AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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 of principal executive offices)
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DELAWARE 7375 52-2073361
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
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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)
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COPIES TO:
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 23210-1320
(410) 539-2530 (804) 643-1991
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. |_|
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
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Shares of Common Stock, par value $.0001 $28,750,000 $7,993
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
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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SUBJECT TO COMPLETION - JUNE 4, 1999
PROSPECTUS
[POWERIZE.COM LOGO]
Shares of Common Stock
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We are offering 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 $ and $ per share.
We will file an application to qualify our common stock for quotation
on the Nasdaq National Market under the symbol "POWZ."
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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Per Share Total
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Public offering price (estimated): $ $
Underwriting fees:
Proceeds to Powerize.com (after expenses):
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We have granted the underwriters the right to purchase an additional
shares of common stock from us at the initial public offering price, less
underwriting fees, to cover over-allotments. See "Underwriting."
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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.
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FERRIS, BAKER WATTS RYAN, LEE & COMPANY
Incorporated Incorporated
The date of this prospectus is , 1999
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[TO BE INSERTED VERTICALLY ON LEFT MARGIN OF COVER]
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.
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ART
The inside front cover contains a number of screen shots from Powerize.com's Web
page.
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TABLE OF CONTENTS
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Page Page
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Prospectus Summary..................................... Management....................................
Risk Factors........................................... Related Transactions and Relationships........
Use of Proceeds........................................ Principal Stockholders........................
Dividend Policy........................................ Description of our Capital Stock..............
Capitalization......................................... Shares Eligible for Future Sale...............
Dilution............................................... Underwriting..................................
Selected Financial Data................................ Validity of the Shares........................
Management's Discussion and Analysis of Financial Experts.......................................
Condition and Results of Operations................. Additional Information........................
Business............................................... Index to Financial Statements................. F-1
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We use market data and industry forecasts throughout this prospectus, which
we have obtained from internal surveys, market research, publicly available
information and industry publications. Industry publications generally state
that the information they provide has been obtained from sources believed to be
reliable, but that the accuracy and completeness of this information is not
guaranteed. We believe that the surveys and market research we or others have
performed is reliable, but we have not independently verified this information.
Neither we nor any of the underwriters represents that any such information is
accurate.
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.
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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. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN
THIS PROSPECTUS ASSUMES THAT:
o OUR COMMON STOCK WILL BE SOLD AT $ PER SHARE, WHICH IS THE MID-POINT
OF THE RANGE SHOWN ON THE COVER PAGE OF THIS PROSPECTUS; AND
o 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 and VerticalNet, Inc. Inktomi will market our content
collection to its Internet customers, including America Online, Yahoo! and
HotBot. 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:
o 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
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engine with a single search directive. Our Web site serves
business users, professionals, investors and others who use
specialized business and financial information.
o 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:
o 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.
o 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.
o 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.
o 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.
o 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 46 employees including 21 engineers, three
librarians, six customer support representatives and 12 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.
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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.
Common stock offered.................. shares
Common stock to be outstanding after
this offering....................... 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"
The number of shares of common stock to be outstanding after this offering is
based on shares outstanding on May 31, 1999. This number excludes:
o 1,662,641 shares of our common stock, issuable upon the exercise of
stock options outstanding on May 31, 1999, with a weighted average
exercise price of $0.78 per share;
o 1,035,998 shares of our common stock issuable upon the exercise of
warrants outstanding on May 31, 1999, with a weighted average exercise
price of $1.70 per share; and
o 87,359 shares of our common stock reserved for issuance under our 1998
Stock Incentive Plan.
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SUMMARY FINANCIAL DATA
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MARCH 17, 1997
(DATE OF
INCEPTION) TO YEAR ENDED THREE MONTHS ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, ----------------------------------
1997 1998 1998 1999
---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
Revenue..................................... $ 24,458 $ 330,660 $ -- $ 295,694
Expenses:
Cost of revenue.......................... 2,868 520,219 -- 219,857
Sales and marketing...................... 132,953 919,094 93,137 362,686
Product development...................... 352,621 1,654,859 187,975 600,844
General and administrative............... 88,580 439,703 53,751 252,184
----------------- ---------------- ---------------- ----------------
Operating loss.............................. (552,564) (3,203,215) (334,863) (1,139,877)
Interest expense, net....................... (5,867) (31,278) (3,890) (16,288)
----------------- ---------------- ---------------- ----------------
Net loss.................................... $ (558,431) $(3,234,493) $ (338,753) $(1,156,165)
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Basic and diluted net loss per common share. $(0.20) $(0.68) $(0.10) $(0.19)
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Weighted average number of common shares
outstanding.............................. 2,841,546 4,765,601 3,554,059 6,184,005
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DECEMBER 31, MARCH 31, 1999
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PRO FORMA
BALANCE SHEET DATA: 1997 1998 ACTUAL PRO FORMA AS ADJUSTED
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Cash.......................................... $ 78,534 $57,609 $157,518 $8,673,599 $
Total assets.................................. 198,808 1,539,527 1,608,938 10,548,147
Total debt.................................... 50,000 1,009,812 166,945 166,945
Total stockholder's equity (deficit).......... (12,681) (932,337) (10,399) 8,928,810
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In the Pro Forma column, we have adjusted the Actual numbers to reflect the
following events that have occurred since March 31, 1999:
o The issuance in May 1999 and application of the net proceeds from the
private placements of (i) 3,071,422 shares of common stock sold at a
price of $1.75 per share, and (ii) 1,400,000 shares of common stock
sold at a price of $2.50 per share;
o The exercise of 51,388 options to purchase shares of common stock at
exercise prices ranging from $0.01 to $1.50 per share;
o The issuance of 243,200 warrants to purchase shares of common stock,
with an aggregate fair value of $449,000; and
o The deferred compensation of $75,000 related to 30,000 warrants to
purchase shares of common stock issued to non-employee directors at an
exercise price of $0.01 per share.
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In the Pro Forma As Adjusted column, we have further adjusted the Pro Forma
numbers to give effect to:
o our issuance of warrants to purchase shares of common stock,
with an exercise price of $ per share. This issuance will occur
immediately prior to the closing of this offering. See "Business -
Strategic Relationships"; and
o our 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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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. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE
FACE. 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, FINANCIAL CONDITION OR RESULTS OF OPERATIONS 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 US
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 us. 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 business, financial condition and
operating results will be materially and adversely affected.
WE ANTICIPATE WE WILL INCUR CONTINUED LOSSES AND NEGATIVE OPERATING CASH FLOWS
FOR THE FORESEEABLE FUTURE
From inception on March 17, 1997 through March 31, 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 $1.2 million for the three months ended March 31, 1999.
As of March 31, 1999, our accumulated deficit was $4.9 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
Some of our expenses are fixed, including non-cancelable agreements,
equipment leases and real estate leases. If our revenue does not increase, we
may not be able to compensate by reducing expenses in a timely manner. In
addition, we plan to increase significantly our operating expenses to:
o expand the amount of content available to our users free of charge;
o increase our sales and marketing operations;
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o broaden our customer support capabilities;
o establish additional marketing and distribution relationships; and
o 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
business, financial condition and operating results would be materially and
adversely affected.
WE PLAN TO RELY HEAVILY ON ADVERTISING REVENUE AND IF OUR ADVERTISING REVENUE
DOES NOT DEVELOP AS EXPECTED OUR BUSINESS WOULD BE ADVERSELY AFFECTED
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 would be
materially and adversely affected. Our ability to increase our advertising
revenue will depend on many factors, including:
o advertisers' acceptance of the Internet as a legitimate advertising
medium;
o the development of a large base of users on our Web site who possess
demographic characteristics attractive to advertisers;
o the expansion of our sales force and business development staff; and
o advertising rates.
WE ARE AN EARLY STAGE COMPANY IN A NEW AND RAPIDLY EVOLVING MARKET, SUBJECT TO
GREATER RISKS THAN MANY OF OUR COMPETITORS
You should consider the risks, expenses and difficulties we may encounter,
including those frequently encountered by early stage companies in new and
rapidly evolving markets, including, among others, responding to rapid
technological changes, lack of financing resources, lack of brand name loyalty,
and lack of market acceptance. To overcome these risks, we must, among other
things:
o attract and retain a large base of users;
o increase awareness of our services;
o respond to competitive developments;
o continue to attract, retain and motivate qualified persons;
o continue to upgrade our technologies;
o introduce and develop new technology for our services; and
o effectively manage our expanding operations.
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If we are unable to successfully accomplish some or all of the foregoing,
our business, financial condition and operating results may be materially and
adversely affected.
OUR FAILURE TO MANAGE FUTURE GROWTH WILL STRAIN OUR RESOURCES AND COULD IMPAIR
THE EXPANSION OF OUR BUSINESS
We plan to continue to significantly expand our operations. We have
experienced rapid growth in our operations. As of March 31, 1999, we had grown
to a total of 41 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 impaired. We may be unable to successfully implement 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:
o improve existing and implement new operational, financial and
management information controls, reporting systems and procedures;
o hire, train and manage sufficient additional qualified personnel;
o expand and upgrade our technologies; and
o manage multiple relationships with our users, vendors and other third
parties.
If we are unable to accomplish any of these objectives and manage our
growth effectively, our business, operating results and financial condition
could be materially and adversely affected.
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY, CAUSING
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:
o the rate at which we are able to attract and retain users;
o the frequency and duration of user visits to our Web site;
o changes in advertising rates;
o the prices our customers are willing to pay;
o the amount and timing of expenditures relating to the expansion of our
services and infrastructure;
o the ability of our equipment and service suppliers to meet our needs;
o the success of our relationships with our content providers and
distributors;
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o introduction of new services or technologies by our competitors;
o regulatory developments governing our industry; and
o 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
OUR INABILITY TO TRACK AND MEASURE THE DELIVERY OF ADVERTISEMENTS MAY HURT OUR
BUSINESS
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, financial condition and operating results 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 or obtain them from
another provider. 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 made to be reliable.
IF WE ARE NOT SUCCESSFUL IN INCREASING BRAND AWARENESS OF, AND REGULAR AND
REPEATED VISITS TO, OUR WEB SITE, 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 our Web site, we must succeed in 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, operating results and financial condition would be
materially and adversely affected.
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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, financial condition and
operating results could be materially and adversely affected. A number of
factors could prevent such acceptance, including the following:
o advertising and electronic commerce over the Internet is at an early
stage and may not develop as quickly as expected;
o the necessary network infrastructure for substantial growth in usage of
the Internet may not be adequately developed;
o increased government regulation or taxation may adversely affect the
viability of electronic commerce;
o insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times; and
o adverse publicity and consumer concern about the security of electronic
commerce transactions could discourage its acceptance and growth.
CHANGES IN ADVERTISING RATES OR PRICING MODELS 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.
THERE IS INTENSE COMPETITION FOR THE INTERNET PRODUCTS AND SERVICES THAT WE
OFFER
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:
o 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;
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o providers of company information, such as MarketGuide and Standard &
Poor's, many of whom are also our content providers;
o providers of proprietary business and financial information, such as
Bloomberg Business News, Dow Jones Interactive and Reuters News
Service;
o 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
o Internet portal companies and other free or low cost mass market
on-line services, such as Excite, Infoseek, Lycos, Yahoo! and
AOL/Netscape.
Our ability to compete depends on many factors, including:
o the timeliness, comprehensiveness and trustworthiness of our content
and that of our competitors;
o the cost of our services compared to our competitors;
o the ease of use of services developed either by us or our competitors;
o the usefulness of our technology and tools;
o the attractiveness of the demographic characteristics of our audience;
and
o 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, operating results and financial
condition would be materially and adversely affected.
CONCERNS REGARDING SECURITY OF TRANSACTIONS AND TRANSMITTING CONFIDENTIAL
INFORMATION OVER THE INTERNET MAY NEGATIVELY IMPACT OUR BUSINESS
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.
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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
our business, financial condition and operating results.
WE ARE DEPENDENT ON STRATEGIC RELATIONSHIPS AND OUR BUSINESS WOULD BE MATERIALLY
AND ADVERSELY AFFECTED IF WE WERE TO LOSE OR FAIL TO GAIN ADDITIONAL STRATEGIC
RELATIONSHIPS
We depend on the following strategic relationships:
o 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 business, financial condition
and 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, our business
and delivery of our products may be disrupted. This could result in a
loss of customers and have a material adverse effect on our business,
financial condition and results of operations.
o 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
anticipated benefits.
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OUR BUSINESS DEPENDS ON THE GROWTH 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 reasons, including:
o inadequate network infrastructure;
o security concerns;
o inconsistent quality of service; and
o unavailability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth or its performance or
reliability may decline. In addition, Web sites may from time to time experience
interruptions in their service as a result of outages and other delays occurring
throughout the Internet network infrastructure. If these outages or delays
frequently occur in the future, Internet usage could be adversely affected. We
also depend on third-party content providers to deliver information and data
feeds to us on a 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, operating results and financial condition.
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 business, financial
condition and 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 LIABILITY FOR DISTRIBUTING CONTENT OVER THE INTERNET
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
business, financial condition and operating results could suffer a material
adverse effect if costs resulting from these claims are not covered by our
insurance or exceed our coverage.
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RISK OF FAILURE OF OUR COMPUTER AND COMMUNICATIONS HARDWARE SYSTEMS
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.
CAPACITY LIMITS ON OUR TECHNOLOGY, TRANSACTION PROCESSING SYSTEM AND NETWORK
HARDWARE AND SOFTWARE MAY BE DIFFICULT TO PROJECT AND WE MAY NOT BE ABLE TO
EXPAND AND UPGRADE OUR SYSTEMS TO MEET INCREASED USE
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.
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
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, results of operations and financial
condition would be materially and adversely affected.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD
HURT OUR BUSINESS
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
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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, operating results and financial condition.
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."
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
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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
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:
o 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;
o the potential difficulty in obtaining and enforcing patent rights on
Internet-related technologies and processes;
o the authority necessary to republish information available from Web
sites and other portals on the Internet;
o the right to collect, use, exploit or disseminate personal information
and data concerning users;
o 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;
o the extent of protection of intellectual property rights in foreign
jurisdictions; and
o 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 adverse effect on our business, financial condition and
results of operations.
OUR INTELLECTUAL PROPERTY PROTECTION MAY BE INADEQUATE TO PROTECT OUR
PROPRIETARY RIGHTS AND WE MAY BE SUBJECT TO INFRINGEMENT CLAIMS
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 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, there could be a material and adverse effect on our
business, operating results and financial condition.
OUR PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWN A SIGNIFICANT PERCENTAGE OF OUR
COMMON STOCK AND WILL BE ABLE TO EXERCISE SIGNIFICANT INFLUENCE OVER OUR COMPANY
Our executive officers, directors and principal stockholders together will
beneficially own % of our common stock after this offering, or % 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 be able to determine the composition of our Board of Directors, will retain
the voting power to approve all matters requiring stockholder approval,
including any merger or sale of the Company, and will continue to have
significant influence over our affairs.
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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.
OUR COMMON STOCK HAS NOT BEEN TRADED IN THE PUBLIC MARKET BEFORE THIS OFFERING
Our common stock has not been traded in the public market before this
offering. We will apply 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. 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."
WE EXPECT OUR STOCK PRICE TO BE VOLATILE
The price at which our common stock will trade will depend upon many
factors, including our historical and anticipated quarterly and annual operating
results, variations between our actual results and analyst and investor
expectations, announcements by us or others and developments affecting our
business, investor perceptions of our company and comparable public companies,
changes in our industry and general market and economic conditions. Many of
these factors are beyond our control. You should be aware that the stock market
in general and the stock of Internet companies in particular have from time to
time experienced extreme price and volume fluctuations.
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION OF APPROXIMATELY $ 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 $ 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. See "Dilution."
MANAGEMENT HAS BROAD DISCRETION REGARDING THE USE OF PROCEEDS FROM THIS OFFERING
Our management will have broad discretion in how we use the net proceeds of
this offering. You must rely on the judgment of management regarding the
application of the proceeds of this offering. See "Use of Proceeds."
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
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our common stock. The number of shares of common stock available for sale in the
public market will be limited by lock-up agreements under which the holders of
over % of our outstanding shares of common stock after this offering 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. 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 1,750,000 shares of
common stock subject to outstanding stock options or reserved for issuance under
our Omnibus Stock Incentive Plan. See "Management - 1998 Stock Incentive Plan"
and "Shares Eligible for Future Sale."
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. 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.
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USE OF PROCEEDS
We estimate that we will receive approximately $22.4 million in net
proceeds from this offering based upon an assumed initial public offering price
of $ per share. This amount reflects deductions from the gross proceeds of the
offering of:
o approximately $1.8 million, which will be retained by the underwriters
as discounts and commissions; and
o approximately $900,000, 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:
o our future revenue growth;
o our future capital expenditures;
o the amount of cash generated by our operations; and
o 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 $3.5
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.
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CAPITALIZATION
The following table shows our capitalization as of March 31, 1999. You
should also refer to our financial statements and the related notes included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, 1999
------------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
Cash.............................................................. $ 157,518 $8,673,599 $
Stockholders' equity:
Common stock, $0.0001 par value, 50,000,000 shares authorized,
7,753,758 shares issued and outstanding (actual); 12,470,738
shares issued and outstanding (on a pro forma basis); and
shares issued and outstanding (on a pro forma as
adjusted basis)............................................. 775 1,247
Preferred stock, $0.0001 par value, 15,000,000 shares
authorized, none issued................................. -- --
Additional paid-in capital..................................... 5,179,172 14,048,970
Deferred compensation.......................................... (241,257) (312,844)
Accumulated deficit............................................ (4,949,089) (4,808,563)
---------------- ------------ ---------------
Total stockholders' equity (deficit)......................... (10,399) 8,928,810
---------------- ------------ ---------------
Total capitalization...................................... $1,608,938 $10,548,147 $
================ ============ ===============
</TABLE>
The number of shares of common stock shown in the above table excludes:
o 1,662,641 shares of our common stock issuable upon the exercise of
stock options outstanding on May 31, 1999, with a weighted average
exercise price of $0.78 per share;
o 1,035,998 shares of our common stock issuable upon the exercise of
warrants outstanding on May 31, 1999, with a weighted average exercise
price of $1.70 per share; and
o 87,359 shares reserved for issuance under our 1998 Stock Incentive
Plan as of May 31, 1999.
In the Pro Forma column, we have adjusted the Actual numbers to reflect the
following events that have occurred since March 31, 1999:
o The issuance in May 1999 and application of the net proceeds from the
private placements of (i) 3,071,422 shares of common stock sold at a price
of $1.75 per share, and (ii) 1,400,000 shares of common stock sold at a
price of $2.50 per share;
o The issuance in May 1999 of 194,170 shares of common stock for no proceeds
to third parties as a finder's fee relating to the May 1999 private
placements;
o The exercise of 51,388 options to purchase shares of common stock at
exercise prices ranging from $0.01 to $1.50 per share;
o The issuance of 243,200 warrants to purchase shares of common stock, with an
aggregate fair value of $449,000; and
o The deferred compensation of $75,000 related to 30,000 warrants to purchase
shares of common stock issued to non-employee directors at an exercise price
of $0.01 per share.
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<PAGE>
In the Pro Forma As Adjusted column, we have further adjusted the Pro Forma
numbers to give effect to:
o The issuance of warrants shares of common stock, with an exercise
price of $ per share. This issuance will occur immediately prior to
the closing of this offering. See "Business--Strategic Relationships"; and
o 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 March 31, 1999 was $ , or $ 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 shares of common stock in this offering at an assumed initial public
offering price of $ 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 March 31, 1999
would have been approximately $ million, or $ per share. This
represents an immediate increase in net tangible book value of $ per share
to our existing stockholders and an immediate dilution of $ 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>
Assumed initial public offering price per common share............................ $
Net tangible book value per common share at March 31, 1999.................. $
Increase per share attributable to new investors............................
Net tangible book value per common share after this offering...................... ------------
Dilution per common share to new investors........................................ $
============
</TABLE>
The following table sets forth at March 31, 1999:
o 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;
o the number of shares of our common stock purchased by new investors,
the total consideration and the price per share paid by them for these
shares; and
o 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>
Existing stockholders.......... % $ % $
New investors..................
Total..................... 100.0% $ 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
March 31, 1999, 1,100,694 shares of common stock were issuable upon the
exercise of outstanding stock options, with a weighted average exercise price of
$0.98 per share, and 142,500 shares of common stock were issuable upon the
exercise of outstanding warrants, with a weighted average exercise price of
$1.50 per share. To the extent these stock options and warrants are exercised,
new investors will experience further dilution.
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<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 March 31, 1999 and for the
three months ended March 31, 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>
<S> <C> <C>
MARCH 17, 1997
(DATE OF
INCEPTION) TO YEAR ENDED THREE MONTHS ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, -------------------------------
1997 1998 1998 1999
---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
Revenue..................................... $ 24,458 $ 330,660 $ -- $ 295,694
Expenses:
Cost of revenue.......................... 2,868 520,219 -- 219,857
Sales and marketing...................... 132,953 919,094 93,137 362,686
Product development...................... 352,621 1,654,859 187,975 600,844
General and administrative............... 88,580 439,703 53,751 252,184
----------------- ---------------- ---------------- ----------------
Operating loss.............................. (552,564) (3,203,215) (334,863) (1,139,877)
Interest expense, net....................... (5,867) (31,278) (3,890) (16,288)
----------------- ---------------- ---------------- ----------------
Net loss.................................... $ (558,431) $(3,234,493) $(338,753) $(1,156,165)
================= ================ ================ ================
Basic and diluted net loss per common share. $ (0.20) $ (0.68) $ (0.10) $ (0.19)
================= ================ ================ ================
Weighted average number of common shares
outstanding.............................. 2,841,546 4,765,601 3,554,059 6,184,005
================= ================ ================ ================
DECEMBER 31,
---------------------------
1997 1998 MARCH 31, 1999
---- ---- -----------------
BALANCE SHEET DATA:
Cash................................. $ 78,534 $ 57,609 $ 157,518
Total assets......................... 198,808 1,539,527 1,608,938
Total debt........................... 50,000 1,009,812 166,945
Total stockholders' equity (deficit). (12,681) (932,337) (10,399)
</TABLE>
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<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."
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 March 31, 1999, our revenue was derived 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
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<PAGE>
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:
o 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.
o CONSULTING REVENUE. We receive consulting revenue relating to the
installation and customization of our technology. Revenue is recognized
as the services are performed.
o 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.
o 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.
o 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.
o 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:
o 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.
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<PAGE>
o 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.
o 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.
o 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
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1998
REVENUE. We recognized $296,000 in revenue for the three months ended March
31, 1999, as compared to no revenue for the three months ended March 31, 1998.
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.
COST OF REVENUE. Cost of revenue was $220,000 for the three months ended
March 31, 1999, as compared to no cost of revenue for the three months ended
March 31, 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.
PRODUCT DEVELOPMENT EXPENSES. Product development expenses were $601,000
for the three months ended March 31, 1999, as compared to $188,000 for the three
months ended March 31, 1998, an increase of $413,000. Product development
expenses increased primarily as a result of an increase in our technology
personnel from 21 persons in the first quarter of 1998 to 30 persons in the
first quarter of 1999.
SALES AND MARKETING EXPENSES. Sales and marketing expenses were $363,000
for the three months ended March 31, 1999, as compared to $93,000 for the three
months ended March 31, 1998, an increase of $270,000. The increase was primarily
attributable to increases in fees paid to public relations firms, expenses
related to trade shows and the addition of four sales and marketing personnel.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $252,000 for the three months ended March 31, 1999, as compared to $54,000
for the three months ended March 31, 1998, an increase of $198,000. 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.
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<PAGE>
INTEREST EXPENSE, NET. Interest expense, net was $16,000 for the three
months ended March 31, 1999 compared to $4,000 for the three months ended March
31, 1999, an increase of $12,000. The increase was primarily attributable to the
increase in the outstanding loans from Mr. Addison.
NET LOSS. We incurred a net loss of $1.2 million for the first quarter of
1999, as compared to a net loss of $339,000 for the first quarter of 1998. The
increase was primarily due to increased compensation expenses, Internet hosting
fees and expenses related to the transaction with IBM.
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.
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.
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.
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.
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.
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<PAGE>
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 March 31, 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 has placed
severe pressure on our capital resources and liquidity position.
For the first quarter of 1999, the impact of our $1.2 million net loss was
reduced by depreciation and amortization of $115,000. Our net operating cash
deficit was $841,000 for the quarter. We continued to utilize increased accounts
payable to meet the demands of accounts receivable increasing as a function of
increased sales. The net operating cash deficit, and approximately $97,000 of
fixed asset purchases, were funded from the proceeds of private sales of common
stock totaling $1.1 million. Net cash for the quarter increased $100,000 to
$158,000.
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 net operating cash deficit
for the period 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 the Company's 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 aggregate future minimum
payments under these strategic relationships is $1,575,000 in 1999, $1,150,000
in 2000, $1,150,000 in 2001 and $575,000 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:
o demand for our services or cash flow from operations is more or less
than expected;
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<PAGE>
o our development plans or projections change or prove to be inaccurate;
or
o we engage in any acquisitions.
During the first half of 1999, we received net proceeds of approximately
$8.5 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. See "Risk Factors--We may need
significant additional funds."
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:
o evaluating our date dependent code, software and hardware and
evaluating external dependencies;
o quality assurance testing of our internally-developed proprietary
software and systems;
o 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
o 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 have has been certified as Year 2000 compliant by our vendors.
We have incurred approximately $15,000 in costs in connection with our Year
2000 compliance efforts since inception through March 31, 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.
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<PAGE>
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. 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.
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<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 1998 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.
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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 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:
o offer large quantities of business and financial information without
charge to our users;
o link to hundreds of free "hidden" Web sites and through our search
technology provide accurate navigation to the content for our users;
and
o 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:
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SERVICE NUMBER OF DOCUMENTS
- ---------------------------------------------------- ---------------------------
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
- ---------------------------------------------------- ---------------------------
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:
o 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.
o 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.
o 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.
o 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.
o 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.
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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.
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
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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:
o obtaining the rights to free summaries;
o adding new sources;
o developing an advertising-driven model;
o redesigning the search interface and Web site;
o adding access to the "hidden" Web; and
o 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 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:
o 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.
o 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.
o 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.
o 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.
o EBSCO INDUSTRIES, INC. provides databases, journals and periodical
publications to the education and library marketplace.
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o FAULKNER INFORMATION SERVICES provides information and publishes
newsletters on computer and telecommunications companies and products
to technology end users and managers, information technology
professionals, corporate and educational libraries, government
agencies, and computer and communications companies.
o 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.
o FOI SERVICES, INC. provides a database offering access to Food and Drug
Administration information.
o 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.
o 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.
o HOOVER'S provides profiles and other information on approximately
14,000 U.S. and foreign companies, covering both public and private
companies.
o INFOUSA provides business and consumer marketing information products
and data processing services throughout the United States and Canada.
o INTERNATIONAL DATA CORPORATION is an industry research firm that
provides research reports on technology trends, such as knowledge
management.
o 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.
o MARKETGUIDE provides a database containing financial information on
over 12,000 publicly-traded companies.
o 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.
o 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.
o 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.
o 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.
o 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
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data is available from 1985 to the present while quarterly data is
available for the most recent three years.
o 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.
o 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:
o BUSINESSWIRE
o CNN.COM
o COMMERCE BUSINESS DAILY
o FORBES
o SEC EDGAR DATABASES
o NATIONAL TECHNICAL INFORMATION SERVICE
o PR NEWSWIRE
o STATE LEGISLATIVE WEB SITES
o WIRED NEWS
o U.S. PATENT & TRADEMARK OFFICE
o AUTO.COM
o MANUFACTURING MARKETPLACE
o BIOSPACE
o HOSPITALITY.NET
o MEDIA CENTRAL
o 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:
o 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.
o 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.
o 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.
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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.
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:
o Inktomi will host and serve our index of documents on a dedicated
cluster of its servers; and
o 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
466,400 shares of our common stock at $1.75 per share, 50% of 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 shares of our common stock at the
initial public offering price. This warrant will be exercisable for a one year
period.
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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:
o Lotus will embed portions of our technology into its Domino Extended
Search Version 2.0, scheduled to be released in the summer of 1999;
o 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;
o Lotus will provide certain marketing support to us; and
o 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.
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.
In June 1999, we entered into a one year revenue sharing agreement with
VerticalNet 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.
COMMERCE CORPORATION, an Internet business to business content provider
that serves the estimated 11 million small businesses in the U.S. In May 1999,
we entered into a two year agreement with Commerce Corporation 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.
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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 28,000 registered
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, has 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 May 31, 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 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.
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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
o The Allstate Corporation
o American Express Company
o Citigroup Inc.
o Massachusetts Mutual Life Insurance Company
o Bank of America
ENERGY
o B.P. Amoco p.l.c.
o Chevron Corporation
o Exxon Corporation
o Mobil Corporation
o Texaco Corporation
GOVERNMENT/DEFENSE
o U.S. Congress
o U.S. Dept. of Housing & Urban Development
o U.S. Department of Labor
o U.S. Environmental Protection Agency
o U.S. Navy
INFORMATION TECHNOLOGY
o Hewlett-Packard Company
o International Business Machines Corporation
o Intel Corporation
o Microsoft Corporation
o Oracle Corporation
PHARMACEUTICALS
o Bristol-Myers Squibb Company
o Eli Lilly Company
o Johnson & Johnson
o Merck & Co.
o Pfizer, Inc.
TELECOMMUNICATIONS
o Bell Atlantic Corporation
o GTE Corporation
o Lucent Technologies, Inc.
o MCI WorldCom, Inc.
o SBC Communications, Inc.
OTHER
o The Boeing Company
o E.I. du Pont de Nemours and Company
o Ernst & Young International
o Ford Motor Company
o General Electric Company
o General Motors Corporation
o Lockheed Martin Corporation
o PepsiCo, Inc.
o Philip Morris Companies
o United Technologies Corporation
For the year ended December 31, 1998, two of our customers, Bureau of
National Affairs 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.
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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:
o 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;
o providers of company information, such as MarketGuide and Standard &
Poor's, many of whom are also our content providers;
o providers of proprietary business and financial information, such as
Bloomberg Business News, Dow Jones Interactive and Reuters News
Service;
o 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
o 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:
o the timeliness, comprehensiveness and trustworthiness of our content
and that of our competitors;
o the cost of our services compared to our competitors;
o the ease of use of services developed either by us or our competitors;
o the usefulness of our technology and tools;
o the attractiveness of the demographic characteristics of our audience;
and
o 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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<PAGE>
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.
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<PAGE>
EMPLOYEES
As of May 31, 1999, we employed 46 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 12 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.
-46-
<PAGE>
MANAGEMENT
OUR DIRECTORS AND EXECUTIVE OFFICERS
The following table shows information about our directors and executive
officers:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
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....................... 45 Executive Vice President - Strategic Development
Jeffrey Crigler.................... 42 Director
James G. Groninger................. 55 Director
Dr. Francis J. Harvey.............. 55 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.
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<PAGE>
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 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
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<PAGE>
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.
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:
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<PAGE>
o Messrs. Crigler, Groninger and Levine are classified as Class I
directors and will serve until our 2000 annual meeting of stockholders;
o Messrs. Bagheri and Harvey are classified as Class II directors and
will serve until our 2001 annual meeting of stockholders; and
o 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:
o 18 months after the date of this offering;
o the time at which Sevenson owns less than 5.0% of our outstanding
shares of common stock; or
o 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:
o recommending to our board of directors the independent public
accountants to conduct the annual audit of our books and records;
o reviewing the proposed scope of the audit;
o approving the audit fees to be paid;
o reviewing accounting and financial controls with the independent public
accountants and our financial and accounting staff; and
o reviewing and approving transactions between us and our directors,
officers and affiliates.
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<PAGE>
DIRECTORS' COMPENSATION
In May 1999, each of our non-employee directors, other than Mr. Groninger,
received a warrant to purchase 10,000 shares of common stock at an exercise
price of $0.01 per share. In future years, our non-employee directors will
receive compensation for serving as directors as determined by the board of
directors. 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.
-51-
<PAGE>
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>
<S> <C> <C>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION (1) SECURITIES
------------------------- UNDERLYING
NAME AND PRINCIPAL POSITIONS SALARY BONUS OPTIONS (#)
---------------------------- ------ ----- -----------
Edwin R. Addison..................................... $75,000 $ - -
Chairman of the Board
and Chief Executive Officer
Mark A. Gaertner..................................... 80,000 - 120,000
President and Chief Operating Officer
Ted S. Bagheri....................................... 90,607 - 100,000
Executive Vice President
and Chief Financial Officer
J. Robert Kaminski................................... 87,500 - 100,000
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 $100,000 per
year.
No compensation intended to serve as incentive for performance to occur
over a period longer than one year was paid pursuant to a long-term incentive
plan during the last year to any of the named executive officers named above.
-52-
<PAGE>
OPTIONS GRANTS DURING 1998
The following table shows information about our grants of options to
purchase our common stock made to the named executive officers during 1998:
<TABLE>
<CAPTION>
<S> <C>
INDIVIDUAL GRANTS
----------------------------------------------------------
NUMBER OF PERCENT OF POTENTIAL REALIZABLE VALUE AT
SECURITIES TOTAL OPTIONS EXERCISE MARKET ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO OR BASE PRICE AT RICE APPRECIATION FOR OPTION TERM (4)
OPTIONS EMPLOYEES IN PRICE GRANT DATE EXPIRATION ---------------------------------------
NAME GRANTED (1) 1998 (2) ($/SHARE) ($/SHARE) DATE (3) 0% 5% 10%
- ------------------------ ----------- -------------- ---------- ----------- ---------- ------------ ----------- -------------
Edwin R. Addison....... - -% $- $- - $- $- $-
Mark A. Gaertner....... 120,000 12 0.01 1.25 03/31/08
Ted S. Bagheri......... 100,000 10 0.01 1.25 03/31/08
J. Robert Kaminski..... 100,000 10 0.50 1.25 02/08/08
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 1,002,500 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.
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<PAGE>
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>
<S> <C>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998(1)
------------------------------------- -----------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------ -----------------------------------
Edwin R. Addison............. - - $- $-
Mark A. Gaertner............. 26,666 93,334
Ted S. Bagheri............... 33,333 66,667
J. Robert Kaminski........... 33,333 66,667
John McGrath................. - - - -
</TABLE>
- -----------------------------
(1) Calculated on the basis of $ 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.
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:
CURRENT ANNUAL
BASE SALARY MAXIMUM ANNUAL BONUS
------------------------- ----------------------
Edwin R. Addison.............. $120,000 $80,000
Mark A. Gaertner.............. 150,000 75,000
Ted S. Bagheri................ 125,000 62,500
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.
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<PAGE>
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:
o stock options;
o stock appreciation rights;
o stock awards;
o phantom stock; and
o 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.
The maximum number of shares available for issuance under our stock
incentive plan is 1,750,000. As of May 31, 1999, we had issued 1,388 shares of
our common stock in connection with awards granted, we had outstanding awards
with respect to 1,662,641 shares of our common stock and 87,359 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.
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<PAGE>
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.
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<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 500,000 shares of our common stock at a conversion price of $1.50
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 2,257,143 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
o 18 months after the date of our initial public offering;
o the time at which Sevenson owns less than 5.0% of our outstanding
shares of common stock, or
o 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 171,428 shares of common stock. In connection with Mr.
Groninger assisting Sevenson in making its investment in us, Sevenson
transferred 13,542 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
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<PAGE>
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.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table shows the number and percentage of outstanding shares
of our common stock that were owned as of May 31, 1999 and that will be owned
after this offering by:
o all persons known to us to beneficially own more that 5% of our common
stock;
o each director and named executive officer; and
o all directors and executive officers as a group.
As of May 31, 1999 there were 12,470,738 shares of our common stock
outstanding. After this offering, shares of our common stock will be
outstanding or shares if the underwriters exercise their over-allotment
option in full.
<TABLE>
<CAPTION>
<S> <C>
SHARES PERCENT PERCENT
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- -------------------------------- --------------- ------------- -------------
Edwin R. Addison (2).................................. 3,000,001 24.0% %
Mark A. Gaertner (2)(3)............................... 487,553 3.9
Ted S. Bagheri (4).................................... 488,982 3.9
J. Robert Kaminski(2)(5).............................. 103,526 * *
John McGrath (6)...................................... 43,359 * *
Jeffrey Crigler (7)................................... 1,667 * *
James G. Groninger (8)................................ 2,671,904 21.4
Dr. Francis J. Harvey (7)............................. 1,667 * *
Jay S. Levine (7)..................................... 1,667 * *
Sevenson Environmental Services, Inc. (8).............. 2,671,904 21.4
All directors and executive officers as a group
(9 persons)(9)...................................... 6,700,326 52.9%
</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 May 31, 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) 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 100,000 shares of Mr. Addison's
common stock subject to a three year vesting schedule. The totals shown
for Messrs. Gaertner and Kaminski include 50,000 shares of common stock
underlying these options excercisable within 60 days of May 31, 1999.
