirements set forth in this Agreement.
2.4 Co-Branding. The Service Pages will be co-branded by Netscape and
-----------
Participant an average of 3 clicks away from the Service Index Page in
accordance with the site map provided as part of Exhibit A.
2
<PAGE>
The co-branding will be subject to Netscape's Guidelines and will include
Participant's company name and logo. Co-branding will include a "Powered By"
[Participant's logo], so long as the Participant logo conforms to Netcenter
standard design guidelines (eg. Placement in upper right hand side of page,
standard-sized logo, links not hot). Index Pages will not be co-branded.
2.5 Service Implementation. Participant shall provide updated content for the
----------------------
Service Pages and the Index Pages in a manner consistent with the descriptions,
if any, set forth in Exhibit A or as Netscape may reasonably require.
Participant may not make any modifications additions or subtractions to the
Service Pages as such Service Pages are described in Exhibit A without
Netscape's written permission. All content supplied by Participant for the
Service will meet Netscape's performance requirements and specifications with
regard to page size, loading speed and speed of access to database driven
content as set forth in Exhibit A. Participant shall be responsible for the
production, technology deployment, content programming, and creation of graphic
user interfaces of the Service, all in accordance with Netscape's Guidelines The
Service shall use substantially the same technology and advantages that
Participant uses in its own proprietary service(s), if any, unless otherwise
mutually agreed by the parties. The Service shall not be disadvantaged or suffer
from inferior production, programming or performance relative to Participant's
similar services, or any similar service that Participant might make available
to, or operate on behalf of, third parties. The Service shall perform
substantially in accordance with the performance standards of its own
proprietary services, including, but not limited to, load time, timeliness of
content, and quality of programming. Participant's obligation to produce the
Service, including production services, technology deployment and content
programming that meets or exceeds standards established by Participant on
Participant's Web Site or services (or any web site or services Participant
manages for any third party) and general industry standards is a material
obligation of Participant under this Agreement.
2.6 Commerce. Participant shall not conduct any merchandising through the
--------
Service Pages through auctions, clubs, directly or any other method without
Netscape's prior written consent. Prior to entering into negotiations with any
third party regarding merchandising or commerce arrangements through
Participant's Web Site, Participant shall give Netscape written notice of such
desire and, upon request by Netscape, negotiate in good faith with Netscape or
its commerce or marketing participant in the applicable product/service category
regarding a merchandising or commerce arrangement. Any merchandising (including
direct merchandising) permitted hereunder through the Service shall be subject
to (i) the then-current requirements of Netscape's merchant certification
program; (ii) Netscape's standard terms and conditions applicable to its
interactive marketing participants; (iii) prior written approval by Netscape for
all products, services, and other goods to be offered through the Service; and
(iv) Participant will take all reasonable steps necessary to confirm its
promotion and sale of such products, services, and other goods through the
Service to the then- existing technologies identified by Netscape which are
optimized for the Netscape Network.
2.7 Advertising; Commitments.
------------------------
(a) Participant shall ensure that Netscape Members accessing the Service
Pages or linking to the Participant Web Site do not receive advertisements,
promotions or links for any entity reasonably construed to be in competition
with the Netscape Network or with Netscape Network software or Products or
otherwise in violation of the applicable Netscape Network then- standard
advertising policies or exclusivity commitments or other contractual preferences
to third parties.
(b) Except for Participant links that sell Participant products and
services (as set forth in Exhibit A), Netscape will design, manage, sell and
serve all sponsorships, ads or other promotional elements or revenue generating
opportunities to be included throughout the Service
2.8 Service Name. The Service name will be as mutually agreed upon by Netscape
------------
and Participant. Participant shall not independently use the Service name
without Netscape's prior written consent. If
3
<PAGE>
the Service name includes a co-branding component that is not generic or
descriptive, Participant may not use the Service name with Netscape's name
expunged.
2.9 Technical Support. Participant will provide technical support to Netscape
-----------------
to ensure that content is correctly received and displayed by Netscape in
accordance with the priority response times set forth as Exhibit B. Participant
shall appoint a technical contact to whom Netscape may address all technical
questions relating to the Service, and use its best efforts to promptly remedy
any material malfunctioning of the Service. Participant shall be solely
responsible for the purchase, implementation, maintenance and support of all
software and hardware required to fulfill its obligations under this Agreement.
In the event Netscape technical support is required, Netscape will provide
technical support to Participant upon Netscape standard terms, conditions and
rates.
3. PAYMENT
For the mutual benefits provided under this Agreement, payments shall be made in
the amount and subject to the terms set forth in Exhibit C.
4. NETCENTER PROGRAM REQUIREMENTS
4.1 User Registration. If end users are required to register to access certain
-----------------
features within the Service, the Service's user registration processes will be
integrated with Netscape's "Universal Registration" system and be consistent
with Netscape's then-current privacy policy, each as set forth on Exhibit D.
4.2 Core Services. Participant will integrate Netscape's then-current Core
-------------
Services into the Service. Netscape may modify the Core Services from time to
time and notify Participant of any such changes for the Service.
5. NETSCAPE PRODUCTS AND TECHNOLOGY
5.1 Optimize for Netscape Technology and Services.
---------------------------------------------
(a) Participant shall ensure that, during the term of the Agreement, the
Netscape search engine will be used within: (i) the home page of Participant's
Web Site; and (ii) any proprietary server software developed by or for
Participant.
(b) In order to optimize the efficiency of the Service, Participant will:
(i) within the Service, ensure compatibility with the client software used by
Netcenter members, especially the latest version of Netscape Communicator client
software; (ii) consider the use of at least one current version of Netscape core
Web server software product to maintain Participant's Web Sites, to be obtained
by Participant pursuant to Netscape's standard licensing terms; (iii) display
the "Netscape Now" button (or successor Netscape marketing button) prominently
on the home page of Participant's Web Site, on the Service Pages, on any page to
which the Service links, and on any page on Participant's Web Site which
contains a virtual button or other text or graphic for any third party Internet
client or online service; (iv) display a prominent button or banner above the
fold on Participant's home page and the Service pages promoting a Netscape
Network property (such property as specified by Netscape) that does not promote
a service or product that competes with Participant services and products; and
(v) use and promote only Netscape client and server software and online services
within the Service.
5.2 Course of Dealing. In consideration of (i) the use of the netscape.com
-----------------
domain name for the Service, and (ii) the treatment of the Service as a
fundamental part of the Netcenter service, until such
4
<PAGE>
time as Microsoft fully publicly documents and makes available its operating
systems' programming interfaces sufficiently to enable Netscape to make use of
all of the facilities and resources of those operating systems on a basis equal
to that of Microsoft, Participant agrees to the following:
5.2.1 No Disadvantage. Participant shall not make any content available solely
---------------
to users of client software or services other than Netscape's, or disfavor or
disadvantage users of Netscape client software or services in any way relative
to users of other Internet client software or services; and
5.2.2 Preference for Netscape Products and Services. Participant shall: Within
---------------------------------------------
one click away from the Service, (a) use and promote only Netscape client and
server software and online services; and (b) Use reasonable efforts to ensure
that: (i) Participant's marketing and promotional materials; (ii) Any web page
in Participant's Web Site located more than one click away from the Service; and
(iii) Any page within 1 click away from a page described in subparagraph (b)(ii)
of this Section 5.2.2, accord Netscape's products and services a position of
prominence at least as great as the positioning accorded any third-party
Internet client or server software, software provider or online service.
5.3 No Disabling. Participant shall not provide or implement any means or
------------
functionality that would (i) alter, modify or enable end users to alter or
modify, any Netscape client software, standard user interface or configuration
(collectively, the "Software"), (ii) disable any functionality of the Software
or any other Internet browser software, or (iii) modify the functioning of pages
served from Netscape's Web Site.
5.4 E-Commerce. Participant shall make commercially reasonable efforts to
----------
integrate, within the Service, any Netscape or AOL standard that integrates a
wallet or other customer supplied commerce information program that can be used
to simplify an e-commerce transaction for an end user.