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(3) In addition to the options disclosed in footnote (2), includes 49,998
shares of common stock underlying options excercisable within 60 days of
May 31, 1999.
(4) Includes 52,779 shares of common stock underlying options excercisable
within 60 days of May 31, 1999.
(5) In addition to the options disclosed in footnote (2), includes 52,779
shares of common stock underlying options excercisable within 60 days of
May 31, 1999.
(6) Includes 18,859 shares of common stock underlying options exercisable
within 60 days of May 31, 1999.
(7) Represents shares of common stock underlying warrants excercisable within
60 days of May 31, 1999.
(8) 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 184,970 shares of common stock directly.
(9) Includes shares of common stock underlying options and warrants
excercisable within 60 days of May 31, 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 is 2749
Lockport Road, Niagara Falls, New York 14302.
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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 May 31, 1999, there were 12,470,738 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 shares of common stock
if the underwriters do not exercise their over-allotment option, or 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 May 31, 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.
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WARRANTS
At May 31, 1999, we had warrants outstanding for the purchase of 1,035,998
shares of our common stock with a weighted average exercise price of $1.70 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.
REGISTRATION RIGHTS
In May 1999, we entered into an agreement with Sevenson Environmental
Services, Inc, pursuant to which Sevenson purchased 2,257,143 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:
o for any breach of the director's duty of loyalty to us or our
stockholders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o under Section 174 of the Delaware General Corporation Law, relating to
unlawful payment of dividends or unlawful stock purchase or redemption
of stock; or
o 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
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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 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
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<PAGE>
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:
o 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
o 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, unless otherwise prescribed by statute.
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 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.
SHARES ELIGIBLE FOR FUTURE SALE
After this offering, we will have shares of common stock outstanding.
If the underwriters exercise their over-allotment option in full, we will have
shares of common stock outstanding. All of the shares we sell in this
offering will be freely tradeable without restriction or further registration
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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:
o one percent of the then outstanding shares of our common stock, or
approximately shares immediately after this offering; or
o 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 1,750,000 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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LOCK-UP AGREEMENTS
Our officers, directors and stockholders, who will hold an aggregate of
over % of our outstanding common stock after this offering, have agreed 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 the underwriting agreement. 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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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:
UNDERWRITERS: NUMBER OF SHARES
- ------------- ----------------
Ferris, Baker Watts, Incorporated.......................
Ryan, Lee & Company Incorporated........................
----------------
Total..............................................
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>
<S> <C>
Without With
Per Share Over-Allotment Over-Allotment
----------- -------------- ----------------
Underwriting discounts and commissions payable by Powerize.com....... $ $
Expenses payable by Powerize.com..................................... $ $
</TABLE>
We will pay the offering expenses, estimated to be $900,000.
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
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registration statement of which this prospectus is a part. We have agreed to pay
the representatives a non-accountable expense allowance estimated to be
approximately $750,000.
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 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
either of the following:
o 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 otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or any
securities convertible into or exercisable or exchangeable for our
common stock; or
o enter into any swap or other arrangement that transfers all or a
portion of the economic consequences associated with the ownership of
our common stock.
Either of 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.
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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.
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:
o our history of and the prospects for the industry in which we compete;
o our past and present operations;
o our historical results of operations;
o our prospects for future earnings;
o the recent market prices of securities of generally comparable
companies; and
o 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.
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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 three months ended March 31,
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 three months
ended March 31, 1998 and 1999 (unaudited)............................................. F-4
Statements of Changes in Stockholders' 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
three months ended March 31, 1998 and 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 three months
ended March 31, 1998 and 1999 (unaudited)............................................. F-7
Notes to Financial Statements............................................................. F-8
</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 stockholders' 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
F-2
<PAGE>
POWERIZE.COM, INC.
BALANCE SHEETS
---------------------------------
<TABLE>
DECEMBER 31,
--------------------------- MARCH 31,
1997 1998 1999
------------ ------------- ---------------
(UNAUDITED)
ASSETS
Current assets:
<S> <C> <C> <C>
Cash $ 78,534 $ 57,609 $ 157,518
Accounts receivable..................................................... -- 417,094 343,338
Prepaid expenses and other current assets............................... 21,350 20,039 34,811
------------ ------------- ---------------
Total current assets...................................... 99,884 494,742 535,667
Property and equipment, net............................................. 61,772 232,608 298,074
Prepaid license fees, net............................................... 36,724 757,224 673,344
Other assets............................................................ 428 54,953 101,853
------------ ------------- ---------------
Total assets.............................................. $198,808 $1,539,527 $1,608,938
============ ============= ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Line of credit....................................................... $ -- $ 24,560 $ 4,568
Note payable - related party......................................... -- 185,252 162,377
Accounts payable..................................................... 89,369 493,400 572,776
Accrued expenses .................................................... 72,120 139,850 64,130
Accrued compensation................................................. -- 132,439 146,321
Deferred revenue..................................................... -- 696,363 669,165
------------ ------------- ---------------
Total current liabilities................................. 161,489 1,671,864 1,619,337
Note payable............................................................ 50,000 50,000 --
Convertible promissory note - related party ............................ -- 750,000 --
------------ ------------- ---------------
Total liabilities......................................... 211,489 2,471,864 1,619,337
------------ ------------- ---------------
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,
4,875,000, 6,509,666 and 7,753,758 (unaudited) shares issued and
outstanding, respectively ....................................... 488 651 775
Additional paid-in capital........................................... 545,262 3,133,197 5,179,172
Deferred compensation................................................ -- (273,261) (241,257)
Accumulated deficit.................................................. (558,431) (3,792,924) (4,949,089)
------------ ------------- ---------------
Total stockholders' deficit............................... (12,681) (932,337) (10,399)
------------ ------------- ---------------
Total liabilities and stockholders' deficit............... $198,808 $1,539,527 $1,608,938
============ ============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
POWERIZE.COM, INC.
STATEMENTS OF OPERATIONS
---------------------------------
<TABLE>
MARCH 17, 1997
(DATE OF THREE MONTHS ENDED
INCEPTION) TO YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, ---------------------------------
1997 1998 1998 1999
------------------ ------------------ --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Subscription royalties................... $ -- $ 308,340 $ -- $ 263,278
Consulting............................... 24,458 22,320 -- 32,416
------------------ ------------------ --------------- ---------------
Total revenue................. 24,458 330,660 -- 295,694
------------------ ------------------ ---------------- ---------------
Cost of revenue:
Subscription royalties................... -- 515,913 -- 215,275
Consulting............................... 2,868 4,306 -- 4,582
------------------ ------------------ ---------------- --------------
Total cost of revenue......... 2,868 520,219 -- 219,857
------------------ ------------------ ----------------- ---------------
Gross profit(loss).......................... 21,590 (189,559) -- 75,837
------------------ ------------------ ----------------- ----------------
Operating expenses:
Sales and marketing...................... 132,953 919,094 93,137 362,686
Product development...................... 352,621 1,654,859 187,975 600,844
General and administrative............... 88,580 439,703 53,751 252,184
------------------ ------------------ --------------- ---------------
Total operating expenses...... 574,154 3,013,656 334,863 1,215,714
------------------ ------------------ --------------- ---------------
Operating loss.............................. (552,564) (3,203,215) (334,863) (1,139,877)
Interest expense, net....................... (5,867) (31,278) (3,890) (16,288)
------------------ ------------------ --------------- ---------------
Net loss.................................... $ (558,431) $ (3,234,493) $ (338,753) $ (1,156,165)
================== ================== =============== ===============
Basic and diluted net loss per
common share.............................. $ (0.20) $ (0.68) $ (0.10) $ (0.19)
================== ================== =============== ===============
Weighted average number of
common shares outstanding................ 2,841,546 4,765,601 3,554,059 6,184,005
================== ================== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
POWERIZE.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM MARCH 17, 1997 (DATE OF INCEPTION) TO DECEMBER 31,
1997, THE YEAR ENDED DECEMBER 31, 1998 AND THE THREE MONTHS ENDED MARCH 31,
1999(UNAUDITED)
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
POWERIZE.COM, INC.
---------------------------------
<TABLE>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------------ PAID-IN DEFERRED ACCUMULATED ------------------------
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT SHARES AMOUNT TOTAL
------------------------ ------------ ------------------ --------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance March 17,
1997 (date of
inception)..... -- $ -- $ -- $ -- $ -- -- $ -- $ --
Issuance of
common stock
to founders.... 4,875,000 488 545,262 -- -- -- -- 545,750
Net loss.......... -- -- -- -- (558,431) -- -- (558,431)
------------ ----------- ------------- ----------------- --------------- ---------- --------------- ------------
Balance at
December 31,
1997........... 4,875,000 488 545,262 -- (558,431) -- -- (12,681)
Issuance of
common stock
at $1.25....... 1,558,000 156 1,947,344 -- -- -- -- 1,947,500
Issuance of
common stock
at $1.50....... 171,666 17 257,481 -- -- -- -- 257,498
Purchase of
common stock... -- -- -- -- -- 95,000 (950) (950)
Retirement of
treasury stock. (95,000) (10) (940) -- -- (95,000) 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........... 6,509,666 651 3,133,197 (273,261) (3,792,924) -- -- (932,337)
Issuance of
common stock
at $1.50, net
(unaudited).... 744,092 74 1,056,910 -- -- -- -- 1,056,984
Conversion of note
payable To common
stock(unaudited).. -- 50,000 -- -- -- -- 50,000
Conversion of note
payable related
party to common
stock (unaudited).500,000 50 787,465 -- -- -- -- 787,515
Amortization of
deferred
compensation
on employee
stock options
(unaudited).... -- -- -- 32,004 -- -- -- 32,004
Fair value of
warrants
issued to
non-employees
(unaudited).... -- -- 151,600 -- -- -- -- 151,600
Net loss
(unaudited).... -- -- -- -- (1,156,165) -- -- (1,156,165)
----------- ----------- -------------- ----------------- --------------- ---------- -------------- --------------
Balance at
March 31, 1999
(unaudited).... 7,753,758 $ 775 $ 5,179,172 $ (241,257) $ (4,949,089) -- $ -- $ (10,399)
=========== =========== ============== ================= =============== ========== ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
POWERIZE.COM, INC.
STATEMENTS OF CASH FLOWS
---------------------------------
<TABLE>
MARCH 17,
1997 (DATE OF THREE MONTHS
INCEPTION) TO YEAR ENDED ENDED MARCH 31,
DECEMBER DECEMBER --------------------------------
31, 1997 31, 1998 1998 1999
--------------- --------------- -------------- ---------------
(UNAUDITED)
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net loss........................................ $ (558,431) $ (3,234,493) $ (338,753) $ (1,156,165)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................. 16,109 273,098 10,678 114,954
Amortization of deferred compensation on
employee stock options...................... -- 110,789 8,576 32,004
Expense related to fair value of warrants
issued to non-employees..................... -- -- -- 104,000
Changes in assets and liabilities:
Accounts receivable......................... -- (417,094) -- 73,756
Prepaid expenses and other assets........... (21,778) (53,214) (45,941) (14,072)
Prepaid license fees........................ (41,968) (926,139) (4,099) --
Accounts payable ........................... 89,369 404,031 84,516 79,376
Accrued expenses............................ 72,120 92,982 (53,960) (61,080)
Accrued compensation........................ -- 132,439 10,000 13,882
Deferred revenue............................ -- 696,363 -- (27,198)
--------------- --------------- -------------- ---------------
Net cash used in operating activities... (444,579) (2,921,238) (328,983) (840,543)
--------------- --------------- -------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment.............. (72,637) (238,295) (11,088) (96,540)
--------------- --------------- ------------------ -------------
Net cash used in investing activities... (72,637) (238,295) (11,088) (96,540)
--------------- --------------- ------------ -------------
Cash flows from financing activities:
Proceeds from the issuance of common stock...... 545,750 2,204,998 825,000 1,056,984
Proceeds from note payable...................... 50,000 -- -- --
Proceeds from note payable-related party........ -- 910,000 151,886 --
Repurchase of common shares..................... -- (950) -- --
Net borrowings under line of credit agreement... -- 24,560 -- (19,992)
--------------- --------------- -------------- ---------------
Net cash provided by financing
activities........................... 595,750 3,138,608 976,886 1,036,992
--------------- --------------- -------------- ---------------
Net increase (decrease) in cash.................... 78,534 (20,925) 636,815 99,909
Cash at beginning of period........................ -- 78,534 78,534 57,609
=============== =============== ============== ===============
Cash at end of period.............................. $ 78,534 $ 57,609 $ 715,349 $ 157,518
=============== =============== ============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
---------------------------------
1. BUSINESS
THE COMPANY
Powerize.com, Inc. (formerly KnowledgeLink LLC or 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.
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 only been
traditionally 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 March 31, 1999, the
Company received net proceeds of $8,516,000 from equity financings with third
parties (see Note 13).
During 1999, the Company plans to complete an initial public offering 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.
F-8
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements 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.
Royalty revenue 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.
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
F-9
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
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.
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 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 1,602,769, 944,425 and 783,177
(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 three months ended March 31, 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 three months ended
March 31, 1999, revenues from three customers comprised approximately 46%, 27%
and 11% (unaudited), respectively, of total revenue. As of March 31, 1999, one
customer accounted for 64% (unaudited) of total accounts receivable. The Company
has not experienced any difficulties with collections of accounts receivable
from these customers.
FAIR VALUE INFORMATION
The carrying amount of current assets and current liabilities approximates
fair value because of the short maturity of these instruments.
F-10
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
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.
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 three months
ended March 31, 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 March 31, 1999, the statements of
operations and of cash flows for the three months ended March 31, 1998 and 1999
and the statement of changes in stockholders' deficit for the three months ended
March 31, 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
F-11
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
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 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 11).
Amortization of prepaid license fees was approximately $5,000, $205,000
and $84,000 (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 three
months ended March 31, 1999, respectively.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
DECEMBER 31,
---------------------------- MARCH 31,
1997 1998 1999
------------ ------------ ---------------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software....... $ 60,447 $ 237,856 $ 315,900
Office furniture and equipment........ 12,190 69,076 87,572
Leasehold improvements................ - 4,000 4,000
------------ ------------ ---------------
72,637 310,932 407,472
Less accumulated depreciation......... (10,865) (78,324) (109,398)
------------ ------------ ---------------
$ 61,772 $ 232,608 $ 298,074
============ ============ ===============
</TABLE>
Depreciation expense was approximately $17,000, 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 $6,800 (unaudited) and $31,000
(unaudited) for the three months ended March 31, 1998 and 1999, respectively.
5. 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
F-12
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
provides for borrowings up to $60,000 at an interest rate of 15.9% per annum. As
of December 31, 1998 and March 31, 1999, the outstanding balance on the line of
credit was $24,560 and $4,568 (unaudited), respectively.
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 to common
stock (see Note 13) and the existing agreement was cancelled. No royalties were
paid under this agreement prior to the conversion.
6. 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
$1.50. 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 500,000 (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.
7. 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
March 31, 1999, 1,602,769, 944,425 and 783,177 (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 1,318,000
shares of common stock at a purchase price of $1.25 per share for aggregate
proceeds of $1,647,500.
F-13
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
In June 1998, the Company and DBED entered into an agreement for the sale
of 240,000 shares of common stock at $1.25 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' deficit
caption in the accompanying Balance Sheet.
In November 1998, the Company issued through a second private placement
131,666 shares of common stock at a purchase price of $1.50 per share for
aggregate proceeds of $197,498. In addition, the Company sold 40,000 shares of
common stock in November 1998 at $1.50 share to third parties for aggregate
proceeds of $60,000.
8. 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 1,000,000 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 1,750,000. At December 31, 1998, options to
purchase 947,778 shares were outstanding and 52,222 shares were available for
future grants. At March 31, 1999, 1,100,694 (unaudited) and 649,306 (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 options granted during 1998, the Company recorded
deferred compensation of $384,050. This amount was recorded as an increase to
stockholders' 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 three months ended March 31, 1999, the Company recognized $110,789 and
$32,004 (unaudited), respectively, of compensation expense related to these
options.
The following table summarizes the Company's activity for all of its stock
option awards:
F-14
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
<TABLE>
NUMBER OF RANGE OF WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICES EXERCISE PRICE
------------- ----------------- -----------------
<S> <C> <C> <C>
Balance at December 31, 1997 -- $ -- $ --
Granted 1,002,500 0.01 - 1.50 0.91
Exercised -- -- --
Canceled (54,722) 1.25 1.25
-------- --------------- ---------------
Balance at December 31, 1998 947,778 0.01 - 1.50 0.89
Granted (unaudited) 710,000 0.01 - 1.50 0.45
Exercised (unaudited) -- -- --
Canceled (unaudited) (62,084) $ 1.25-1.50 $ 1.48
------------- ----------------- -----------------
Balance at March 31, 1999 (unaudited) 1,595,694 $ 0.01-1.50 $ 0.68
============= ================= =================
</TABLE>
Options to purchase 209,723 shares of the Company's common stock were
vested and exercisable at December 31, 1998, at a weighted-average exercise
prices of $0.76 per share. At March 31, 1999, 279,392 options (unaudited) were
vested and exercisable at a weighted average exercise price of $0.77 (unaudited)
per share.
The following table summarizes additional information about stock options
outstanding at December 31, 1998:
<TABLE>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- ----------------------------------
WEIGHTED
AVERAGE WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE WEIGHTED
EXERCISE OF CONTRACTUAL EXERCISE NUMBER AVERAGE
PRICES OPTIONS LIFE PRICE EXERCISABLE EXERCISE PRICE
- ------------------ ----------- -------------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
$0.01 220,000 9.1 years $0.01 57,223 $0.01
$0.50 115,000 9.0 years $0.50 38,333 $0.50
$1.00 - $1.50 612,778 9.5 years $1.29 114,167 $1.22
----------- -------------------- -------------- --------------- -----------------
947,778 9.3 years $0.89 209,723 $0.76
=========== ===============
</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>
MARCH 31,
1998 1999
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
Net loss, as reported........................................... $ (3,234,493) $ (1,156,165)
Pro forma net loss.............................................. (3,269,284) (1,173,765)
Basic and diluted net loss per common share, as reported........ $ (0.68) (0.19)
Basic and diluted net loss per common share, pro forma.......... $ (0.69) (0.19)
</TABLE>
F-15
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
___________________________
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:
Expected volatility.................................... 0%
Risk free interest rates............................... 4.5% to 5.6%
Dividend yield......................................... None
Expected lives......................................... 5 years
The weighted average fair value per share for stock option grants that were
awarded in fiscal year 1998 and for the three months ended March 31, 1999 was
$1.30 and $1.50 (unaudited). The weighted average fair value of non-vested stock
that was converted from LLC member units at December 31, 1997 was $0.01 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 50,000 options to purchase 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.
9. 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.
10. 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:
F-16
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
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 $ -
===============
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.
11. 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:
YEAR ENDING
DECEMBER 31,
----------------
1999 $ 263,143
2000 205,250
-------------
$ 468,393
=============
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 $4,800 (unaudited) and $64,000 (unaudited)
for the three months ended March 31, 1998 and 1999.
OTHER COMMITMENTS
In conjunction with the transaction with IBM (see Note 3), 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:
F-17
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
YEAR ENDING
DECEMBER 31,
-----------------
1999 $ 475,600
2000 475,600
2001 320,400
-------
$ 1,271,600
=================
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,
no hosting expense for the three months ended March 31, 1998 and $120,169
(unaudited) for the three months ended March 31, 1999.
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
<TABLE>
MARCH 17, 1997
(DATE OF
INCEPTION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------- ---------------- ----------------------------------
1997 1998 1998 1999
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Interest.................................... $ 1,933 $ 2,296 $ 607 $ 513
================= ================ ================ ================
Non-cash investing and financing activities:
Conversion of notes payable to
corporation............................ $ -- $ -- $ -- $ 837,515
================= ================ ================ ================
Accrued interest converted to notes
payable $ -- $ 25,252 $ -- $ 14,640
================= =============== ================ =================
Fair value of warrants issued
to non-employees.................. $ -- $ -- $ -- $ 151,600
Less: Expense related to fair value
of warrants issued to
non-employees................. $ -- $ -- $ -- $ (104,000)
----------------- ------------- --------------- -----------------
$ -- $ -- $ -- $ 47,600
================= ============= =============== =================
</TABLE>
F-18
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
13. SUBSEQUENT EVENTS
During the first quarter of 1999, the Company completed its second private
placement, issuing an additional 516,399 shares of common stock at a purchase
price of $1.50 per share for aggregate gross proceeds of $774,599 and issued
61,026 shares of common stock to employees for aggregate gross proceeds of
$82,385.
In February 1999, DBED purchased an additional 166,667 shares of common
stock at $1.50 per share. The Company received cash proceeds of $200,000 in
connection with the issuance of these shares and the $50,000 note payable issued
by the Company in 1997 (see Note 5) was converted into common stock.
In March 1999, the Company issued warrants to purchase 142,500 shares of
common stock to five advisors for past and future services. The aggregate fair
value of these warrants of $151,600 was determined using the Black-Scholes
valuation model. The Company recorded $104,000 in expense for the three months
ended March 31, 1999 and the remaining $47,600 will be amortized over the
remaining service period of 12 months.
On March 30, 1999, the Company granted 495,000 options to certain employees
with an exercise price of $0.01 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. As of March 31, 1999, the performance
objectives had not been achieved. Once the performance objectives are achieved,
the stock options generally vest over a two to three year period.
In May 1999, the Company issued, through a third private placement,
2,214,279 shares of common stock at a purchase price of $1.75 per share for
aggregate gross proceeds of $3,875,000. The gross proceeds were offset by
commissions of $336,000 paid to the investment banking firm responsible for
placing these shares and $25,000 in legal and other costs associated with the
offering. In connection with this private placement, the Company also issued the
investment banking firm warrants to purchase 192,927 shares of the Company's
common stock. The aggregate fair value of these warrants of $347,060 was
determined using the Black Scholes valuation model. This amount will be recorded
as a reduction of the related proceeds.
In May 1999, the Company issued 857,143 shares of common stock at a price
of $1.75 per share and 1,400,000 shares of common stock at a price of $2.50 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 fails to complete an initial public offering by April 30,
2000 of shares which, in any consecutive 10 day trading period up to April 30,
2000 do not reach an average closing price per share of at least $5.00 per
share, then the Company will issue the third party an additional 600,000 shares
of common stock. In connection with this issuance of common stock, the Company
issued 97,085 of common stock to the investment banking firm and 97,085 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
will be recorded as a reduction of the related proceeds. The value of the common
stock issued to the third party as a finders fee will be 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 194,171
shares of the Company's common stock to the investment banking firm. The
aggregate fair value of these warrants of $349,517 was determined using the
Black-Scholes valuation model. The value of these warrants will be recorded as a
reduction of the related proceeds.
During May 1999, the Company entered into two strategic relationships with
Inktomi Corporation ("Inktomi") and Bell and Howell Information and Learning
Company ("Bell and Howell"). Inktomi will provide the Company with distribution
services and indexing services, and Bell and Howell will provide the Company
with premium
F-19
<PAGE>
POWERIZE.COM, INC.
NOTES TO FINANCIAL STATEMENTS----(Continued)
content from business journals and newspapers. In connection with the
Inktomi agreement, the Company issued warrants to purchase 466,400 shares of
common stock at an exercise price of $1.75 per share. 233,200 of these warrants
vest immediately upon execution of the agreement and the remaining 233,200
warrants vest upon the achievement of certain performance criteria, as defined
in the agreement. The fair value attributable to the warrants that vest upon
execution of the agreement of $429,000 was determined using the Black-Scholes
valuation model. This fair value will be amortized to expense over the three
year term of the agreement. No value has been ascribed to the warrants that vest
upon the achievement of certain performance criteria because such criteria have
not been achieved.
The term of the Bell & Howell agreement commences May 21, 1999 and
continues through July 1, 2000. 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. Pursuant to the agreement, if the Company completes an initial
public offering, then warrants 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. Such warrants 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 these
warrants as the event giving rise to the issuance of the warrants has not yet
occurred.
During the first half of 1999, the Company entered into several strategic
relationships, including the Inktomi and Bell & Howell relationships discussed
above. The aggregate future minimum payments under these agreements are
$1,575,000 in 1999, $1,150,000 in 2000, $1,150,000 in 2001 and $575,000 in 2002.
In addition, under certain of the agreements, the Company is required to make
royalty payments if specified levels of revenue are achieved.
F-20
<PAGE>
, 1999
[POWERIZE.COM LOGO]
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.
Securities and Exchange Commission registration fee................ $ 8,340
National Association of Securities Dealers, Inc. filing fee......... 3,375
Nasdaq National Market listing fee.................................. *
Transfer agent's and registrar's fees............................... *
Printing expenses................................................... *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
Blue Sky filing fees and expenses................................... *
Miscellaneous expenses.............................................. *
----------
Total.......................................................... *
----------
-------
* To be filed by amendment.
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
II-1
<PAGE>
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 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 one share of common stock to
an investor for an aggregate purchase price of $1.00.
2. In December 1997, we issued and sold 4,875,000 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.
3. 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 500,000 shares of common stock in
March 1999.
4. In April 1998, we issued and sold 1,318,000 shares of common stock
to a group of investors for an aggregate purchase price of
$1,647,500 in a private placement.
5. In April 1998, we issued and sold 240,000 shares of common stock to one
investor for an aggregate purchase price of $300,000 in a private
placement.
6. In June 1998, we issued and sold 280,000 shares of common stock to
three investors for an aggregate purchase price of $360,000 in a
private placement.
7. Between November 1998 and March 1999, we issued and sold 700,000
shares of common stock to a stockholder for an aggregate purchase
price of $1,050,000 in a private placement.
8. In February 1999, we issued and sold 166,667 shares of common
stock to one investor for an aggregate purchase price of $250,000 in
a private placement.
9. In March 1999, we issued warrants exercisable for 152,500 shares
of common stock to five advisors.
10. In May 1999 we issued and sold 2,214,279 shares of common stock to
a group of investors for an aggregate purchase price of $3,875,000
in a private placement.
11. In May 1999 we issued and sold 2,257,143 shares of common stock to
one investor for an aggregate purchase price of $5,000,000 in a
private placement.
II-2
<PAGE>
12. In March 1999 we issued 50,000 shares of common stock to one
stockholder upon exercise of options to purchase common stock for
an aggregate exercise price of $10.00.
13. In April 1999 we issued 1,388 shares of common stock to one of our
employees upon exercise of stock options.
14. In May 1999 we issued warrants exercisable for an aggregate of
466,400 shares of common stock.
15. We have from time to time granted stock options to employees. The
following table shows information regarding these grants:
NUMBER OF EXERCISE PRICE PER
TIME PERIOD SHARES SHARE
- --------------------------------------- ------------- ------------------
January 1, 1998 to December 31, 1998 1,002,500 $0.01-$1.50
January 1, 1999 to March 31, 1999 710,000 $0.01-$1.75
April 1, 1999 to May 31, 1999 66,947 $1.50-$2.50
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION
<TABLE>
<CAPTION>
<S> <C>
1.1* Form of Underwriting Agreement
3.1 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
II-4
<PAGE>
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
10.20+ Warrant Agreement dated May 14, 1999 by and between the Company and Inktomi 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 (included in signature pages)
27 Financial Data Schedule
</TABLE>
- -----------
* To be filed by amendment.
+ 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
II-5
<PAGE>
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-6
<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 4th day of June, 1999.
POWERIZE.COM, INC.
By: /s/ Edwin R. Addison
-------------------------
Edwin R. Addison
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated. Each person whose signature appears
below in so signing also makes, constitutes and appoints Edwin R. Addison and
Ted S. Bagheri, and each of them acting alone, his true and lawful
attorney-in-fact, with full power of substitution, for him in any and all
capacities, to execute and cause to be filed with the Securities and Exchange
Commission any and all amendments and post-effective amendments to this
Registration Statement, with exhibits thereto and other documents in connection
therewith, and hereby ratifies and confirms all that said attorney-in-fact or
his substitute or substitutes may do or cause to be done by virtue hereof.
II-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NAME TITLE DATE
- ---- ----- ----
/s/ Edwin R. Addison Chairman of the Board, June 4, 1999
- ------------------------------- Chief Executive Officer and
Edwin R. Addison Director (principal executive
officer)
/s/ Mark A. Gaertner President, Chief Operating June 4, 1999
- ------------------------------- Officer and Director
Mark A. Gaertner
/s/ Ted S. Bagheri Executive Vice President, Chief June 4, 1999
- ------------------------------- Financial Officer and Director
Ted S. Bagheri (principal financial and
accounting officer)
/s/ Jeffrey Crigler Director June 4, 1999
- -------------------------------
Jeffrey Crigler
/s/ James G. Groninger Director June 4, 1999
- -------------------------------
James G. Groninger
/s/ Dr. Francis J. Harvey Director June 4, 1999
- -------------------------------
Dr. Francis J. Harvey
/s/ Jay S. Levine Director June 4, 1999
- -------------------------------
Jay S. Levine
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1.1* Form of Underwriting Agreement
3.1 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 , 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
<PAGE>
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
10.20 Warrant Agreement dated May 14, 1999 by and between the Company and Inktomi 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 (included in signature pages)
27 Financial Data Schedule
</TABLE>
- -----------
* To be filed by amendment.
+ Information has been omitted from this exhibit pursuant to a request for
confidential treatment and filed separately with the Securities and Exchange
Commission.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
KNOWLEDGELINK INTERACTIVE, INC.
KnowledgeLink Interactive, Inc., a Delaware corporation having its
principal Delaware office in Wilmington, Delaware (the "Corporation") hereby
certifies to the Secretary of State of the State of Delaware that:
FIRST: The name of the Corporation is KnowledgeLink Interactive, Inc.
The Corporation's original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on December 29, 1997.
SECOND: This Amended and Restated Certificate of Incorporation (the
"Certificate") was duly adopted and declared advisable by unanimous written
consent of the Board of Directors in accordance with the applicable provisions
of Sections 242 and 141 of the General Corporation Law of the State of Delaware.
THIRD: The stockholders of the Corporation duly adopted this
Certificate in a Special Meeting of the stockholders in accordance with the
applicable provisions of Sections 211, 242 and 245 of the General Corporation
Law of the State of Delaware.
FOURTH: The Certificate of Incorporation of the Corporation is amended
and restated in its entirety to read as follows:
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
POWERIZE.COM, INC.
FIRST. Name. The name of the Corporation is Powerize.com, Inc.
SECOND. Registered Office and Agent. The address of the registered
office of the Corporation in the State of Delaware is Corporation Trust Center,
1209 Orange Street, County of New Castle, Wilmington, Delaware 19801. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD. Purpose. The purposes for which the Corporation is formed are to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware, as amended from time to time,
(the "DGCL") and to possess and exercise all of the powers and privileges
granted by such law and other laws of Delaware.
FOURTH. Capital Stock. The total number of shares of capital stock of
all classes that the Corporation shall have authority to issue is 65,000,000
shares. The authorized capital stock is divided into 50,000,000 shares of common
stock, with the par value of $.0001 each (the "Common Stock") and 15,000,000
shares of preferred stock, with the par value of $.0001 each (the "Preferred
Stock"). Stockholders shall not have preemptive rights to acquire additional
shares of stock of any class which the Corporation may elect to issue or sell.
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<PAGE>
(b) Common Stock. Subject to all of the rights of the holders of
Preferred Stock provided for by resolution or resolutions of the Board of
Directors pursuant to this Article FOURTH or provided for by the DGCL, each
holder of Common Stock shall have one vote per share of Common Stock held by
such holder on all matters on which holders of Common Stock are entitled to vote
and shall have the right to receive notice of and to vote at all meetings of the
stockholders of the Corporation. The holders of Common Stock shall have the
right to receive dividends as and if declared by the Board of Directors in its
sole discretion, subject to any limitations on the declaring of dividends
imposed by the DGCL or the rights of holders of Preferred Stock provided for by
resolutions or resolutions of the Board of Directors pursuant to this Article
FOURTH.
(c) Preferred Stock. Authority is hereby expressly granted to the Board
of Directors of the Corporation, subject to the provisions of this Article
FOURTH and to the limitations prescribed by the DGCL, to authorize the issuance
of one or more classes of Preferred Stock and, with respect to each such class,
to fix by resolution or resolutions providing for the issue of such class, the
voting powers, full or limited, if any, of the shares of such class, the
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof. The authority
of the Board of Directors with respect to each class thereof shall include, but
not be limited to, the determination or fixing of the following:
(i) the designation of such class;
(ii) the number of shares to compose such class, which
number the Board of Directors may thereafter (except where otherwise provided in
a resolution designating a particular class) increase (but not above the total
number of authorized shares of the class) or decrease (but not below the number
of shares thereof then outstanding);
(iii) the dividend rate of such class, the conditions and
dates upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or classes of
capital stock of the Corporation and whether such dividends shall be cumulative
or noncumulative;
(iv) whether the shares of such class shall be subject to
redemption by the Corporation and, if made subject to such redemption, the
times, prices and other terms and conditions of such redemption;
(v) the terms and amount of any sinking fund provided for
the purchase or redemption of the shares of such class;
(vi) whether the shares of such class shall be convertible
into or exchangeable for shares of any other class or classes of any capital
stock or any other securities of the Corporation, and, if provision is made for
conversion or exchange, the times, prices, rates, adjustments and other terms
and conditions of such conversion or exchange;
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<PAGE>
(vii) the extent, if any, to which the holders of shares
of such class shall be entitled to vote with respect to the election of
directors or otherwise;
(viii) the restrictions, if any, on the issuance or
reissuance of any additional Preferred Stock;
(ix) the rights of the holders of the shares of such class
upon the dissolution of, voluntary or involuntary liquidation, winding up or the
distribution of assets of the Corporation; and
(x) the manner in which any facts ascertainable outside
the resolution or resolutions providing for the issue of such class shall
operate upon the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of such class.
(d) Subject to all of the rights of the holders of Preferred Stock
provided for by resolution or resolutions of the Board of Directors pursuant to
this Article FOURTH or by the DGCL, the Board of Directors is hereby authorized
to create and to authorize and direct the issuance (on either a pro rata or a
non-pro rata basis) by the Corporation of rights, options and warrants for the
purchase of shares of capital stock of the Corporation, other securities of the
Corporation or shares or other securities of any successor in interest of the
Corporation (a "Successor"), at such times, in such amounts, to such persons,
for such consideration (if any), with such form and content (including without
limitation the consideration for which any shares of capital stock of the
Corporation, other securities of the Corporation or shares or other securities
of any Successor are to be issued) and upon such terms and conditions as it may
from time to time determine, subject only to the restrictions, limitations,
conditions and requirements imposed by the DGCL, other applicable laws and this
Certificate.
FIFTH. Term. The Corporation is to have perpetual existence.
SIXTH. Management of the Affairs of the Corporation. (a) The business
and affairs of the Corporation shall be managed by its Board of Directors, which
may exercise all the powers of the Corporation and do all such lawful acts and
things that are not conferred upon or reserved to the stockholders by law, by
this Certificate or by the Amended and Restated By-laws of the Corporation (the
"By-laws").
(b) The following provisions are inserted for the limitation and
regulation of the powers of the Corporation and of its directors and
stockholders:
(i) The Board of Directors shall have the power to make,
alter, amend, change or repeal the By-laws by the affirmative vote of a majority
of the members of the Board of Directors then in office. In addition, the
By-laws may be made, altered, amended, changed or repealed 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.
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<PAGE>
(ii) The number of directors of the Corporation shall be
as from time to time fixed by, or in the manner provided in, the By-laws of the
Corporation. The directors shall be divided into three classes, designated Class
I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. The term of the initial Class I directors shall terminate on
the date of the 2000 annual meeting of stockholders; the term of the initial
Class II directors shall terminate on the date of the 2001 annual meeting of
stockholders; and the term of the initial Class III directors shall terminate on
the date of the 2002 annual meeting of stockholders. At each annual meeting of
stockholders beginning in 2000, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
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 that results from an increase in
the number of directors and any other vacancy occurring on the Board of
Directors, howsoever resulting, may be filled by a majority of the directors
then in office, even if less than a quorum, or by a sole remaining director. 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.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate or the resolution or resolutions adopted by the Board
of Directors pursuant to Article FOURTH applicable thereto, and such directors
so elected shall not be divided into classes pursuant to this clause (b) of
Article SIXTH unless expressly provided by such terms.
(iii) Subject to the rights, if any, of the holders of
shares of Preferred Stock then outstanding, any or all of the directors of the
Corporation may be removed from office at any time by the stockholders of the
Corporation, but only for cause and only by the affirmative vote of the holders
of a majority of the outstanding shares of the Corporation then entitled to vote
generally in the election of directors, considered for purposes of this
paragraph as one class.
(iv) The Corporation may in its By-laws confer powers upon
the Board of Directors in addition to the foregoing and in addition to the
powers and authorities expressly conferred upon the Board of Directors by
applicable law.