6. TERM & TERMINATION
6.1. Term. Unless earlier terminated as set forth herein, the initial term of
----
this Agreement shall commence on the Effective Date and expire 2 years from the
Effective Date. Netscape shall have the right to extend this Agreement for one
(1) successive period (an "Extension Term"). The Extension Term shall be for
ninety (90) days; and each Extension Term shall be subject to the same terms,
including payment, on a pro-rata basis, as the terms set forth herein. Netscape
shall exercise its option to extend this Agreement by providing Participant with
written notice of such election no later than sixty (60) days prior to the
expiration of the initial term.
6.2 Termination for Breach. Either Party may terminate this Agreement at any
----------------------
time in the event of a material breach by the other Party which remains uncured
after thirty (30) days written notice thereof.
6.3 Termination for Bankruptcy/Insolvency. Either Party may terminate this
-------------------------------------
Agreement immediately following written notice to the other Party if the other
Party (i) ceases to do business in the normal course, (ii) becomes or is
declared insolvent or bankrupt, (iii) is the subject of any proceeding related
to its liquidation or insolvency (whether voluntary or involuntary) which is not
dismissed within ninety (90) calendar days or (iv) makes an assignment for the
benefit of creditors. 6.4 Site and Content Preparation. Except as otherwise set
forth in Exhibit A, Participant shall achieve Site and Content preparation
within one hundred and twenty (120) days after the Effective Date. "Site and
Content Preparation" shall mean that Participant shall have completed production
of the Service and the Licensed Content in accordance with this Agreement and
completed all other necessary work to prepare the Service and the Licensed
Content and any other related areas or screens to launch on the Netscape Network
as contemplated hereunder. In the event Participant has not achieved Site and
Content Preparation within one hundred and fifty (150) days after the Effective
Date,
5
<PAGE>
then in addition to any other remedies available, Netscape shall have the right
to terminate this Agreement by giving Participant written notice thereof. If
Participant is delayed in achieving Site and Content Preparation due to a
failure by Netscape to perform its obligations under this Agreement and
Participant notifies Netscape in writing of such failure and the resulting
delay, then the one hundred and twenty (120) day and one hundred and fifty (150)
day periods referenced in this Section shall each be extended by the amount of
time of Participant's delay solely attributable to such failure by Netscape.
6.5 Rights Upon Termination or Expiration. Upon termination or expiration of
-------------------------------------
this Agreement, Netscape shall have the right, without any additional payment,
charge or royalty to Participant, to produce versions of the Service that do not
include Participant's proprietary technology, logo or name but that might employ
a graphic user interface or underlying technology that is substantially similar
to the graphic user interface or underlying technology of the Service. In order
to continue to offer a successor to the Service within Netcenter without
interruption, Participant shall promptly deliver to Netscape or its designee
content and information necessary for the Service in a form and manner to be
designated by Netscape. Netscape shall not be liable to Participant in the event
of termination, expiration or failure to agree upon an extension of the term of
this Agreement for compensation, reimbursement or damages on account of the loss
of prospective profits, or anticipated sales, or on account of expenditures,
investments, leases or commitments in connection with the business or goodwill
of Participant.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
Effective Date.
NETSCAPE COMMUNICATIONS POWERIZE.COM, INC.
CORPORATION
By: /s/ Kent Wakeford By: /s/ Edwin R. Addison
------------------------------- ------------------------------
Print Name: Kent Wakeford Print Name: Edwin R. Addison
----------------------- ----------------------
Title: Director -Business Affairs Title: CEO
---------------------------- ---------------------------
Date: 6/30/99 Date: 6/30/99
----------------------------- ----------------------------
Tax ID/EIN#: 52-2073361
------------------------------
This Agreement includes the following Exhibits:
Exhibit A: The Service
Exhibit B: Priority Response Times
Exhibit C: Payment
Exhibit D: User Registration and Privacy
Exhibit E: Reporting Requirements
Exhibit F: Definitions
Exhibit G: General Terms and Conditions
6
<PAGE>
EXHIBIT A: THE SERVICE
----------------------
Netscape and Participant will provide a co-branded service offering on the
Netcenter Business Channel and that may also be accessed from index pages from
My Netscape or Custom Netcenter that offers users paid for content and
subscription services and free in-depth industry research for the following
industry vertical categories: Healthcare, Pharmaceuticals, Financial Services,
Insurance and Telecom. In addition, Participant will provide a tool
that will allow an end user who is accessing the Service to customize and search
the Licensed Content contained within the Service.
Within the industry verticals, participant will provide:
Wizards for customizing research results as well as standard default settings
for the following industries: . Healthcare
. Pharmaceuticals
. Financial Services
. Telecommunications
. Insurance
Within the wizards, Netscape has the option to choose any of the following
categories: [*]
Participant also agrees to work with Netscape to produce a FAQ: A "Frequently
Asked Question" Section that informs users how to trouble shoot problems and
gives further details to maximize the value of the service and enhance user
experience.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
7
<PAGE>
Participant also agrees to deliver the following to Netscape as part of the
Service:
- --------------------------------------------------------------------------------
Headlines . Participant will post headlines for the Service to a
database outside of its firewall in a format specified by
Netscape. These headlines can be served on My Netscape,
Custom Netcenter and Netcenter Business Channel at
Netscape's discretion. Resulting clicks will drive users
into the Service.
- --------------------------------------------------------------------------------
Content Providers . Participant will code in search engine and open directory
results from companies chosen by Netcenter. The ordering of
these search providers as they appear in the set-up process
will be determined by Netscape. Netscape reserves the right
to hard-code choices, such as its own proprietary search
engine and Open Directory into the user set-up selections
for the service.
- --------------------------------------------------------------------------------
Search Results . Participant will make best efforts to comply with
Netscape's request to hardcode certain search constraints
within the results that are generated by the participant.
These include, but are not limited to date and content
provider. Netscape reserves the right to exclude third party
content providers from appearing in the Service.
. Netscape and Participant agree to a caching and indexing
mechanism that will allow Participant to maximize system
performance and optimize the results for end-user data
delivery without incurring burdensome content royalties for
the Participant. Netscape can specify templates for creating
default settings for user profiles (e.g. not customized) for
industry and company information.
- --------------------------------------------------------------------------------
Content . Participant will provide Netscape with customized industry
wizard templates based upon mutually agreed upon standards
and content.
. Participant will create a streamlined wizard approach for
user personalization and customization based on Netscape
requirements.
. Participant will use best efforts to ensure that links to
articles by current Netcenter participants (e.g. NewsEdge)
will link through directly to such current co-branded pages
already within Netcenter. Participant and Netscape will work
jointly with third party to implement the engineering to
enable this referral.
- --------------------------------------------------------------------------------
Content Display . Participant agrees to mix free and paid-for content within
the service results. Content that requires payment will be
specifically displayed as such.
- --------------------------------------------------------------------------------
8
<PAGE>
EXHIBIT B: PRIORITY RESPONSE TIMES
----------------------------------
Participant shall provide to Netscape support services for the Service
consistent with the following support obligations:
1. OBLIGATIONS
1.1. Error Reporting. Errors may be reported on a 24 hours per day, 365 day per
year basis. During normal business hours, Participant's technical staff shall be
available to receive Error reports directly from end users or Netscape by
telephone. Outside of normal business hours, Errors may be reported by pager,
electronic mail, voice mail, fax or telephonic recording capability. Participant
shall provide Netscape with a pager number for both a primary and secondary
pager which will be carried by appropriate support personnel at all times and to
which Errors may be reported at any time.
1.2. Support Requests. Participant will Respond and use best efforts to correct
or provide a Workaround to Priority 1 and Priority 2 Errors that Netscape or end
users identify, classify and report; and will use reasonable commercial efforts
to Respond to other Errors within the time frames set forth below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Priority Title and Notification Status Reports Target
Error Explanation Mechanism & (in Response to Repair
Required Time to Errors) Time
Respond
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1 Fatal Error-- Voice or Pager: Twice Daily 2 days
No useful work 15/30 minutes (7X24) (7X24)
can be done. 7X24 coverage
- -------------------------------------------------------------------------------------
2 Severe Impact-- Voice or Pager: Twice Daily 5 days
Functionality 1 hour
disabled. Errors 7X24 coverage
which result in a
lack of application
functionality or
cause intermittent
system failure.
- -------------------------------------------------------------------------------------
3 Degraded Voice or Pager: Daily
Operations-- 1 hour (business days) business
Errors causing Email: 8 hours days
malfunction of Business day coverage
non-critical
functions.
- -------------------------------------------------------------------------------------
4 Minimal Impact-- Voice or Pager: Weekly Next
Attributes and/or 2 hours (business days) Release
options to Email: 8 hours
ancillary features Business day coverage
do not operate as
stated.
- -------------------------------------------------------------------------------------
5 Enhancement Voice: Weekly No
Request. 8 hours (business days) Requirem
business day coverage ent
- -------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
EXHIBIT C: PAYMENT
------------------
1. Payment. For placement of the Service within Netcenter pursuant to the terms
-------
and conditions set forth in this Agreement, Participant will pay Netscape an
amount equal to [*] subject to the payment schedule set forth below.
[*]
2. Taxes. All payment amounts in this Agreement are in U.S. dollars and are
-----
exclusive of any applicable taxes and shall be made free and clear of without
reduction for, (and Participant shall be responsible for and shall indemnify
Netscape against) any applicable U.S. and foreign, state and local taxes, value
added or sales taxes, withholding taxes, duties or levies and assessments,
howsoever designated or computed, pertaining to the payments under this
Agreement (excluding taxes based upon the net income of Netscape). Participant
shall promptly furnish Netscape with tax receipts evidencing the payment of any
taxes referred to in the preceding sentence. Netscape and Participant shall
cooperate with each other in minimizing any applicable tax and in obtaining any
exemption from or reduced rate of tax available under any applicable law or tax
treaty.
3. Revenue Share.
-------------
(a) Provided that Participant has paid the fees as set forth above in
Section 1 of this Exhibit C, Netscape will pay Participant, within 30 days
following each calendar quarter, 35% of the Net Revenue that Netscape collects
for revenue from banner and advertisements placed on Service Pages during such
calendar quarter.
(b) For revenue that Participant derives from paid for Licensed Content via
links within or from the Service (except for revenue generated from
subscriptions), Participant will pay Netscape, within 30 days following each
calendar quarter, [*] of the Net Revenue generated during such calendar quarter.
(c) For revenue that Participant derives from subscriptions sold via links
within or from the Service, Participant will pay Netscape, within 30 days
following each calendar quarter, [*] of the Net Revenue generated during such
calendar quarter from such subscriptions.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
10
<PAGE>
EXHIBIT D: USER REGISTRATION AND PRIVACY
----------------------------------------
I. REGISTRATION PROCESS
To the extent that Participant desires to offer a registration process,
Participant will be responsible for the implementation of the Service
Registration and the integration of the Service and service registration with
Netcenter Registration. The functionality, design, and, integration of the
Service Registration process and Netcenter Registration will be subject to
Netscape's approval, terms and conditions as defined this Agreement. Such
specifications, terms and conditions may be revised by Netscape from time to
time upon 30 days prior notice to Participant. Participant will implement
changes within a 30 day period unless the parties mutually agree otherwise. The
point of entry to the registration area from the Service shall be hosted and
controlled by Netscape unless otherwise determined by Netscape.
II. REGISTRATION FEATURES
The Service Registration area shall be co-branded and have a look and feel that
is consistent with the implementation of the registration process in other
sections of Netcenter. Participant shall not launch the Service Registration
until Netscape has notified Participant in writing that Netscape has accepted
Participant's implementation. Participant shall manage site access using
Netcenter site access models, as Netscape determines such site access models
from time to time upon notice to Participant. Netscape shall transfer to
Participant all data necessary to provide site access to registered Netcenter
users. Participant will make commercially reasonable efforts to implement such
changes within a 30 day period.
III. DATA COLLECTED BY PARTICIPANT DURING SERVICE REGISTRATION PROCESS
Netscape will determine the data to be collected in the Service Registration
process considering Participant's recommendations and technical restrictions.
Netscape reserves the right to change such data requirements from time to time.
Participant will make best efforts to implement these changes within 5 working
days unless mutually agreed to otherwise. If Netscape implements a Netcenter
loyalty program, Participant shall also offer end user loyalty selections as
part of the Service Registration process at Netscape's request. Participant
shall deliver to Netscape data collected pursuant to such loyalty programs in a
format and timeframe as mutually agreed to by the parties.
IV. DATA TRANSFER
Participant shall use commercially reasonable efforts to transfer all end user
data collected during the Service Registration process and data collected by any
other means, to Netscape in real time data transfer, unless otherwise agreed to
by the parties. Netscape reserves the right to request any information collected
during the Service Registration to be supplied in a Netscape specified format
and timeframe. If Participant collects information about users accessing the
Service in addition to information supplied by the users during the registration
process, such information shall be made available to Netscape in a format and
timeframe as the parties shall mutually agree.
V. NETCENTER CONSIDERATIONS
All third party programs participating in the Service within Netcenter shall
register users with Netcenter when the user completes an order, if such user is
not already registered with Netcenter. If a user is a registered Netcenter
member, Participant shall pre-populate relevant customer data fields in the
customer order form based on information in the Netcenter database or seamlessly
pass this information to the third party provider.
VI. USE OF PERSONAL DATA
11
<PAGE>
Netscape shall solely own and use all end user data and information obtained in
connection with the Service except that Participant: (i) shall have the right to
aggregate such end user data and information and use such aggregated data only
for Participant's internal use except as required for legal, audit or tax
purposes; (ii) shall not disclose to any third party such end user data and
information without Netscape's prior written approval; except that Participant
may supply aggregated data to third parties to the extent that: (a) such data
only relates to demographic information; (b) such data cannot be used by any
third party to solicit Netscape Members; and (c) Netscape's privacy policy must
be adhered to; and (iii) may use information collected about the users during
registration or from any other means ("End User Information") only for the
purpose of marketing Netcenter programs to the users. It is a material
obligation of this Agreement that Participant shall adhere to Netscape's then-
current privacy policy, set forth at
http://home.netscape.com/legal.notices/privacy.html or at such other URL as
Netscape may designate from time to time. The parties will cooperate to create
guidelines for Participant's disclosure of aggregate statistical information
concerning Service's demographics and use to advertisers. Participant shall not
resell or disclose such End User Information to any third party; provided
however, that Participant may sell or disclose such End User Information to
third parties upon prior notice to and consent from such end users and written
approval from Netscape. If Netscape determines that Participant or third party
in contract with Participant is not complying with the terms of use of personal
data published on Netscape's Web Site at
http://home.netscape.com/netcenter/index.html, or such other URL as Netscape may
determine from time to time, Netscape may terminate this Agreement upon written
notice to Participant if Participant is not in compliance within 5 days of
written notice from Netscape. End User Information shall be owned exclusively by
Netscape. After a given end user has requested to be " Participant will
terminate all Services unless otherwise specified by the user and discontinue
any use of the End User Information associated with the given user. After the
termination or expiration of the Service Period, Participant will transfer all
End User data to Netscape and destroy all copies of that data.
VII. SOLICITATION OF NETSCAPE MEMBERS
Notwithstanding any other conditions of this Agreement, during the Term and for
the two-year period following the expiration or termination of this Agreement,
neither Participant nor its agents will use the Netscape Network toi) solicit or
participate in the solicitation of Netscape Members when that solicitation is
for the benefit of any entity (including Participant) which could reasonably be
construed to be or become in competition with Netscape or (ii) promote any
services which could reasonably be construed to be in competition with services
available through Netscape including, but not limited to, services available
through the Internet (e.g., an Participant Web Site). Participant may not send
any Netscape Member unsolicited e-mail communications on or through the Netscape
Network without a "Prior Business Relationship." For purposes of this Agreement,
a "Prior Business Relationship" shall mean that the Netscape Member has either
(i) purchased Products from Participant through the Netscape Network or (ii)
voluntarily provided information to Participant through a contest, registration,
or other communication, which included clear and conspicuous notice to the
Netscape Member that the information provided by the Netscape Member could
result in an e-mail being sent to that Netscape Member by Participant or its
agents. A Prior Business Relationship does not exist solely by virtue of a
Netscape Member's visit to the Service (absent the additional elements described
above). In any commercial e-mail communications to Netscape Members that are
otherwise permitted hereunder, Participant will provide the recipient with a
prominent and easy means to "opt-out" of receiving any future commercial e-mail
communications from Participant.