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<PAGE>
SEVENTH. Limitation on Liability. No director of the Corporation shall
be personally liable to the Corporation or to any stockholder of the Corporation
for monetary damages for breach of fiduciary duty as a director, provided that
this provision shall not limit the liability of a director (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involved intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
If the DGCL or any other statute of the State of Delaware hereafter is
amended to authorize the further elimination or limitation of the liability of
directors of the Corporation, then the liability of a director of the
Corporation shall be limited to the fullest extent permitted by the statutes of
the State of Delaware, as so amended, and such elimination or limitation of
liability shall be in addition to, and not in lieu of, the limitation on the
liability of a director provided by the foregoing provisions of this Article
SEVENTH.
Any repeal of or amendment to this Article SEVENTH shall be prospective
only and shall not adversely affect any limitation on the liability of a
director of the Corporation existing at the time of such repeal or amendment.
EIGHTH. Meetings of Stockholders. Meetings of stockholders may be held
within or without the State of Delaware, as the By-laws may provide.
NINTH. Corporate Records. The books of the Corporation may be kept
(subject to any provision contained in applicable statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-laws.
TENTH. Right to Amend. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate and in any
certificate amendatory hereof, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders or others hereunder or
thereunder are granted subject to this reservation. Notwithstanding the
foregoing, the affirmative vote of the holders of at least 66-2/3% of the
outstanding shares of Common Stock shall be required to amend or repeal, or
adopt any provision inconsistent with, clause (b) of Article SIXTH or this
Article TENTH of this Certificate.
ELEVENTH . Indemnification. (a) The Corporation shall, to the fullest
extent permitted by Section 145 of the DGCL, indemnify each person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was, or has agreed to become,
a director or officer of the Corporation, or is or was serving, or has agreed to
serve, at the request of the Corporation, as a director, officer or trustee of,
or in a similar capacity with, another corporation, partnership, joint venture,
trust or other enterprise (including any employee benefit plan), or by reason of
any action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees), judgments, fines and amounts
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<PAGE>
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom.
(b) Indemnification may include payment by the Corporation of expenses
in defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the person indemnified to
repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article ELEVENTh, which undertaking may
be accepted without reference to the financial ability of such person to make
such repayment.
(c) The Corporation shall not indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person unless the initiation thereof was approved by the Board of Directors
of the corporation.
(d) The indemnification rights provided in this Article ELEVENTH (i)
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any law, agreement or vote of stockholders or disinterested
directors or otherwise, and (ii) shall inure to the benefit of the heirs,
executors and administrators of such persons. The Corporation may, to the extent
authorized from time to time by its Board of Directors, grant indemnification
rights to other employees or agents of the Corporation or other persons serving
the Corporation and such rights may be equivalent to, or greater or less than,
those set forth in this Article ELEVENTH.
This Certificate shall be effective upon its filing with the Secretary
of State of the State of Delaware.
I, THE UNDERSIGNED, being the sole incorporator, for the purpose of
forming a Corporation pursuant to the General Corporation Law of the State of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true and, accordingly, have
hereunto set my hand this 29th day of December, 1997.
/s/ Wm. David Chalk
------------------------
Wm. David Chalk
-------------------------
Sole Incorporator
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate to be signed by its President and attested
to by its Secretary this 8th day of April, 1999.
KNOWLEDGELINK INTERACTIVE, INC.
By: /s/ Mark A. Gaertner
---------------------------
Mark A. Gaertner, President
Attested: /s/ Ted S. Bagheri
-------------------------
Ted S. Bagheri, Secretary
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POWERIZE.COM, INC.
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
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<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
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<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.
Section 2.12 Written Action. Any action required to be taken at any
annual or special meeting of
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<PAGE>
stockholders, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE 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
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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 they 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.
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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 3.11 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 3.12 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 3.13 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 4.1
-----------
INCORPORATED UNDER THE
LAWS OF THE STATE OR DELAWARE
NUMBER SHARES
[POWERIZE.COM LOGO]
POWERIZE.COM, INC.
SHARES OF COMMON
STOCK
THIS CERTIFIES THAT
IS THE REGISTERED HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK
OF THE CORPORATION (PAR VALUE $.0001)
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
[POWERIZE.COM, INC.
DELAWARE
1999 SEAL]
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this day of A.D. 1999.
________________________________ __________________________________
TED L. BAGHER, SECRETARY EDWIN R. ADDISON,
CHIEF EXECUTIVE OFFICER
- --------------------------------------------------------------------------------
For Value received, hereby sell, assign and
transfer unto
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<PAGE>
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OR ASSIGNEE
________________________________________________________________________________
Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint Attorney to transfer the said stock
in the books of the within named Corporation with full power of substitution in
the premises.
Dated,____________________ x_______________________________________
NOTICE: THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATEVER
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS 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 Edwin R. Addison (the
"Employee").
EXPLANATORY STATEMENT
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
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 earnings objectives and when the Employee satisfies reasonable
performance standards set by management.
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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 Chief Executive 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.
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
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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 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.
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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 the Employee is terminated pursuant to this Section 10 for reasons other than
for Cause, or if a Change of Control (as defined below) occurs and, within two
(2) years thereafter, (A) the Employee is terminated without Cause, or (B) 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. 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.
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,
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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 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.
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(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 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.
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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
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
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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 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.
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<PAGE>
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 S. Gaertner /s/ Edwin R. Addison
- ----------------------------- -----------------------------------
Edwin R. Addison
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SCHEDULE A
COMPENSATION
EDWIN R. ADDISON, CHIEF EXECUTIVE OFFICER
<TABLE>
TIME PERIOD SALARY PER MONTH ANNUAL BONUS ELIGIBILITY*
----------- ---------------- -------------------------
<S> <C> <C>
January 1, 1999 and thereafter $10,000 $80,000
(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.
KNOWLEDGELINK INTERACTIVE, INC.
1998 STOCK INCENTIVE PLAN
(As amended March 31, 1999)
1. Establishment, Purpose and Types of Awards
KnowledgeLink Interactive, Inc. hereby establishes the KnowledgeLink
Interactive, Inc. 1998 Stock Incentive Plan (the "Plan"). The purpose of the
Plan is to promote the long-term growth and profitability of KnowledgeLink
Interactive, Inc. (the "Corporation") by (i) providing key people with
incentives to improve stockholder value and to contribute to the growth and
financial success of the Corporation, and (ii) enabling the Corporation to
attract, retain and reward the best-available persons for positions of
substantial responsibility.
The Plan permits the granting of stock options (including incentive
stock options qualifying under Code section 422 and nonqualified stock options),
stock appreciation rights, restricted or unrestricted stock awards, phantom
stock, performance awards, or any combination of the foregoing.
2. Definitions
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Affiliate" shall mean any entity, whether now or hereafter
existing, which controls, is controlled by, or is under common control with, the
Corporation (including, but not limited to, joint ventures, limited liability
companies, and partnerships). For this purpose, "control" shall mean ownership
of 50% or more of the total combined voting power or value of all classes of
stock or interests of the entity.
(b) "Award" shall mean any stock option, stock appreciation right,
stock award, phantom stock award, or performance award.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
(e) "Common Stock" shall mean shares of common stock of the
Corporation, par value of $0.0001 per share.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Fair Market Value" of a share of the Corporation's Common Stock
for any purpose on a particular date shall be determined in a manner such as the
Administrator shall in good faith determine to be appropriate; provided that in
the event the Common Stock shall become registered under Section 12 of the
Exchange Act, then thereafter the Fair Market Value of the Corporation's Common
Stock for any purpose on a particular date shall mean the last reported sale
price per share of Common Stock, regular way, on such date or, in case no such
sale takes place on such date, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on a national securities exchange or included for quotation on the
Nasdaq-National Market, or if the Common Stock is not so listed or admitted to
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trading or included for quotation, the last quoted price, or if the Common Stock
is not so quoted, the average of the high bid and low asked prices, regular way,
in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or, if such system is no
longer in use, the principal other automated quotations system that may then be
in use or, if the Common Stock is not quoted by any such organization, the
average of the closing bid and asked prices, regular way, as furnished by a
professional market maker making a market in the Common Stock as selected in
good faith by the Administrator or by such other source or sources as shall be
selected in good faith by the Administrator. If, as the case may be, the
relevant date is not a trading day, the determination shall be made as of the
next preceding trading day. As used herein, the term "trading day" shall mean a
day on which public trading of securities occurs and is reported in the
principal consolidated reporting system referred to above, or if the Common
Stock is not listed or admitted to trading on a national securities exchange or
included for quotation on the Nasdaq-National Market, any business day.
(h) "Grant Agreement" shall mean a written document memorializing the
terms and conditions of an Award granted pursuant to the Plan and shall
incorporate the terms of the Plan.
(i) "Parent" shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of "parent corporation" provided
in Code section 424(e), or any successor thereto.
(j) "Subsidiary" and "subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the Code,
or any successor thereto.
3. Administration
(a) Administration of the Plan. The Plan shall be administered by the
Board or by such committee or committees as may be appointed by the Board from
time to time (the Board, committee or committees hereinafter referred to as the
"Administrator").
(b) Powers of the Administrator. The Administrator shall have all the
powers vested in it by the terms of the Plan, such powers to include authority,
in its sole and absolute discretion, to grant Awards under the Plan, prescribe
Grant Agreements evidencing such Awards and establish programs for granting
Awards.
The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate; (v) modify, amend, extend or renew
outstanding Awards, or accept the surrender of outstanding Awards and substitute
new Awards (provided however, that, except as provided in Section 7(d) of the
Plan, any modification that would materially adversely affect any outstanding
Award shall not be made without the consent of the holder); (vi) accelerate or
otherwise change the time in which an Award may be exercised or becomes payable
and to waive or accelerate the lapse, in whole or in part, of any restriction or
condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an
Award following termination of any grantee's employment; and (vii) establish
objectives and conditions,
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<PAGE>
if any, for earning Awards and determining whether Awards will be paid after the
end of a performance period.
The Administrator shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.
(c) Non-Uniform Determinations. The Administrator's determinations
under the Plan (including without limitation, determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the Grant Agreements evidencing such Awards) need
not be uniform and may be made by the Administrator selectively among persons
who receive, or are eligible to receive, Awards under the Plan, whether or not
such persons are similarly situated.
(d) Limited Liability. To the maximum extent permitted by law, no
member of the Administrator shall be liable for any action taken or decision
made in good faith relating to the Plan or any Award thereunder.
(e) Indemnification. To the maximum extent permitted by law and by the
Corporation's charter and by-laws, the members of the Administrator shall be
indemnified by the Corporation in respect of all their activities under the
Plan.
(f) Effect of Administrator's Decision. All actions taken and decisions
and determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator's
sole and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee of the Corporation, and their respective successors
in interest.
4. Shares Available for the Plan; Maximum Awards
Subject to adjustments as provided in Section 7(d) of the Plan, the
shares of Common Stock that may be issued with respect to Awards granted under
the Plan shall not exceed an aggregate of 1,750,000 shares of Common Stock. The
Corporation shall reserve such number of shares for Awards under the Plan,
subject to adjustments as provided in Section 7(d) of the Plan. If any Award, or
portion of an Award, under the Plan expires or terminates unexercised, becomes
unexercisable or is forfeited or otherwise terminated, surrendered or canceled
as to any shares, or if any shares of Common Stock are surrendered to the
Corporation in connection with any Award (whether or not such surrendered shares
were acquired pursuant to any Award), the shares subject to such Award and the
surrendered shares shall thereafter be available for further Awards under the
Plan; provided, however, that any such shares that are surrendered to the
Corporation in connection with any Award or that are otherwise forfeited after
issuance shall not be available for purchase pursuant to incentive stock options
intended to qualify under Code section 422.
5. Participation
Participation in the Plan shall be open to all employees, officers,
directors and consultants of the Corporation, or of any Affiliate of the
Corporation, as may be selected by the Administrator from time to time.
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<PAGE>
6. Awards
The Administrator, in its sole discretion, establishes the terms of all
Awards granted under the Plan. Awards may be granted individually or in tandem
with other types of Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement.
(a) Stock Options. The Administrator may from time to time grant to
eligible participants Awards of incentive stock options as that term is defined
in Code section 422 or nonqualified stock options; provided, however, that
Awards of incentive stock options shall be limited to employees of the
Corporation or of any Parent or Subsidiary of the Corporation. Options intended
to qualify as incentive stock options under Code section 422 must have an
exercise price at least equal to Fair Market Value on the date of grant, but
nonqualified stock options may be granted with an exercise price less than Fair
Market Value. No stock option shall be an incentive stock option unless so
designated by the Administrator at the time of grant or in the Grant Agreement
evidencing such stock option.
(b) Stock Appreciation Rights. The Administrator may from time to time
grant to eligible participants Awards of Stock Appreciation Rights ("SAR"). An
SAR entitles the grantee to receive, subject to the provisions of the Plan and
the Grant Agreement, a payment having an aggregate value equal to the product of
(i) the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Corporation of the amount receivable upon any
exercise of an SAR may be made by the delivery of Common Stock or cash, or any
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator. If upon settlement of the exercise of an SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be used
for such payment and the Administrator shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.
(c) Stock Awards. The Administrator may from time to time grant
restricted or unrestricted stock Awards to eligible participants in such
amounts, on such terms and conditions, and for such consideration, including no
consideration or such minimum consideration as may be required by law, as it
shall determine. A stock Award may be paid in Common Stock, in cash, or in a
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator.
(d) Phantom Stock. The Administrator may from time to time grant Awards
to eligible participants denominated in stock-equivalent units ("phantom stock")
in such amounts and on such terms and conditions as it shall determine. Phantom
stock units granted to a participant shall be credited to a bookkeeping reserve
account solely for accounting purposes and shall not require a segregation of
any of the Corporation's assets. An Award of phantom stock may be settled in
Common Stock, in cash, or in a combination of Common Stock and cash, as
determined in the sole discretion of the Administrator. Except as otherwise
provided in the applicable Grant Agreement, the grantee shall not have the
rights of a stockholder with respect to any shares of Common Stock represented
by a phantom stock unit solely as a result of the grant of a phantom stock unit
to the grantee.
(e) Performance Awards. The Administrator may, in its discretion, grant
performance awards which become payable on account of attainment of one or more
performance goals established by the Administrator. Performance awards may be
paid by the delivery of Common Stock or cash, or any
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combination of Common Stock and cash, as determined in the sole discretion of
the Administrator. Performance goals established by the Administrator may be
based on the Corporation's or an Affiliate's operating income or one or more
other business criteria selected by the Administrator that apply to an
individual or group of individuals, a business unit, or the Corporation or an
Affiliate as a whole, over such performance period as the Administrator may
designate.
7. Miscellaneous
(a) Withholding of Taxes. Grantees and holders of Awards shall pay to
the Corporation, or make provision satisfactory to the Administrator for payment
of, any taxes required to be withheld in respect of Awards under the Plan no
later than the date of the event creating the tax liability. The Corporation
may, to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the grantee or holder of an Award. In the
event that payment to the Corporation of such tax obligations is made in shares
of Common Stock, such shares shall be valued at Fair Market Value on the
applicable date for such purposes.
(b) Loans. The Corporation may make or guarantee loans to grantees to
assist grantees in exercising Awards and satisfying any withholding tax
obligations.
(c) Transferability. Except as otherwise determined by the
Administrator, and in any event in the case of an incentive stock option or a
stock appreciation right granted with respect to an incentive stock option, no
Award granted under the Plan shall be transferable by a grantee otherwise than
by will or the laws of descent and distribution. Unless otherwise determined by
the Administrator in accord with the provisions of the immediately preceding
sentence, an Award may be exercised during the lifetime of the grantee, only by
the grantee or, during the period the grantee is under a legal disability, by
the grantee's guardian or legal representative.
(d) Adjustments; Business Combinations. In the event of changes in the
Common Stock of the Corporation by reason of any stock dividend, split-up,
recapitalization, merger, consolidation, business combination or exchange of
shares and the like, the Administrator shall, in its discretion, make
appropriate adjustments to the maximum number and kind of shares reserved for
issuance or with respect to which Awards may be granted under the Plan as
provided in Section 4 of the Plan and to the number, kind and price of shares
covered by Awards granted, and shall, in its discretion and without the consent
of holders of Awards, make any other adjustments in Awards, including but not
limited to reducing the number of shares subject to Awards or providing or
mandating alternative settlement methods such as settlement of the Awards in
cash or in shares of Common Stock or other securities of the Corporation or of
any other entity, or in any other matters which relate to Awards as the
Administrator shall, in its sole discretion, determine to be necessary or
appropriate.
Notwithstanding anything in the Plan to the contrary and without the
consent of holders of Awards, the Administrator, in its sole discretion, may
make any modifications to any Awards, including but not limited to cancellation,
forfeiture, surrender or other termination of the Awards in whole or in part
regardless of the vested status of the Award, in order to facilitate any
business combination that is authorized by the Board to comply with requirements
for treatment as a pooling of interests transaction for accounting purposes
under generally accepted accounting principles.
The Administrator is authorized to make, in its discretion and without
the consent of holders of Awards, adjustments in the terms and conditions of,
and the criteria included in, Awards in recognition of unusual or nonrecurring
events affecting the Corporation, or the financial statements of the Corporation
or
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<PAGE>
any Subsidiary, or of changes in applicable laws, regulations, or accounting
principles, whenever the Administrator determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
(e) Substitution of Awards in Mergers and Acquisitions. Awards may be
granted under the Plan from time to time in substitution for Awards held by
employees or directors of entities who become or are about to become employees
or directors of the Corporation or an Affiliate as the result of a merger or
consolidation of the employing entity with the Corporation or an Affiliate, or
the acquisition by the Corporation or an Affiliate of the assets or stock of the
employing entity. The terms and conditions of any substitute Awards so granted
may vary from the terms and conditions set forth herein to the extent that the
Administrator deems appropriate at the time of grant to conform the substitute
Awards to the provisions of the awards for which they are substituted.
(f) Stockholders' Agreement. As a condition precedent to the grant of
any Award under the Plan or the exercise pursuant to such an Award or to the
delivery of certificates for shares issued pursuant to any Award, the
Administrator may require the grantee or the grantee's successor or permitted
transferee, as the case may be, to become a party to a Stockholders' Agreement
of the Corporation in such form as the Administrator may determine from time to
time.
(g) Termination, Amendment and Modification of the Plan. The Board may
terminate, amend or modify the Plan or any portion thereof at any time.
(h) Non-Guarantee of Employment or Service. Nothing in the Plan or in
any Grant Agreement thereunder shall confer any right on an individual to
continue in the service of the Corporation or shall interfere in any way with
the right of the Corporation to terminate such service at any time.
(i) Compliance with Securities Laws; Listing and Registration. Common
Stock shall not be issued with respect to an Award granted under the Plan unless
the exercise of such Award and the issuance and delivery of stock certificates
for such Common Stock pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933 and the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any national securities exchange or any listing or quotation
system established by the National Association of Securities Dealers, Inc.
("Nasdaq System") upon which the Common Stock may then be listed or quoted, and
shall be further subject to the approval of counsel for the Corporation with
respect to such compliance to the extent such approval is sought by the
Committee. The Corporation may require that a grantee, as a condition to
exercise of an Award, and as a condition to the delivery of any share
certificate, provide to the Corporation, at the time of each such exercise and
each such delivery, a written representation that the shares of Common Stock
being acquired shall be acquired by the grantee solely for investment and will
not be sold or transferred without registration or the availability of an
exemption from registration under the Securities Act and applicable state
securities laws. The Corporation may also require that a grantee submit other
written representations which will permit the Corporation to comply with federal
and applicable state securities laws in connection with the issuance of the
Common Stock, including representations as to the knowledge and experience in
financial and business matters of the grantee and the grantee's ability to bear
the economic risk of the grantee's investment. The Corporation may require that
the grantee obtain a "purchaser representative" as that term is defined in
applicable federal and state securities laws. The stock certificates for any
shares of Common Stock issued pursuant to this Plan may bear a legend
restricting transferability of the shares of Common Stock unless such shares are
registered or an exemption from registration is available under the Securities
Act and applicable state securities laws. The Corporation may notify its
transfer agent to stop any transfer of shares of Common Stock not
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<PAGE>
made in compliance with these restrictions. If the Corporation determines that
the listing, registration or qualification upon any securities exchange or upon
the Nasdaq System or under any law, of shares subject to any Award is necessary
or desirable as a condition of, or in connection with, the granting of the Award
or the issuance or purchase of shares thereunder, no such Award may be exercised
in whole or in part and no restrictions on such Award shall lapse, unless such
listing, registration or qualification is effected free of any conditions not
acceptable to the Corporation.
(j) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Corporation and a grantee or any other
person. To the extent that any grantee or other person acquires a right to
receive payments from the Corporation pursuant to an Award, such right shall be
no greater than the right of any unsecured general creditor of the Corporation.
(k) Governing Law. The validity, construction and effect of the Plan,
of Grant Agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Administrator relating to
the Plan or such Grant Agreements, and the rights of any and all persons having
or claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the State
of Maryland, without regard to its conflict of laws principles.
(l) Effective Date; Termination Date. The Plan is effective as of the
date on which the Plan was adopted by the Board, subject to approval of the
stockholders within twelve months before or after such date. No Award shall be
granted under the Plan after the close of business on the day immediately
preceding the tenth anniversary of the effective date of the Plan. Subject to
other applicable provisions of the Plan, all Awards made under the Plan prior to
such termination of the Plan shall remain in effect until such Awards have been
satisfied or terminated in accordance with the Plan and the terms of such
Awards.
Date Initially Approved by the Board: February 9, 1998
Date Initially Approved by the Stockholders: February 24, 1998
Date Approved by the Board, as amended: March 31, 1999
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EXHIBIT 10.7
[FORM OF]
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of _____________ 1999 (this
"AGREEMENT"), by and between Powerize.com, Inc., a Delaware corporation (the
"COMPANY"), and _________________________ ("INDEMNITEE").
W I T N E S S E T H:
WHEREAS, the Company desires to attract and retain the services of able
persons to serve as its officers and directors;
WHEREAS, the Company and Indemnitee recognize the increasing difficulty
in obtaining officers' and directors' liability insurance, the significant
increase in the cost of such insurance and the general reduction in the coverage
of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to litigation risks at the same time that liability insurance has been severely
limited; and
WHEREAS, neither Indemnitee nor the Company regards statutory
indemnification protection as fully adequate given the present circumstances;
NOW THEREFORE, the Company and Indemnitee hereby agree as follows:
1. (a) THIRD-PARTY PROCEEDINGS. The Company shall indemnify Indemnitee
to the fullest extent of Delaware law, except as otherwise provided in Section 3
of this Agreement, if Indemnitee is or was a party or is threatened to be made a
party to any threatened, pending or completed suit, action, proceeding,
arbitration or alternative dispute resolution mechanism, investigation,
administrative hearing, whether civil, criminal, administrative or investigative
(any such suit, action, proceeding, arbitration or alternative dispute
resolution mechanism, investigation, administrative hearing being referred to
herein as a "PROCEEDING") (other than an action by or in the right of the
Company) by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company or any subsidiary or affiliated entity (each, a
"Subsidiary") of the Company, by reason of any action or inaction on the part of
Indemnitee while an officer or director of the Company or any Subsidiary of the
Company or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
Person (as defined in Section 6(d)), against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement (if such settlement is
approved in advance by the Company, which approval shall not be unreasonably
withheld) actually and reasonably incurred by Indemnitee in connection with such
action or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company and its stockholders, and
<PAGE>
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company
shall indemnify Indemnitee to the fullest extent of Delaware law, except as
otherwise provided in Section 3 of this Agreement, if Indemnitee is or was a
party or is threatened to be made a party to any threatened, pending or
completed Proceeding by or in the right of the Company or any subsidiary of the
Company to procure a judgment in its favor by reason of the fact that Indemnitee
is or was a director, officer, employee or agent of the Company or any
Subsidiary of the Company, by reason of any action or inaction on the part of
Indemnitee while an officer or director of the Company or any Subsidiary of the
Company or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
Person, against expenses (including attorneys' fees) and, to the fullest extent
permitted by Delaware law, amounts paid in settlement (if such settlement is
approved by the Company, which approval shall not be unreasonably withheld), in
each case to the extent actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such Proceeding if Indemnitee acted
in good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company and its stockholders, except that
no indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to the Company and its
stockholders in the performance of Indemnitee's duty to the Company and its
stockholders unless and only to the extent that the Court of Chancery of the
State of Delaware, or the court in which such action or proceeding shall have
been brought or is pending, shall determine that in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for expense, and then only to the extent that the court shall
determine.
(c) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 1(a) or (b) hereof to pay the expenses of any Proceeding
against Indemnitee, the Company shall be entitled to assume the defense of such
Proceeding, with counsel approved by Indemnitee (who shall not unreasonably
withhold such approval), upon the delivery to Indemnitee of written notice of
its election so to do. After delivery of such notice, approval of such counsel
by Indemnitee and the retention of such counsel by the Company, the Company will
not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same Proceeding,
PROVIDED, THAT, (i) Indemnitee shall have the right to employ his counsel in any
such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized in writing by the Company,
(B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
and shall have notified the company in writing thereof, (C) Indemnitee shall
have reasonably concluded that there may be a conflict of interest between
Indemnitee and other indemnitees of the Company being represented by counsel
retained by the Company in the same proceeding and shall have notified the
Company in writing thereof, or (D) the Company shall not, in fact, have employed
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<PAGE>
counsel to assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
2. CONTRIBUTION. If, when Indemnitee has met the applicable standard of
conduct, the indemnification provisions set forth in Section 1 should, under
applicable law, be to any extent unenforceable, then the Company agrees that it
shall be treated as though it is or was a party to the threatened, pending or
completed Proceeding in which Indemnitee is or was involved and that the Company
shall contribute to the amounts paid or payable by Indemnitee as a result of
such expenses (including attorneys' fees), judgments in third-party Proceedings,
fines and amounts paid in settlement actually and reasonably incurred by
Indemnitee in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and Indemnitee on the other in connection with such
action or inaction, or alleged action or inaction, as well as any other relevant
equitable considerations.
For purposes of this Section 2, the relative benefit to the Company
shall be deemed to be the benefits accruing to it and to all of its directors,
officers, employees and agents (other than Indemnitee), as a group and treated
as one entity, and the relative benefit to Indemnitee shall be deemed to be an
amount not greater than Indemnitee's yearly base salary or director's
compensation as the case may be, from the Company during the first year in which
the action or inaction, or alleged action or inaction, forming the basis for the
threatened, pending or contemplated Proceeding was alleged to have occurred plus
the amount, if any, of monetary benefit and other consideration received by
Indemnitee in the transaction (s) that gave rise to such Proceeding. The
relative fault shall be determined by reference to, among other things, the
fault of the Company and all of its directors, officers, employees and agents
(other than Indemnitee), as a group and treated as one entity, and such group's
relative intent, knowledge, access to information and opportunity to have
altered or prevented the action or inaction, or alleged action or inaction,
forming the basis for the threatened, pending or contemplated Proceeding, and
Indemnitee's relative fault in light of such factors on the other hand.
3. LIMITATIONS TO RIGHTS OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. Except as otherwise provided in Sections 9 and 12 of this Agreement,
Indemnitee shall not be entitled to indemnification or advancement of expenses
under this Agreement:
(a) with respect to any Proceeding initiated, brought or made
by Indemnitee (i) against the Company, unless a Change in Control(as defined in
Section 5(b) of this Agreement) shall have occurred, or (ii) against any person
other than the Company, unless approved in advance by the Board of Directors of
the Company (the "Board");
(b) on account of any suit in which it shall be determined by
final judgment by a court having jurisdiction in the matter that Indemnitee
intentionally caused or intentionally contributed to the injury complained of
with the knowledge that such injury would occur;
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<PAGE>
(c) on account of Indemnitee's conduct which shall be
determined by final judgment by a court having jurisdiction in the mater that
Indemnitee was knowingly fraudulent, deliberately dishonest, engaged in willful
misconduct or that Indemnitee received an improper personal benefit;
(d) for any expenses incurred by Indemnitee with respect to
any proceeding instituted by Indemnitee to enforce or interpret this Agreement,
to the extent that a court of competent jurisdiction determines that any of the
material assertions made by Indemnitee in such proceeding was not made in good
faith or was frivolous;
(e) for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) which have been paid directly to
Indemnitee by an insurance carrier under a policy of officers' and directors'
liability insurance maintained by the Company;
(f) for expenses or the payment of profits arising from the
purchase and sale by Indemnitee of securities in violation of Section 16(b) of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or any
similar successor statute; or
(g) if it shall be determined by final judgment by a court
having jurisdiction in the matter that such indemnification is not lawful.
4. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. (a)
To obtain indemnification under this Agreement, Indemnitee shall submit to the
Company a written request, including such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification. The
Secretary of the Company shall, promptly upon receipt of such a request for
indemnification, advise the Board in writing that Indemnitee has requested
indemnification.
(b) Upon written request by Indemnitee for indemnification, a
determination with respect to Indemnitee's entitlement thereto shall be made in
the specific case as follows:
(i) if a Change in Control (as defined in section 5(b)
of this Agreement) shall have occurred, by Independent Counsel (as defined in
Section 5(a) of this Agreement) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee (unless Indemnitee shall request that
such determination be made by the Board or the Stockholders, in which case the
determination shall be made in the manner provided below in clause (ii); or
(ii) if a Change in Control shall not have occurred, (A)
by the Board by a majority vote of a quorum consisting of disinterested
directors, (B) if a quorum of the Board consisting of disinterested directors is
not obtainable or, even if obtainable, such quorum of disinterested directors so
directs, by Independent Counsel in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee or (C) by the stockholders of the
Company.
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<PAGE>
(c) If it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after
such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information that is not
privileged or otherwise protected from disclosure and that is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(d) If a Change in Control shall not have occurred, the
Independent Counsel shall be selected by the Board, and the Company shall give
written notice to Indemnitee advising him of the identity of the Independent
counsel so selected. If a Change in Control shall have occurred, the Independent
Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board), and Indemnitee shall give written notice
to the Company advising it of the identity of the Independent Counsel so
selected. In either event, Indemnitee or the Company, as the case may be, a
written objection to such selection. Such objection may be asserted only on the
ground that the Independent Counsel so selected may not serve as Independent
Counsel unless and until a court has determined that such objection is without
merit. If, twenty (20) days after submission by Indemnitee of a written request
for indemnification pursuant to Section 4 hereof, no Independent Counsel shall
have been selected or if selected, shall have been objected to, in accordance
with this Section 4(d), either the Company or Indemnitee may petition the Court
of Chancery of the State of Delaware or other court of competent jurisdiction
for resolution of any objection which shall have been made by the Company or
Indemnitee to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the court or by such
other person as the court shall designate. The person with respect to whom an
objection is favorably resolved or the person so appointed shall act as
Independent Counsel under Section 4 hereof. The Company shall pay any and all
reasonable fees and expenses incident to the procedures of this Section 4,
including reasonable fees and expenses incurred by such Independent Counsel
regardless of the manner in which such Independent Counsel was selected or
appointed. Upon the due commencement of any judicial proceeding or arbitration
pursuant to Section 12 of this Agreement, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then prevailing).
5. (a) "Independent Counsel" means a law firm or a member of a law firm
that neither at the time in question, nor in the five years immediately
preceding such time has been retained to represent (i) the Company or Indemnitee
in any matter material to either such party or (ii) any other party to the
proceeding giving rise to a claim for indemnification under this Agreement.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing under the law of the
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<PAGE>
State of Delaware, would be precluded from representing either the Company or
Indemnitee in an action to determine Indemnitee's rights under this Agreement.
(b) "Change in Control" means the occurrence of any of the
following events:
(i) the Company is merged, consolidated or reorganized
into or with another corporation or other entity, and as a result of
such merger, consolidation or reorganization less than a majority of
the combined voting power of the then-outstanding securities of such
corporation or entity immediately after such transaction are held in
the aggregate by the holders of voting stock immediately prior to such
transaction;
(ii) the Company sells or otherwise transfers all or
substantially all of its assets to another corporation or other entity
in which, after giving effect to such sale or transfer, the holders of
voting stock of the Company immediately prior to such sale or transfer
hold in the aggregate less than a majority of the combined voting power
of the then-outstanding securities of such other corporation;
(iii) there is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report or item
therein), each as promulgated pursuant to the Exchange Act, disclosing
that any person or entity, other than any shareholder of the Company
(and its affiliates) owning 10% or more of the Company's voting stock
on the date hereof, has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities
representing 50% or more of the combined voting power of the Company's
voting stock; or
(iv) if during any period of two consecutive years
individuals who at the beginning of any such period constitute the
Board cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that for purposes of this clause (iv) each director
of the Company who is first elected, or first nominated for election by
the Company's stockholders, by a vote of at least majority of the
directors of the Company (or a committee of the Board) then still in
office who were directors of the Company at the beginning of any such
period shall be deemed to have been a director of the Company at the
beginning of such period.
Notwithstanding the provisions of clause (iii) above, unless otherwise
determined in the specific case by majority vote of the Board, a "Change in
Control" shall not be deemed to have occurred solely because the Company, any
subsidiary or any employee stock ownership plan or any other employee benefit
plan of the Company or any subsidiary either files or becomes obligated to file
a report or a proxy statement under or in response to Schedule 13D, Schedule
14D-1 or Schedule 14A (or any successor schedule, form or report or item
therein) under the Exchange Act disclosing beneficial ownership by it of shares
of voting stock of the Company, whether in excess of 50% or otherwise, or
because the Company reports that a change in control of the Company has occurred
or will occur in the future by reason of such beneficial ownership.
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6. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. (a) In making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 4 of this
Agreement, and the Company shall bear the burden of proof to rebut that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) The termination of any Proceeding or of any claim, issue or
matter therein by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee 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 Company, or, with respect to any criminal action or
proceeding, that Indemnitee had reasonable cause to believe that his conduct was
unlawful.
(c) Indemnitee's conduct with respect to an employee benefit
plan for a purpose he reasonably believed to be in the interests of the
participants in and beneficiaries of the plan shall be deemed to be conduct that
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company.
(d) For purposes of any determination hereunder, Indemnitee
shall be deemed to have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, or, with
respect to any criminal action or proceeding, to have had no reasonable cause to
believe his conduct was unlawful, if his action was based on (i) the records or
books of account of the Company or another Person, including financial
statements, (ii) information supplied to him by the officers of the Company or
another Person in the course of their duties, (iii) the advice of legal counsel
for the Company or another Person, or (iv) information or records given or
reports made to the Company or another Person by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Company or another Person. the term "another Person" as used in this
Agreement shall mean any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise of which Indemnitee is or was
serving at the request of the Company as an officer, director, partner, trustee,
employee or agent. The provisions of this Section 6(d) shall not be deemed to
limit in any way the other circumstances in which Indemnitee may be deemed to
have met the applicable standard of conduct set forth in Section 1.
7. SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding described in
Section 1 hereof, 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 with the investigation, defense,
settlement or appeal thereof. For purposes of this Section 7, the term
"successful on the merits or otherwise" shall include, but not be limited to,
(i) any termination, withdrawal or dismissal (with
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or without prejudice) of any Proceeding against Indemnitee without any express
finding of liability or guilt against him, (ii) the expiration of 180 days after
the making of any claim or threat of a Proceeding without the institution of the
same and without any promise of payment or payment made to induce a settlement
or (iii) the settlement of any Proceeding under Section 1, pursuant to which
Indemnitee pays less than $10,000.
8. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the claims, damages, expenses (including attorneys' fees), judgments,
fines or amounts paid in settlement by Indemnitee in connection with the
investigation, defense, settlement or appeal of any Proceeding specified in
Section 1, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. The party or parties making the determination shall determine the
portion (if less than all) of such claims, damages, expenses (including
attorneys' fees), judgments, fines or amounts paid in settlement for which
Indemnitee is entitled to indemnification under this Agreement.
9. COSTS. All the costs of making the determination required by Section
4 hereof shall be borne solely by the Company, including, but not limited to,
the costs of legal counsel, proxy solicitations and judicial determinations. The
Company shall also be solely responsible for paying (i) all reasonable expenses
incurred by Indemnitee to enforce this Agreement, including, but not limited to,
the costs incurred by Indemnitee to obtain court-ordered indemnification
pursuant to Section 12, regardless of the outcome of any such application or
proceeding, and (ii) all costs of defending any Proceedings challenging payments
to Indemnitee under this Agreement.