12
<PAGE>
EXHIBIT E: USAGE REPORTING REQUIREMENTS
---------------------------------------
Netscape may, from time to time, modify (e.g., replace, add or delete): (a) the
format of the reports required, (b) the frequency of the reports, or (c) the
data required therein, upon reasonable advance notice to Participant.
All of the foregoing usage reports shall be delivered separately for each
Territory.
1. Report Frequency
(a) Reporting frequency within 90 days from the date that the Service is
launched: The report frequency is bi-weekly. The bi-weekly report period is
Thursday to Wednesday, with bi-weekly reports due the following day, Thursday by
noon PST
(b) Reporting frequency 91 days after the date the Service is launched: The
report frequency is weekly. The weekly report period is Thursday to Wednesday,
with weekly reports due the following day, Thursday by noon PST. In addition to
the Weekly Report, daily Page Views exceed [*] per day, then Participant shall
report to Netscape on a daily basis and online, with report period being the
previous day.)
2. Report Delivery
The report shall be emailed to <[email protected]> in the Weekly
Report Format. In addition to the Weekly Report: if daily Page Views exceed [*]
per day, then for on-line reporting, Participant shall provide Netscape with a
URL to the Participant's reporting system. The online report system would be
accessible via secure means such as username/password and static IP address to
Netscape related reports only."
3. Report Specifications: The report must cover the following information:
3.1. Breakdown of Total Page Views by day for the entire co-branded site; daily
Total Page Views for each area within the site and, if applicable and if daily
Page Views exceed [*] per day, then the break down of individual Page Views
shall be provided daily in each area.
3.2. Breakdown of registration numbers.
3.3. Breakdown of Visits by day, if online reporting is required.
3.4. Optional: Unique Visitors by day, week and month, if applicable.
4. Participant Information
Participant provides to Netcenter Report Team the following information upon
execution/signature of contract:
- - Participant Name
- - Participant Contact Name
- - Participant phone number and e-mail
- - Participant technical contact phone, pager and e-mail
- - location of online Participant traffic reports (if applicable)
- -> URL location
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
13
<PAGE>
- -> Login/password
- -> Does Netscape need a Static IP address for access
- - Channel/directory names
- - subchannel/subdirectory names
5. Weekly Report Format
The following example is received weekly by NOON Thursdays via e-mail to:
[email protected]
Subject: Participant Traffic Report for <Participantname> from <mm-dd-yyyy>
through <mm-dd-yyyy>
date,mm-dd-yyyy,mm-dd-yyyy,mm-dd-yyyy,mm-dd-yyyy,mm-dd-yyyy,mm-dd-yyyy,mm-dd-
yyyy
Total Page Views, x1,x2,x3,x4,x5,x6,x7
channelname1, y1,y2,y3,y4,y5,y6,y7
channelname2,y1,y2,y3,y4,y5,y6,y7
channelname1:sub-channelname1,z1,z2,z3,z4,z5,z6,z7
channelname1:sub-channelname2,z1,z2,z3,z4,z5,z6,z7
etc....
Definitions
date = mm-dd-yyyy
channelname = an alphanumeric string excluding colons (:), or commas (,). Spaces
are allowed.
subchannelname = an alphanumeric string excluding embedded colons (:), or commas
(,),
separated from a channel by a colon. Spaces are allowed.
x1,x2,x3... = the actual number of Page Views for each date.
y1,y2,y3... = the actual number of channelname Page Views for each date.
z1,z2,z3... = the actual number of sub-channelname Page Views for each date.
Example
Subject: Participant Traffic Report for Classified2000 from 09-03-1998 through
09-09-1998
date,09-03-1998,09-04-1998,09-05-1998,09-06-1998,09-07-1998,08-03-1998,09-09-
1998
Total Page Views,271652,254771,140885,153994,289143,301992,278666
home page,78948,75321,43999,52917,79434,85019,67554
computers,34958,37988,22908,24958,40984,43959,32093
autos,747,857,343,565,867,949,767
computers:apples,2938,5954,4349,3876,7433,8578,7657
computers:pcs,32020,32034,18559,21082,33551,35381,24436 etc...
6. Access Logs
Netscape may require Participant to furnish to Netscape access logs for the
Services on a quarterly basis. If daily Page Views exceed [*] per day, such logs
will be required daily. Access logs will be subject to review or audit by I/Pro
at Netscape's request in addition to the audit requirements set forth in the
Agreement.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
14
<PAGE>
EXHIBIT F: DEFINITIONS
----------------------
DEFINITIONS. The following definitions shall apply to this Agreement:
"Affiliates" means any corporation, participantship, joint venture or other
entity or person controlled, controlling or under common control with Netscape.
For purposes of this definition, the term "control" shall mean the direct or
indirect beneficial ownership of more than nineteen percent (19%) of the voting
interests (representing the right to vote for the election of directors or other
managing authority) in an entity.
"Channel(s)" or "sub-Channel(s)" means one or more of the topic-specific areas
providing content and links on Netcenter, all as determined by Netscape from
time to time, Core Services, e-commerce opportunities or links, and other tools,
resources, and applications pertaining to the specific topic.
"Confidential Information" means any information relating to or disclosed in the
course of negotiating and implementing the Agreement, which is, or should be
reasonably understood to be, confidential or proprietary to the disclosing
Party, including, but not limited to, the content of negotiations between the
Parties, the material terms of this Agreement, information about Netscape
Members, technical processes and formulas, source codes, product designs, sales,
cost and other unpublished financial information, product and business plans,
projections and marketing data. "Confidential Information" shall not include
information (a) already lawfully known to or independently developed at any time
by the receiving Party, (b) disclosed in published materials, (c) generally
known to the public, or (d) lawfully obtained from any third party and not
required to be kept confidential.
"Content" means text, images, video, audio (including, without limitation, music
used in time relation with text, images, or video), and other data, products,
services, advertisements, promotions, links, pointers, technology and software.
"Core Services" mean services and applications that generally apply to all
Netcenter links or channels, as Netscape may amend from time to time. As of the
Effective Date, "Core Services" consist of discussion group, chat,
personalization, personal home page, member directory, email, instant messaging,
white and yellow pages and search features and functions.
"Error" means any instance where Participant-controlled portions of the Service
or Netcenter do not substantially conform to agreed-upon features and
specifications.
"Guidelines" means Netscape's then-current commercial design, operational, and
usage guidelines which Netscape may issue from time to time for the Services and
the Netscape Network.
"Index Page" or "Index Pages" means that certain page or pages on Netcenter that
serves as a gateway from Netcenter to a specific Netcenter service, which
gateway contains a listing, or "index" of all services that are related to a
certain topical link, or "Channel." The Index Pages may consist only of the
Service Index Page, or any index page that may link from Netcenter to the
Channel or sub-Channel.
"Licensed Content" means all Content provided by Participant or its agents to
Netscape or its Affiliates for distribution through the Netscape Network in
connection with the subject matter of this Agreement.
15
<PAGE>
"Net Revenue" means gross revenue less reasonable expenses, including, without
limitation, sales commissions, agency fees, bad debt, refunds, rebates,
makegoods or other reasonable costs directly associated in the process of
promoting the Service. For banners and advertising sold directly by Netscape,
the aggregate of such expenses and costs will not exceed [*] of gross revenues
from such banners or advertising. For banners and advertising sold by a third
party, the aggregate of such expenses and costs will not exceed [*] of gross
revenues from such banners or advertising.
"Netcenter" means the U.S. version of the Netscape Netcenter internet based
interactive site marketed under the "Netcenter" brand, without exclusivity
specifically excluding (a) any other Netscape or Netscape Affiliate owned or
operated internet based interactive sites, (b) the international versions of
Netcenter or any similar Netscape or Affiliate service or interactive site; (c)
"Netscape AOL Instant Messenger(TM)," "Netscape Custom Netcenter," Netscape
WebMail, or any similar independent product, service or property which may be
offered by, through or by Netscape; (d) any programming or content area offered
by or through the U.S. version of the Netcenter brand service over which
Netscape does not exercise complete operational control (including, without
limitation, Content areas controlled by other parties), (e) any yellow pages,
white pages, classifieds or other search, directory or review services or
Content offered by or through the U.S. version of the Netcenter brand service,
(f) any property, feature, product or service which Netscape or its Affiliates
may acquire subsequent to the Effective Date and (h) any other version of a
Netscape service which is materially different from Netcenter by virtue of its
branding, distribution, functionality, Content or services, including, without
limitation, any co-branded version of the service or any version distributed
through any other distribution platform or through any platform or device other
than a desktop personal computer.
"Netcenter Registration" means the portion of the registration that is
maintained, hosted, and controlled by Netscape and applies to multiple services
across Netcenter. Netcenter Registration includes the assignment of a user name,
password, and the collection of core Netcenter user profile data including but
not limited to: First name, Last name, Address, City, State, Country, Zip Code,
Email Address and Age. Netscape Registration means any registration that is
maintained, hosted, and controlled by Netscape and applies to Netscape's Web
Site.
"Netscape Member" means authorized users (through Netcenter Registration,
purchase of goods on the Netscape Network, or through other means that Netscape
may reasonably designate from time to time) of the Netscape Network, including
without limitation both registered members and Visitors to Netscape's Web Site.
"Netscape Network" means (i) Netcenter and (ii) any other product or service
owned, operated, distributed, licensed, or authorized to be distributed by or
through Netscape or its Affiliates worldwide through which such party elects to
offer the Licensed Content (which may include, without limitation,
Netscape-related Internet sites, "offline" information browsing products, and
international versions of the Netscape products or Netscape Web sites.
"Netscape's Web Site" means the collection of Local Language HTML documents
targeted at end users in the Territory and currently accessible by the public
via the Internet at the URL http://home.netscape.com and/or at such other URL or
locations as Netscape may designate. Netscape's Web Site does not include any
future technologies or future uses of existing technologies which might embody a
collection of documents (other than HTML documents) on the Internet.
CONFIDENTIAL TREATMENT REQUESTED
Brackets have been used to identify information which has been omitted from this
exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
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"Page Views" means the units of measurement that represent the number of
requests for a page of content. A page of content is, but is not limited to, a
static page such as an HTML document or a dynamically generated page such as
from a CGI script. Pages containing framesets shall not be counted as Page Views
and only the pages within the frameset containing principle content shall be
counted as Page Views.
"Participant's Web Site" means Participant's primary Local Language Web site,
which is currently accessible by the public via the Internet at the URL
http://www.powerize.com.
"Products" means any product, good or service which Participant offers, sells or
licenses to Netscape Members through (i) the Service and (ii) any web site
linked to Participant's Web Site.
"Respond" means and includes: taking and logging the Error call; in the case of
Priority 1 Errors, providing to the reporting party an action/resolution plan
within four (4) hours of initial call receipt and acknowledgment; and, in cases
of Priority 1 and 2 Errors, making best efforts on a continuing basis to cure
the Error until the Error is cured.
"Service" means the specific area within the Netscape Network, as described in
Exhibit A and Section 2.1 of the Netcenter Services Agreement, which shall be
developed, managed or marketed by Participant pursuant to this Agreement,
including but not limited to the Licensed Content, any functionality or
services, message boards, chat and other Netscape Member- supplied content areas
contained therein (but excluding any site or area outside of Netcenter that is
linked to the Service (through a "pointer" or similar link) in accordance with
the terms and conditions of this Agreement.).
"Service Index Page" means the page, linked to or accessible from Netcenter,
that serves as the first available point of entry for an end user accessing the
Service from Netcenter or the Channel or sub-Channel.
"Service Pages" means all pages of the Service excluding the Index Pages.
"Term" means the period beginning on the Effective Date and ending upon the
expiration or earlier termination of the Agreement.
"Total Page Views" means the sum of all Page Views for all co-branded content
hosted by the Participant.
"Unique Visitors" means the number of different Visitors who access a site
within a specific time period as determined by Netscape. To identify Unique
Users, Web sites need an unique identifier, which may be obtained through some
form of user registration or identification system. The definition of "Unique
Visitors" may be changed by Netscape from time to time upon notice to
Participant.
"Visitor" means an individual who interacts with a web site.
"Visits" means a series of page requests by a Visitor without a specified period
of inactivity (usually 30 consecutive minutes). If a Visitor leaves the site and
comes back within that specified period of inactivity, it is counted as part of
the same Visit.
"Workaround" means a method by which a user of a product can, by making a
limited number of procedural or programming changes in a product, prevent the
occurrence or re- occurrence of an Error. Programming changes include
adjustments to set-up and configurations files or other settings that do not
require recompilation.
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EXHIBIT G: GENERAL TERMS AND CONDITIONS
---------------------------------------
I. SERVICE PAGES
Contests. Participant shall take all steps necessary to ensure that any contest,
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sweepstakes or similar promotion conducted or promoted through the Service (a
"Contest") complies with all applicable laws and regulations. Participant shall
provide Netscape with (i) at least thirty (30) days prior written notice of any
Contest and (ii) upon Netscape's request, an opinion from Participant's counsel
confirming that the Contest complies with all applicable laws and regulations.
Netscape Look and Feel. Participant acknowledges and agrees that Netscape shall
- ----------------------
own all right, title and interest in and to the look and feel of the Index Pages
and the Service Pages (the "Netscape Look and Feel"). In addition, Netscape
shall retain editorial control over the portions of the Service and Index Pages
which frame the Licensed Content including without limitation the Index Page and
Service Pages (the "Netscape Frames"). Netscape may, at its discretion,
incorporate navigational icons, links and pointers or other Content into such
Netscape Frames.
Management. Participant shall review, delete, edit, create, update and otherwise
- ----------
manage all Content available on or through the Service, including but not
limited to the Licensed Content and message boards, in a timely and professional
manner and in accordance with the terms of this Agreement, the Guidelines, and
any generally applicable service standards for interactive content providers
published by Netscape. In managing the Service, Participant agrees to refrain
from editing or altering any opinion expressed by an end user within the
Service, except in cases when Participant (i) has a good faith belief that the
Content in question violates an applicable law, regulation, third party right or
portion of Netscape's Terms of Service or (ii) obtains Netscape's prior
approval. Participant shall ensure that the Service is reasonably current and
well-organized, and shall employ all necessary procedures to insure the accuracy
of the Licensed Content. Participant warrants that the Service and the Licensed
Content: (i) will conform to Netscape's Guidelines (ii) will not infringe or
violate any copyright, trademark, U.S. patent or any other third party right,
including without limitation, any music performance or other music related
rights; and (iii) will not contain any Content which violates any applicable law
or regulation. Netscape shall have no obligations with respect to the Content
available on or through the Service, including, but not limited to, any duty to
review or monitor any such Content.
Changes to the Netscape Network. Netscape reserves the right to redesign or
- -------------------------------
modify the organization, structure, "look and feel," navigation and other
elements of the Netscape Network, including without limitation, by adding or
deleting channels, subchannels and/or screens. If Netscape eliminates or
modifies an area of the Netscape Network in a manner that substantially modifies
the nature of the distribution required under this Agreement in a material
adverse fashion, Netscape will work with Participant in good faith to provide
Participant with comparable distribution reasonably satisfactory to Participant.
Duty to Inform. Participant shall promptly inform Netscape of any information
- --------------
related to the Licensed Content which could reasonably lead to a claim, demand
or liability of or against Netscape and/or its Affiliates by any third party.
Response to Questions/Comments; Customer Service. Participant shall respond
- ------------------------------------------------
promptly and professionally to questions, comments, complaints and other
reasonable requests regarding the Licensed Content by end users or on request by
Netscape, and shall cooperate and assist Netscape in promptly answering the
same.