10. ADVANCE OF EXPENSES. The Company shall advance all expenses
incurred by or on behalf of Indemnitee in connection with any Proceeding within
twenty (20) days after the receipt by the Company of a statement or statements
from Indemnitee requesting such advance or advances from time to time, whether
prior to or after final disposition of such Proceeding. Such statement or
statements shall reasonably evidence the expenses incurred by Indemnitee and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such expenses, which
undertaking shall be accepted by or on behalf of the Company with reference to
the financial ability of Indemnitee to make repayment, and without the pledging
of any security by Indemnitee. Notwithstanding Indemnitee's above-described
rights to advancement of expenses, no advance of expenses shall be made in the
circumstances proscribed by Section 3(a). Notwithstanding any other provision of
this Agreement, if Indemnitee requests an adjudication or an award in
arbitration pursuant to the provisions of Section 12 below in order to establish
an entitlement to indemnification or advancement of expenses, any determination
made pursuant to Section 4 of this Agreement that Indemnitee is not entitled to
indemnification or to receive advancement of expenses shall not be binding and
Indemnitee shall not be required to reimburse the Company for any expense
advance unless and until a final judicial determination or award in arbitration
is made with respect thereto as to which all rights of appeal therefrom have
been exhausted or lapsed.
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11. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Not withstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of any event or occurrence related to the fact that Indemnitee is or was a
director, officer, employee or agent of the Company or any subsidiary of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another Person, a witness in any Proceeding,
whether instituted by the Company or any other party, and to which Indemnitee is
not a party, he shall be indemnified against all expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
12. ENFORCEMENT. (a) If a claim for indemnification or advancement of
expenses made to the Company pursuant to Section 3 or 10 is not timely paid in
full to Indemnitee by the Company as required by Section 3 or 10, respectively,
Indemnitee shall be entitled to seek judicial enforcement of the Company's
obligations to make such payment in an appropriate court of the State of
Delaware or any other court of competent jurisdiction. In the event that a
determination is made that Indemnitee is not entitled to indemnification or
advancement of expenses hereunder, (i) Indemnitee may seek a de novo
adjudication of Indemnitee's entitlement to such indemnification or advancement
either, at Indemnitee's sole option, or (A) an appropriate court of the State of
Delaware or any other court of competent jurisdiction or (B) an arbitration to
be conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association; (ii) any such judicial proceeding or arbitration shall
not in any way be prejudiced by, and Indemnitee shall not be prejudiced in any
way by such adverse determination; and (iii) in any such judicial proceeding or
arbitration the Company shall have the burden of proving that Indemnitee is not
entitled to indemnification or advancement of expenses under this Agreement.
Indemnitee shall commence a proceeding seeking an adjudication of Indemnitee's
right to indemnification or advancement of expenses pursuant to the preceding
sentence within one year following the date on which Indemnitee first has the
right to commence such proceeding pursuant to this Section 12(a); PROVIDED,
HOWEVER, that the foregoing time limitation shall not apply in respect of a
proceeding brought by Indemnitee to enforce Indemnitee's rights under Section 7
hereof.
(b) The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to the provisions of
Section 12(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and shall stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under this Section 12, it shall be a
defense to a claim for indemnification (other than an action brought to enforce
a claim for advancement of expenses) that Indemnitee has not met the standards
of conduct which make it permissible under Delaware law for the Company to
indemnify Indemnitee for the amount claimed. The burden of proving such defense
shall be on the Company.
(d) It is the intent of the Company that Indemnitee not be
required to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or
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other legal action because the cost and expense thereof would substantially
detract from the benefits intended to be extended to Indemnitee hereunder.
Accordingly, if it should appear to Indemnitee that the Company has failed to
comply with any of its obligations under this Agreement or in the event that the
Company or any other person takes any action to declare this Agreement void or
unenforceable, or institutes any proceeding designed (or having the effect of
being designed) to deny, or to recover from Indemnitee the benefits intended to
be provided to Indemnitee hereunder the Company irrevocably authorizes
Indemnitee from time tot time to retain counsel of his choice, at the expense of
the Company as hereafter provided, to represent Indemnitee in connection with
the initiation or defense of any litigation or other legal action, whether by or
against the Company or any director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Regardless of the outcome
thereof, but subject to Indemnitee having acted in good faith, the Company shall
pay and be solely responsible for any and all costs, charges and expenses,
including attorneys' and others' fees and expenses, incurred by Indemnitee (i)
as a result of the Company's failure to perform this Agreement or any provision
thereof, or (ii) as a result of the Company's or any person's contesting the
validity or enforceability of this Agreement or any provision thereof as
aforesaid.
13. LIABILITY INSURANCE AND FUNDING. To the extent the Company
maintains an insurance policy or policies providing directors' and officers'
liability insurance, Indemnitee shall be covered by such policy or polices, in
accordance with its or their terms, to the maximum extent of the coverage
available for any director or officer of the Company. If, at the time of the
receipt of a notice of a claim pursuant to Section 4 hereof, the Company has
directors' and officers' liability insurance in effect, the Company shall give
prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the respective policies. The Company
shall thereafter take all necessary or desirable action to cause such insurers
to pay, on behalf of Indemnitee, all amounts payable as a result of such
proceeding in accordance with the terms of such policies. The Company shall have
no obligation to obtain or maintain such insurance.
14. MERGER OR CONSOLIDATION. In the event that the Company shall be a
constituent corporation in a merger, consolidation or other reorganization, the
Company shall require as a condition thereto, (a) if it shall not be the
surviving, resulting or other corporation therein, the surviving, resulting or
acquiring corporation to agree to indemnify Indemnitee to the full extent
provided herein, and (b) whether or not the Company is the surviving, resulting
or acquiring corporation therein, Indemnitee shall also stand in the same
position under this Agreement with respect to the surviving, resulting or
acquiring corporation as Indemnitee would have with respect to the Company if
the Company's separate existence had continued.
15. NONDISCLOSURE OF PAYMENTS. Except as expressly required by federal
securities laws or other applicable laws, Indemnitee shall not disclose any
payments made under this Agreement, whether indemnification or advancement of
expenses, unless prior written approval of the Company is obtained. Any payments
to Indemnitee that must be disclosed shall, unless otherwise required by law, be
described only in the Company proxy or information statements relating to
special and/or annual meetings of the Company's stockholders, and the
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Company shall afford Indemnitee the reasonable opportunity to review all such
disclosures and, if requested, to explain in such statement any mitigating
circumstances regarding the events reported.
16. NONEXCLUSIVITY AND SEVERABILITY; SUBROGATION. (a) The right to
indemnification and advancement of expenses provided by this Agreement shall not
be exclusive of any other rights to which Indemnitee may be entitled under the
Amended and Restated Certificate of Incorporation (the "Certificate") or Amended
and Restated Bylaws (the "Bylaws") of the Company, Delaware law, any other
statute, insurance policy, agreement, vote of stockholders of the Company or of
the Board (or otherwise), both as to actions in his official capacity and as to
actions in another capacity while holding such office, and shall continue after
Indemnitee has ceased to be a director or officer of the Company and shall inure
to the benefit of his heirs, executors and administrators; PROVIDED, HOWEVER,
that to the extent Indemnitee otherwise would have any greater right to
indemnification and/or advancement of expenses under any provision of the
Certificate or the Bylaws of the Company, Indemnitee shall be deemed to have
such greater right pursuant to this Agreement; and, PROVIDED, FURTHER, that to
the extent that any change is made to the Delaware law (whether by legislative
action or judicial decision), the Certificate and/or the Bylaws that permits any
greater right to indemnification and/or advancement of expenses than that
provided under this Agreement as of the date hereof, Indemnitee shall be deemed
to have such greater right pursuant to this Agreement. No amendment, alteration,
or repeal of this Agreement or of any provision hereof shall limit or restrict
any right of Indemnitee under this Agreement in respect of any action taken or
omitted by such Indemnitee prior to such amendment, alteration, or repeal.
(b) If any provision or provisions of this Agreement are held to
be invalid, illegal or unenforceable for any reason whatsoever: (i) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, all portions of any provisions of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any provisions of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
(c) In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
actions necessary to secure such rights, including execution of such documents
as are necessary to enable the Company to bring suit to enforce such rights.
17. NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressed, on the date of such
receipt, or (ii) if mailed by domestic
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certified or registered mail with postage prepaid, on the third business day
after the date postmarked. Addresses for notice to either party are as shown on
the signature page of this Agreement, or as subsequently modified by written
notice.
18. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "COMMISSION") has
taken the position that indemnification is not permissible for liabilities
arising under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. INDEMNITEE understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Commission to submit the question of indemnification to a
court in certain circumstances for a determination of the Company's right under
public policy to indemnify Indemnitee.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to
principles of conflict of laws.
20. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action, suit or proceeding which arises
out of or relates to this Agreement.
21. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforcement is sought
needs to be produced to evidence the existence of this Agreement.
22. MODIFICATION; SURVIVAL. This Agreement may be modified only by an
instrument in writing signed by both parties hereto. The provisions of this
Agreement shall survive the death, disability or incapacity of Indemnitee or the
termination of Indemnitee's service as a director or officer of the Company and
shall inure to the benefit of Indemnitee's heirs, executors and administrators.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first above written.
INDEMNITEE: POWERIZE.COM, INC.
_______________________________ By: _______________________________
Title:
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KNOWLEDGELINK INTERACTIVE, INC.
1998 STOCK INCENTIVE PLAN
INCENTIVE STOCK OPTION GRANT AGREEMENT
This Grant Agreement (the "Agreement") is entered into by and between
KnowledgeLink Interactive, Inc., a Delaware corporation (the "Corporation"), and
JOHN MCGRATH ("Grantee"), effective as of March 31, 1999 or such later date as
Grantee's employment with the Corporation commences (the "Grant Date").
In consideration of the premises, mutual covenants and agreements
herein, the Corporation and Grantee agree as follows:
ARTICLE 1
GRANT OF OPTION
SECTION 1.1 GRANT OF OPTION. The Corporation hereby grants to Grantee,
pursuant to the provisions of the KnowledgeLink Interactive, Inc. 1998 Stock
Incentive Plan (the "Plan"), an incentive stock option to purchase from the
Corporation, at a price of $1.50 per share (the "Exercise Price"), up to 150,000
shares of common stock of the Corporation, par value of $0.0001 per share
("Stock"), subject to the provisions of this Agreement (the "Option"). The
Option shall expire at 5:00 p.m. Eastern Time on the last business day preceding
the tenth anniversary of the Grant Date (the "Expiration Date"), unless fully
exercised or terminated earlier pursuant to this Agreement. Unless stated
otherwise herein, capitalized terms in this Agreement shall have the meaning set
forth in the Plan.
ARTICLE 2
VESTING
SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated
pursuant to the provisions of this Agreement, Grantee shall become vested in the
shares subject to the Option pro rata over three years in accordance with the
vesting schedule attached hereto and made a part hereof (the "Vesting
Schedule"); provided, however, that Grantee shall have been in the continuous
employ of the Corporation from the Grant Date through each vesting date
specified on the Vesting Schedule.
<PAGE>
ARTICLE 3
EXERCISE OF OPTION
SECTION 3.1 EXERCISABILITY OF OPTION. Pursuant to the terms of the
Agreement, the Option may be exercised at any time, and from time to time, with
respect to the number of shares subject to the Option in which Grantee is then
vested.
SECTION 3.2 SHAREHOLDERS' AGREEMENT. The Administrator in its sole
discretion may require as a condition precedent to the exercise of the Option
granted pursuant to Section 1.1, that Grantee or such other person exercising
the Option be, or shall execute and become, a party to a Shareholders' Agreement
in substantially in the form attached hereto as Exhibit A.
SECTION 3.3 MANNER OF EXERCISE. The Option may be exercised, in whole
or in part, by delivering written notice to the Administrator in such form as
the Administrator may require from time to time; provided, however, that the
Option may not be exercised at any one time as to fewer than one hundred (100)
shares (or such number of shares as to which the Option is then exercisable if
such number of shares then exercisable is less than one hundred (100). Such
notice shall specify the number of shares of Stock subject to the Option as to
which the Option is being exercised, and shall be accompanied by full payment of
the Exercise Price for such shares.
Payment of the Exercise Price shall be made (a) in cash (or cash
equivalents acceptable to the Administrator in the Administrator's discretion);
(b) in the Administrator's discretion at the time of exercise, by tender (via
actual delivery or attestation) to the Corporation of shares of the
Corporation's common stock owned by the Grantee, having a Fair Market Value on
the date of tender not less than the Exercise Price, which have been owned by
the Grantee at least six (6) months; (c) in the Administrator's discretion at
the time of exercise, by withholding shares of the Corporation's common stock
from the number of shares deliverable upon exercise; (d) in the Administrator's
discretion at the time of exercise, by the Grantee's full recourse promissory
note in a form approved by the Administrator; (e) by a broker-assisted cashless
exercise in accordance with Regulation T of the Board of Governors of the
Federal Reserve System and the provisions of the next paragraph; or (f) by any
combination of the foregoing. In the Administrator's sole and absolute
discretion, the Administrator may authorize payment of the Exercise Price to be
made, in whole or in part, by such other means as the Administrator may
prescribe. The Option may be exercised only in multiples of whole shares and no
fractional shares shall be issued.
If the Stock is registered under Section 12(b) of the Securities
Exchange Act of 1934, as amended, payment of the exercise price may be made, in
whole or in part, subject to such limitations as the Administrator may
determine, by delivery of a properly
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executed exercise notice, together with irrevocable instructions: (i) to a
brokerage firm approved by the Corporation to deliver promptly to the
Corporation the aggregate amount of sale or loan proceeds to pay the exercise
price and any withholding tax obligations that may arise in connection with the
exercise, and (ii) to the Corporation to deliver the certificates for such
purchased shares directly to such brokerage firm.
SECTION 3.4 ISSUANCE OF SHARES UPON EXERCISE. Upon exercise of the
Option, in whole or in part, in accordance with the terms of the Agreement and
upon payment of the Exercise Price for the shares of Stock as to which the
Option is exercised and delivery of such executed Shareholders' Agreement as may
be required by the Administrator pursuant to Section 3.2, the Corporation shall
issue to Grantee or such other person exercising the Option, as the case may be,
the number of shares of Stock so paid for, in the form of fully paid and
nonassessable Stock and shall deliver certificates therefor as soon as
practicable thereafter. The stock certificates for any shares of Stock issued
hereunder shall, unless such shares are registered or an exemption from
registration is available under applicable federal and state law, bear a legend
restricting transferability of such shares and referencing the Shareholders'
Agreement, if applicable.
ARTICLE 4
TERMINATION OF OPTION
SECTION 4.1 TERMINATION, IN GENERAL. The Option granted hereby shall
terminate and be of no force or effect after the Expiration Date set forth in
Section 1.1, unless terminated prior to such time as provided below.
SECTION 4.2 TERMINATION OF EMPLOYMENT FOR REASON OTHER THAN RETIREMENT,
DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the
provisions of the Agreement, the Option shall terminate in its entirety,
regardless of whether the Option is vested in whole or in part, ninety (90) days
after the date Grantee is no longer employed by the Corporation and its
Affiliates for any reason other than Grantee's Retirement, death or Disability.
Unless sooner terminated, the Option shall terminate upon the expiration of such
ninety-day period. Notwithstanding the foregoing, the Option shall terminate in
its entirety, regardless of whether the Option is vested in whole or in part,
upon termination of the employment of the Grantee by the Corporation or an
Affiliate for "Cause."
If Grantee is a party to a written employment agreement with the
Corporation or an Affiliate which contains a definition of "cause," "termination
for cause" or words of similar import, whether such Grantee is terminated for
"Cause" pursuant to this Section 4.2 shall be determined according to the terms
of and in a manner consistent with the provisions of such written employment
agreement. If Grantee is not party to such a written employment agreement with
the Corporation or an Affiliate, then for purposes of this Section 4.2, "Cause"
shall mean (i) gross negligence or willful misconduct or any substantiated act
by Grantee involving dishonesty or bad faith against the Corporation or an
Affiliate, or any act or omission that demonstrates a lack of integrity of
Grantee with respect to the Corporation or an Affiliate; (ii) Grantee engaging
in acts or omissions the likely consequence of which is material injury to the
Corporation's or an Affiliate's
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business, property or reputation; (iii) breach or threatened breach by Grantee
of any non-competition or confidentiality agreement entered into between Grantee
and the Corporation or its Affiliate; (iv) chronic use of alcohol, drugs or
other similar substances affecting Grantee's work performance; or (v) Grantee
being convicted of, or pleading guilty or nolo contendere to, or being indicted
for a felony or other crime involving theft, fraud or moral turpitude. The good
faith determination by the Administrator of whether the Grantee's employment was
terminated by the Corporation for "Cause" shall be final and binding for all
purposes hereunder.
SECTION 4.3 TERMINATION OF EMPLOYMENT BY REASON OF RETIREMENT. Unless
the Option has earlier terminated pursuant to the provisions of the Agreement,
in the event that Grantee ceases, by reason of Retirement, to be an employee of
the Corporation or an Affiliate, the outstanding Option may be exercised in
whole or in part with respect to the shares of Stock as to which the Option is
vested as of the date of Grantee's termination of employment at any time within
ninety (90) days after such date of termination, but not later than the end of
the stated term of the Option. Unless sooner terminated, the Option shall
terminate upon the expiration of such ninety-day period.
For purposes of this Agreement, Retirement shall mean termination of
employment on or after age 65 or termination of employment on or after the
attainment of such younger age and satisfaction of such minimum service
requirement, if any, specified by the Corporation's qualified retirement plan in
effect at such time, but excluding any termination for Cause.
SECTION 4.4 UPON GRANTEE'S DEATH. Unless the Option has earlier
terminated pursuant to the provisions of the Agreement, upon Grantee's death
Grantee's executor, personal representative, or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
the case may be, may exercise all or any part of the outstanding Option with
respect to the shares of Stock as to which the Option is vested as of the
Grantee's date of death, provided such exercise occurs within six (6) months
after the date of Grantee's death, but not later than the end of the stated term
of the Option. Unless sooner terminated, the Option shall terminate upon the
expiration of such six-month period.
SECTION 4.5 TERMINATION OF EMPLOYMENT BY REASON OF DISABILITY. Unless
the Option has earlier terminated pursuant to the provisions of the Agreement,
in the event that Grantee ceases, by reason of Disability, to be an employee of
the Corporation or an Affiliate, the outstanding Option may be exercised in
whole or in part with respect to the shares of Stock as to which the Option is
vested as of the date of Grantee's termination of employment due to Disability
at any time within ninety (90) days after the date of such termination, but not
later than the end of the stated term of the Option. Unless sooner terminated,
the Option shall terminate upon the expiration of such ninety-day period.
For purposes of this Agreement, Disability shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months. The
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Administrator may require such proof of Disability as the Administrator in its
sole discretion deems appropriate and the Administrator's determination as to
whether Grantee is Disabled shall be final and binding on all parties concerned.
ARTICLE 5
DRAG-ALONG RIGHTS
SECTION 5.1 DRAG-ALONG RIGHTS. If at any time any shareholder of the
Corporation or group of shareholders owning a majority or more of the voting
capital stock of the Corporation proposes to enter into any transaction
involving (i) a sale of more than fifty percent (50%) of the outstanding voting
capital stock of the Corporation in a non-public sale or (ii) any merger or
consolidation of the Corporation immediately after which a majority of the
directors of the surviving entity is not comprised of persons who were directors
of the Corporation immediately prior to such transaction or after which persons
who hold a majority of the common stock of the surviving entity are not persons
who held voting capital stock of the Corporation immediately prior to such
transaction, the Corporation may require Grantee to participate in such
transaction by giving Grantee written notice thereof at least ten (10) days in
advance of the date of the transaction or the date that tender is required, as
the case may be. Upon receipt of such notice, Grantee shall sell, assign, tender
or transfer the same percentage of the Option to the extent vested as the
percentage of the shares of Common Stock proposed to be sold, assigned, tendered
or transferred by the transferring shareholders collectively, upon the same
terms and conditions applicable to the transferring shareholders and at a price
equal to the difference between the Exercise Price per share under the Option
and the price per share of Common Stock the transferring shareholders will
receive pursuant to the terms of the transaction. The provisions of this Section
5.1 shall apply in the event of Grantee's death, to Grantee's executor, personal
representative or the person to whom the Option shall have been transferred by
will or the laws of descent and distribution, as though such person is Grantee.
ARTICLE 6
ADJUSTMENTS; BUSINESS COMBINATIONS
SECTION 6.1 ADJUSTMENTS FOR EVENTS AFFECTING COMMON STOCK. In the
event of changes in the Common Stock of the Corporation by reason of any stock
dividend, split-up, recapitalization, merger, consolidation, business
combination or exchange of shares and the like, the Administrator shall, in its
discretion, make appropriate adjustments to the number, kind and price of shares
covered by this Option, and shall, in its discretion and without the consent of
the Grantee, make any other adjustments in this Option, including but not
limited to reducing the number of shares subject to the Option or providing or
mandating alternative settlement methods such as settlement of the Option in
cash or in shares of Common Stock or other securities of the Corporation or of
any other entity, or in any other matters which relate to the Option as the
Administrator shall, in its sole discretion, determine to be necessary or
appropriate.
SECTION 6.2 POOLING OF INTERESTS TRANSACTION. Notwithstanding
anything in the Plan or the Agreement to the contrary and without the consent of
the Grantee, the
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Administrator, in its sole discretion, may make any modifications to the Option,
including but not limited to cancellation, forfeiture, surrender or other
termination of the Option in whole or in part regardless of the vested status of
the Option, in order to facilitate any business combination that is authorized
by the Board to comply with requirements for treatment as a pooling of interests
transaction for accounting purposes under generally accepted accounting
principles.
SECTION 6.3 ADJUSTMENTS FOR UNUSUAL EVENTS. The Administrator is
authorized to make, in its discretion and without the consent of the Grantee,
adjustments in the terms and conditions of, and the criteria included in, the
Option in recognition of unusual or nonrecurring events affecting the
Corporation, or the financial statements of the Corporation or any Subsidiary,
or of changes in applicable laws, regulations, or accounting principles,
whenever the Administrator determines that such adjustments are appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Option or the Plan.
SECTION 6.4 BINDING NATURE OF ADJUSTMENTS. Adjustments under this
Article 6 will be made by the Administrator, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued pursuant to this Option on
account of any such adjustments.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or the
Agreement shall be construed as a contract of employment between the Corporation
(or an Affiliate) and Grantee, or as a contractual right of Grantee to continue
in the employ of the Corporation or an Affiliate, or as a limitation of the
right of the Corporation or an Affiliate to discharge Grantee at any time with
or without cause or notice.
SECTION 7.2 NO RIGHTS OF SHAREHOLDER. Grantee shall not have any of the
rights of a shareholder with respect to the shares of Common Stock that may be
issued upon the exercise of the Option until such shares of Common Stock have
been issued to him upon the due exercise of the Option. No adjustment shall be
made for dividends or distributions or other rights for which the record date is
prior to the date such certificate or certificates are issued.
SECTION 7.3 QUALIFIED NATURE OF AGREEMENT. The Option is intended to
qualify as an incentive stock option ("Incentive Stock Option") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), to the fullest extent permitted within the limit set forth under
Section 422(d) of the Code and this Agreement shall be so construed. The
aggregate fair market value (determined as of the Grant Date) of shares of Stock
with respect to which all Incentive Stock Options first become exercisable by
the Grantee in any calendar year under the Plan or any other plan of the
Corporation (and its parent and subsidiary corporations, as may exist from time
to time) may not exceed $100,000 or such other amount as may be permitted from
time to time
-6-
<PAGE>
under Section 422 of the Code. To the extent that such aggregate fair market
value shall exceed $100,000 or other applicable amount in any calendar year,
such stock options shall be treated as nonqualified stock options with respect
to the amount of aggregate fair market value thereof that exceeds the Section
422(d) limit. For this purpose, the Incentive Stock Options will be taken into
account in the order in which they were granted. In such case, the Corporation
may designate the shares of Stock that are to be treated as stock acquired
pursuant to the exercise of an Incentive Stock Option and the shares of Stock
that are to be treated as stock acquired pursuant to a nonqualified stock option
by issuing separate certificates for such shares and identifying the
certificates as such in the stock transfer records of the Company.
Notwithstanding anything herein to the contrary, if the Grantee owns,
directly or indirectly through attribution, stock possessing more than 10% of
the total combined voting power of all classes of stock of the Corporation or of
any of its subsidiaries on the Grant Date, then the Exercise Price shall be the
greater of (a) the Exercise Price stated in Section 1.1 or (b) 110% of the Fair
Market Value of the Stock on the Grant Date, and the Expiration Date shall be
the fifth anniversary of the Grant Date.
SECTION 7.4 NOTICE OF DISQUALIFYING DISPOSITION. If Grantee makes a
disposition (as that term is defined in Section 424(c) of the Code) of any
shares of Stock acquired pursuant to the exercise of an Incentive Stock Option
within two (2) years of the Grant Date or within one (1) year after the shares
of Stock are transferred to Grantee, Grantee shall notify the Administrator of
such disposition in writing.
SECTION 7.5 THE CORPORATION'S RIGHTS. The existence of this Option
shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or other stocks with preference ahead of or
convertible into, or otherwise affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all or
any part of the Corporation's assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
SECTION 7.6 WITHHOLDING OF TAXES. The Corporation or any Affiliate
shall have the right to deduct from any compensation or any other payment of any
kind (including withholding the issuance of shares of Stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of the Option or the disposition (as that term is
defined in Section 424(c) of the Code) of shares of Stock acquired pursuant to
the exercise of the Option. In lieu of such deduction, the Administrator may
require Grantee to make a cash payment to the Corporation or an Affiliate equal
to the amount required to be withheld. If Grantee does not make such payment
when requested, the Corporation may refuse to issue any Stock certificate under
the Plan until arrangements satisfactory to the Administrator for such payment
have been made.
-7-
<PAGE>
SECTION 7.7 GRANTEE. Whenever the word "Grantee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word "Grantee" shall be deemed to include such
person.
SECTION 7.8 NONTRANSFERABILITY OF OPTION. The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution
and (ii) during the lifetime of Grantee, the Option may be exercised only by
Grantee or, during the period Grantee is under a legal disability, by Grantee's
guardian or legal representative. Except as provided above, the Option may not
be assigned, transferred, pledged, hypothecated or disposed of in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process.
SECTION 7.9 NOTICES. All notices and other communications made or given
pursuant to the Agreement shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to Grantee at the
address contained in the records of the Corporation, or addressed to the
Administrator, care of the Corporation for the attention of its Secretary at its
principal office or, if the receiving party consents in advance, transmitted and
received via telecopy or via such other electronic transmission mechanism as may
be available to the parties.
SECTION 7.10 ENTIRE AGREEMENT; MODIFICATION. The Agreement contains the
entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in the Plan or in a
written document signed by each of the parties hereto. Any oral or written
agreements, representations, warranties, written inducements, or other
communications made prior to the execution of the Agreement shall be void and
ineffective for all purposes.
SECTION 7.11 CONFORMITY WITH PLAN. This Agreement is intended to
conform in all respects with, and is subject to all applicable provisions of,
the Plan, which is incorporated herein by reference. Inconsistencies between
this Agreement and the Plan shall be resolved in accordance with the terms of
the Plan. In the event of any ambiguity in the Agreement or any matters as to
which the Agreement is silent, the Plan shall govern.
SECTION 7.12 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, other than the
conflict of laws principles thereof.
SECTION 7.13 HEADINGS. The headings in the Agreement are for reference
purposes only and shall not affect the meaning or interpretation of the
Agreement.
-8-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officer as of the date first above written.
ATTEST: KNOWLEDGELINK INTERACTIVE, INC.
By:/s/ Ted S. Bagheri
- ----------------------------- -----------------------------
The undersigned hereby acknowledges that he/she has carefully read this
Agreement and the Plan and agrees to be bound by all of the provisions set forth
in such documents.
WITNESS: GRANTEE
/s/ John R. McGrath
- ----------------------------- -----------------------------
Date:3/30/99
--------------------------
Enclosure: KnowledgeLink Interactive, Inc. 1998 Stock Incentive Plan
-9-
<PAGE>
<TABLE>
<CAPTION>
VESTING SCHEDULE
(John R. McGrath, 03/30/1999 STOCK OPTION GRANT)
- ---------------------------------- -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
AGGREGATE AGGREGATE AGGREGATE
PERCENTAGE PERCENTAGE PERCENTAGE
VESTING OF VESTED VESTING OF VESTED VESTING OF VESTED
DATE SHARES DATE SHARES DATE SHARES
- ---------------------------------- -------------------------------- --------------------------------
04/30/99 2.778% 04/30/00 36.111% 04/30/01 69.444%
- ---------------------------------- -------------------------------- --------------------------------
05/30/99 5.556% 05/30/00 38.889% 05/30/01 72.222%
- ---------------------------------- -------------------------------- --------------------------------
06/30/99 8.333% 06/30/00 41.667% 06/30/01 75.000%
- ---------------------------------- -------------------------------- --------------------------------
07/30/99 11.111% 07/30/00 44.444% 07/30/01 77.778%
- ---------------------------------- -------------------------------- --------------------------------
08/30/99 13.889% 08/30/00 47.222% 08/30/01 80.556%
- ---------------------------------- -------------------------------- --------------------------------
09/30/99 16.667% 09/30/00 50.000% 09/30/01 83.333%
- ---------------------------------- -------------------------------- --------------------------------
10/30/99 19.444% 10/30/00 52.778% 10/30/01 86.111%
- ---------------------------------- -------------------------------- --------------------------------
11/30/99 22.222% 11/30/00 55.556% 11/30/01 88.889%
- ---------------------------------- -------------------------------- --------------------------------
12/30/99 25.000% 12/30/00 58.333% 12/30/01 91.667%
- ---------------------------------- -------------------------------- --------------------------------
01/30/00 27.778% 01/30/01 61.111% 01/30/02 94.444%
- ---------------------------------- -------------------------------- --------------------------------
02/29/00 30.556% 02/28/01 63.889% 02/28/02 97.222%
- ---------------------------------- -------------------------------- --------------------------------
03/30/00 33.333% 03/30/01 66.667% 03/30/02 100%
- ---------------------------------- -------------------------------- --------------------------------
</TABLE>
The number of shares subject to the Option in which the Grantee shall be vested
as of a particular vesting date shall be rounded down to the nearest whole
share. However, vesting will be rounded up to the nearest whole share with
respect to the last vesting date reflected on this Vesting Schedule.
Exhibit 10.9
KNOWLEDGELINK INTERACTIVE, INC.
1998 STOCK INCENTIVE PLAN
PERFORMANCE STOCK OPTION GRANT AGREEMENT
This Grant Agreement (the "Agreement") is entered into by and between
KnowledgeLink Interactive, Inc., a Delaware corporation (the "Corporation"), and
Mark Gaertner ("Grantee"), effective as of March 30, 1999 (the "Grant Date").
In consideration of the premises, mutual covenants and agreements
herein, the Corporation and Grantee agree as follows:
ARTICLE 1
GRANT OF OPTION
SECTION 1.1 GRANT OF OPTION. The Corporation hereby grants to Grantee,
pursuant to the provisions of the KnowledgeLink Interactive, Inc. 1998 Stock
Incentive Plan (the "Plan"), a nonqualified stock option to purchase from the
Corporation, at a price of $0.01 per share (the "Exercise Price"), up to 50,000
shares of common stock of the Corporation, par value of $0.0001 per share
("Stock"), subject to the provisions of this Agreement (the "Option"). The
Option shall expire at 5:00 p.m. Eastern Time on the date ten years and one day
after the Grant Date (the "Expiration Date"), unless fully exercised or
terminated earlier pursuant to this Agreement. Unless stated otherwise herein,
capitalized terms in this Agreement shall have the meaning set forth in the
Plan.
ARTICLE 2
VESTING
SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated
pursuant to the provisions of this Agreement and subject to the condition
precedent in the next sentence, Grantee shall become vested in the shares
subject to the Option pro rata over three years in accordance with the vesting
schedule attached hereto and made a part hereof (the "Vesting Schedule").
Notwithstanding the preceding sentence, no vesting under the attached Vesting
Schedule shall occur and Grantee shall remain 0% vested in the shares subject to
the Option at all times, unless and until the Administrator, in its sole
discretion, determines that the performance objectives attached hereto and made
a part hereof (the "Statement of Performance Objectives") are satisfied in full
by the Achievement Date (as specified on the Statement of Performance
Objectives). The Administrator shall make its determination as soon as
practicable after December 31, 1999.
If the Administrator determines that the Performance
Objectives have been satisfied in full as of the Achievement Date, then Grantee
shall become vested in shares subject to the Option in accordance with the
Vesting Schedule. If the Administrator determines that the Performance
Objectives have not been satisfied in full as of the Achievement Date, then the
Option shall terminate in its entirety immediately upon such determination and
shall be of no further force or effect. In all events, Grantee
<PAGE>
shall become vested in shares on a vesting date only if Grantee has been in the
continuous employ of the Corporation from the Grant Date through the applicable
date upon which vesting is scheduled to occur.
SECTION 2.2 ACCELERATION OF VESTING. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, the Performance
Objectives shall be deemed satisfied and the vesting of the Option granted to
Grantee hereunder shall be accelerated so that the unvested portion of the
Option shall become one hundred percent (100%) vested in Grantee upon a Change
of Control. For purposes of this Agreement, the term "Change of Control" shall
mean (i) the sale of all or substantially all of the assets of the Corporation,
(ii) the sale of more than fifty percent (50%) of the outstanding capital stock
of the Corporation in a non-public sale, (iii) the dissolution or liquidation of
the Corporation, or (iv) any merger, share exchange, consolidation or other
reorganization or business combination of the Corporation if immediately after
such transaction either (A) persons who were directors of the Corporation
immediately prior to such transaction do not constitute at least a majority of
the directors of the surviving entity, or (B) persons who hold a majority of the
voting capital stock of the surviving entity are not persons who held a majority
of the voting capital stock of the Corporation immediately prior to such
transaction.
ARTICLE 3
EXERCISE OF OPTION
SECTION 3.1 EXERCISABILITY OF OPTION. Pursuant to the terms of this
Agreement, the Option may be exercised at any time, and from time to time, with
respect to the number of shares subject to the Option in which Grantee is then
vested.
SECTION 3.2 SHAREHOLDERS' AGREEMENT. The Administrator in its sole
discretion may require as a condition precedent to the exercise of the Option
granted pursuant to Section 1.1, that Grantee or such other person exercising
the Option be, or shall execute and become, a party to a Shareholders' Agreement
in substantially in the form attached hereto as Exhibit A.
SECTION 3.3 MANNER OF EXERCISE. The Option may be exercised, in whole
or in part, by delivering written notice to the Administrator in such form as
the Administrator may require from time to time; provided, however, that the
Option may not be exercised at any one time as to fewer than one hundred (100)
shares (or such number of shares as to which the Option is then exercisable if
such number of shares then exercisable is less than one hundred (100)). Such
notice shall specify the number of shares of Stock subject to the Option as to
which the Option is being exercised, and shall be accompanied by full payment of
the Exercise Price for such shares. Payment of the Exercise Price shall be made
in cash (or cash equivalents acceptable to the Administrator in the
Administrator's discretion). In the Administrator's sole and absolute
discretion, the Administrator may authorize payment of the Exercise Price to be
made, in whole or in part, by such other means as the Administrator may
prescribe. The Option may be exercised only in multiples of whole shares and no
partial shares shall be issued.
<PAGE>
If the Stock is registered under Section 12(b) of the
Securities Exchange Act of 1934, as amended, the Administrator, subject to such
limitations as it may determine, may authorize payment of the exercise price, in
whole or in part, by delivery of a properly executed exercise notice, together
with irrevocable instructions: (i) to a brokerage firm approved by the
Corporation to deliver promptly to the Corporation the aggregate amount of sale
or loan proceeds to pay the exercise price and any withholding tax obligations
that may arise in connection with the exercise, and (ii) to the Corporation to
deliver the certificates for such purchased shares directly to such brokerage
firm.
SECTION 3.4 ISSUANCE OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon
exercise of the Option, in whole or in part, in accordance with the terms of
this Agreement and upon payment of the Exercise Price for the shares of Stock as
to which the Option is exercised and delivery of such executed Shareholders'
Agreement as may be required by the Administrator pursuant to Section 3.2, the
Corporation shall issue to Grantee or such other person exercising the Option,
as the case may be, the number of shares of Stock so paid for, in the form of
fully paid and nonassessable Stock and shall deliver certificates therefor as
soon as practicable thereafter. The stock certificates for any shares of Stock
issued hereunder shall, unless such shares are registered or an exemption from
registration is available under applicable federal and state law, bear a legend
restricting transferability of such shares and referencing the Shareholders'
Agreement, if applicable.
ARTICLE 4
TERMINATION OF OPTION
SECTION 4.1 TERMINATION, IN GENERAL. The Option granted hereby shall
terminate and be of no force or effect after the Expiration Date set forth in
Section 1.1, unless terminated prior to such time as provided below or in
Section 2.1.
SECTION 4.2 TERMINATION OF EMPLOYMENT FOR REASON OTHER THAN RETIREMENT,
DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the
provisions of this Agreement, (i) the unvested portion of the Option shall
terminate immediately upon the Grantee's termination of employment with the
Corporation for any reason and (ii) the vested portion of the Option shall
terminate ninety days after the date Grantee is no longer employed by the
Corporation and its Affiliates for any reason other than Grantee's Retirement,
death or Disability. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period. Notwithstanding the
foregoing, the Option shall terminate in its entirety, regardless of whether the
Option is vested in whole or in part, upon termination of the employment of the
Grantee by the Corporation or an Affiliate for "Cause."