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Classifieds. To the extent Participant desires to implement any classifieds
- -----------
listing features through the Service, Participant shall obtain Netscape's prior
written approval. Such approval may be conditioned upon, among other things,
Participant's conformance with any then-applicable service-wide technical or
other standards related to online classifieds.
Statements Through Netscape Network. Participant shall not make, publish, or
- -----------------------------------
otherwise communicate through the Netscape Network any deleterious remarks
concerning Netscape or it Affiliates, directors, officers, employees, or agents
(including, without limitation, Netscape's business projects, business
capabilities, performance of duties and services, or financial position) which
remarks are based on the relationship established by this Agreement or
information exchanged hereunder. This section is not intended to limit good
faith editorial statements made by Participant based upon publicly available
information, or information developed by Participant independent of its
relationship with Netscape and its employees and agents.
Launch Date. In the event that any terms contained herein relate to or depend on
- -----------
the launch date of the Service or other property contemplated by this Agreement,
then it is the intention of the Parties to record such launch date in a written
instrument signed by both Parties promptly following such launch date; provided
that, in the absence of such a written instrument, the launch date shall be as
reasonably determined by Netscape based on the information available to
Netscape.
Harmful Content. Participant is solely responsible for any liability arising out
- ---------------
of or relating to (i) the Service and/or (ii) any material to which users can
link through the Service. If Netscape becomes aware that the Service contains
any material that violates any of the terms and conditions of this Agreement or
any Netscape policy, or that Netscape otherwise deems likely to cause Netscape
material harm, then Netscape will inform Participant and may elect not to
include the offending Content or the Service on Netscape's Web Site. Netscape
reserves the right not to include in Netscape's Web Site all or any part of the
Service that does not substantially conform to the terms set forth herein.
II. TRADEMARKS
Trademark License. In designing and implementing Promotional Materials promoting
- -----------------
the Service (as defined below) and subject to the other provisions contained
herein, Participant shall be entitled to use the following trade names,
trademarks and service marks of Netscape: Netscape(R), Netcenter(TM), and the
Netscape N and Design logo, and Netscape and its Affiliates shall be entitled to
use the trade names, trademarks and service marks of Participant associated with
the Service (collectively, together with the Netscape marks listed above, the
"Marks"); provided that each Party: (i) does not create a unitary composite mark
involving a Mark of the other Party without the prior written approval of such
other Party and (ii) displays symbols and notices clearly and sufficiently
indicating the trademark status and ownership of the other Party's Marks in
accordance with Netscape's then current trademark guidelines available at
http://home.netscape.com/legal_notices/trademarks.html and applicable trademark
law and practice.
Rights. Each Party acknowledges that its utilization of the other Party's Marks
- ------
will not create in it, nor will it represent it has, any right, title or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees not to do anything contesting or impairing the trademark
rights of the other Party, including registering or attempting to register the
Marks of the Title as a trademark, service mark, Internet domain name, trade
name, or any similar trademarks or name, with any domestic or foreign
governmental or quasi-governmental authority which would be likely to cause
confusion with the Marks. Licensee may not register or use the Marks or the
Title or an abbreviation of the Marks of the Title as part of an Internet domain
name.
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Quality Standards. Each Party agrees that the nature and quality of its products
- -----------------
and services supplied in connection with the other Party's Marks shall conform
to quality standards communicated in writing by the other Party for use of its
trademarks. Each Party agrees to supply the other Party, upon request, with a
reasonable number of samples of any Materials publicly disseminated by such
Party which utilize the other Party's Marks. Each Party shall comply with all
applicable laws, regulations and customs and obtain any required government
approvals pertaining to use of the other Party's Marks.
Promotional Materials/Press Releases. Each Party will submit to the other Party,
- ------------------------------------
for its prior written approval, which shall not be unreasonably withheld or
delayed, any marketing, advertising, press releases or other promotional
materials related to the Service and/or referencing the other Party and/or its
trade names, trademarks and service marks (the "Promotional Materials");
provided, however, that, following the initial public announcement of the
business relationship between the Parties in accordance with the approval and
other requirements contained herein, either Party's subsequent factual reference
to the existence of a business relationship between Netscape and Participant,
including, without limitation, the availability of the Service on the Netscape
Network, or use of screen shots of the Service (so long as the Netscape Network
is clearly identified as the source of such screen shots) for promotional
purposes shall not require the approval of the other Party. Once approved, the
Promotional Materials may be used by a Party and its affiliates for the purpose
of promoting the Service and the content contained therein and reused for such
purpose until such approval is withdrawn with reasonable prior notice. In the
event such approval is withdrawn, existing inventories of Promotional Materials
may be depleted.
Infringement Proceedings. Each Party agrees to promptly notify the other Party
- ------------------------
of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party shall have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party,
at such other Party's expense, with its reasonable cooperation and assistance
with respect to any such infringement proceedings.
III. REPRESENTATIONS AND WARRANTIES
Authorization. Each Party represents and warrants to the other Party that: (i)
- -------------
such Party has the full corporate right, power and authority to enter into this
Agreement, to grant the licenses granted hereunder and to perform the acts
required of it hereunder; (ii) the execution of this Agreement by such Party,
and the performance by such Party of its obligations and duties hereunder, do
not and will not violate any agreement to which such Party is a party or by
which it is otherwise bound; (iii) when executed and delivered by such Party,
this Agreement will constitute the legal, valid and binding obligation of such
Party, enforceable against such Party in accordance with its terms; (iv) such
Party's Promotional Materials, Licensed Content, Products, or Services when used
pursuant to this Agreement, will neither infringe on any copyright, U.S. patent
or any other third party right nor violate any applicable law or regulation and
(v) such Party acknowledges that the other Party makes no representations,
warranties or agreements related to the subject matter hereof which are not
expressly provided for in this Agreement.
Insurance. Participant, at its sole cost and expense, shall secure and maintain
- ---------
adequate insurance coverage as is necessary, as a reasonable prudent
businessperson, for Participant to bear all of its obligations under this
Agreement. Such coverage shall include Worker's Compensation Insurance (or self
insurance, if applicable law permits), Employers Liability Insurance,
Comprehensive Automobile Liability Insurance, Umbrella Liability Insurance,
professional Liability Insurance, and Commercial General Liability Insurance,
and include a waiver of subrogation in Netscape's favor. Maintenance of the
foregoing insurance shall in no way be interpreted as relieving Participant of
any responsibility or obligation whatsoever and Participant may acquire, at its
own expense, such additional insurance as
20
<PAGE>
Participant deems necessary. Participant assumes full and complete liability for
all injuries to, or death of, any person, or for any damages to property arising
from the acts or omissions of Participant. Participant shall add Netscape as an
additional insured under such coverage and provide copies thereof and waivers of
subrogation to Netscape within 30 days of the Effective Date. Before any
cancellation or material change in any coverage, Participant shall provide
Netscape with 30 days' advance written notice. Participant's insurance shall be
primary to any other insurance Netscape may have. All insurance shall be written
by companies with a current A.M. Best rating of A-, VI or better.
IV. CONFIDENTIALITY
Each Party acknowledges that Confidential Information may be disclosed to the
other Party during the course of this Agreement. Each Party agrees that it will
take reasonable steps, at least substantially equivalent to the steps it takes
to protect its own proprietary information, during the term of this Agreement,
and for a period of three years following expiration or termination of this
Agreement, to prevent the disclosure of Confidential Information of the other
Party, other than to its employees, or its other agents who must have access to
such Confidential Information for such Party to perform its obligations
hereunder, who will each agree to comply with this section. Notwithstanding the
foregoing, either Party may issue a press release or other disclosure containing
Confidential Information without the consent of the other Party, to the extent
such disclosure is required by law, rule, regulation or government or court
order. In such event, the disclosing Party will provide at least five (5)
business days prior written notice of such proposed disclosure to the other
Party. Further, in the event such disclosure is required of either Party under
the laws, rules or regulations of the Securities and Exchange Commission or any
other applicable governing body, such Party will (i) redact mutually agreed-upon
portions of this Agreement to the fullest extent permitted under applicable
laws, rules and regulations and (ii) submit a request to such governing body
that such portions and other provisions of this Agreement receive confidential
treatment under the laws, rules and regulations of the Securities and Exchange
Commission or otherwise be held in the strictest confidence to the fullest
extent permitted under the laws, rules or regulations of any other applicable
governing body.
V. TREATMENT OF CLAIMS
Liability. EXCEPT AS PROVIDED BELOW IN THE "INDEMNITY" SECTION, UNDER NO
- ---------
CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM THE USE OF OR
INABILITY TO USE THE NETSCAPE NETWORK OR ONLINE AREA OR ANY OTHER PROVISION OF
THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED
PROFITS OR LOST BUSINESS. EXCEPT AS PROVIDED BELOW IN THE "INDEMNITY" SECTION,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR MORE THAN THE AGGREGATE
AMOUNTS PAYABLE HEREUNDER AS OF THE DATE LIABILITY ACCRUED.
No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
- ------------------------
NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE NETSCAPE
NETWORK, THE ONLINE AREA OR ANY NETSCAPE PUBLISHING TOOLS, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND
IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NETSCAPE SPECIFICALLY
DISCLAIMS ANY WARRANTY REGARDING THE PROFITABILITY OF THE ONLINE AREA.
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Indemnity. Either Party will defend, indemnify, save and hold harmless the other
- ---------
Party and the officers, directors, agents, affiliates, distributors, franchisees
and employees of the other Party from any and all third party claims, demands,
liabilities, costs or expenses, including reasonable attorneys' fees
("Liabilities"), resulting from the indemnifying Party's material breach of any
duty, representation, or warranty of this Agreement.
If a Party entitled to indemnification hereunder (the "Indemnified Party")
becomes aware of any matter it believes is indemnifiable hereunder involving any
claim, action, suit, investigation, arbitration or other proceeding against the
Indemnified Party by any third party (each an "Action"), the Indemnified Party
shall give the other Party (the "Indemnifying Party") prompt written notice of
such Action. Such notice shall (i) provide the basis on which indemnification is
being asserted and (ii) be accompanied by copies of all relevant pleadings,
demands, and other papers related to the Action and in the possession of the
Indemnified Party. The Indemnifying Party shall have a period of ten (10) days
after delivery of such notice to respond. If the Indemnifying Party elects to
defend the Action or does not respond within the requisite ten (10) day period,
the Indemnifying Party shall be obligated to defend the Action, at its own
expense, and by counsel reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall cooperate, at the expense of the Indemnifying Party,
with the Indemnifying Party and its counsel in the defense and the Indemnified
Party shall have the right to participate fully, at its own expense, in the
defense of such Action. If the Indemnifying Party responds within the required
ten (10) day period and elects not to defend such Action, the Indemnified Party
shall be free, without prejudice to any of the Indemnified Party's rights
hereunder, to compromise or defend (and control the defense of) such Action. In
such case, the Indemnifying Party shall cooperate, at its own expense, with the
Indemnified Party and its counsel in the defense against such Action and the
Indemnifying Party shall have the right to participate fully, at its own
expense, in the defense of such Action. Any compromise or settlement of an
Action shall require the prior written consent of both Parties hereunder, such
consent not to be unreasonably withheld or delayed.
Acknowledgment. NETSCAPE AND PARTICIPANT EACH ACKNOWLEDGES THAT THE
- --------------
PROVISIONS OF THIS AGREEMENT WERE NEGOTIATED TO REFLECT AN INFORMED,
VOLUNTARY ALLOCATION BETWEEN THEM OF ALL RISKS (BOTH KNOWN AND UNKNOWN)
ASSOCIATED WITH THE TRANSACTIONS CONTEMPLATED HEREUNDER. THE LIMITATIONS
AND DISCLAIMERS RELATED TO WARRANTIES AND LIABILITY CONTAINED IN THIS
AGREEMENT ARE INTENDED TO LIMIT THE CIRCUMSTANCES AND EXTENT OF LIABILITY.
THE PROVISIONS OF THIS SECTION SHALL BE ENFORCEABLE INDEPENDENT OF AND
SEVERABLE FROM ANY OTHER ENFORCEABLE OR UNENFORCEABLE PROVISION OF THIS
AGREEMENT.
VI. ARBITRATION
(a) The Parties shall act in good faith and use commercially reasonable efforts
to promptly resolve any claim, dispute, claim, controversy or disagreement (each
a "Dispute") between the Parties or any of their respective subsidiaries,
affiliates, successors and assigns under or related to this Agreement or any
document executed pursuant to this Agreement or any of the transactions
contemplated hereby. If the Parties cannot resolve the Dispute within such
timeframe, the Dispute shall be submitted to the Management Committee for
resolution. For ten (10) days after the Dispute was submitted to the Management
Committee, the Management Committee shall have the exclusive right to resolve
such Dispute; provided further that the Management Committee shall have the
final and exclusive right to resolve Disputes arising from any provision of this
Agreement which expressly or implicitly provides for the Parties to reach mutual
agreement as to certain terms. If the Management Committee is unable to amicably
resolve the Dispute during the ten (10) day period, then the Management
Committee will consider in good faith the possibility of retaining a third party
mediator to facilitate resolution of the Dispute. In the event the Management
Committee elects not to retain a mediator, the Dispute will be
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subject to the resolution mechanisms described below. "Management Committee"
shall mean a committee made up of a senior executive from each of the Parties
for the purpose of resolving Disputes under this Section and generally
overseeing the relationship between the Parties contemplated by this Agreement.
Neither Party shall seek, nor shall be entitled to seek, binding outside
resolution of the Dispute unless and until the Parties have been unable to
amicably resolve the dispute as set forth in this paragraph (a) and then, only
in compliance with the procedures set forth in this Section.
(b) Except for Disputes relating to issues of (i) proprietary rights, including
but not limited to intellectual property and confidentiality, and (ii) any
provision of this Agreement which expressly or implicitly provides for the
Parties to reach mutual agreement as to certain terms (which shall be resolved
by the Parties solely and exclusively through amicable resolution as set forth
in paragraph (a), any Dispute not resolved by amicable resolution as set forth
in paragraph (a) shall be governed exclusively and finally by arbitration. Such
arbitration shall be conducted by the American Arbitration Association ("AAA")
in Washington, D.C. and shall be initiated and conducted in accordance with the
Commercial Arbitration Rules ("Commercial Rules") of the AAA, including the AAA
Supplementary Procedures for Large Complex Commercial Disputes ("Complex
Procedures"), as such rules shall be in effect on the date of delivery of a
demand for arbitration ("Demand"), except to the extent that such rules are
inconsistent with the provisions set forth herein. Notwithstanding the
foregoing, the Parties may agree in good faith that the Complex Procedures shall
not apply in order to promote the efficient arbitration of Disputes where the
nature of the Dispute, including without limitation the amount in controversy,
does not justify the application of such procedures.
(c) The arbitration panel shall consist of three arbitrators. Each Party shall
name an arbitrator within ten (10) days after the delivery of the Demand. The
two arbitrators named by the Parties may have prior relationships with the
naming Party, which in a judicial setting would be considered a conflict of
interest. The third arbitrator, selected by the first two, shall be a neutral
participant, with no prior working relationship with either Party. If the two
arbitrators are unable to select a third arbitrator within ten (10) days, a
third neutral arbitrator will be appointed by the AAA from the panel of
commercial arbitrators of any of the AAA Large and Complex Resolution Programs.
If a vacancy in the arbitration panel occurs after the hearings have commenced,
the remaining arbitrator or arbitrators may not continue with the hearing and
determination of the controversy, unless the Parties agree otherwise.
(d) The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and not state law, shall
govern the arbitrability of all Disputes. The arbitrators shall allow such
discovery as is appropriate to the purposes of arbitration in accomplishing a
fair, speedy and cost-effective resolution of the Disputes. The arbitrators
shall reference the Federal Rules of Civil Procedure then in effect in setting
the scope and timing of discovery. The Federal Rules of Evidence shall apply in
toto. The arbitrators may enter a default decision against any Party who fails
to participate in the arbitration proceedings.