If Grantee is a party to a written employment agreement with the
Corporation or an Affiliate which contains a definition of "cause", "termination
for cause" or words of similar import, whether such Grantee is terminated for
"Cause" pursuant to this Section 4.2 shall be determined according to the terms
of and in a manner consistent with the provisions of such written employment
agreement. If Grantee is not party to such a written employment agreement with
the Corporation or an Affiliate, then for purposes of
<PAGE>
this Section 4.2, "Cause" shall mean (i) gross negligence or willful misconduct
or any substantiated act by Grantee involving dishonesty or bad faith against
the Corporation or an Affiliate, or any act or omission that demonstrates a lack
of integrity of Grantee with respect to the Corporation or an Affiliate; (ii)
Grantee engaging in acts or omissions the likely consequence of which is
material injury to the Corporation's or an Affiliate's business, property or
reputation; (iii) breach or threatened breach by Grantee of any non-competition
or confidentiality agreement entered into between Grantee and the Corporation or
its Affiliate; (iv) chronic use of alcohol, drugs or other similar substances
affecting Grantee's work performance; or (v) Grantee being convicted of, or
pleading guilty or nolo contendere to, or being indicted for a felony or other
crime involving theft, fraud or moral turpitude. The good faith determination by
the Administrator of whether the Grantee's employment was terminated by the
Corporation for "Cause" shall be final and binding for all purposes hereunder.
SECTION 4.3 TERMINATION OF EMPLOYMENT BY REASON OF RETIREMENT. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Retirement, to be an employee of
the Corporation or an Affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment at any time within ninety
days after such date of termination, but not later than the end of the stated
term of the Option. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Retirement shall mean termination of
employment on or after age 65 or termination of employment on or after the
attainment of such younger age and satisfaction of such minimum service
requirement, if any, specified by the Corporation's qualified retirement plan in
effect at such time, but excluding any termination for Cause.
SECTION 4.4 UPON GRANTEE'S DEATH. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, upon Grantee's death,
(i) the unvested portion of the Option shall terminate immediately and (ii)
Grantee's executor, personal representative, or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
the case may be, may exercise all or any part of the outstanding Option with
respect to the shares of Stock as to which the Option is vested as of the
Grantee's date of death, provided such exercise occurs within six months after
the date of Grantee's death, but not later than the end of the stated term of
the Option. Unless sooner terminated, the Option shall terminate in its entirety
upon the expiration of such six-month period.
SECTION 4.5 TERMINATION OF EMPLOYMENT BY REASON OF DISABILITY. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Disability, to be an employee of
the Corporation or an Affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of
<PAGE>
employment due to Disability at any time within ninety days after the date of
such termination, but not later than the end of the stated term of the Option.
Unless sooner terminated, the Option shall terminate in its entirety upon the
expiration of such ninety-day period.
For purposes of this Agreement, Disability shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months. The Administrator may require such proof of
Disability as the Administrator in its sole discretion deems appropriate and the
Administrator's determination as to whether Grantee is Disabled shall be final
and binding on all parties concerned.
ARTICLE 5
DRAG-ALONG RIGHTS
SECTION 5.1 DRAG-ALONG RIGHTS. If at any time any stockholder of the
Corporation, or group of stockholders, owning a majority or more of the capital
stock of the Corporation (hereinafter, the "Transferring Stockholders") proposes
to enter into any transaction involving (i) a sale of more than 50% of the
outstanding capital stock of the Corporation in a non-public sale or (ii) any
merger, share exchange, consolidation or other reorganization or business
combination of the Corporation immediately after which a majority of the
directors of the surviving entity is not comprised of persons who were directors
of the Corporation immediately prior to such transaction or after which persons
who hold a majority of the common stock of the surviving entity are not persons
who held a majority of the voting capital stock of the Corporation immediately
prior to such transaction, the Corporation may require Grantee to participate in
such transaction by giving Grantee written notice thereof at least ten days in
advance of the date of the transaction or the date that tender is required, as
the case may be (hereinafter referred to as the "Drag-Along Date").
Notwithstanding anything herein to the contrary and without Grantee's consent,
if such notice is provided to Grantee, then the outstanding Option, or a portion
thereof, as determined by the Corporation in its sole discretion and specified
in the written notice of the transaction, shall terminate effective as of the
Drag-Along Date, and shall be of no further force or effect thereafter, provided
that, in consideration therefor, Grantee receives from the Corporation, the
acquiror or the Corporation's successor, an aggregate amount equal to the
product of (i) the number of shares of Stock as to which the Option so
terminates, multiplied by (ii) the difference between (1) the Exercise Price per
share under the Option and (2) the price the Transferring Stockholders receive
per share of Stock pursuant to the terms of the transaction, adjusted as
determined by the Administrator to reflect the fact that the Exercise Price with
respect to the Option has not, in fact, been paid. The payment of such amount to
Grantee shall be made either upon the same terms and conditions as those
applicable to the Transferring Stockholders with respect to their Stock pursuant
to the terms of the transaction or via delivery of immediately available funds
within thirty days following the transaction, as determined in the sole
discretion of the payor.
<PAGE>
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or this
Agreement shall be construed as a contract of employment between the Corporation
(or an Affiliate) and Grantee, or as a contractual right of Grantee to continue
in the employ of the Corporation or an Affiliate, or as a limitation of the
right of the Corporation or an Affiliate to discharge Grantee at any time.
SECTION 6.2 NO RIGHTS OF SHAREHOLDER. Grantee shall not have any of the
rights of a shareholder with respect to the shares of Common Stock that may be
issued upon the exercise of the Option until such shares of Common Stock have
been issued to him upon the due exercise of the Option.
SECTION 6.3 NON-QUALIFIED NATURE OF AGREEMENT. This Agreement is
intended to be an agreement concerning a stock option arrangement which does not
qualify under section 422 of the Internal Revenue Code, and this Agreement shall
be so construed.
SECTION 6.4 THE CORPORATION'S RIGHTS. The existence of this Option
shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or other stocks with preference ahead of or
convertible into, or otherwise affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all or
any part of the Corporation's assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
SECTION 6.5 WITHHOLDING OF TAXES. The Corporation or any Affiliate
shall have the right to deduct from any compensation or any other payment of any
kind (including withholding the issuance of shares of Stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of the Option. In lieu of such deduction, the
Administrator may require Grantee to make a cash payment to the Corporation or
an Affiliate equal to the amount required to be withheld. If Grantee does not
make such payment when requested, the Corporation may refuse to issue any Stock
certificate under the Plan until arrangements satisfactory to the Administrator
for such payment have been made.
SECTION 6.6 GRANTEE. Whenever the word "Grantee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word "Grantee" shall be deemed to include such
person.
SECTION 6.7 NONTRANSFERABILITY OF OPTION. The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution
and (ii) during the lifetime of Grantee, the Option may be exercised only by
Grantee or, during the period Grantee is
<PAGE>
under a legal disability, by Grantee's guardian or legal representative. Except
as provided above, the Option may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
SECTION 6.8 NOTICES. All notices and other communications made or given
pursuant to this Agreement shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to Grantee at the
address contained in the records of the Corporation, or addressed to the
Administrator, care of the Corporation for the attention of its Secretary at its
principal office or, if the receiving party consents in advance, transmitted and
received via telecopy or via such other electronic transmission mechanism as may
be available to the parties.
SECTION 6.9 ENTIRE AGREEMENT; MODIFICATION. The Agreement contains the
entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in the Plan or in a
written document signed by each of the parties hereto. Any oral or written
agreements, representations, warranties, written inducements, or other
communications made prior to the execution of this Agreement shall be void and
ineffective for all purposes.
SECTION 6.10 CONFORMITY WITH PLAN. This Agreement is intended to
conform in all respects with, and is subject to all applicable provisions of,
the Plan, which is incorporated herein by reference. Inconsistencies between
this Agreement and the Plan shall be resolved in accordance with the terms of
the Plan. In the event of any ambiguity in this Agreement or any matters as to
which this Agreement is silent, the Plan shall govern.
SECTION 6.11 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, other than the
conflict of laws principles thereof.
SECTION 6.12 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officer as of the date first above written.
ATTEST: KNOWLEDGELINK INTERACTIVE, INC.
By: /s/ Ted S. Bagheri
The undersigned hereby acknowledges that he/she has carefully read this
Agreement and the Plan and agrees to be bound by all of the provisions set forth
in such documents.
WITNESS: GRANTEE
/s/ Mark A. Gaertner
Date:
Enclosure: KnowledgeLink Interactive, Inc. 1998 Stock Incentive Plan
<PAGE>
VESTING SCHEDULE
MARK GAERTNER 3/30/99 STOCK OPTION GRANT
<TABLE>
<CAPTION>
- --------------- ------------------ ------------- ------------------ ------------ -------------------
AGGREGATE AGGREGATE AGGREGATE
PERCENTAGE PERCENTAGE PERCENTAGE
VESTING OF VESTED VESTING OF VESTED VESTING OF VESTED
DATE SHARES DATE SHARES DATE SHARES
- --------------- ------------------ ------------- ------------------ ------------ -------------------
<S> <C> <C> <C> <C> <C>
01/31/99 2.778% 01/31/00 36.111% 01/31/01 69.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
02/28/99 5.556% 02/29/00 38.889% 02/28/01 72.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
03/31/99 8.333% 03/31/00 41.667% 03/31/01 75.000%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
04/30/99 11.111% 04/30/00 44.444% 04/30/01 77.778%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
05/31/99 13.889% 05/31/00 47.222% 05/31/01 80.556%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
06/30/99 16.667% 06/30/00 50.000% 06/30/01 83.333%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
07/31/99 19.444% 07/31/00 52.778% 07/31/01 86.111%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
08/31/99 22.222% 08/31/00 55.556% 08/31/01 88.889%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
09/30/99 25.000% 09/30/00 58.333% 09/30/01 91.667%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
10/31/99 27.778% 10/31/00 61.111% 10/31/01 94.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
11/30/99 30.556% 11/30/00 63.889% 11/30/01 97.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
12/31/99 33.333% 12/31/00 66.667% 12/31/01 100%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
</TABLE>
VESTING IN ACCORDANCE WITH THE ABOVE VESTING SCHEDULE SHALL NOT ACCRUE AND
GRANTEE SHALL BE 0% VESTED IN THE SHARES SUBJECT TO THE OPTION UNLESS AND UNTIL
THE ADMINISTRATOR DETERMINES THAT THE PERFORMANCE OBJECTIVES ARE SATISFIED IN
FULL AS OF THE ACHIEVEMENT DATE.
The number of shares subject to the Option in which the Grantee shall be vested
as of a particular vesting date shall be rounded down to the nearest whole
share. However, vesting will be rounded up to the nearest whole share with
respect to the last vesting date reflected on this Vesting Schedule.
<PAGE>
STATEMENT OF PERFORMANCE OBJECTIVES
MARK GAERTNER STOCK OPTION GRANT
Subject to the terms and conditions of the attached Stock Option Grant
Agreement, of which this Statement of Performance Objectives is a part, vesting
of shares subject to the Option is contingent upon the following performance
objectives being satisfied in full as of December 31, 1999 (the "Achievement
Date"), as determined in the sole discretion of the Administrator, which
determination will be made as soon as practicable after the Achievement Date:
50,000 shares for a successful launch of powerize.com web site
and helper application
<PAGE>
EXERCISE NOTICE
Administrator of 1998 Stock Incentive Plan
c/o Office of the Corporate Secretary
KnowledgeLink Interactive, Inc.
901 Elkridge Landing Road
Suite 350
Linthicum, Maryland 21090
Gentlemen:
I, _________________________, hereby exercise the Option granted to me
on February ___, 1999, by KnowledgeLink Interactive, Inc. (the "Company"),
subject to all the terms and provisions thereof and of the KnowledgeLink
Interactive, Inc. 1998 Stock Incentive Plan (the "Plan"), and notify you of my
desire to purchase ____________ shares of Common Stock of the Company at a price
of $0.01 per share pursuant to the exercise of said Option. This will confirm my
understanding with respect to the shares to be issued to me by reason of this
exercise of the Option (the shares to be issued pursuant hereto shall be
collectively referred to hereinafter as the "Shares") as follows:
(a) I am acquiring the Shares for my own account for
investment with no present intention of dividing my interest with others or of
reselling or otherwise disposing of any of the Shares.
(b) The Shares are being issued without registration under the
Securities Act of 1933, as amended (the "Act"), in reliance upon one or more
exemptions contained in the Act, and such reliance is based in part on the above
representation.
(c) The certificates for the Shares to be issued to me will
bear a legend substantially as follows:
"The securities represented by this stock certificate
have not been registered under the Securities Act of 1933 (the "Act")
or applicable state securities laws (the "State Acts"), and shall not
be sold, pledged, hypothecated, donated, or otherwise transferred
(whether or not for consideration) by the holder except upon the
issuance to the Company of a favorable opinion of its counsel and/or
submission to the Company of such other evidence as may be satisfactory
to counsel for the Company, to the effect that any such transfer shall
not be in violation of the Act and the State Acts.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection at the office of the Corporation upon
appropriate request and without charge."
<PAGE>
Appropriate stop transfer instructions will be issued by the issuer to its
transfer agent.
(d) Since the Shares have not been registered under the Act,
they must be held indefinitely until an exemption from the registration
requirements of the Act is available or they are subsequently registered, in
which event the representation in Paragraph (a) hereof shall terminate. As a
condition to any transfer of the shares, I understand that the issuer will
require an opinion of counsel satisfactory to the issuer to the effect that such
transfer does not require registration under the Act or any state securities
law.
(e) The issuer is not obligated to comply with the
registration requirements of the Act or with the requirements for an exemption
under Regulation A under the Act for my benefit.
(f) I am a party to a Shareholders' Agreement with the Issuer
and others, pursuant to which I have agreed to certain restrictions on the
transferability of the Shares and other matters relating thereto.
Total Amount Enclosed: $__________
Date:________________________ ____________________________________
(Grantee)
Received by KnowledgeLink Interactive, Inc. on
---------------------------, -----
By: _______________________________
Exhibit 10.10
KNOWLEDGELINK INTERACTIVE, INC.
1998 STOCK INCENTIVE PLAN
PERFORMANCE STOCK OPTION GRANT AGREEMENT
This Grant Agreement (the "Agreement") is entered into by and between
KnowledgeLink Interactive, Inc., a Delaware corporation (the "Corporation"), and
John Robert Kaminski ("Grantee"), effective as of March 30, 1999 (the "Grant
Date").
In consideration of the premises, mutual covenants and agreements
herein, the Corporation and Grantee agree as follows:
ARTICLE 1
GRANT OF OPTION
SECTION 1.1 GRANT OF OPTION. The Corporation hereby grants to Grantee,
pursuant to the provisions of the KnowledgeLink Interactive, Inc. 1998 Stock
Incentive Plan (the "Plan"), a nonqualified stock option to purchase from the
Corporation, at a price of $0.01 per share (the "Exercise Price"), up to 50,000
shares of common stock of the Corporation, par value of $0.0001 per share
("Stock"), subject to the provisions of this Agreement (the "Option"). The
Option shall expire at 5:00 p.m. Eastern Time on the date ten years and one day
after the Grant Date (the "Expiration Date"), unless fully exercised or
terminated earlier pursuant to this Agreement. Unless stated otherwise herein,
capitalized terms in this Agreement shall have the meaning set forth in the
Plan.
ARTICLE 2
VESTING
SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated
pursuant to the provisions of this Agreement and subject to the condition
precedent in the next sentence, Grantee shall become vested in the shares
subject to the Option pro rata over three years in accordance with the vesting
schedule attached hereto and made a part hereof (the "Vesting Schedule").
Notwithstanding the preceding sentence, no vesting under the attached Vesting
Schedule shall occur and Grantee shall remain 0% vested in the shares subject to
the Option at all times, unless and until the Administrator, in its sole
discretion, determines that the performance objectives attached hereto and made
a part hereof (the "Statement of Performance Objectives") are satisfied in full
by the Achievement Date (as specified on the Statement of Performance
Objectives). The Administrator shall make its determination as soon as
practicable after December 31, 1999.
If the Administrator determines that the Performance
Objectives have been satisfied in full as of the Achievement Date, then Grantee
shall become vested in shares subject to the Option in accordance with the
Vesting Schedule. If the Administrator determines that the Performance
Objectives have not been satisfied in full as of the Achievement Date, then the
Option shall terminate in its entirety immediately upon such determination and
shall be of no further force or effect. In all events, Grantee
<PAGE>
shall become vested in shares on a vesting date only if Grantee has been in the
continuous employ of the Corporation from the Grant Date through the applicable
date upon which vesting is scheduled to occur.
SECTION 2.2 ACCELERATION OF VESTING. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, the Performance
Objectives shall be deemed satisfied and the vesting of the Option granted to
Grantee hereunder shall be accelerated so that the unvested portion of the
Option shall become one hundred percent (100%) vested in Grantee upon a Change
of Control. For purposes of this Agreement, the term "Change of Control" shall
mean (i) the sale of all or substantially all of the assets of the Corporation,
(ii) the sale of more than fifty percent (50%) of the outstanding capital stock
of the Corporation in a non-public sale, (iii) the dissolution or liquidation of
the Corporation, or (iv) any merger, share exchange, consolidation or other
reorganization or business combination of the Corporation if immediately after
such transaction either (A) persons who were directors of the Corporation
immediately prior to such transaction do not constitute at least a majority of
the directors of the surviving entity, or (B) persons who hold a majority of the
voting capital stock of the surviving entity are not persons who held a majority
of the voting capital stock of the Corporation immediately prior to such
transaction.
ARTICLE 3
EXERCISE OF OPTION
SECTION 3.1 EXERCISABILITY OF OPTION. Pursuant to the terms of this
Agreement, the Option may be exercised at any time, and from time to time, with
respect to the number of shares subject to the Option in which Grantee is then
vested.
SECTION 3.2 SHAREHOLDERS' AGREEMENT. The Administrator in its sole
discretion may require as a condition precedent to the exercise of the Option
granted pursuant to Section 1.1, that Grantee or such other person exercising
the Option be, or shall execute and become, a party to a Shareholders' Agreement
in substantially in the form attached hereto as Exhibit A.
SECTION 3.3 MANNER OF EXERCISE. The Option may be exercised, in whole
or in part, by delivering written notice to the Administrator in such form as
the Administrator may require from time to time; provided, however, that the
Option may not be exercised at any one time as to fewer than one hundred (100)
shares (or such number of shares as to which the Option is then exercisable if
such number of shares then exercisable is less than one hundred (100)). Such
notice shall specify the number of shares of Stock subject to the Option as to
which the Option is being exercised, and shall be accompanied by full payment of
the Exercise Price for such shares. Payment of the Exercise Price shall be made
in cash (or cash equivalents acceptable to the Administrator in the
Administrator's discretion). In the Administrator's sole and absolute
discretion, the Administrator may authorize payment of the Exercise Price to be
made, in whole or in part, by such other means as the Administrator may
prescribe. The Option may be exercised only in multiples of whole shares and no
partial shares shall be issued.
<PAGE>
If the Stock is registered under Section 12(b) of the
Securities Exchange Act of 1934, as amended, the Administrator, subject to such
limitations as it may determine, may authorize payment of the exercise price, in
whole or in part, by delivery of a properly executed exercise notice, together
with irrevocable instructions: (i) to a brokerage firm approved by the
Corporation to deliver promptly to the Corporation the aggregate amount of sale
or loan proceeds to pay the exercise price and any withholding tax obligations
that may arise in connection with the exercise, and (ii) to the Corporation to
deliver the certificates for such purchased shares directly to such brokerage
firm.
SECTION 3.4 ISSUANCE OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon
exercise of the Option, in whole or in part, in accordance with the terms of
this Agreement and upon payment of the Exercise Price for the shares of Stock as
to which the Option is exercised and delivery of such executed Shareholders'
Agreement as may be required by the Administrator pursuant to Section 3.2, the
Corporation shall issue to Grantee or such other person exercising the Option,
as the case may be, the number of shares of Stock so paid for, in the form of
fully paid and nonassessable Stock and shall deliver certificates therefor as
soon as practicable thereafter. The stock certificates for any shares of Stock
issued hereunder shall, unless such shares are registered or an exemption from
registration is available under applicable federal and state law, bear a legend
restricting transferability of such shares and referencing the Shareholders'
Agreement, if applicable.
ARTICLE 4
TERMINATION OF OPTION
SECTION 4.1 TERMINATION, IN GENERAL. The Option granted hereby shall
terminate and be of no force or effect after the Expiration Date set forth in
Section 1.1, unless terminated prior to such time as provided below or in
Section 2.1.
SECTION 4.2 TERMINATION OF EMPLOYMENT FOR REASON OTHER THAN RETIREMENT,
DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the
provisions of this Agreement, (i) the unvested portion of the Option shall
terminate immediately upon the Grantee's termination of employment with the
Corporation for any reason and (ii) the vested portion of the Option shall
terminate ninety days after the date Grantee is no longer employed by the
Corporation and its Affiliates for any reason other than Grantee's Retirement,
death or Disability. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period. Notwithstanding the
foregoing, the Option shall terminate in its entirety, regardless of whether the
Option is vested in whole or in part, upon termination of the employment of the
Grantee by the Corporation or an Affiliate for "Cause."
If Grantee is a party to a written employment agreement with the
Corporation or an Affiliate which contains a definition of "cause", "termination
for cause" or words of similar import, whether such Grantee is terminated for
"Cause" pursuant to this Section 4.2 shall be determined according to the terms
of and in a manner consistent with the provisions of such written employment
agreement. If Grantee is not party to such a written employment agreement with
the Corporation or an Affiliate, then for purposes of
<PAGE>
this Section 4.2, "Cause" shall mean (i) gross negligence or willful misconduct
or any substantiated act by Grantee involving dishonesty or bad faith against
the Corporation or an Affiliate, or any act or omission that demonstrates a lack
of integrity of Grantee with respect to the Corporation or an Affiliate; (ii)
Grantee engaging in acts or omissions the likely consequence of which is
material injury to the Corporation's or an Affiliate's business, property or
reputation; (iii) breach or threatened breach by Grantee of any non-competition
or confidentiality agreement entered into between Grantee and the Corporation or
its Affiliate; (iv) chronic use of alcohol, drugs or other similar substances
affecting Grantee's work performance; or (v) Grantee being convicted of, or
pleading guilty or nolo contendere to, or being indicted for a felony or other
crime involving theft, fraud or moral turpitude. The good faith determination by
the Administrator of whether the Grantee's employment was terminated by the
Corporation for "Cause" shall be final and binding for all purposes hereunder.
SECTION 4.3 TERMINATION OF EMPLOYMENT BY REASON OF RETIREMENT. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Retirement, to be an employee of
the Corporation or an Affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment at any time within ninety
days after such date of termination, but not later than the end of the stated
term of the Option. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Retirement shall mean termination of
employment on or after age 65 or termination of employment on or after the
attainment of such younger age and satisfaction of such minimum service
requirement, if any, specified by the Corporation's qualified retirement plan in
effect at such time, but excluding any termination for Cause.
SECTION 4.4 UPON GRANTEE'S DEATH. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, upon Grantee's death,
(i) the unvested portion of the Option shall terminate immediately and (ii)
Grantee's executor, personal representative, or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
the case may be, may exercise all or any part of the outstanding Option with
respect to the shares of Stock as to which the Option is vested as of the
Grantee's date of death, provided such exercise occurs within six months after
the date of Grantee's death, but not later than the end of the stated term of
the Option. Unless sooner terminated, the Option shall terminate in its entirety
upon the expiration of such six-month period.
SECTION 4.5 TERMINATION OF EMPLOYMENT BY REASON OF DISABILITY. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Disability, to be an employee of
the Corporation or an Affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of
<PAGE>
employment due to Disability at any time within ninety days after the date of
such termination, but not later than the end of the stated term of the Option.
Unless sooner terminated, the Option shall terminate in its entirety upon the
expiration of such ninety-day period.
For purposes of this Agreement, Disability shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months. The Administrator may require such proof of
Disability as the Administrator in its sole discretion deems appropriate and the
Administrator's determination as to whether Grantee is Disabled shall be final
and binding on all parties concerned.
ARTICLE 5
DRAG-ALONG RIGHTS
SECTION 5.1 DRAG-ALONG RIGHTS. If at any time any stockholder of the
Corporation, or group of stockholders, owning a majority or more of the capital
stock of the Corporation (hereinafter, the "Transferring Stockholders") proposes
to enter into any transaction involving (i) a sale of more than 50% of the
outstanding capital stock of the Corporation in a non-public sale or (ii) any
merger, share exchange, consolidation or other reorganization or business
combination of the Corporation immediately after which a majority of the
directors of the surviving entity is not comprised of persons who were directors
of the Corporation immediately prior to such transaction or after which persons
who hold a majority of the common stock of the surviving entity are not persons
who held a majority of the voting capital stock of the Corporation immediately
prior to such transaction, the Corporation may require Grantee to participate in
such transaction by giving Grantee written notice thereof at least ten days in
advance of the date of the transaction or the date that tender is required, as
the case may be (hereinafter referred to as the "Drag-Along Date").
Notwithstanding anything herein to the contrary and without Grantee's consent,
if such notice is provided to Grantee, then the outstanding Option, or a portion
thereof, as determined by the Corporation in its sole discretion and specified
in the written notice of the transaction, shall terminate effective as of the
Drag-Along Date, and shall be of no further force or effect thereafter, provided
that, in consideration therefor, Grantee receives from the Corporation, the
acquiror or the Corporation's successor, an aggregate amount equal to the
product of (i) the number of shares of Stock as to which the Option so
terminates, multiplied by (ii) the difference between (1) the Exercise Price per
share under the Option and (2) the price the Transferring Stockholders receive
per share of Stock pursuant to the terms of the transaction, adjusted as
determined by the Administrator to reflect the fact that the Exercise Price with
respect to the Option has not, in fact, been paid. The payment of such amount to
Grantee shall be made either upon the same terms and conditions as those
applicable to the Transferring Stockholders with respect to their Stock pursuant
to the terms of the transaction or via delivery of immediately available funds
within thirty days following the transaction, as determined in the sole
discretion of the payor.
<PAGE>
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or this
Agreement shall be construed as a contract of employment between the Corporation
(or an Affiliate) and Grantee, or as a contractual right of Grantee to continue
in the employ of the Corporation or an Affiliate, or as a limitation of the
right of the Corporation or an Affiliate to discharge Grantee at any time.
SECTION 6.2 NO RIGHTS OF SHAREHOLDER. Grantee shall not have any of the
rights of a shareholder with respect to the shares of Common Stock that may be
issued upon the exercise of the Option until such shares of Common Stock have
been issued to him upon the due exercise of the Option.
SECTION 6.3 NON-QUALIFIED NATURE OF AGREEMENT. This Agreement is
intended to be an agreement concerning a stock option arrangement which does not
qualify under section 422 of the Internal Revenue Code, and this Agreement shall
be so construed.
SECTION 6.4 THE CORPORATION'S RIGHTS. The existence of this Option
shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or other stocks with preference ahead of or
convertible into, or otherwise affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all or
any part of the Corporation's assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
SECTION 6.5 WITHHOLDING OF TAXES. The Corporation or any Affiliate
shall have the right to deduct from any compensation or any other payment of any
kind (including withholding the issuance of shares of Stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of the Option. In lieu of such deduction, the
Administrator may require Grantee to make a cash payment to the Corporation or
an Affiliate equal to the amount required to be withheld. If Grantee does not
make such payment when requested, the Corporation may refuse to issue any Stock
certificate under the Plan until arrangements satisfactory to the Administrator
for such payment have been made.
SECTION 6.6 GRANTEE. Whenever the word "Grantee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word "Grantee" shall be deemed to include such
person.
SECTION 6.7 NONTRANSFERABILITY OF OPTION. The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution
and (ii) during the lifetime of Grantee, the Option may be exercised only by
Grantee or, during the period Grantee is
<PAGE>
under a legal disability, by Grantee's guardian or legal representative. Except
as provided above, the Option may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
SECTION 6.8 NOTICES. All notices and other communications made or given
pursuant to this Agreement shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to Grantee at the
address contained in the records of the Corporation, or addressed to the
Administrator, care of the Corporation for the attention of its Secretary at its
principal office or, if the receiving party consents in advance, transmitted and
received via telecopy or via such other electronic transmission mechanism as may
be available to the parties.
SECTION 6.9 ENTIRE AGREEMENT; MODIFICATION. The Agreement contains the
entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in the Plan or in a
written document signed by each of the parties hereto. Any oral or written
agreements, representations, warranties, written inducements, or other
communications made prior to the execution of this Agreement shall be void and
ineffective for all purposes.
SECTION 6.10 CONFORMITY WITH PLAN. This Agreement is intended to
conform in all respects with, and is subject to all applicable provisions of,
the Plan, which is incorporated herein by reference. Inconsistencies between
this Agreement and the Plan shall be resolved in accordance with the terms of
the Plan. In the event of any ambiguity in this Agreement or any matters as to
which this Agreement is silent, the Plan shall govern.
SECTION 6.11 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, other than the
conflict of laws principles thereof.
SECTION 6.12 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officer as of the date first above written.
ATTEST: KNOWLEDGELINK INTERACTIVE, INC.
By: /s/ Ted S. Bagheri
---------------------------------- ------------------------------
The undersigned hereby acknowledges that he/she has carefully read this
Agreement and the Plan and agrees to be bound by all of the provisions set forth
in such documents.
WITNESS: GRANTEE
/s/ John Robert Kaminski
---------------------------------- ------------------------------
Date: June 2, 1999
Enclosure: KnowledgeLink Interactive, Inc. 1998 Stock Incentive Plan
<PAGE>
VESTING SCHEDULE
JOHN ROBERT KAMINSKI OF GRANTEE 3/30/99 STOCK OPTION GRANT
<TABLE>
<CAPTION>
- --------------- ------------------ ------------- ------------------ ------------ -------------------
AGGREGATE AGGREGATE AGGREGATE
PERCENTAGE PERCENTAGE PERCENTAGE
VESTING OF VESTED VESTING OF VESTED VESTING OF VESTED
DATE SHARES DATE SHARES DATE SHARES
- --------------- ------------------ ------------- ------------------ ------------ -------------------
<S> <C> <C> <C> <C> <C>
3/25/99 2.778% 3/25/00 36.111% 3/25/01 69.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
4/25/99 5.556% 4/25/00 38.889% 4/25/01 72.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
5/25/99 8.333% 5/25/00 41.667% 5/25/01 75.000%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
6/25/99 11.111% 6/25/00 44.444% 6/25/01 77.778%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
7/25/99 13.889% 7/25/00 47.222% 7/25/01 80.556%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
8/25/99 16.667% 8/25/00 50.000% 8/25/01 83.333%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
9/25/99 19.444% 9/25/00 52.778% 9/25/01 86.111%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
10/25/99 22.222% 10/25/00 55.556% 10/25/01 88.889%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
11/25/99 25.000% 11/25/00 58.333% 11/25/01 91.667%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
12/25/99 27.778% 12/25/00 61.111% 12/25/01 94.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
1/25/00 30.556% 1/25/01 63.889% 1/25/02 97.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
2/25/00 33.333% 2/25/01 66.667% 2/25/02 100%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
</TABLE>
VESTING IN ACCORDANCE WITH THE ABOVE VESTING SCHEDULE SHALL NOT ACCRUE AND
GRANTEE SHALL BE 0% VESTED IN THE SHARES SUBJECT TO THE OPTION UNLESS AND UNTIL
THE ADMINISTRATOR DETERMINES THAT THE PERFORMANCE OBJECTIVES ARE SATISFIED IN
FULL AS OF THE ACHIEVEMENT DATE.
The number of shares subject to the Option in which the Grantee shall be vested
as of a particular vesting date shall be rounded down to the nearest whole
share. However, vesting will be rounded up to the nearest whole share with
respect to the last vesting date reflected on this Vesting Schedule.
<PAGE>
STATEMENT OF PERFORMANCE OBJECTIVES
JOHN ROBERT KAMINSKI STOCK OPTION GRANT
Subject to the terms and conditions of the attached Stock Option Grant
Agreement, of which this Statement of Performance Objectives is a part, vesting
of shares subject to the Option is contingent upon the following performance
objectives being satisfied in full as of December 31, 1999 (the "Achievement
Date"), as determined in the sole discretion of the Administrator, which
determination will be made as soon as practicable after the Achievement Date:
25,000 shares for reaching 250,000 corporate desktops by Dec. 31, 1999
10,000 shares for obtaining a site license with a big-5 consulting firm
15,000 shares for reaching personal sales quota of $750,000 by Dec. 31, 1999
<PAGE>
EXERCISE NOTICE
Administrator of 1998 Stock Incentive Plan
c/o Office of the Corporate Secretary
KnowledgeLink Interactive, Inc.
901 Elkridge Landing Road
Suite 350
Linthicum, Maryland 21090
Gentlemen:
I, _________________________, hereby exercise the Option granted to me
on February ___, 1999, by KnowledgeLink Interactive, Inc. (the "Company"),
subject to all the terms and provisions thereof and of the KnowledgeLink
Interactive, Inc. 1998 Stock Incentive Plan (the "Plan"), and notify you of my
desire to purchase ____________ shares of Common Stock of the Company at a price
of $0.01 per share pursuant to the exercise of said Option. This will confirm my
understanding with respect to the shares to be issued to me by reason of this
exercise of the Option (the shares to be issued pursuant hereto shall be
collectively referred to hereinafter as the "Shares") as follows:
(a) I am acquiring the Shares for my own account for
investment with no present intention of dividing my interest with others or of
reselling or otherwise disposing of any of the Shares.
(b) The Shares are being issued without registration under the
Securities Act of 1933, as amended (the "Act"), in reliance upon one or more
exemptions contained in the Act, and such reliance is based in part on the above
representation.
(c) The certificates for the Shares to be issued to me will
bear a legend substantially as follows:
"The securities represented by this stock certificate
have not been registered under the Securities Act of 1933 (the "Act")
or applicable state securities laws (the "State Acts"), and shall not
be sold, pledged, hypothecated, donated, or otherwise transferred
(whether or not for consideration) by the holder except upon the
issuance to the Company of a favorable opinion of its counsel and/or
submission to the Company of such other evidence as may be satisfactory
to counsel for the Company, to the effect that any such transfer shall
not be in violation of the Act and the State Acts.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection at the office of the Corporation upon
appropriate request and without charge."
<PAGE>
Appropriate stop transfer instructions will be issued by the issuer to its
transfer agent.
(d) Since the Shares have not been registered under the Act,
they must be held indefinitely until an exemption from the registration
requirements of the Act is available or they are subsequently registered, in
which event the representation in Paragraph (a) hereof shall terminate. As a
condition to any transfer of the shares, I understand that the issuer will
require an opinion of counsel satisfactory to the issuer to the effect that such
transfer does not require registration under the Act or any state securities
law.
(e) The issuer is not obligated to comply with the
registration requirements of the Act or with the requirements for an exemption
under Regulation A under the Act for my benefit.
(f) I am a party to a Shareholders' Agreement with the Issuer
and others, pursuant to which I have agreed to certain restrictions on the
transferability of the Shares and other matters relating thereto.
Total Amount Enclosed: $__________
Date:________________________ ____________________________________
(Grantee)
Received by KnowledgeLink Interactive, Inc. on
---------------------------, -----
By: _______________________________
Exhibit 10.11
KNOWLEDGELINK INTERACTIVE, INC.
1998 STOCK INCENTIVE PLAN
PERFORMANCE STOCK OPTION GRANT AGREEMENT
This Grant Agreement (the "Agreement") is entered into by and between
KnowledgeLink Interactive, Inc., a Delaware corporation (the "Corporation"), and
Ted S. Bagheri ("Grantee"), effective as of March 30, 1999 (the "Grant Date").
In consideration of the premises, mutual covenants and agreements
herein, the Corporation and Grantee agree as follows:
ARTICLE 1
GRANT OF OPTION
SECTION 1.1 GRANT OF OPTION. The Corporation hereby grants to Grantee,
pursuant to the provisions of the KnowledgeLink Interactive, Inc. 1998 Stock
Incentive Plan (the "Plan"), a nonqualified stock option to purchase from the
Corporation, at a price of $0.01 per share (the "Exercise Price"), up to 85,000
shares of common stock of the Corporation, par value of $0.0001 per share
("Stock"), subject to the provisions of this Agreement (the "Option"). The
Option shall expire at 5:00 p.m. Eastern Time on the date ten years and one day
after the Grant Date (the "Expiration Date"), unless fully exercised or
terminated earlier pursuant to this Agreement. Unless stated otherwise herein,
capitalized terms in this Agreement shall have the meaning set forth in the
Plan.