(e) The arbitrators shall have the authority to award compensatory damages only.
Any award by the arbitrators shall be accompanied by a written opinion setting
forth the findings of fact and conclusions of law relied upon in reaching the
decision. The award rendered by the arbitrators shall be final, binding and
non-appealable, and judgment upon such award may be entered by any court of
competent jurisdiction. The Parties agree that the existence, conduct and
content of any arbitration shall be kept confidential and no Party shall
disclose to any person any information about such arbitration, except as may be
required by law or by any governmental authority or for financial reporting
purposes in each Party's financial statements.
(f) Each Party shall pay the fees of its own attorneys, expenses of witnesses
and all other expenses and costs in connection with the presentation of such
Party's case (collectively, "Attorneys' Fees"). The remaining costs of the
arbitration, including without limitation, fees of the arbitrators, costs of
records or transcripts and administrative fees (collectively, "Arbitration
Costs") shall be born equally by the
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parties. Notwithstanding the foregoing, the arbitrators may modify the
allocation of Arbitration Costs and award Attorneys' Fees in those cases where
fairness dictates a different allocation of Arbitration Costs between the
Parties and an award of Attorneys' Fees to the prevailing Party as determined by
the arbitrators.
(g) Any Dispute that is not subject to final resolution by the Management
Committee or to arbitration under this Section or law (collectively,
"Non-Arbitration Claims") shall be brought in a court of competent jurisdiction
in the Commonwealth of Virginia. Each Party irrevocably consents to the
exclusive jurisdiction of the courts of the Commonwealth of Virginia and the
federal courts situated in the Commonwealth of Virginia, over any and all
Non-Arbitration Claims and any and all actions to enforce such claims or to
recover damages or other relief in connection with such claims or to enforce a
judgment rendered in an arbitration proceeding.
VII. MISCELLANEOUS
Auditing Rights. Each Party shall maintain complete, clear and accurate records
- ---------------
of all expenses, revenues, fees, transactions and related documentation
(including agreements) in connection with the performance of this Agreement
("Records"). All such Records shall be maintained for a minimum of five (5)
years following termination of this Agreement. For the sole purpose of ensuring
compliance with this Agreement, each Party shall have the right, at its expense,
to direct an independent certified public accounting firm subject to strict
confidentiality restrictions to conduct a reasonable and necessary copying and
inspection of portions of the Records of the other Party which are directly
related to amounts payable to the Party requesting the audit pursuant to this
Agreement. Any such audit may be conducted after twenty (20) business days prior
written notice, subject to the following. Such audits shall not be made more
frequently than once every twelve months. No such audit of Netscape shall occur
during the period beginning on June 1 and ending October 1. In lieu of providing
access to its Records as described above, a Party shall be entitled to provide
the other Party with a report from an independent certified public accounting
firm confirming the information to be derived from such Records.
Excuse. Neither Party shall be liable for, or be considered in breach of or
- ------
default under this Agreement on account of, any delay or failure to perform as
required by this Agreement as a result of any causes or conditions which are
beyond such Party's reasonable control and which such Party is unable to
overcome by the exercise of reasonable diligence.
Independent Contractors. The Parties to this Agreement are independent
- -----------------------
contractors. Neither Party is an agent, representative or participant of the
other Party. Neither Party shall have any right, power or authority to enter
into any agreement for or on behalf of, or incur any obligation or liability of,
or to otherwise bind, the other Party. This Agreement shall not be interpreted
or construed to create an association, agency, joint venture or participantship
between the Parties or to impose any liability attributable to such a
relationship upon either Party.
Notice. Any notice, approval, request, authorization, direction or other
- ------
communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered personally to the Party to whom the same is directed; (ii) one
business day after deposit with a commercial overnight carrier, with written
verification of receipt; or (iii) five business days after the mailing date,
whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available. In the case of Netscape, such notice
will be provided to both the Senior Vice President for Business Affairs, America
Online, Inc. (fax no. 703-265-1206) and the General Counsel, Netscape
Communications Corporation (fax no 650-988-1132), each at the address of
Netscape set forth
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in the first paragraph of this Agreement. In the case of Participant, except as
otherwise specified herein, the notice address shall be the address for
Participant set forth in the first paragraph of this Agreement, with the other
relevant notice information, including the recipient for notice and, as
applicable, such recipient's fax number or Netscape e-mail address, to be as
reasonably identified by Netscape.
No Waiver. The failure of either Party to insist upon or enforce strict
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performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.
Return of Information. Upon the expiration or termination of this Agreement,
- ---------------------
each Party shall, upon the written request of the other Party, return or destroy
(at the option of the Party receiving the request) all of the other party's
Confidential Information.
Survival. Section 6.5 of the Netcenter Services Agreement, Section VI of Exhibit
- --------
D to the Netcenter Services Agreement, and Sections III, IV, V, VI and VII of
this Exhibit G to the Netcenter Services Agreement, shall survive the
completion, expiration, termination or cancellation of this Agreement.
Entire Agreement. This Agreement sets forth the entire agreement and supersedes
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any and all prior agreements of the Parties with respect to the transactions set
forth herein. Neither Party shall be bound by, and each Party specifically
objects to, any term, condition or other provision which is different from or in
addition to the provisions of this Agreement (whether or not it would materially
alter this Agreement) and which is proffered by the other Party in any
correspondence or other document, unless the Party to be bound thereby
specifically agrees to such provision in writing.
Amendment. No change, amendment or modification of any provision of this
- ---------
Agreement shall be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment.
Further Assurances. Each Party shall take such action (including, but not
- ------------------
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by any other Party for the implementation or continuing
performance of this Agreement.
Assignment. Participant shall not assign this Agreement or any right, interest
- ----------
or benefit under this Agreement without the prior written consent of Netscape.
Assumption of this Agreement by any successor to Participant (including, without
limitation, by way of merger or consolidation) shall be subject to Netscape's
prior written approval. Subject to the foregoing, this Agreement shall be fully
binding upon, inure to the benefit of and be enforceable by the Parties hereto
and their respective successors and assigns.
Construction; Severability. In the event that any provision of this Agreement
- --------------------------
conflicts with the law under which this Agreement is to be construed or if any
such provision is held invalid by a court with jurisdiction over the Parties to
this Agreement, (i) such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the Parties in accordance with
applicable law, and (ii) the remaining terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect.
Remedies. Except where otherwise specified, the rights and remedies granted to a
- --------
Party under this Agreement are cumulative and in addition to, and not in lieu
of, any other rights or remedies which the Party may possess at law or in
equity.
Applicable Law; Jurisdiction. This Agreement shall be interpreted, construed and
- ----------------------------
enforced in all respects in accordance with the laws of the Commonwealth of
Virginia except for its conflicts of laws
25
<PAGE>
principles. Each Party irrevocably consents to the exclusive jurisdiction of the
courts of the Commonwealth of Virginia and the federal courts situated in the
Commonwealth of Virginia, in connection with any action to enforce the
provisions of this Agreement, to recover damages or other relief for breach or
default under this Agreement, or otherwise arising under or by reason of this
Agreement.
Export Controls. Both parties shall adhere to all applicable laws, regulations
- ---------------
and rules relating to the export of technical data and shall not export or
re-export any technical data, any products received from the other Party or the
direct product of such technical data to any proscribed country listed in such
applicable laws, regulations and rules unless properly authorized.
Headings. The captions and headings used in this Agreement are inserted for
- --------
convenience only and shall not affect the meaning or interpretation of this
Agreement.
Counterparts. This Agreement may be executed in counterparts, each of which
- ------------
shall be deemed an original and all of which together shall constitute one and
the same document.
26
<PAGE>
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 June 2, 1999, except for the thirteenth paragraph of Note
14 which is as of June 30, 1999 and the second paragraph of Note 1, which is as
of July 26, 1999, relating to the financial statements of Powerize.com, 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
------------------------------
McLean, Virginia
July 26, 1999
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