ARTICLE 2
VESTING
SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated
pursuant to the provisions of this Agreement and subject to the condition
precedent in the next sentence, Grantee shall become vested in the shares
subject to the Option pro rata over three years in accordance with the vesting
schedule attached hereto and made a part hereof (the "Vesting Schedule").
Notwithstanding the preceding sentence, no vesting under the attached Vesting
Schedule shall occur and Grantee shall remain 0% vested in the shares subject to
the Option at all times, unless and until the Administrator, in its sole
discretion, determines that the performance objectives attached hereto and made
a part hereof (the "Statement of Performance Objectives") are satisfied in full
by the Achievement Date (as specified on the Statement of Performance
Objectives). The Administrator shall make its determination as soon as
practicable after December 31, 1999.
If the Administrator determines that the Performance
Objectives have been satisfied in full as of the Achievement Date, then Grantee
shall become vested in shares subject to the Option in accordance with the
Vesting Schedule. If the Administrator determines that the Performance
Objectives have not been satisfied in full as of the Achievement Date, then the
Option shall terminate in its entirety immediately upon such determination and
shall be of no further force or effect. In all events, Grantee
<PAGE>
shall become vested in shares on a vesting date only if Grantee has been in the
continuous employ of the Corporation from the Grant Date through the applicable
date upon which vesting is scheduled to occur.
SECTION 2.2 ACCELERATION OF VESTING. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, the Performance
Objectives shall be deemed satisfied and the vesting of the Option granted to
Grantee hereunder shall be accelerated so that the unvested portion of the
Option shall become one hundred percent (100%) vested in Grantee upon a Change
of Control. For purposes of this Agreement, the term "Change of Control" shall
mean (i) the sale of all or substantially all of the assets of the Corporation,
(ii) the sale of more than fifty percent (50%) of the outstanding capital stock
of the Corporation in a non-public sale, (iii) the dissolution or liquidation of
the Corporation, or (iv) any merger, share exchange, consolidation or other
reorganization or business combination of the Corporation if immediately after
such transaction either (A) persons who were directors of the Corporation
immediately prior to such transaction do not constitute at least a majority of
the directors of the surviving entity, or (B) persons who hold a majority of the
voting capital stock of the surviving entity are not persons who held a majority
of the voting capital stock of the Corporation immediately prior to such
transaction.
ARTICLE 3
EXERCISE OF OPTION
SECTION 3.1 EXERCISABILITY OF OPTION. Pursuant to the terms of this
Agreement, the Option may be exercised at any time, and from time to time, with
respect to the number of shares subject to the Option in which Grantee is then
vested.
SECTION 3.2 SHAREHOLDERS' AGREEMENT. The Administrator in its sole
discretion may require as a condition precedent to the exercise of the Option
granted pursuant to Section 1.1, that Grantee or such other person exercising
the Option be, or shall execute and become, a party to a Shareholders' Agreement
in substantially in the form attached hereto as Exhibit A.
SECTION 3.3 MANNER OF EXERCISE. The Option may be exercised, in whole
or in part, by delivering written notice to the Administrator in such form as
the Administrator may require from time to time; provided, however, that the
Option may not be exercised at any one time as to fewer than one hundred (100)
shares (or such number of shares as to which the Option is then exercisable if
such number of shares then exercisable is less than one hundred (100)). Such
notice shall specify the number of shares of Stock subject to the Option as to
which the Option is being exercised, and shall be accompanied by full payment of
the Exercise Price for such shares. Payment of the Exercise Price shall be made
in cash (or cash equivalents acceptable to the Administrator in the
Administrator's discretion). In the Administrator's sole and absolute
discretion, the Administrator may authorize payment of the Exercise Price to be
made, in whole or in part, by such other means as the Administrator may
prescribe. The Option may be exercised only in multiples of whole shares and no
partial shares shall be issued.
<PAGE>
If the Stock is registered under Section 12(b) of the
Securities Exchange Act of 1934, as amended, the Administrator, subject to such
limitations as it may determine, may authorize payment of the exercise price, in
whole or in part, by delivery of a properly executed exercise notice, together
with irrevocable instructions: (i) to a brokerage firm approved by the
Corporation to deliver promptly to the Corporation the aggregate amount of sale
or loan proceeds to pay the exercise price and any withholding tax obligations
that may arise in connection with the exercise, and (ii) to the Corporation to
deliver the certificates for such purchased shares directly to such brokerage
firm.
SECTION 3.4 ISSUANCE OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon
exercise of the Option, in whole or in part, in accordance with the terms of
this Agreement and upon payment of the Exercise Price for the shares of Stock as
to which the Option is exercised and delivery of such executed Shareholders'
Agreement as may be required by the Administrator pursuant to Section 3.2, the
Corporation shall issue to Grantee or such other person exercising the Option,
as the case may be, the number of shares of Stock so paid for, in the form of
fully paid and nonassessable Stock and shall deliver certificates therefor as
soon as practicable thereafter. The stock certificates for any shares of Stock
issued hereunder shall, unless such shares are registered or an exemption from
registration is available under applicable federal and state law, bear a legend
restricting transferability of such shares and referencing the Shareholders'
Agreement, if applicable.
ARTICLE 4
TERMINATION OF OPTION
SECTION 4.1 TERMINATION, IN GENERAL. The Option granted hereby shall
terminate and be of no force or effect after the Expiration Date set forth in
Section 1.1, unless terminated prior to such time as provided below or in
Section 2.1.
SECTION 4.2 TERMINATION OF EMPLOYMENT FOR REASON OTHER THAN RETIREMENT,
DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the
provisions of this Agreement, (i) the unvested portion of the Option shall
terminate immediately upon the Grantee's termination of employment with the
Corporation for any reason and (ii) the vested portion of the Option shall
terminate ninety days after the date Grantee is no longer employed by the
Corporation and its Affiliates for any reason other than Grantee's Retirement,
death or Disability. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period. Notwithstanding the
foregoing, the Option shall terminate in its entirety, regardless of whether the
Option is vested in whole or in part, upon termination of the employment of the
Grantee by the Corporation or an Affiliate for "Cause."
If Grantee is a party to a written employment agreement with the
Corporation or an Affiliate which contains a definition of "cause", "termination
for cause" or words of similar import, whether such Grantee is terminated for
"Cause" pursuant to this Section 4.2 shall be determined according to the terms
of and in a manner consistent with the provisions of such written employment
agreement. If Grantee is not party to such a written employment agreement with
the Corporation or an Affiliate, then for purposes of
<PAGE>
this Section 4.2, "Cause" shall mean (i) gross negligence or willful misconduct
or any substantiated act by Grantee involving dishonesty or bad faith against
the Corporation or an Affiliate, or any act or omission that demonstrates a lack
of integrity of Grantee with respect to the Corporation or an Affiliate; (ii)
Grantee engaging in acts or omissions the likely consequence of which is
material injury to the Corporation's or an Affiliate's business, property or
reputation; (iii) breach or threatened breach by Grantee of any non-competition
or confidentiality agreement entered into between Grantee and the Corporation or
its Affiliate; (iv) chronic use of alcohol, drugs or other similar substances
affecting Grantee's work performance; or (v) Grantee being convicted of, or
pleading guilty or nolo contendere to, or being indicted for a felony or other
crime involving theft, fraud or moral turpitude. The good faith determination by
the Administrator of whether the Grantee's employment was terminated by the
Corporation for "Cause" shall be final and binding for all purposes hereunder.
SECTION 4.3 TERMINATION OF EMPLOYMENT BY REASON OF RETIREMENT. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Retirement, to be an employee of
the Corporation or an Affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment at any time within ninety
days after such date of termination, but not later than the end of the stated
term of the Option. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Retirement shall mean termination of
employment on or after age 65 or termination of employment on or after the
attainment of such younger age and satisfaction of such minimum service
requirement, if any, specified by the Corporation's qualified retirement plan in
effect at such time, but excluding any termination for Cause.
SECTION 4.4 UPON GRANTEE'S DEATH. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, upon Grantee's death,
(i) the unvested portion of the Option shall terminate immediately and (ii)
Grantee's executor, personal representative, or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
the case may be, may exercise all or any part of the outstanding Option with
respect to the shares of Stock as to which the Option is vested as of the
Grantee's date of death, provided such exercise occurs within six months after
the date of Grantee's death, but not later than the end of the stated term of
the Option. Unless sooner terminated, the Option shall terminate in its entirety
upon the expiration of such six-month period.
SECTION 4.5 TERMINATION OF EMPLOYMENT BY REASON OF DISABILITY. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Disability, to be an employee of
the Corporation or an Affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of
<PAGE>
employment due to Disability at any time within ninety days after the date of
such termination, but not later than the end of the stated term of the Option.
Unless sooner terminated, the Option shall terminate in its entirety upon the
expiration of such ninety-day period.
For purposes of this Agreement, Disability shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months. The Administrator may require such proof of
Disability as the Administrator in its sole discretion deems appropriate and the
Administrator's determination as to whether Grantee is Disabled shall be final
and binding on all parties concerned.
ARTICLE 5
DRAG-ALONG RIGHTS
SECTION 5.1 DRAG-ALONG RIGHTS. If at any time any stockholder of the
Corporation, or group of stockholders, owning a majority or more of the capital
stock of the Corporation (hereinafter, the "Transferring Stockholders") proposes
to enter into any transaction involving (i) a sale of more than 50% of the
outstanding capital stock of the Corporation in a non-public sale or (ii) any
merger, share exchange, consolidation or other reorganization or business
combination of the Corporation immediately after which a majority of the
directors of the surviving entity is not comprised of persons who were directors
of the Corporation immediately prior to such transaction or after which persons
who hold a majority of the common stock of the surviving entity are not persons
who held a majority of the voting capital stock of the Corporation immediately
prior to such transaction, the Corporation may require Grantee to participate in
such transaction by giving Grantee written notice thereof at least ten days in
advance of the date of the transaction or the date that tender is required, as
the case may be (hereinafter referred to as the "Drag-Along Date").
Notwithstanding anything herein to the contrary and without Grantee's consent,
if such notice is provided to Grantee, then the outstanding Option, or a portion
thereof, as determined by the Corporation in its sole discretion and specified
in the written notice of the transaction, shall terminate effective as of the
Drag-Along Date, and shall be of no further force or effect thereafter, provided
that, in consideration therefor, Grantee receives from the Corporation, the
acquiror or the Corporation's successor, an aggregate amount equal to the
product of (i) the number of shares of Stock as to which the Option so
terminates, multiplied by (ii) the difference between (1) the Exercise Price per
share under the Option and (2) the price the Transferring Stockholders receive
per share of Stock pursuant to the terms of the transaction, adjusted as
determined by the Administrator to reflect the fact that the Exercise Price with
respect to the Option has not, in fact, been paid. The payment of such amount to
Grantee shall be made either upon the same terms and conditions as those
applicable to the Transferring Stockholders with respect to their Stock pursuant
to the terms of the transaction or via delivery of immediately available funds
within thirty days following the transaction, as determined in the sole
discretion of the payor.
<PAGE>
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or this
Agreement shall be construed as a contract of employment between the Corporation
(or an Affiliate) and Grantee, or as a contractual right of Grantee to continue
in the employ of the Corporation or an Affiliate, or as a limitation of the
right of the Corporation or an Affiliate to discharge Grantee at any time.
SECTION 6.2 NO RIGHTS OF SHAREHOLDER. Grantee shall not have any of the
rights of a shareholder with respect to the shares of Common Stock that may be
issued upon the exercise of the Option until such shares of Common Stock have
been issued to him upon the due exercise of the Option.
SECTION 6.3 NON-QUALIFIED NATURE OF AGREEMENT. This Agreement is
intended to be an agreement concerning a stock option arrangement which does not
qualify under section 422 of the Internal Revenue Code, and this Agreement shall
be so construed.
SECTION 6.4 THE CORPORATION'S RIGHTS. The existence of this Option
shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or other stocks with preference ahead of or
convertible into, or otherwise affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all or
any part of the Corporation's assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
SECTION 6.5 WITHHOLDING OF TAXES. The Corporation or any Affiliate
shall have the right to deduct from any compensation or any other payment of any
kind (including withholding the issuance of shares of Stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of the Option. In lieu of such deduction, the
Administrator may require Grantee to make a cash payment to the Corporation or
an Affiliate equal to the amount required to be withheld. If Grantee does not
make such payment when requested, the Corporation may refuse to issue any Stock
certificate under the Plan until arrangements satisfactory to the Administrator
for such payment have been made.
SECTION 6.6 GRANTEE. Whenever the word "Grantee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word "Grantee" shall be deemed to include such
person.
SECTION 6.7 NONTRANSFERABILITY OF OPTION. The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution
and (ii) during the lifetime of Grantee, the Option may be exercised only by
Grantee or, during the period Grantee is
<PAGE>
under a legal disability, by Grantee's guardian or legal representative. Except
as provided above, the Option may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
SECTION 6.8 NOTICES. All notices and other communications made or given
pursuant to this Agreement shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to Grantee at the
address contained in the records of the Corporation, or addressed to the
Administrator, care of the Corporation for the attention of its Secretary at its
principal office or, if the receiving party consents in advance, transmitted and
received via telecopy or via such other electronic transmission mechanism as may
be available to the parties.
SECTION 6.9 ENTIRE AGREEMENT; MODIFICATION. The Agreement contains the
entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in the Plan or in a
written document signed by each of the parties hereto. Any oral or written
agreements, representations, warranties, written inducements, or other
communications made prior to the execution of this Agreement shall be void and
ineffective for all purposes.
SECTION 6.10 CONFORMITY WITH PLAN. This Agreement is intended to
conform in all respects with, and is subject to all applicable provisions of,
the Plan, which is incorporated herein by reference. Inconsistencies between
this Agreement and the Plan shall be resolved in accordance with the terms of
the Plan. In the event of any ambiguity in this Agreement or any matters as to
which this Agreement is silent, the Plan shall govern.
SECTION 6.11 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, other than the
conflict of laws principles thereof.
SECTION 6.12 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officer as of the date first above written.
ATTEST: KNOWLEDGELINK INTERACTIVE, INC.
By: /s/ Edwin R. Addison
- ---------------------------- ----------------------------
The undersigned hereby acknowledges that he/she has carefully read this
Agreement and the Plan and agrees to be bound by all of the provisions set forth
in such documents.
WITNESS: GRANTEE
/s/ Ted s. Bagheri
- ---------------------------- -------------------------------
Date:
--------------------------
Enclosure: KnowledgeLink Interactive, Inc. 1998 Stock Incentive Plan
<PAGE>
VESTING SCHEDULE
TED S. BAGHERI 3/30/99 STOCK OPTION GRANT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------- ------------------ ------------- ------------------ ------------ -------------------
AGGREGATE AGGREGATE AGGREGATE
PERCENTAGE PERCENTAGE PERCENTAGE
VESTING OF VESTED VESTING OF VESTED VESTING OF VESTED
DATE SHARES DATE SHARES DATE SHARES
- --------------- ------------------ ------------- ------------------ ------------ -------------------
01/31/99 2.778% 01/31/00 36.111% 01/31/01 69.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
02/28/99 5.556% 02/29/00 38.889% 02/28/01 72.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
03/31/99 8.333% 03/31/00 41.667% 03/31/01 75.000%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
04/30/99 11.111% 04/30/00 44.444% 04/30/01 77.778%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
05/31/99 13.889% 05/31/00 47.222% 05/31/01 80.556%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
06/30/99 16.667% 06/30/99 50.000% 06/30/01 83.333%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
07/31/99 19.444% 07/31/00 52.778% 07/31/01 86.111%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
08/31/99 22.222% 08/31/00 55.556% 08/31/01 88.889%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
09/30/99 25.000% 09/30/00 58.333% 09/30/01 91.667%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
10/31/99 27.778% 10/31/00 61.111% 10/31/01 94.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
11/30/99 30.556% 11/30/00 63.889% 11/30/01 97.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
12/31/99 33.333% 12/31/00 66.667% 12/31/01 100%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
</TABLE>
VESTING IN ACCORDANCE WITH THE ABOVE VESTING SCHEDULE SHALL NOT ACCRUE AND
GRANTEE SHALL BE 0% VESTED IN THE SHARES SUBJECT TO THE OPTION UNLESS AND UNTIL
THE ADMINISTRATOR DETERMINES THAT THE PERFORMANCE OBJECTIVES ARE SATISFIED IN
FULL AS OF THE ACHIEVEMENT DATE.
The number of shares subject to the Option in which the Grantee shall be vested
as of a particular vesting date shall be rounded down to the nearest whole
share. However, vesting will be rounded up to the nearest whole share with
respect to the last vesting date reflected on this Vesting Schedule.
<PAGE>
STATEMENT OF PERFORMANCE OBJECTIVES
TED S. BAGHERI STOCK OPTION GRANT
Subject to the terms and conditions of the attached Stock Option Grant
Agreement, of which this Statement of Performance Objectives is a part, vesting
of shares subject to the Option is contingent upon the following performance
objectives being satisfied in full as of December 31, 1999 (the "Achievement
Date"), as determined in the sole discretion of the Administrator, which
determination will be made as soon as practicable after the Achievement Date:
85,000 shares for successful preparation for a 1998 audit and obtaining
interim financing prior to attempting an initial public offering
<PAGE>
EXERCISE NOTICE
Administrator of 1998 Stock Incentive Plan
c/o Office of the Corporate Secretary
KnowledgeLink Interactive, Inc.
901 Elkridge Landing Road
Suite 350
Linthicum, Maryland 21090
Gentlemen:
I, _________________________, hereby exercise the Option granted to me
on February ___, 1999, by KnowledgeLink Interactive, Inc. (the "Company"),
subject to all the terms and provisions thereof and of the KnowledgeLink
Interactive, Inc. 1998 Stock Incentive Plan (the "Plan"), and notify you of my
desire to purchase ____________ shares of Common Stock of the Company at a price
of $0.01 per share pursuant to the exercise of said Option. This will confirm my
understanding with respect to the shares to be issued to me by reason of this
exercise of the Option (the shares to be issued pursuant hereto shall be
collectively referred to hereinafter as the "Shares") as follows:
(a) I am acquiring the Shares for my own account for
investment with no present intention of dividing my interest with others or of
reselling or otherwise disposing of any of the Shares.
(b) The Shares are being issued without registration under the
Securities Act of 1933, as amended (the "Act"), in reliance upon one or more
exemptions contained in the Act, and such reliance is based in part on the above
representation.
(c) The certificates for the Shares to be issued to me will
bear a legend substantially as follows:
"The securities represented by this stock certificate
have not been registered under the Securities Act of 1933 (the "Act")
or applicable state securities laws (the "State Acts"), and shall not
be sold, pledged, hypothecated, donated, or otherwise transferred
(whether or not for consideration) by the holder except upon the
issuance to the Company of a favorable opinion of its counsel and/or
submission to the Company of such other evidence as may be satisfactory
to counsel for the Company, to the effect that any such transfer shall
not be in violation of the Act and the State Acts.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection at the office of the Corporation upon
appropriate request and without charge."
<PAGE>
Appropriate stop transfer instructions will be issued by the issuer to its
transfer agent.
(d) Since the Shares have not been registered under the Act,
they must be held indefinitely until an exemption from the registration
requirements of the Act is available or they are subsequently registered, in
which event the representation in Paragraph (a) hereof shall terminate. As a
condition to any transfer of the shares, I understand that the issuer will
require an opinion of counsel satisfactory to the issuer to the effect that such
transfer does not require registration under the Act or any state securities
law.
(e) The issuer is not obligated to comply with the
registration requirements of the Act or with the requirements for an exemption
under Regulation A under the Act for my benefit.
(f) I am a party to a Shareholders' Agreement with the Issuer
and others, pursuant to which I have agreed to certain restrictions on the
transferability of the Shares and other matters relating thereto.
Total Amount Enclosed: $__________
Date:
------------------ ----------------------------------
(Grantee)
Received by KnowledgeLink Interactive, Inc. on
---------------------------, -----
By:
-------------------------------
EXHIBIT 10.12
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT
INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
STOCK OPTION GRANT AGREEMENT
This Grant Agreement (the "Agreement") is entered into by and between EDWIN R.
ADDISON ("Grantor") and MARK GAERTNER ("Grantee"), effective as of April 1, 1998
(the "Grant Date").
In consideration of the premises, mutual covenants and agreements
herein, the Grantor and Grantee agree as follows:
ARTICLE 1
GRANT OF OPTION
SECTION 1.1 GRANT OF OPTION. The Grantor hereby grants to Grantee a
nonstatutory stock option to purchase from the Grantor, at the price of $1.25
per share (the "Exercise Price"), up to 100,000 shares of common stock of
KnowledgeLink Interactive, Inc. (the "Corporation"), par value of $0.0001 per
share (also referred to in this Agreement as "Stock"), subject to the provisions
of this Agreement (the "Option"). The Option shall expire at 5:00 p.m. Eastern
Time on the tenth anniversary of the Grant Date (the "Expiration Date"), unless
fully exercised or terminated earlier pursuant to this Agreement.
ARTICLE 2
VESTING
SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated
pursuant to the provisions of this Agreement, Grantee shall become vested in the
shares subject to the Option pro rata over three years in accordance with the
vesting schedule attached hereto and made a part hereof (the "Vesting
Schedule"); provided, however, that Grantee must be in the continuous employ of
the Corporation from the Grant Date through the applicable vesting date
specified on the Vesting Schedule for vesting to occur.
SECTION 2.2 ACCELERATION OF VESTING. Unless the Option has earlier
terminated pursuant to the provisions of the Agreement, vesting of the Option
granted to Grantee hereunder shall be accelerated so that the unvested portion
of the Option shall become one hundred percent (100%) vested in Grantee upon a
Change of Control. For purposes of this Agreement, the term "Change of Control"
shall mean (i) the sale of all or
<PAGE>
substantially all of the assets of the Corporation, (ii) the sale of more than
fifty percent (50%) of the outstanding capital stock of the Corporation in a
non-public sale, (iii) the dissolution or liquidation of the Corporation, or
(iv) any merger, share exchange, consolidation or other reorganization or
business combination of the Corporation if immediately after such transaction
either (A) persons who were directors of the Corporation immediately prior to
such transaction do not constitute at least a majority of the directors of the
surviving entity, or (B) persons who hold a majority of the voting capital stock
of the surviving entity are not persons who held a majority of the voting
capital stock of the Corporation immediately prior to such transaction.
ARTICLE 3
EXERCISE OF OPTION
SECTION 3.1 EXERCISABILITY OF OPTION. Pursuant to the terms of the
Agreement, the Option may be exercised at any time, and from time to time, with
respect to the number of shares subject to the Option in which Grantee is then
vested.
SECTION 3.2 SHAREHOLDERS' AGREEMENT. The Grantor in his sole discretion
may require as a condition precedent to the exercise of the Option granted
pursuant to Section 1.1, that Grantee or such other person exercising the Option
be, or shall execute and become, a party to a Shareholders' Agreement in
substantially in the form attached hereto as Exhibit A.
SECTION 3.3 MANNER OF EXERCISE. The Option may be exercised, in whole
or in part, by delivering written notice to the Grantor in such form as the
Grantor may require from time to time; provided, however, that the Option may
not be exercised at any one time as to fewer than one hundred (100) shares (or
such number of shares as to which the Option is then exercisable if such number
of shares then exercisable is less than one hundred (100)). Such notice shall
specify the number of shares of Stock subject to the Option as to which the
Option is being exercised, and shall be accompanied by full payment of the
Exercise Price for such shares. Payment of the Exercise Price shall be made in
cash (or cash equivalents acceptable to the Grantor in the Grantor's
discretion). In the Grantor's sole and absolute discretion, the Grantor may
authorize payment of the Exercise Price to be made, in whole or in part, by such
other means as the Grantor may prescribe. The Option may be exercised only in
multiples of whole shares and no partial shares shall be issued.
If the Stock is registered under Section 12(b) of the Securities
Exchange Act of 1934, as amended, the Grantor, subject to such limitations as he
may determine, may authorize payment of the Exercise Price, in whole or in part,
by delivery of a properly executed exercise notice, together with irrevocable
instructions: (i) to a brokerage firm approved by the Grantor to deliver
promptly to the Grantor the aggregate amount of sale or loan proceeds to pay the
Exercise Price, and (ii) to the Grantor to instruct the Corporation's Transfer
Agent to transfer ownership of the purchased shares and to deliver the
certificates for such purchased shares directly to such brokerage firm.
-2-
<PAGE>
SECTION 3.4 TRANSFER OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon
exercise of the Option, in whole or in part, in accordance with the terms of
this Agreement and upon payment of the Exercise Price for the shares of Stock as
to which the Option is exercised and delivery of such executed Shareholders'
Agreement as may be required by the Grantor pursuant to Section 3.2, the Grantor
shall instruct the Corporation's Transfer Agent to transfer ownership of the
purchased shares to the Grantee or such other person exercising the Option, as
the case may be, and to deliver certificates therefor as soon as practicable
thereafter. The stock certificates for any shares of Stock transferred hereunder
shall, unless such shares are registered or an exemption from registration is
available under applicable federal and state law, bear a legend restricting
transferability of such shares and referencing the Shareholders' Agreement, if
applicable.
ARTICLE 4
TERMINATION OF OPTION
SECTION 4.1 TERMINATION, IN GENERAL. The Option granted hereby shall
terminate and be of no force or effect after the Expiration Date set forth in
Section 1.1, unless terminated prior to such time as provided below.
SECTION 4.2 TERMINATION OF EMPLOYMENT FOR REASON OTHER THAN RETIREMENT,
DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the
provisions of the Agreement, (i) the unvested portion of the Option shall
terminate immediately upon the Grantee's termination of employment with the
Corporation for any reason and (ii) the vested portion of the Option shall
terminate ninety days after the date Grantee is no longer employed by the
Corporation and its affiliates for any reason other than Grantee's Retirement,
death or Disability. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period. Notwithstanding the
foregoing, the Option shall terminate in its entirety, regardless of whether the
Option is vested in whole or in part, upon termination of the employment of the
Grantee by the Corporation or an affiliate for "Cause."
If Grantee is a party to a written employment agreement with the
Corporation or an affiliate which contains a definition of "cause," "termination
for cause" or words of similar import, whether Grantee is terminated for "Cause"
pursuant to this Section 4.2 shall be determined according to the terms of and
in a manner consistent with the provisions of such written employment agreement.
If Grantee is not party to such a written employment agreement with the
Corporation or an affiliate, then for purposes of this Section 4.2, "Cause"
shall mean (i) gross negligence or willful misconduct or any substantiated act
by Grantee involving dishonesty or bad faith against the Corporation or an
affiliate, or any act or omission that demonstrates a lack of integrity of
Grantee with respect to the Corporation or an affiliate; (ii) Grantee engaging
in acts or omissions the likely consequence of which is material injury to the
Corporation's or an affiliate's business, property or reputation; (iii) breach
or threatened breach by Grantee of any non-competition or confidentiality
agreement entered into between Grantee and the Corporation or its affiliate;
(iv) chronic use of alcohol, drugs or other similar substances
-3-
<PAGE>
affecting Grantee's work performance; or (v) Grantee being convicted of, or
pleading guilty or nolo contendere to, or being indicted for a felony or other
crime involving theft, fraud or moral turpitude. The good faith determination by
the Grantor of whether the Grantee's employment was terminated by the
Corporation or an affiliate for "Cause" shall be final and binding for all
purposes hereunder.
SECTION 4.3 TERMINATION OF EMPLOYMENT BY REASON OF RETIREMENT. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Retirement, to be an employee of
the Corporation or an affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment at any time within ninety
days after such date of termination, but not later than the end of the stated
term of the Option. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Retirement shall mean termination of
employment on or after age 65 or termination of employment on or after the
attainment of such younger age and satisfaction of such minimum service
requirement, if any, specified by the Corporation's qualified retirement plan in
effect at such time, but excluding any termination for Cause.
SECTION 4.4 UPON GRANTEE'S DEATH. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, upon Grantee's death,
(i) the unvested portion of the Option shall terminate immediately and (ii)
Grantee's executor, personal representative, or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
the case may be, may exercise all or any part of the outstanding Option with
respect to the shares of Stock as to which the Option is vested as of the
Grantee's date of death, provided such exercise occurs within six months after
the date of Grantee's death, but not later than the end of the stated term of
the Option. Unless sooner terminated, the Option shall terminate in its entirety
upon the expiration of such six-month period.
SECTION 4.5 TERMINATION OF EMPLOYMENT BY REASON OF DISABILITY. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Disability, to be an employee of
the Corporation or an affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment due to Disability at any
time within ninety days after the date of such termination, but not later than
the end of the stated term of the Option. Unless sooner terminated, the Option
shall terminate in its entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Disability shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or
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<PAGE>
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve
months.
ARTICLE 5
DRAG-ALONG RIGHTS
SECTION 5.1 DRAG-ALONG RIGHTS. If at any time any shareholder of the
Corporation or group of shareholders owning a majority or more of the voting
capital stock of the Corporation proposes to enter into any transaction
involving (i) a sale of more than fifty percent (50%) of the outstanding voting
capital stock of the Corporation in a non-public sale or (ii) any merger or
consolidation of the Corporation immediately after which a majority of the
directors of the surviving entity is not comprised of persons who were directors
of the Corporation immediately prior to such transaction or after which persons
who hold a majority of the common stock of the surviving entity are not persons
who held voting capital stock of the Corporation immediately prior to such
transaction, the Grantor or the Corporation may require Grantee to participate
in such transaction by giving Grantee written notice thereof at least ten (10)
days in advance of the date of the transaction or the date that tender is
required, as the case may be. Upon receipt of such notice, Grantee shall sell,
assign, tender or transfer the same percentage of the Option to the extent
vested as the percentage of the shares of common stock proposed to be sold,
assigned, tendered or transferred by the transferring shareholders collectively,
upon the same terms and conditions applicable to the transferring shareholders
and at a price equal to the difference between the Exercise Price per share
under the Option and the price per share of common stock the transferring
shareholders will receive pursuant to the terms of the transaction. The
provisions of this Section 5.1 shall apply in the event of Grantee's death, to
Grantee's executor, personal representative or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
though such person is Grantee.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or the
Agreement shall be construed as a contract of employment between the Corporation
(or an affiliate or Grantor) and Grantee, or as a contractual right of Grantee
to continue in the employ of the Corporation or an affiliate, or as a limitation
of the right of the Corporation or an affiliate to discharge Grantee at any
time.
SECTION 6.2 NO RIGHTS OF SHAREHOLDER. Grantee shall not have any of the
rights of a shareholder with respect to the shares of common stock that may be
transferred upon the exercise of the Option until such shares of common stock
have been transferred to him upon the due exercise of the Option.
SECTION 6.3 NON-QUALIFIED NATURE OF AGREEMENT. This Agreement is
intended to be an agreement concerning a stock option arrangement which does not
qualify under section 422 of the Internal Revenue Code, and this Agreement shall
be so construed.
-5-
<PAGE>
SECTION 6.4 THE CORPORATION'S RIGHTS. The existence of this Option
shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or other stocks with preference ahead of or
convertible into, or otherwise affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all or
any part of the Corporation's assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
SECTION 6.5 WITHHOLDING OF TAXES. The Corporation or any affiliate
shall have the right to deduct from any compensation or any other payment of any
kind (including withholding the issuance of shares of stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of the Option. In lieu of such deduction, the
Corporation or Grantor may require Grantee to make a cash payment to the
Corporation or an affiliate equal to the amount required to be withheld. If
Grantee does not make such payment when requested, the Grantor may refuse to
instruct the Corporation's Transfer Agent to transfer ownership of the purchased
shares until arrangements satisfactory to the Grantor for such payment have been
made.
SECTION 6.6 GRANTEE. Whenever the word "Grantee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word "Grantee" shall be deemed to include such
person.
SECTION 6.7 NONTRANSFERABILITY OF OPTION. The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution
and during the lifetime of Grantee, the Option may be exercised only by Grantee
or, during the period Grantee is under a legal disability, by Grantee's guardian
or legal representative. Except as provided above, the Option may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.
SECTION 6.8 ADJUSTMENTS; CORPORATE TRANSACTIONS. In the event of
changes in the common stock of the Corporation owned by the Grantor and subject
to this Option by reason of any stock dividend, split-up, recapitalization,
merger, consolidation, business combination or exchange of shares and the like,
the Grantor shall, in his discretion, make appropriate adjustments to the
number, kind and price of shares covered by the Option, and shall, in his
discretion and without the consent of the Grantee, make any other adjustments in
the Option, including but not limited to reducing the number of shares subject
to the Option or providing or mandating alternative settlement methods such as
settlement of the Option in cash or in shares of common stock or other
securities of the Corporation or of any other entity, or in any other matters
which relate to the Option as the Grantor shall, in his sole discretion,
determine to be necessary or appropriate.
-6-
<PAGE>
The Grantor, in his sole discretion and without consent of the Grantee,
may make any modifications to the Option, including but not limited to
cancellation, forfeiture, surrender or other termination of the Option in whole
or in part regardless of the vested status of the Option, in order to facilitate
any business combination that is authorized by the Board of the Corporation to
comply with requirements for treatment as a pooling of interests transaction for
accounting purposes under generally accepted accounting principles.
The Grantor is authorized to make, in his discretion and without the
consent of the Grantee, adjustments in the terms and conditions of the Option in
recognition of unusual or nonrecurring events affecting the Corporation, or the
financial statements of the Corporation or any subsidiary or affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever the
Grantor determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Option.
SECTION 6.9 INVESTMENT REPRESENTATIONS; LEGEND.
(a) Representations. The Grantee represents, warrants and covenants
that:
(1) Any shares purchased upon exercise of this Option shall be
acquired for the Grantee's account for investment only and not with a view to,
or for sale in connection with, any distribution of the shares in violation of
the Securities Act of 1933 (the "Securities Act") or any rule or regulation
under the Securities Act, and that he will not distribute the same in violation
of any state or federal law or regulation.
(2) The Grantee has had such opportunity as he has deemed
adequate to obtain from representatives of the Corporation such information as
is necessary to permit the Grantee to evaluate the merits and risks of his
investment in the Corporation.
(3) The Grantee is able to bear the economic risk of holding
shares acquired pursuant to the exercise of this Option for an indefinite
period.
(4) The Grantee understands that (A) the shares acquired
pursuant to the exercise of this Option will not be registered under the
Securities Act or under the securities laws of any state and are "restricted
securities" within the meaning of Rule 144 under the Securities Act; (B) such
shares cannot be sold, transferred or otherwise disposed of unless they are
subsequently registered under the Securities Act, and such registration or
qualification as may be necessary under the securities laws of any state, or an
exemption from registration is then available; (C) in any event, the exemption
from registration under Rule 144 will not be available for at least one (1) year
from date of exercise and even then will not be available unless a public market
then exists for the common stock of the Corporation, adequate information
concerning the Corporation is then available to the public and other terms and
conditions of Rule 144 are complied with; and (D) there is as of the date of
this Agreement no registration statement on file with the Securities and
Exchange Commission with respect to any stock of the Corporation and the neither
the Grantor nor the Corporation has any obligation or current
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<PAGE>
intention to register any shares acquired pursuant to the exercise of this
Option under the Securities Act.
By making payment upon exercise of this Option, the Grantee shall be
deemed to have reaffirmed, as of the date of such payment, the representations
made in this Section 6.9.
(b) Legend on Stock Certificates. All stock certificates representing
shares of common stock of the Corporation transferred by the Grantor to the
Grantee upon exercise of this Option shall have affixed thereto a legend
substantially in the following form, in addition to any other legends required
by applicable state law:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares evidenced
by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Corporation to
the effect that registration under such Act is not required.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection by any shareholder of the Corporation at
the office of the Corporation upon appropriate request and without
charge."
SECTION 6.10 RESERVATION OF SHARES. The Grantor will reserve and set
apart and have at all times, free from preemptive rights, a number of shares of
common stock of the Corporation deliverable upon the exercise of this Option
sufficient to enable the Grantor at any time to fulfill all of his obligations
hereunder. In the event the Grantor desires to sell or otherwise transfer any
portion of these reserved shares to any party other than the Grantee, the
Grantor may unilaterally cancel the Option with respect to those shares. If the
Grantor cancels the Option (or a part of the Option), then the Grantor shall pay
to the Grantee an amount equal to the difference between the aggregate Exercise
Price under the Option with respect to the portion of the Option so cancelled
and the greater of either (i) the fair market value, as determined in good faith
by the Board of Directors of the Corporation, of such shares to be sold or
otherwise transferred by the Grantor, or (ii) such other consideration that the
Grantor receives upon such sale or transfer.
SECTION 6.11 NOTICES. All notices and other communications made or
given pursuant to the Agreement shall be in writing and shall be sufficiently
made or given if hand-delivered or mailed by certified mail, addressed to
Grantee at the address contained in the records of the Corporation, or addressed
to the Grantor, care of the Corporation or, if the receiving party consents in
advance, transmitted and received via telecopy or via such other electronic
transmission mechanism as may be available to the parties.
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<PAGE>
SECTION 6.12 ENTIRE AGREEMENT; MODIFICATION. This Agreement contains
the entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in a written
document signed by each of the parties hereto. Any oral or written agreements,
representations, warranties, written inducements, or other communications made
prior to the execution of the Agreement shall be void and ineffective for all
purposes.
SECTION 6.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, other than the
conflict of laws principles thereof.
SECTION 6.14 HEADINGS. The headings in the Agreement are for reference
purposes only and shall not affect the meaning or interpretation of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WITNESS: EDWIN R. ADDISON
/s/ Melissa A. Hodges /s/ Edwin R. Addison
- ------------------------ --------------------------
WITNESS: MARK GAERTNER
/s/ Melissa A. Hodges /s/ Mark Gaertner
- ------------------------ --------------------------
-9-
<PAGE>
VESTING SCHEDULE
(MARK GAERTNER 4/1/98 STOCK OPTION GRANT
BY EDWIN R. ADDISON)
<TABLE>
<CAPTION>
- --------------- ------------------ ------------- ------------------ ------------ -------------------
AGGREGATE AGGREGATE AGGREGATE
PERCENTAGE PERCENTAGE PERCENTAGE
VESTING OF VESTED VESTING OF VESTED VESTING OF VESTED
DATE SHARES DATE SHARES DATE SHARES
- --------------- ------------------ ------------- ------------------ ------------ -------------------
<S> <C> <C> <C> <C> <C>
5/1/98 2.778% 5/1/99 36.111% 5/1/00 69.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
6/1/98 5.556% 6/1/99 38.889% 6/1/00 72.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
74/1/98 8.333% 7/1/99 41.667% 7/1/00 75.000%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
8/1/98 11.111% 8/1/99 44.444% 8/1/00 77.778%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
9/1/98 13.889% 9/1/99 47.222% 9/1/00 80.556%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
10/1/98 16.667% 10/1/99 50.000% 10/1/00 83.333%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
11/1/98 19.444% 11/1/99 52.778% 11/1/00 86.111%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
12/1/98 22.222% 12/1/99 55.556% 12/1/00 88.889%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
1/1/99 25.000% 1/1/00 58.333% 1/1/01 91.667%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
2/1/99 27.778% 2/1/00 61.111% 2/1/01 94.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
3/1/99 30.556% 3/1/00 63.889% 3/1/01 97.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
4/1/99 33.333% 4/1/00 66.667% 4/1/01 100%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
</TABLE>
The number of shares subject to the Option in which the Grantee shall be vested
as of a particular vesting date shall be rounded down to the nearest whole
share. However, vesting will be rounded up to the nearest whole share with
respect to the last vesting date reflected on this Vesting Schedule.
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<PAGE>
EXERCISE NOTICE
Edwin R. Addison
c/o KnowledgeLink Interactive, Inc.
901 Elkridge Landing Road
Suite 350
Linthicum, Maryland 21090
Mr. Addison:
I, Mark Gaertner, hereby exercise the Option granted to me on April 1,
1998, by you, Edwin R. Addison (the "Grantor"), and notify you of my desire to
purchase 100,000 shares of KnowledgeLink Interactive, Inc. (the "Company")
common stock at a price of $1.25 per share pursuant to the exercise of said
Option. This will confirm my understanding with respect to the shares to be
transferred to me by reason of this exercise of the Option (the shares to be
transferred pursuant hereto shall be collectively referred to hereinafter as the
"Shares") as follows:
(a) I am acquiring the Shares for my own account for
investment with no present intention of dividing my interest with others or of
reselling or otherwise disposing of any of the Shares.
(b) The Shares being transferred to me are not registered
under the Securities Act of 1933, as amended (the "Act"), in reliance upon one
or more exemptions contained in the Act, and such reliance is based in part on
the above representation.
(c) The certificates for the Shares will bear a legend
substantially as follows:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares evidenced
by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Corporation to
the effect that registration under such Act is not required.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection by any shareholder of the Corporation at
the office of the Corporation upon appropriate request and without
charge."
<PAGE>
Appropriate stop transfer instructions will be issued by the Company and the
Grantor to the Company's Transfer Agent.
(d) Since the Shares have not been registered under the Act,
they must be held indefinitely until an exemption from the registration
requirements of the Act is available or they are subsequently registered, in
which event the representation in Paragraph (a) hereof shall terminate. As a
condition to any transfer of the shares, I understand that the issuer will
require an opinion of counsel satisfactory to the issuer to the effect that such
transfer does not require registration under the Act or any state securities
law.
(e) The Company is not obligated to comply with the
registration requirements of the Act or with the requirements for an exemption
under Regulation A under the Act for my benefit.
(f) I am a party to a Shareholders' Agreement with the Company
and others, pursuant to which I have agreed to certain restrictions on the
transferability of the Shares and other matters relating thereto.
Total Amount Enclosed: $0 (upon sale of options).
Date: /s/ Mark Gaertner
------------------------- ---------------------------------------
Mark Gaertner
Received by Edwin R. Addison on
/s/ Edwin R. Addison , 1999
---------------------------------------
---------------------------------------
Edwin R. Addison
<PAGE>
EXHIBIT A
KNOWLEDGELINK INTERACTIVE, INC.
OPTIONEE/SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (this "Agreement"), dated as of
____________, ____, is made by and among KNOWLEDGELINK INTERACTIVE, INC., a
Delaware corporation (the "Company"), and the other parties now or hereafter
listed on Exhibit A hereto, as the same may be amended from time to time (all
Shareholders party to this Agreement shall be individually and collectively
referred to as the "Shareholder" or the "Shareholders", as applicable).
W I T N E S S E T H:
WHEREAS, the Shareholders are owners of shares of issued and
outstanding common stock of the Company (the "Shares"); and
WHEREAS, the Company and the Shareholders wish to enter into
appropriate agreements among themselves to assure continuity in the ownership
and management of the Company and to provide a market for the Shares upon the
occurrence of certain events which otherwise could be disruptive for the
Company.
NOW, THEREFORE, in consideration of the foregoing and the premises and
the mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
RESTRICTIONS ON TRANSFER;
VOLUNTARY TRANSFER; TRANSFER UPON DEATH
1.1 RESTRICTIONS ON TRANSFER.
(A) IN GENERAL. No Shareholder shall sell, transfer, give,
pledge, encumber or otherwise dispose of his Shares without the written consent
of the holders of two-thirds of the issued and outstanding Shares, except in
accordance with the terms of this Agreement, and any attempted transfer in
violation of this Agreement shall be null and void and not recognized for any
purpose.
(B) LIFETIME TRANSFER. Each of the Shareholders agrees that he
will not transfer any Shares now or hereafter owned by him except as hereinafter
provided. For purposes of this Agreement, the term "transfer" shall mean any
sale, assignment or other disposition, whether or not for value, and any pledge,
encumbrance or creation of any other security interest in the Shares.
(C) TRANSFER UPON DEATH. Notwithstanding anything herein to
the contrary, a Shareholder may transfer any of his Shares by will or the laws
of descent and distribution. Any Shares so transferred shall remain subject to
this Agreement, and all rights, obligations and provisions for purchase of such
Shares hereunder shall remain unaffected by such a transfer.
<PAGE>
1.2 LEGEND ON CERTIFICATES.
The Shareholders shall cause the following legend to be conspicuously
noted upon all certificates representing Shares of the Company now or hereafter
owned by each of them:
"Transfer of any interest in the securities represented by
this certificate is subject to a Shareholders' Agreement dated
__________, ____, by and among KnowledgeLink Interactive, Inc., a
Delaware corporation, and the Shareholders (as defined therein), and no
such transfer may be made without compliance with that Agreement. A
copy of that Agreement is available for inspection at the office of the
corporation upon appropriate request.
The Securities represented by this certificate have not been
registered under the Securities Act of 1933 or the applicable
securities act of any state but have been issued in reliance upon
exemptions from registration contained in said acts. No sale, offer to
sell or other transfer of the securities represented by this
certificate may be made unless a registration statement under said acts
is in effect with respect to the securities, or an exemption from the
registration provisions of such acts is then applicable."
An executed copy of this Agreement shall at all times be kept on file at the
office of the Company and shall be open for inspection by each Shareholder or
any person claiming any right or interest through a Shareholder in any Share
which is subject to this Agreement.
ARTICLE II
SHARE TRANSFERS
2.1 OPTION UPON VOLUNTARY TRANSFER. Except as otherwise provided in
Section 1.1 hereof, any Shareholder who receives a bona fide written offer from
a third party to purchase all or any portion of his Shares (an "Offer"), such
Shareholder (in this context, a "Transferring Shareholder") shall be obligated,
before accepting any such Offer, to first offer such Shares for purchase by the
Company as hereinafter provided.
(A) NOTICE OF TRANSFER. Prior to accepting any Offer, the
Transferring Shareholder shall give written notice (a "Notice of Offer") to the
Company stating the date the Notice of Offer is sent to the Company (the "Notice
Date"), the number of Shares to be transferred by the Transferring Shareholder
pursuant to the Offer (the "Transferable Shares"), the name and address of the
proposed transferee, the per-Share price offered by the proposed transferee and
the other terms of the Offer.
(B) COMPANY'S OPTION TO PURCHASE. The Company shall have the
right and option to purchase all or any of the Transferable Shares for the price
and upon the other terms hereinafter provided. Such option may be exercised only
by giving written notice to the Transferring Shareholder within thirty (30) days
after the Notice Date, stating the number of Shares which the Company desires to
purchase. Any purchase of Transferable Shares by the Company under this Section
2.1 shall be consummated within ninety (90) days after the Notice Date.
(C) SALE TO THIRD PARTY. If the Company fails to purchase all
of the Transferable Shares pursuant to subsection (b) of this Section 2.1, then
the Transferring Shareholder shall be entitled to sell the unpurchased Shares
for the price and upon the terms and conditions set forth in the Notice of
Offer, subject to the remaining provisions of this Agreement, including, without
limitation, the following:
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(I) The proposed transferee shall become a party to
this Agreement.
(II) If the transfer constitutes a Change of Control
as contemplated by Section 4.1 below, the Transferring Shareholder shall have
complied with the requirements of Section 4.1(a).
Notwithstanding anything in this Agreement to the contrary other than the
provisions of Section 2.2, the Shareholder shall not be entitled to make a
voluntary transfer of his Shares to a third party so long as the Shareholder is
employed by or in a service relationship with the Company or any of its
affiliates.
(D) REOFFER UPON FAILURE TO SELL OR MODIFICATION OF TERMS. If
the Transferring Shareholder fails to consummate a sale or transfer to the
proposed transferee within ninety (90) days after the Notice Date, or if the
proposed transferee modifies the material terms of the offer or makes a new
Offer, then no sale or transfer of the Transferable Shares may be made
thereafter to the proposed transferee or to any other transferee without again
complying in full with the provisions of this Section 2.1.
(E) OPINION OF COUNSEL. Notwithstanding the foregoing, the
Shareholders also agree that no permitted transfer will occur unless and until a
registration statement has been filed for the Shares permitting their transfer
under the Securities Act of 1933, as amended, and any applicable state
securities laws, or the Company has received an opinion of counsel that an
exemption is available and registration is not required under such laws.
2.2 OPTION UPON INVOLUNTARY TRANSFER. If other than by reason of a
Shareholder's death any Shares are transferred by operation of law to any person
other than the Company, or if (i) any Shareholder shall be adjudicated as
bankrupt or make an assignment for the benefit of creditors; (ii) bankruptcy
proceedings in which a Shareholder is alleged to be insolvent or unable to pay
his debts as they mature are instituted by or against that Shareholder and that
Shareholder consents thereto or admits in writing the material allegations of
the petitions filed in those proceedings; (iii) a Shareholder's Shares are
attached; (iv) any judgment is obtained in any legal or equitable proceeding
against a Shareholder and the sale of his Shares is contemplated or threatened
under legal process as a result of that judgment; (v) any execution process is
issued against a Shareholder's Shares; or (vi) any other form of legal
proceeding or process is instituted by which a Shareholder's Shares may be sold
or transferred voluntarily or involuntarily and the same remains undismissed for
sixty (60) days, then in each case, such transfer or event shall be deemed to be
the giving of a Notice of Offer and the Company shall have the right (but not
the obligation), exercisable in accordance with Sections 2.1(b) above, to
purchase any or all of that Shareholder's Shares for a Purchase Price equal to
the Fair Market Value (determined in accordance with Article V below) of such
Shares.
2.3 PURCHASE PRICE. The purchase price for any Share purchased by the
Company under this Article II shall be equal to the lesser of: (a) Fair Market
Value per Share (as described in Article V below); and (b) if the proposed
transfer is a sale, the per-Share price offered by the proposed purchaser and
identified in the Notice of Offer.
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ARTICLE III
PURCHASE OF SHARES UPON DEATH, PERMANENT DISABILITY OR TERMINATION OF
EMPLOYMENT OF A SHAREHOLDER
3.1 OPTION OF COMPANY TO PURCHASE SHARES. Upon: (a) the death or
permanent disability of any Shareholder as certified to the Company by the
Shareholder's physician or, if such disability is insured by the Company, as
determined in accordance with such disability insurance policy, or (b) the
termination of such Shareholder's employment by the Company (with or without
cause) or by the Shareholder for any reason, the Company shall have the right
and option to purchase, and such Shareholder or his personal representative,
estate, heirs or legatees, as the case may be, shall have the obligation to
sell, any or all of such Shareholder's Shares, which option may be exercised at
any time and from time to time by the Company by giving written notice to the
Shareholder or personal representative, estate, heirs or legatees, as the case
may be, stating the number of Shares to be purchased.
3.2 PURCHASE PRICE OF SHARES. The purchase price for any Shares sold
and purchased pursuant to this Article III shall be equal to their Fair Market
Value as determined under Article V of this Agreement. Notwithstanding the
immediately preceding sentence, in the event that the Shareholder's employment
is terminated by the Company for "cause", the purchase price for any Shares sold
and purchased pursuant to this Article III shall be equal to the exercise price
per Share tendered to the Company by the Shareholder upon exercise of the option
pursuant to which the Shares were acquired. For purposes of this Agreement, if
the Shareholder is a party to a written employment agreement with the Company or
an affiliate which contains a definition of "cause", "termination for cause" or
any other similar term or phrase, whether such Shareholder is terminated for
"cause" pursuant to this Article III shall be determined according to the terms
of and in a manner consistent with the provisions of such written employment
agreement. If the Shareholder is not party to such a written employment
agreement with the Company or an affiliate, then for purposes of this Article
III, "cause" shall mean willful misconduct in connection with the Shareholder's
duties or willful failure to perform his or her responsibilities in the best
interests of the Company (including, without limitation, breach by the
Shareholder of any provision of any employment, non-disclosure, non-competition
or other similar agreement between the Shareholder and the Company). The good
faith determination by the Board of Directors of the Company of whether the
Shareholder's employment was terminated by the Company for "cause" shall be
final and binding for all purposes hereunder.
ARTICLE IV
FUNDAMENTAL TRANSACTIONS
4.1 CHANGE OF CONTROL.
(A) Notwithstanding anything contained herein to the contrary,
if at any time a shareholder of the Company or group of shareholders (including
shareholders not party to this Agreement) owning a majority or more of the
voting capital stock proposes to enter into any transaction involving a Change
of Control (defined below) that involves the sale, assignment, tender or
transfer of voting capital stock, the Company and/or the transferring
shareholder(s) may require each Shareholder to participate in such Change of
Control transaction by giving such Shareholders written notice thereof at least
ten (10) days in advance of the date of the transaction or the date that tender
is required, as the case may be. Upon receipt of such notice, each Shareholder
shall tender the same proportionate amount of shares owned by him or her as the
transferring shareholder(s) propose to sell or tender of the Shares
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owned by them, at the same price and upon the same terms and conditions
applicable to the transferring shareholder(s) in the transaction. In addition,
if at any time the Company and/or any shareholder(s) propose to enter into any
Change of Control transaction, the Company and/or transferring shareholder(s)
may require each Shareholder to vote in favor of such transaction, where
approval of the Shareholders is required by law or otherwise sought, by giving
all of the Shareholders notice thereof within the time prescribed by law and the
Company's Certificate of Incorporation and By-Laws for giving notice of a
meeting of Shareholders called for the purpose of approving such transaction. If
the Company or transferring shareholder(s) requires such vote, each Shareholder
agrees that he or she will, if requested, deliver his or her proxy to the person
designated by the Company or such transferring shareholder(s) to vote his or her
shares in favor of such Change of Control transaction.
(B) For purposes of this Section 4.1, a "Change of Control"
shall mean (i) the sale of all or substantially all of the assets of the
Company; (ii) the sale of more than fifty percent (50%) of the outstanding
common stock of the Company in a non-public sale; (iii) any merger, share
exchange, consolidation or other reorganization or business combination of the
Company, if immediately after such transaction either (A) persons who were
directors of the Company immediately prior to such transaction do not constitute
at least a majority of the directors of the surviving entity, or (B) persons who
hold a majority of the voting capital stock of the surviving entity are not
persons who held a majority of the voting capital stock of the Company
immediately prior to such transaction; or (iv) the dissolution or liquidation of
the Company.
4.2 PUBLIC OFFERING. In the event that the Company enters into an
underwriting agreement to make an initial public offering of the common stock of
the Company, each Shareholder shall become a party to any stand-off or lock-up
agreement with respect to his or her Shares as the underwriter may request.
ARTICLE V
FAIR MARKET VALUE; INSURANCE PROCEEDS;
PAYMENT OF PURCHASE PRICE
5.1 IN GENERAL. For purposes of this Agreement, the fair market value
of Shares (the "Fair Market Value") shall be determined in good faith by the
Board of Directors. Fair Market Value shall mean that price at which a willing
buyer would pay a willing seller for the Shares, neither being under any
compulsion to buy or sell and both having reasonable knowledge of the relevant
facts. In making such determination, the Board of Directors may take into
account any valuation factors it deems appropriate or advisable in its sole
discretion, including, without limitation, profitability, financial position,
asset value or other factor relating to the value of the Company, as well as
discounts to account for minority interests and lack of marketability.
5.2 USE OF INSURANCE PROCEEDS. If the Company is required to purchase
the Shares of a deceased Shareholder pursuant to Section 3.1, and the Company is
the owner and beneficiary of any insurance policy on the life of the deceased
Shareholder, the Company may use the total death benefit payable to the
beneficiary under such policy to pay the purchase price for such deceased
Shareholder's Shares, and the excess, if any, of the insurance proceeds over the
purchase price of the Shares shall remain the property of the Company.
5.3 PAYMENT OF PURCHASE PRICE. In the event that the Company purchases
Shares pursuant to this Agreement, an amount equal to at least 25% of the
Purchase Price shall be payable by the
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Company in cash at settlement of the purchase and sale of the Shares. The
balance, if any, of the Purchase Price shall be payable according to the terms
of a three-year Promissory Note (the "Note") in such form as the Company may
specify from time to time. The Note shall reflect the payment of annual
installments of principal and interest, with an interest rate equal to the
applicable federal rate for debt instruments of similar term under Section
1274(d)(1) of the Internal Revenue Code of 1986, as amended, which is in effect
as of the date the Note is made. The Company shall not be obligated to make any
payment due the payee under the Note at a time when the Company does not have
sufficient legally available funds to make such payment or when the payment
would violate the provisions of a senior debt instrument of the Company.
5.4 LEGALLY AVAILABLE FUNDS. If, at the time the Company is obligated
or elects to purchase Shares from any Shareholder hereunder, the Company does
not have funds legally available for the purchase of those Shares, then (a) the
Company shall purchase that number of Shares which it legally may purchase, and
(b) the Company shall remain obligated to purchase any remaining Shares at such
time or times as it has funds legally available for such purpose.
ARTICLE VI
MISCELLANEOUS
6.1 TERMINATION.
This Agreement and all restrictions, obligations and rights hereunder
shall terminate upon the successful completion of any firm underwritten public
offering of equity securities of the Company or as otherwise determined by the
Board of Directors of the Company. The termination of this Agreement for any
reason shall not affect any right or remedy existing hereunder before the
effective date of its termination.
6.2 APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland.
6.3 NOTICES.
Any notice required hereunder or permitted to be given hereunder shall
be given in writing and shall be deemed to have been validly given when
delivered by hand or deposited with the U.S. Postal Service as first-class mail,
postage prepaid, (a) if to the Company, at its then executive office, and (b) if
to a Shareholder, at the address of that Shareholder as then shown on the
Company's records, or at such other address as such Shareholder may have
designated in writing to the Company.
6.4 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Shareholders, and their respective transferees, heirs, personal
representatives, successors and assigns. None of the Shareholders may assign
this Agreement or any of his rights or obligations hereunder. None of the
provisions of this Agreement shall be for the benefit of, or enforceable by, any
creditor of the Company.
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6.5 ENTIRE AGREEMENT; AMENDMENT.
This Agreement represents the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings related to the subject matter hereof. This
Agreement may not be amended or modified except by a writing executed by all of
the parties hereto.
6.6 SEVERABILITY.
If any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be effected or impaired thereby.
6.7 ARBITRATION.
The parties agree that any dispute arising under or in connection with
this Agreement shall be resolved by final and binding arbitration conducted in
Baltimore, Maryland in accordance with the Commercial Rules of the American
Arbitration Association.
6.8 CAPTIONS.
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provision hereof.
6.9 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which when taken together, shall constitute one
and the same instrument.
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.}
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date set forth opposite its or his name.
KNOWLEDGELINK INTERACTIVE, INC.
Date of Execution: By:
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Name:
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(SEAL) Title:
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(SEAL)
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Shareholder
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[SIGNATURE PAGE FOR ADDITIONAL SHAREHOLDERS --
MAY BE DUPLICATED FOR ADDITIONAL
SIGNATURES, INCLUDING COUNTERPART
SIGNATURES, AS NECESSARY]
IN WITNESS WHEREOF, the parties have executed and delivered, and have agreed to
become bound by, the provisions of the Shareholders' Agreement by and among
KnowledgeLink Interactive, Inc. and the other parties listed on Exhibit A
thereto, as the same may be from time to time amended, modified or supplemented,
as of the date indicated below.
Date of Execution:
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Name:
Date of Execution:
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Name:
Date of Execution:
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Name:
Date of Execution:
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Name:
Date of Execution:
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Name:
Date of Execution:
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Name:
Date of Execution:
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Name:
Date of Execution:
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EXHIBIT A
SHAREHOLDERS
EXHIBIT 10.13
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT
INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
STOCK OPTION GRANT AGREEMENT
This Grant Agreement (the "Agreement") is entered into by and between EDWIN R.
ADDISON ("Grantor") and ROBERT KAMINSKI ("Grantee"), effective as of April 1,
1998 (the "Grant Date").
In consideration of the premises, mutual covenants and agreements
herein, the Grantor and Grantee agree as follows:
ARTICLE 1
GRANT OF OPTION
SECTION 1.1 GRANT OF OPTION. The Grantor hereby grants to Grantee a
nonstatutory stock option to purchase from the Grantor, at the price of $1.25
per share (the "Exercise Price"), up to 25,000 shares of common stock of
KnowledgeLink Interactive, Inc. (the "Corporation"), par value of $0.0001 per
share (also referred to in this Agreement as "Stock"), subject to the provisions
of this Agreement (the "Option"). The Option shall expire at 5:00 p.m. Eastern
Time on the tenth anniversary of the Grant Date (the "Expiration Date"), unless
fully exercised or terminated earlier pursuant to this Agreement.
ARTICLE 2
VESTING
SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated
pursuant to the provisions of this Agreement, Grantee shall become vested in the
shares subject to the Option pro rata over three years in accordance with the
vesting schedule attached hereto and made a part hereof (the "Vesting
Schedule"); provided, however, that Grantee must be in the continuous employ of
the Corporation from the Grant Date through the applicable vesting date
specified on the Vesting Schedule for vesting to occur.
SECTION 2.2 ACCELERATION OF VESTING. Unless the Option has earlier
terminated pursuant to the provisions of the Agreement, vesting of the Option
granted to Grantee hereunder shall be accelerated so that the unvested portion
of the Option shall become one hundred percent (100%) vested in Grantee upon a
Change of Control. For purposes of this Agreement, the term "Change of Control"
shall mean (i) the sale of all or
<PAGE>
substantially all of the assets of the Corporation, (ii) the sale of more than
fifty percent (50%) of the outstanding capital stock of the Corporation in a
non-public sale, (iii) the dissolution or liquidation of the Corporation, or
(iv) any merger, share exchange, consolidation or other reorganization or
business combination of the Corporation if immediately after such transaction
either (A) persons who were directors of the Corporation immediately prior to
such transaction do not constitute at least a majority of the directors of the
surviving entity, or (B) persons who hold a majority of the voting capital stock
of the surviving entity are not persons who held a majority of the voting
capital stock of the Corporation immediately prior to such transaction.
ARTICLE 3
EXERCISE OF OPTION
SECTION 3.1 EXERCISABILITY OF OPTION. Pursuant to the terms of the
Agreement, the Option may be exercised at any time, and from time to time, with
respect to the number of shares subject to the Option in which Grantee is then
vested.
SECTION 3.2 SHAREHOLDERS' AGREEMENT. The Grantor in his sole discretion
may require as a condition precedent to the exercise of the Option granted
pursuant to Section 1.1, that Grantee or such other person exercising the Option
be, or shall execute and become, a party to a Shareholders' Agreement in
substantially in the form attached hereto as Exhibit A.
SECTION 3.3 MANNER OF EXERCISE. The Option may be exercised, in whole
or in part, by delivering written notice to the Grantor in such form as the
Grantor may require from time to time; provided, however, that the Option may
not be exercised at any one time as to fewer than one hundred (100) shares (or
such number of shares as to which the Option is then exercisable if such number
of shares then exercisable is less than one hundred (100)). Such notice shall
specify the number of shares of Stock subject to the Option as to which the
Option is being exercised, and shall be accompanied by full payment of the
Exercise Price for such shares. Payment of the Exercise Price shall be made in
cash (or cash equivalents acceptable to the Grantor in the Grantor's
discretion). In the Grantor's sole and absolute discretion, the Grantor may
authorize payment of the Exercise Price to be made, in whole or in part, by such
other means as the Grantor may prescribe. The Option may be exercised only in
multiples of whole shares and no partial shares shall be issued.
If the Stock is registered under Section 12(b) of the Securities
Exchange Act of 1934, as amended, the Grantor, subject to such limitations as he
may determine, may authorize payment of the Exercise Price, in whole or in part,
by delivery of a properly executed exercise notice, together with irrevocable
instructions: (i) to a brokerage firm approved by the Grantor to deliver
promptly to the Grantor the aggregate amount of sale or loan proceeds to pay the
Exercise Price, and (ii) to the Grantor to instruct the Corporation's Transfer
Agent to transfer ownership of the purchased shares and to deliver the
certificates for such purchased shares directly to such brokerage firm.
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SECTION 3.4 TRANSFER OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon
exercise of the Option, in whole or in part, in accordance with the terms of
this Agreement and upon payment of the Exercise Price for the shares of Stock as
to which the Option is exercised and delivery of such executed Shareholders'
Agreement as may be required by the Grantor pursuant to Section 3.2, the Grantor
shall instruct the Corporation's Transfer Agent to transfer ownership of the
purchased shares to the Grantee or such other person exercising the Option, as
the case may be, and to deliver certificates therefor as soon as practicable
thereafter. The stock certificates for any shares of Stock transferred hereunder
shall, unless such shares are registered or an exemption from registration is
available under applicable federal and state law, bear a legend restricting
transferability of such shares and referencing the Shareholders' Agreement, if
applicable.
ARTICLE 4
TERMINATION OF OPTION
SECTION 4.1 TERMINATION, IN GENERAL. The Option granted hereby shall
terminate and be of no force or effect after the Expiration Date set forth in
Section 1.1, unless terminated prior to such time as provided below.
SECTION 4.2 TERMINATION OF EMPLOYMENT FOR REASON OTHER THAN RETIREMENT,
DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the
provisions of the Agreement, (i) the unvested portion of the Option shall
terminate immediately upon the Grantee's termination of employment with the
Corporation for any reason and (ii) the vested portion of the Option shall
terminate ninety days after the date Grantee is no longer employed by the
Corporation and its affiliates for any reason other than Grantee's Retirement,
death or Disability. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period. Notwithstanding the
foregoing, the Option shall terminate in its entirety, regardless of whether the
Option is vested in whole or in part, upon termination of the employment of the
Grantee by the Corporation or an affiliate for "Cause."
If Grantee is a party to a written employment agreement with the
Corporation or an affiliate which contains a definition of "cause," "termination
for cause" or words of similar import, whether Grantee is terminated for "Cause"
pursuant to this Section 4.2 shall be determined according to the terms of and
in a manner consistent with the provisions of such written employment agreement.
If Grantee is not party to such a written employment agreement with the
Corporation or an affiliate, then for purposes of this Section 4.2, "Cause"
shall mean (i) gross negligence or willful misconduct or any substantiated act
by Grantee involving dishonesty or bad faith against the Corporation or an
affiliate, or any act or omission that demonstrates a lack of integrity of
Grantee with respect to the Corporation or an affiliate; (ii) Grantee engaging
in acts or omissions the likely consequence of which is material injury to the
Corporation's or an affiliate's business, property or reputation; (iii) breach
or threatened breach by Grantee of any non-competition or confidentiality
agreement entered into between Grantee and the Corporation or its affiliate;
(iv) chronic use of alcohol, drugs or other similar substances
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affecting Grantee's work performance; or (v) Grantee being convicted of, or
pleading guilty or nolo contendere to, or being indicted for a felony or other
crime involving theft, fraud or moral turpitude. The good faith determination by
the Grantor of whether the Grantee's employment was terminated by the
Corporation or an affiliate for "Cause" shall be final and binding for all
purposes hereunder.
SECTION 4.3 TERMINATION OF EMPLOYMENT BY REASON OF RETIREMENT. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Retirement, to be an employee of
the Corporation or an affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment at any time within ninety
days after such date of termination, but not later than the end of the stated
term of the Option. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Retirement shall mean termination of
employment on or after age 65 or termination of employment on or after the
attainment of such younger age and satisfaction of such minimum service
requirement, if any, specified by the Corporation's qualified retirement plan in
effect at such time, but excluding any termination for Cause.
SECTION 4.4 UPON GRANTEE'S DEATH. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, upon Grantee's death,
(i) the unvested portion of the Option shall terminate immediately and (ii)
Grantee's executor, personal representative, or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
the case may be, may exercise all or any part of the outstanding Option with
respect to the shares of Stock as to which the Option is vested as of the
Grantee's date of death, provided such exercise occurs within six months after
the date of Grantee's death, but not later than the end of the stated term of
the Option. Unless sooner terminated, the Option shall terminate in its entirety
upon the expiration of such six-month period.
SECTION 4.5 TERMINATION OF EMPLOYMENT BY REASON OF DISABILITY. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Disability, to be an employee of
the Corporation or an affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment due to Disability at any
time within ninety days after the date of such termination, but not later than
the end of the stated term of the Option. Unless sooner terminated, the Option
shall terminate in its entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Disability shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or
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mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve
months.
ARTICLE 5
DRAG-ALONG RIGHTS
SECTION 5.1 DRAG-ALONG RIGHTS. If at any time any shareholder of the
Corporation or group of shareholders owning a majority or more of the voting
capital stock of the Corporation proposes to enter into any transaction
involving (i) a sale of more than fifty percent (50%) of the outstanding voting
capital stock of the Corporation in a non-public sale or (ii) any merger or
consolidation of the Corporation immediately after which a majority of the
directors of the surviving entity is not comprised of persons who were directors
of the Corporation immediately prior to such transaction or after which persons
who hold a majority of the common stock of the surviving entity are not persons
who held voting capital stock of the Corporation immediately prior to such
transaction, the Grantor or the Corporation may require Grantee to participate
in such transaction by giving Grantee written notice thereof at least ten (10)
days in advance of the date of the transaction or the date that tender is
required, as the case may be. Upon receipt of such notice, Grantee shall sell,
assign, tender or transfer the same percentage of the Option to the extent
vested as the percentage of the shares of common stock proposed to be sold,
assigned, tendered or transferred by the transferring shareholders collectively,
upon the same terms and conditions applicable to the transferring shareholders
and at a price equal to the difference between the Exercise Price per share
under the Option and the price per share of common stock the transferring
shareholders will receive pursuant to the terms of the transaction. The
provisions of this Section 5.1 shall apply in the event of Grantee's death, to
Grantee's executor, personal representative or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
though such person is Grantee.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or the
Agreement shall be construed as a contract of employment between the Corporation
(or an affiliate or Grantor) and Grantee, or as a contractual right of Grantee
to continue in the employ of the Corporation or an affiliate, or as a limitation
of the right of the Corporation or an affiliate to discharge Grantee at any
time.
SECTION 6.2 NO RIGHTS OF SHAREHOLDER. Grantee shall not have any of the
rights of a shareholder with respect to the shares of common stock that may be
transferred upon the exercise of the Option until such shares of common stock
have been transferred to him upon the due exercise of the Option.
SECTION 6.3 NON-QUALIFIED NATURE OF AGREEMENT. This Agreement is
intended to be an agreement concerning a stock option arrangement which does not
qualify under section 422 of the Internal Revenue Code, and this Agreement shall
be so construed.
-5-
<PAGE>
SECTION 6.4 THE CORPORATION'S RIGHTS. The existence of this Option
shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or other stocks with preference ahead of or
convertible into, or otherwise affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all or
any part of the Corporation's assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
SECTION 6.5 WITHHOLDING OF TAXES. The Corporation or any affiliate
shall have the right to deduct from any compensation or any other payment of any
kind (including withholding the issuance of shares of stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of the Option. In lieu of such deduction, the
Corporation or Grantor may require Grantee to make a cash payment to the
Corporation or an affiliate equal to the amount required to be withheld. If
Grantee does not make such payment when requested, the Grantor may refuse to
instruct the Corporation's Transfer Agent to transfer ownership of the purchased
shares until arrangements satisfactory to the Grantor for such payment have been
made.
SECTION 6.6 GRANTEE. Whenever the word "Grantee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word "Grantee" shall be deemed to include such
person.
SECTION 6.7 NONTRANSFERABILITY OF OPTION. The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution
and during the lifetime of Grantee, the Option may be exercised only by Grantee
or, during the period Grantee is under a legal disability, by Grantee's guardian
or legal representative. Except as provided above, the Option may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.
SECTION 6.8 ADJUSTMENTS; CORPORATE TRANSACTIONS. In the event of
changes in the common stock of the Corporation owned by the Grantor and subject
to this Option by reason of any stock dividend, split-up, recapitalization,
merger, consolidation, business combination or exchange of shares and the like,
the Grantor shall, in his discretion, make appropriate adjustments to the
number, kind and price of shares covered by the Option, and shall, in his
discretion and without the consent of the Grantee, make any other adjustments in
the Option, including but not limited to reducing the number of shares subject
to the Option or providing or mandating alternative settlement methods such as
settlement of the Option in cash or in shares of common stock or other
securities of the Corporation or of any other entity, or in any other matters
which relate to the Option as the Grantor shall, in his sole discretion,
determine to be necessary or appropriate.
-6-
<PAGE>
The Grantor, in his sole discretion and without consent of the Grantee,
may make any modifications to the Option, including but not limited to
cancellation, forfeiture, surrender or other termination of the Option in whole
or in part regardless of the vested status of the Option, in order to facilitate
any business combination that is authorized by the Board of the Corporation to
comply with requirements for treatment as a pooling of interests transaction for
accounting purposes under generally accepted accounting principles.
The Grantor is authorized to make, in his discretion and without the
consent of the Grantee, adjustments in the terms and conditions of the Option in
recognition of unusual or nonrecurring events affecting the Corporation, or the
financial statements of the Corporation or any subsidiary or affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever the
Grantor determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Option.
SECTION 6.9 INVESTMENT REPRESENTATIONS; LEGEND.
-----------------------------------
(a) Representations. The Grantee represents, warrants and covenants
that:
(1) Any shares purchased upon exercise of this Option shall be
acquired for the Grantee's account for investment only and not with a view to,
or for sale in connection with, any distribution of the shares in violation of
the Securities Act of 1933 (the "Securities Act") or any rule or regulation
under the Securities Act, and that he will not distribute the same in violation
of any state or federal law or regulation.
(2) The Grantee has had such opportunity as he has deemed
adequate to obtain from representatives of the Corporation such information as
is necessary to permit the Grantee to evaluate the merits and risks of his
investment in the Corporation.
(3) The Grantee is able to bear the economic risk of holding
shares acquired pursuant to the exercise of this Option for an indefinite
period.
(4) The Grantee understands that (A) the shares acquired
pursuant to the exercise of this Option will not be registered under the
Securities Act or under the securities laws of any state and are "restricted
securities" within the meaning of Rule 144 under the Securities Act; (B) such
shares cannot be sold, transferred or otherwise disposed of unless they are
subsequently registered under the Securities Act, and such registration or
qualification as may be necessary under the securities laws of any state, or an
exemption from registration is then available; (C) in any event, the exemption
from registration under Rule 144 will not be available for at least one (1) year
from date of exercise and even then will not be available unless a public market
then exists for the common stock of the Corporation, adequate information
concerning the Corporation is then available to the public and other terms and
conditions of Rule 144 are complied with; and (D) there is as of the date of
this Agreement no registration statement on file with the Securities and
Exchange Commission with respect to any stock of the Corporation and the neither
the Grantor nor the Corporation has any obligation or current
-7-
<PAGE>
intention to register any shares acquired pursuant to the exercise of this
Option under the Securities Act.
By making payment upon exercise of this Option, the Grantee shall be
deemed to have reaffirmed, as of the date of such payment, the representations
made in this Section 6.9.
(b) Legend on Stock Certificates. All stock certificates representing
shares of common stock of the Corporation transferred by the Grantor to the
Grantee upon exercise of this Option shall have affixed thereto a legend
substantially in the following form, in addition to any other legends required
by applicable state law:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares evidenced
by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Corporation to
the effect that registration under such Act is not required.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection by any shareholder of the Corporation at
the office of the Corporation upon appropriate request and without
charge."
SECTION 6.10 RESERVATION OF SHARES. The Grantor will reserve and set
apart and have at all times, free from preemptive rights, a number of shares of
common stock of the Corporation deliverable upon the exercise of this Option
sufficient to enable the Grantor at any time to fulfill all of his obligations
hereunder. In the event the Grantor desires to sell or otherwise transfer any
portion of these reserved shares to any party other than the Grantee, the
Grantor may unilaterally cancel the Option with respect to those shares. If the
Grantor cancels the Option (or a part of the Option), then the Grantor shall pay
to the Grantee an amount equal to the difference between the aggregate Exercise
Price under the Option with respect to the portion of the Option so cancelled
and the greater of either (i) the fair market value, as determined in good faith
by the Board of Directors of the Corporation, of such shares to be sold or
otherwise transferred by the Grantor, or (ii) such other consideration that the
Grantor receives upon such sale or transfer.
SECTION 6.11 NOTICES. All notices and other communications made or
given pursuant to the Agreement shall be in writing and shall be sufficiently
made or given if hand-delivered or mailed by certified mail, addressed to
Grantee at the address contained in the records of the Corporation, or addressed
to the Grantor, care of the Corporation or, if the receiving party consents in
advance, transmitted and received via telecopy or via such other electronic
transmission mechanism as may be available to the parties.
-8-
<PAGE>
SECTION 6.12 ENTIRE AGREEMENT; MODIFICATION. This Agreement contains
the entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in a written
document signed by each of the parties hereto. Any oral or written agreements,
representations, warranties, written inducements, or other communications made
prior to the execution of the Agreement shall be void and ineffective for all
purposes.
SECTION 6.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, other than the
conflict of laws principles thereof.
SECTION 6.14 HEADINGS. The headings in the Agreement are for reference
purposes only and shall not affect the meaning or interpretation of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WITNESS: EDWIN R. ADDISON
/s/ Ted S. Bagheri /s/ Edwin R. Addison
- ------------------ --------------------
WITNESS: ROBERT KAMINSKI
/s/ Ted S. Bagheri /s/ John Robert Kaminski
- ------------------ ------------------------
-9-
<PAGE>
VESTING SCHEDULE
(ROBERT KAMINSKI 4/1/98 STOCK OPTION GRANT
BY EDWIN R. ADDISON)
<TABLE>
<CAPTION>
- ---------------------------------- -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
AGGREGATE AGGREGATE AGGREGATE
PERCENTAGE PERCENTAGE PERCENTAGE
VESTING OF VESTED VESTING OF VESTED VESTING OF VESTED
DATE SHARES DATE SHARES DATE SHARES
- ---------------------------------- -------------------------------- --------------------------------
5/1/98 2.778% 5/1/99 36.111% 5/1/00 69.444%
- ---------------------------------- -------------------------------- --------------------------------
6/1/98 5.556% 6/1/99 38.889% 6/1/00 72.222%
- ---------------------------------- -------------------------------- --------------------------------
74/1/98 8.333% 7/1/99 41.667% 7/1/00 75.000%
- ---------------------------------- -------------------------------- --------------------------------
8/1/98 11.111% 8/1/99 44.444% 8/1/00 77.778%
- ---------------------------------- -------------------------------- --------------------------------
9/1/98 13.889% 9/1/99 47.222% 9/1/00 80.556%
- ---------------------------------- -------------------------------- --------------------------------
10/1/98 16.667% 10/1/99 50.000% 10/1/00 83.333%
- ---------------------------------- -------------------------------- --------------------------------
11/1/98 19.444% 11/1/99 52.778% 11/1/00 86.111%
- ---------------------------------- -------------------------------- --------------------------------
12/1/98 22.222% 12/1/99 55.556% 12/1/00 88.889%
- ---------------------------------- -------------------------------- --------------------------------
1/1/99 25.000% 1/1/00 58.333% 1/1/01 91.667%
- ---------------------------------- -------------------------------- --------------------------------
2/1/99 27.778% 2/1/00 61.111% 2/1/01 94.444%
- ---------------------------------- -------------------------------- --------------------------------
3/1/99 30.556% 3/1/00 63.889% 3/1/01 97.222%
- ---------------------------------- -------------------------------- --------------------------------
4/1/99 33.333% 4/1/00 66.667% 4/1/01 100%
- ---------------------------------- -------------------------------- --------------------------------
</TABLE>
The number of shares subject to the Option in which the Grantee shall be vested
as of a particular vesting date shall be rounded down to the nearest whole
share. However, vesting will be rounded up to the nearest whole share with
respect to the last vesting date reflected on this Vesting Schedule.
-10-
<PAGE>
EXERCISE NOTICE
Edwin R. Addison
c/o KnowledgeLink Interactive, Inc.
901 Elkridge Landing Road
Suite 350
Linthicum, Maryland 21090
Mr. Addison:
I, Robert Kaminski, hereby exercise the Option granted to me on April
1, 1998, by you, Edwin R. Addison (the "Grantor"), and notify you of my desire
to purchase ____________ shares of KnowledgeLink Interactive, Inc. (the
"Company") common stock at a price of $1.25 per share pursuant to the exercise
of said Option. This will confirm my understanding with respect to the shares to
be transferred to me by reason of this exercise of the Option (the shares to be
transferred pursuant hereto shall be collectively referred to hereinafter as the
"Shares") as follows:
(a) I am acquiring the Shares for my own account for
investment with no present intention of dividing my interest with others or of
reselling or otherwise disposing of any of the Shares.
(b) The Shares being transferred to me are not registered
under the Securities Act of 1933, as amended (the "Act"), in reliance upon one
or more exemptions contained in the Act, and such reliance is based in part on
the above representation.
(c) The certificates for the Shares will bear a legend
substantially as follows:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares evidenced
by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Corporation to
the effect that registration under such Act is not required.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection by any shareholder of the Corporation at
the office of the Corporation upon appropriate request and without
charge."
<PAGE>
Appropriate stop transfer instructions will be issued by the Company and the
Grantor to the Company's Transfer Agent.
(d) Since the Shares have not been registered under the Act,
they must be held indefinitely until an exemption from the registration
requirements of the Act is available or they are subsequently registered, in
which event the representation in Paragraph (a) hereof shall terminate. As a
condition to any transfer of the shares, I understand that the issuer will
require an opinion of counsel satisfactory to the issuer to the effect that such
transfer does not require registration under the Act or any state securities
law.
(e) The Company is not obligated to comply with the
registration requirements of the Act or with the requirements for an exemption
under Regulation A under the Act for my benefit.
(f) I am a party to a Shareholders' Agreement with the Company
and others, pursuant to which I have agreed to certain restrictions on the
transferability of the Shares and other matters relating thereto.
Total Amount Enclosed: $__________
Date:________________________ ____________________________________
Robert Kaminski
Received by Edwin R. Addison on
___________________________, 199__
----------------------------------
Edwin R. Addison
<PAGE>
EXHIBIT A
---------
KNOWLEDGELINK INTERACTIVE, INC.
OPTIONEE/SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (this "Agreement"), dated as of
____________, ____, is made by and among KNOWLEDGELINK INTERACTIVE, INC., a
Delaware corporation (the "Company"), and the other parties now or hereafter
listed on Exhibit A hereto, as the same may be amended from time to time (all
Shareholders party to this Agreement shall be individually and collectively
referred to as the "Shareholder" or the "Shareholders", as applicable).
W I T N E S S E T H:
WHEREAS, the Shareholders are owners of shares of issued and
outstanding common stock of the Company (the "Shares"); and
WHEREAS, the Company and the Shareholders wish to enter into
appropriate agreements among themselves to assure continuity in the ownership
and management of the Company and to provide a market for the Shares upon the
occurrence of certain events which otherwise could be disruptive for the
Company.
NOW, THEREFORE, in consideration of the foregoing and the premises and
the mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
RESTRICTIONS ON TRANSFER;
VOLUNTARY TRANSFER; TRANSFER UPON DEATH
---------------------------------------
1.1 RESTRICTIONS ON TRANSFER.
-------------------------
(A) IN GENERAL. No Shareholder shall sell, transfer, give,
pledge, encumber or otherwise dispose of his Shares without the written consent
of the holders of two-thirds of the issued and outstanding Shares, except in
accordance with the terms of this Agreement, and any attempted transfer in
violation of this Agreement shall be null and void and not recognized for any
purpose.
(B) LIFETIME TRANSFER. Each of the Shareholders agrees that he
will not transfer any Shares now or hereafter owned by him except as hereinafter
provided. For purposes of this Agreement, the term "transfer" shall mean any
sale, assignment or other disposition, whether or not for value, and any pledge,
encumbrance or creation of any other security interest in the Shares.
(C) TRANSFER UPON DEATH. Notwithstanding anything herein to
the contrary, a Shareholder may transfer any of his Shares by will or the laws
of descent and distribution. Any Shares so transferred shall remain subject to
this Agreement, and all rights, obligations and provisions for purchase of such
Shares hereunder shall remain unaffected by such a transfer.
<PAGE>
1.2 LEGEND ON CERTIFICATES.
-----------------------
The Shareholders shall cause the following legend to be conspicuously
noted upon all certificates representing Shares of the Company now or hereafter
owned by each of them:
"Transfer of any interest in the securities represented by
this certificate is subject to a Shareholders' Agreement dated
__________, ____, by and among KnowledgeLink Interactive, Inc., a
Delaware corporation, and the Shareholders (as defined therein), and no
such transfer may be made without compliance with that Agreement. A
copy of that Agreement is available for inspection at the office of the
corporation upon appropriate request.
The Securities represented by this certificate have not been
registered under the Securities Act of 1933 or the applicable
securities act of any state but have been issued in reliance upon
exemptions from registration contained in said acts. No sale, offer to
sell or other transfer of the securities represented by this
certificate may be made unless a registration statement under said acts
is in effect with respect to the securities, or an exemption from the
registration provisions of such acts is then applicable."
An executed copy of this Agreement shall at all times be kept on file at the
office of the Company and shall be open for inspection by each Shareholder or
any person claiming any right or interest through a Shareholder in any Share
which is subject to this Agreement.
ARTICLE II
SHARE TRANSFERS
---------------
2.1 OPTION UPON VOLUNTARY TRANSFER. Except as otherwise provided in
Section 1.1 hereof, any Shareholder who receives a bona fide written offer from
a third party to purchase all or any portion of his Shares (an "Offer"), such
Shareholder (in this context, a "Transferring Shareholder") shall be obligated,
before accepting any such Offer, to first offer such Shares for purchase by the
Company as hereinafter provided.
(A) NOTICE OF TRANSFER. Prior to accepting any Offer, the
Transferring Shareholder shall give written notice (a "Notice of Offer") to the
Company stating the date the Notice of Offer is sent to the Company (the "Notice
Date"), the number of Shares to be transferred by the Transferring Shareholder
pursuant to the Offer (the "Transferable Shares"), the name and address of the
proposed transferee, the per-Share price offered by the proposed transferee and
the other terms of the Offer.
(B) COMPANY'S OPTION TO PURCHASE. The Company shall have the
right and option to purchase all or any of the Transferable Shares for the price
and upon the other terms hereinafter provided. Such option may be exercised only
by giving written notice to the Transferring Shareholder within thirty (30) days
after the Notice Date, stating the number of Shares which the Company desires to
purchase. Any purchase of Transferable Shares by the Company under this Section
2.1 shall be consummated within ninety (90) days after the Notice Date.
(C) SALE TO THIRD PARTY. If the Company fails to purchase all
of the Transferable Shares pursuant to subsection (b) of this Section 2.1, then
the Transferring Shareholder shall be entitled to sell the unpurchased Shares
for the price and upon the terms and conditions set forth in the Notice of
Offer, subject to the remaining provisions of this Agreement, including, without
limitation, the following:
-2-
<PAGE>
(I) The proposed transferee shall become a party to
this Agreement.
(II) If the transfer constitutes a Change of Control
as contemplated by Section 4.1 below, the Transferring Shareholder shall have
complied with the requirements of Section 4.1(a).
Notwithstanding anything in this Agreement to the contrary other than the
provisions of Section 2.2, the Shareholder shall not be entitled to make a
voluntary transfer of his Shares to a third party so long as the Shareholder is
employed by or in a service relationship with the Company or any of its
affiliates.
(D) REOFFER UPON FAILURE TO SELL OR MODIFICATION OF TERMS. If
the Transferring Shareholder fails to consummate a sale or transfer to the
proposed transferee within ninety (90) days after the Notice Date, or if the
proposed transferee modifies the material terms of the offer or makes a new
Offer, then no sale or transfer of the Transferable Shares may be made
thereafter to the proposed transferee or to any other transferee without again
complying in full with the provisions of this Section 2.1.
(E) OPINION OF COUNSEL. Notwithstanding the foregoing, the
Shareholders also agree that no permitted transfer will occur unless and until a
registration statement has been filed for the Shares permitting their transfer
under the Securities Act of 1933, as amended, and any applicable state
securities laws, or the Company has received an opinion of counsel that an
exemption is available and registration is not required under such laws.
2.2 OPTION UPON INVOLUNTARY TRANSFER. If other than by reason of a
Shareholder's death any Shares are transferred by operation of law to any person
other than the Company, or if (i) any Shareholder shall be adjudicated as
bankrupt or make an assignment for the benefit of creditors; (ii) bankruptcy
proceedings in which a Shareholder is alleged to be insolvent or unable to pay
his debts as they mature are instituted by or against that Shareholder and that
Shareholder consents thereto or admits in writing the material allegations of
the petitions filed in those proceedings; (iii) a Shareholder's Shares are
attached; (iv) any judgment is obtained in any legal or equitable proceeding
against a Shareholder and the sale of his Shares is contemplated or threatened
under legal process as a result of that judgment; (v) any execution process is
issued against a Shareholder's Shares; or (vi) any other form of legal
proceeding or process is instituted by which a Shareholder's Shares may be sold
or transferred voluntarily or involuntarily and the same remains undismissed for
sixty (60) days, then in each case, such transfer or event shall be deemed to be
the giving of a Notice of Offer and the Company shall have the right (but not
the obligation), exercisable in accordance with Sections 2.1(b) above, to
purchase any or all of that Shareholder's Shares for a Purchase Price equal to
the Fair Market Value (determined in accordance with Article V below) of such
Shares.
2.3 PURCHASE PRICE. The purchase price for any Share purchased by the
Company under this Article II shall be equal to the lesser of: (a) Fair Market
Value per Share (as described in Article V below); and (b) if the proposed
transfer is a sale, the per-Share price offered by the proposed purchaser and
identified in the Notice of Offer.
-3-
<PAGE>
ARTICLE III
PURCHASE OF SHARES UPON DEATH, PERMANENT DISABILITY OR TERMINATION OF
---------------------------------------------------------------------
EMPLOYMENT OF A SHAREHOLDER
---------------------------
3.1 OPTION OF COMPANY TO PURCHASE SHARES. Upon: (a) the death or
permanent disability of any Shareholder as certified to the Company by the
Shareholder's physician or, if such disability is insured by the Company, as
determined in accordance with such disability insurance policy, or (b) the
termination of such Shareholder's employment by the Company (with or without
cause) or by the Shareholder for any reason, the Company shall have the right
and option to purchase, and such Shareholder or his personal representative,
estate, heirs or legatees, as the case may be, shall have the obligation to
sell, any or all of such Shareholder's Shares, which option may be exercised at
any time and from time to time by the Company by giving written notice to the
Shareholder or personal representative, estate, heirs or legatees, as the case
may be, stating the number of Shares to be purchased.
3.2 PURCHASE PRICE OF SHARES. The purchase price for any Shares sold
and purchased pursuant to this Article III shall be equal to their Fair Market
Value as determined under Article V of this Agreement. Notwithstanding the
immediately preceding sentence, in the event that the Shareholder's employment
is terminated by the Company for "cause", the purchase price for any Shares sold
and purchased pursuant to this Article III shall be equal to the exercise price
per Share tendered to the Company by the Shareholder upon exercise of the option
pursuant to which the Shares were acquired. For purposes of this Agreement, if
the Shareholder is a party to a written employment agreement with the Company or
an affiliate which contains a definition of "cause", "termination for cause" or
any other similar term or phrase, whether such Shareholder is terminated for
"cause" pursuant to this Article III shall be determined according to the terms
of and in a manner consistent with the provisions of such written employment
agreement. If the Shareholder is not party to such a written employment
agreement with the Company or an affiliate, then for purposes of this Article
III, "cause" shall mean willful misconduct in connection with the Shareholder's
duties or willful failure to perform his or her responsibilities in the best
interests of the Company (including, without limitation, breach by the
Shareholder of any provision of any employment, non-disclosure, non-competition
or other similar agreement between the Shareholder and the Company). The good
faith determination by the Board of Directors of the Company of whether the
Shareholder's employment was terminated by the Company for "cause" shall be
final and binding for all purposes hereunder.
ARTICLE IV
FUNDAMENTAL TRANSACTIONS
------------------------
4.1 CHANGE OF CONTROL.
------------------
(A) Notwithstanding anything contained herein to the contrary,
if at any time a shareholder of the Company or group of shareholders (including
shareholders not party to this Agreement) owning a majority or more of the
voting capital stock proposes to enter into any transaction involving a Change
of Control (defined below) that involves the sale, assignment, tender or
transfer of voting capital stock, the Company and/or the transferring
shareholder(s) may require each Shareholder to participate in such Change of
Control transaction by giving such Shareholders written notice thereof at least
ten (10) days in advance of the date of the transaction or the date that tender
is required, as the case may be. Upon receipt of such notice, each Shareholder
shall tender the same proportionate amount of shares owned by him or her as the
transferring shareholder(s) propose to sell or tender of the Shares
-4-
<PAGE>
owned by them, at the same price and upon the same terms and conditions
applicable to the transferring shareholder(s) in the transaction. In addition,
if at any time the Company and/or any shareholder(s) propose to enter into any
Change of Control transaction, the Company and/or transferring shareholder(s)
may require each Shareholder to vote in favor of such transaction, where
approval of the Shareholders is required by law or otherwise sought, by giving
all of the Shareholders notice thereof within the time prescribed by law and the
Company's Certificate of Incorporation and By-Laws for giving notice of a
meeting of Shareholders called for the purpose of approving such transaction. If
the Company or transferring shareholder(s) requires such vote, each Shareholder
agrees that he or she will, if requested, deliver his or her proxy to the person
designated by the Company or such transferring shareholder(s) to vote his or her
shares in favor of such Change of Control transaction.
(B) For purposes of this Section 4.1, a "Change of Control"
shall mean (i) the sale of all or substantially all of the assets of the
Company; (ii) the sale of more than fifty percent (50%) of the outstanding
common stock of the Company in a non-public sale; (iii) any merger, share
exchange, consolidation or other reorganization or business combination of the
Company, if immediately after such transaction either (A) persons who were
directors of the Company immediately prior to such transaction do not constitute
at least a majority of the directors of the surviving entity, or (B) persons who
hold a majority of the voting capital stock of the surviving entity are not
persons who held a majority of the voting capital stock of the Company
immediately prior to such transaction; or (iv) the dissolution or liquidation of
the Company.
4.2 PUBLIC OFFERING. In the event that the Company enters into an
underwriting agreement to make an initial public offering of the common stock of
the Company, each Shareholder shall become a party to any stand-off or lock-up
agreement with respect to his or her Shares as the underwriter may request.
ARTICLE V
FAIR MARKET VALUE; INSURANCE PROCEEDS;
--------------------------------------
PAYMENT OF PURCHASE PRICE
-------------------------
5.1 IN GENERAL. For purposes of this Agreement, the fair market value
of Shares (the "Fair Market Value") shall be determined in good faith by the
Board of Directors. Fair Market Value shall mean that price at which a willing
buyer would pay a willing seller for the Shares, neither being under any
compulsion to buy or sell and both having reasonable knowledge of the relevant
facts. In making such determination, the Board of Directors may take into
account any valuation factors it deems appropriate or advisable in its sole
discretion, including, without limitation, profitability, financial position,
asset value or other factor relating to the value of the Company, as well as
discounts to account for minority interests and lack of marketability.
5.2 USE OF INSURANCE PROCEEDS. If the Company is required to purchase
the Shares of a deceased Shareholder pursuant to Section 3.1, and the Company is
the owner and beneficiary of any insurance policy on the life of the deceased
Shareholder, the Company may use the total death benefit payable to the
beneficiary under such policy to pay the purchase price for such deceased
Shareholder's Shares, and the excess, if any, of the insurance proceeds over the
purchase price of the Shares shall remain the property of the Company.
5.3 PAYMENT OF PURCHASE PRICE. In the event that the Company purchases
Shares pursuant to this Agreement, an amount equal to at least 25% of the
Purchase Price shall be payable by the
-5-
<PAGE>
Company in cash at settlement of the purchase and sale of the Shares. The
balance, if any, of the Purchase Price shall be payable according to the terms
of a three-year Promissory Note (the "Note") in such form as the Company may
specify from time to time. The Note shall reflect the payment of annual
installments of principal and interest, with an interest rate equal to the
applicable federal rate for debt instruments of similar term under Section
1274(d)(1) of the Internal Revenue Code of 1986, as amended, which is in effect
as of the date the Note is made. The Company shall not be obligated to make any
payment due the payee under the Note at a time when the Company does not have
sufficient legally available funds to make such payment or when the payment
would violate the provisions of a senior debt instrument of the Company.
5.4 LEGALLY AVAILABLE FUNDS. If, at the time the Company is obligated
or elects to purchase Shares from any Shareholder hereunder, the Company does
not have funds legally available for the purchase of those Shares, then (a) the
Company shall purchase that number of Shares which it legally may purchase, and
(b) the Company shall remain obligated to purchase any remaining Shares at such
time or times as it has funds legally available for such purpose.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 TERMINATION.
------------
This Agreement and all restrictions, obligations and rights hereunder
shall terminate upon the successful completion of any firm underwritten public
offering of equity securities of the Company or as otherwise determined by the
Board of Directors of the Company. The termination of this Agreement for any
reason shall not affect any right or remedy existing hereunder before the
effective date of its termination.
6.2 APPLICABLE LAW.
---------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland.
6.3 NOTICES.
--------
Any notice required hereunder or permitted to be given hereunder shall
be given in writing and shall be deemed to have been validly given when
delivered by hand or deposited with the U.S. Postal Service as first-class mail,
postage prepaid, (a) if to the Company, at its then executive office, and (b) if
to a Shareholder, at the address of that Shareholder as then shown on the
Company's records, or at such other address as such Shareholder may have
designated in writing to the Company.
6.4 BINDING EFFECT.
---------------
This Agreement shall be binding upon and inure to the benefit of the
Company, the Shareholders, and their respective transferees, heirs, personal
representatives, successors and assigns. None of the Shareholders may assign
this Agreement or any of his rights or obligations hereunder. None of the
provisions of this Agreement shall be for the benefit of, or enforceable by, any
creditor of the Company.
-6-
<PAGE>
6.5 ENTIRE AGREEMENT; AMENDMENT.
----------------------------
This Agreement represents the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings related to the subject matter hereof. This
Agreement may not be amended or modified except by a writing executed by all of
the parties hereto.
6.6 SEVERABILITY.
-------------
If any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be effected or impaired thereby.
6.7 ARBITRATION.
------------
The parties agree that any dispute arising under or in connection with
this Agreement shall be resolved by final and binding arbitration conducted in
Baltimore, Maryland in accordance with the Commercial Rules of the American
Arbitration Association.
6.8 CAPTIONS.
---------
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provision hereof.
6.9 COUNTERPARTS.
-------------
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which when taken together, shall constitute one
and the same instrument.
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.}
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date set forth opposite its or his name.
KNOWLEDGELINK INTERACTIVE, INC.
Date of Execution: By:
------------------ ----------------------------
Name:
---------------------------
(SEAL) Title:
--------------------------
(SEAL)
--------------------------------
Shareholder
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<PAGE>
[SIGNATURE PAGE FOR ADDITIONAL SHAREHOLDERS --
MAY BE DUPLICATED FOR ADDITIONAL
SIGNATURES, INCLUDING COUNTERPART
SIGNATURES, AS NECESSARY]
IN WITNESS WHEREOF, the parties have executed and delivered, and have agreed to
become bound by, the provisions of the Shareholders' Agreement by and among
KnowledgeLink Interactive, Inc. and the other parties listed on Exhibit A
thereto, as the same may be from time to time amended, modified or supplemented,
as of the date indicated below.
Date of Execution:
------------------ ------------------
Name:
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Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
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Date of Execution:
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Name:
---- --------------
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<PAGE>
EXHIBIT A
SHAREHOLDERS
------------
-10-
EXHIBIT 10.14
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT
INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
STOCK OPTION GRANT AGREEMENT
This Grant Agreement (the "Agreement") is entered into by and between EDWIN R.
ADDISON ("Grantor") and ROBERT KAMINSKI ("Grantee"), effective as of January 1,
1998 (the "Grant Date").
In consideration of the premises, mutual covenants and agreements
herein, the Grantor and Grantee agree as follows:
ARTICLE 1
GRANT OF OPTION
SECTION 1.1 GRANT OF OPTION. The Grantor hereby grants to Grantee a
nonstatutory stock option to purchase from the Grantor, at the price of $1.00
per share (the "Exercise Price"), up to 75,000 shares of common stock of
KnowledgeLink Interactive, Inc. (the "Corporation"), par value of $0.0001 per
share (also referred to in this Agreement as "Stock"), subject to the provisions
of this Agreement (the "Option"). The Option shall expire at 5:00 p.m. Eastern
Time on the tenth anniversary of the Grant Date (the "Expiration Date"), unless
fully exercised or terminated earlier pursuant to this Agreement.
ARTICLE 2
VESTING
SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated
pursuant to the provisions of this Agreement, Grantee shall become vested in the
shares subject to the Option pro rata over three years in accordance with the
vesting schedule attached hereto and made a part hereof (the "Vesting
Schedule"); provided, however, that Grantee must be in the continuous employ of
the Corporation from the Grant Date through the applicable vesting date
specified on the Vesting Schedule for vesting to occur.
SECTION 2.2 ACCELERATION OF VESTING. Unless the Option has earlier
terminated pursuant to the provisions of the Agreement, vesting of the Option
granted to Grantee hereunder shall be accelerated so that the unvested portion
of the Option shall become one hundred percent (100%) vested in Grantee upon a
Change of Control. For purposes of this Agreement, the term "Change of Control"
shall mean (i) the sale of all or
<PAGE>
substantially all of the assets of the Corporation, (ii) the sale of more than
fifty percent (50%) of the outstanding capital stock of the Corporation in a
non-public sale, (iii) the dissolution or liquidation of the Corporation, or
(iv) any merger, share exchange, consolidation or other reorganization or
business combination of the Corporation if immediately after such transaction
either (A) persons who were directors of the Corporation immediately prior to
such transaction do not constitute at least a majority of the directors of the
surviving entity, or (B) persons who hold a majority of the voting capital stock
of the surviving entity are not persons who held a majority of the voting
capital stock of the Corporation immediately prior to such transaction.
ARTICLE 3
EXERCISE OF OPTION
SECTION 3.1 EXERCISABILITY OF OPTION. Pursuant to the terms of the
Agreement, the Option may be exercised at any time, and from time to time, with
respect to the number of shares subject to the Option in which Grantee is then
vested.
SECTION 3.2 SHAREHOLDERS' AGREEMENT. The Grantor in his sole discretion
may require as a condition precedent to the exercise of the Option granted
pursuant to Section 1.1, that Grantee or such other person exercising the Option
be, or shall execute and become, a party to a Shareholders' Agreement in
substantially in the form attached hereto as Exhibit A.
SECTION 3.3 MANNER OF EXERCISE. The Option may be exercised, in whole
or in part, by delivering written notice to the Grantor in such form as the
Grantor may require from time to time; provided, however, that the Option may
not be exercised at any one time as to fewer than one hundred (100) shares (or
such number of shares as to which the Option is then exercisable if such number
of shares then exercisable is less than one hundred (100)). Such notice shall
specify the number of shares of Stock subject to the Option as to which the
Option is being exercised, and shall be accompanied by full payment of the
Exercise Price for such shares. Payment of the Exercise Price shall be made in
cash (or cash equivalents acceptable to the Grantor in the Grantor's
discretion). In the Grantor's sole and absolute discretion, the Grantor may
authorize payment of the Exercise Price to be made, in whole or in part, by such
other means as the Grantor may prescribe. The Option may be exercised only in
multiples of whole shares and no partial shares shall be issued.
If the Stock is registered under Section 12(b) of the Securities
Exchange Act of 1934, as amended, the Grantor, subject to such limitations as he
may determine, may authorize payment of the Exercise Price, in whole or in part,
by delivery of a properly executed exercise notice, together with irrevocable
instructions: (i) to a brokerage firm approved by the Grantor to deliver
promptly to the Grantor the aggregate amount of sale or loan proceeds to pay the
Exercise Price, and (ii) to the Grantor to instruct the Corporation's Transfer
Agent to transfer ownership of the purchased shares and to deliver the
certificates for such purchased shares directly to such brokerage firm.
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<PAGE>
SECTION 3.4 TRANSFER OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon
exercise of the Option, in whole or in part, in accordance with the terms of
this Agreement and upon payment of the Exercise Price for the shares of Stock as
to which the Option is exercised and delivery of such executed Shareholders'
Agreement as may be required by the Grantor pursuant to Section 3.2, the Grantor
shall instruct the Corporation's Transfer Agent to transfer ownership of the
purchased shares to the Grantee or such other person exercising the Option, as
the case may be, and to deliver certificates therefor as soon as practicable
thereafter. The stock certificates for any shares of Stock transferred hereunder
shall, unless such shares are registered or an exemption from registration is
available under applicable federal and state law, bear a legend restricting
transferability of such shares and referencing the Shareholders' Agreement, if
applicable.
ARTICLE 4
TERMINATION OF OPTION
SECTION 4.1 TERMINATION, IN GENERAL. The Option granted hereby shall
terminate and be of no force or effect after the Expiration Date set forth in
Section 1.1, unless terminated prior to such time as provided below.
SECTION 4.2 TERMINATION OF EMPLOYMENT FOR REASON OTHER THAN RETIREMENT,
DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the
provisions of the Agreement, (i) the unvested portion of the Option shall
terminate immediately upon the Grantee's termination of employment with the
Corporation for any reason and (ii) the vested portion of the Option shall
terminate ninety days after the date Grantee is no longer employed by the
Corporation and its affiliates for any reason other than Grantee's Retirement,
death or Disability. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period. Notwithstanding the
foregoing, the Option shall terminate in its entirety, regardless of whether the
Option is vested in whole or in part, upon termination of the employment of the
Grantee by the Corporation or an affiliate for "Cause."
If Grantee is a party to a written employment agreement with the
Corporation or an affiliate which contains a definition of "cause," "termination
for cause" or words of similar import, whether Grantee is terminated for "Cause"
pursuant to this Section 4.2 shall be determined according to the terms of and
in a manner consistent with the provisions of such written employment agreement.
If Grantee is not party to such a written employment agreement with the
Corporation or an affiliate, then for purposes of this Section 4.2, "Cause"
shall mean (i) gross negligence or willful misconduct or any substantiated act
by Grantee involving dishonesty or bad faith against the Corporation or an
affiliate, or any act or omission that demonstrates a lack of integrity of
Grantee with respect to the Corporation or an affiliate; (ii) Grantee engaging
in acts or omissions the likely consequence of which is material injury to the
Corporation's or an affiliate's business, property or reputation; (iii) breach
or threatened breach by Grantee of any non-competition or confidentiality
agreement entered into between Grantee and the Corporation or its affiliate;
(iv) chronic use of alcohol, drugs or other similar substances
-3-
<PAGE>
affecting Grantee's work performance; or (v) Grantee being convicted of, or
pleading guilty or nolo contendere to, or being indicted for a felony or other
crime involving theft, fraud or moral turpitude. The good faith determination by
the Grantor of whether the Grantee's employment was terminated by the
Corporation or an affiliate for "Cause" shall be final and binding for all
purposes hereunder.
SECTION 4.3 TERMINATION OF EMPLOYMENT BY REASON OF RETIREMENT. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Retirement, to be an employee of
the Corporation or an affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment at any time within ninety
days after such date of termination, but not later than the end of the stated
term of the Option. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Retirement shall mean termination of
employment on or after age 65 or termination of employment on or after the
attainment of such younger age and satisfaction of such minimum service
requirement, if any, specified by the Corporation's qualified retirement plan in
effect at such time, but excluding any termination for Cause.
SECTION 4.4 UPON GRANTEE'S DEATH. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, upon Grantee's death,
(i) the unvested portion of the Option shall terminate immediately and (ii)
Grantee's executor, personal representative, or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
the case may be, may exercise all or any part of the outstanding Option with
respect to the shares of Stock as to which the Option is vested as of the
Grantee's date of death, provided such exercise occurs within six months after
the date of Grantee's death, but not later than the end of the stated term of
the Option. Unless sooner terminated, the Option shall terminate in its entirety
upon the expiration of such six-month period.
SECTION 4.5 TERMINATION OF EMPLOYMENT BY REASON OF DISABILITY. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Disability, to be an employee of
the Corporation or an affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment due to Disability at any
time within ninety days after the date of such termination, but not later than
the end of the stated term of the Option. Unless sooner terminated, the Option
shall terminate in its entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Disability shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or
-4-
<PAGE>
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve
months.
ARTICLE 5
DRAG-ALONG RIGHTS
SECTION 5.1 DRAG-ALONG RIGHTS. If at any time any shareholder of the
Corporation or group of shareholders owning a majority or more of the voting
capital stock of the Corporation proposes to enter into any transaction
involving (i) a sale of more than fifty percent (50%) of the outstanding voting
capital stock of the Corporation in a non-public sale or (ii) any merger or
consolidation of the Corporation immediately after which a majority of the
directors of the surviving entity is not comprised of persons who were directors
of the Corporation immediately prior to such transaction or after which persons
who hold a majority of the common stock of the surviving entity are not persons
who held voting capital stock of the Corporation immediately prior to such
transaction, the Grantor or the Corporation may require Grantee to participate
in such transaction by giving Grantee written notice thereof at least ten (10)
days in advance of the date of the transaction or the date that tender is
required, as the case may be. Upon receipt of such notice, Grantee shall sell,
assign, tender or transfer the same percentage of the Option to the extent
vested as the percentage of the shares of common stock proposed to be sold,
assigned, tendered or transferred by the transferring shareholders collectively,
upon the same terms and conditions applicable to the transferring shareholders
and at a price equal to the difference between the Exercise Price per share
under the Option and the price per share of common stock the transferring
shareholders will receive pursuant to the terms of the transaction. The
provisions of this Section 5.1 shall apply in the event of Grantee's death, to
Grantee's executor, personal representative or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
though such person is Grantee.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or the
Agreement shall be construed as a contract of employment between the Corporation
(or an affiliate or Grantor) and Grantee, or as a contractual right of Grantee
to continue in the employ of the Corporation or an affiliate, or as a limitation
of the right of the Corporation or an affiliate to discharge Grantee at any
time.
SECTION 6.2 NO RIGHTS OF SHAREHOLDER. Grantee shall not have any of the
rights of a shareholder with respect to the shares of common stock that may be
transferred upon the exercise of the Option until such shares of common stock
have been transferred to him upon the due exercise of the Option.
SECTION 6.3 NON-QUALIFIED NATURE OF AGREEMENT. This Agreement is
intended to be an agreement concerning a stock option arrangement which does not
qualify under section 422 of the Internal Revenue Code, and this Agreement shall
be so construed.
-5-
<PAGE>
SECTION 6.4 THE CORPORATION'S RIGHTS. The existence of this Option
shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or other stocks with preference ahead of or
convertible into, or otherwise affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all or
any part of the Corporation's assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
SECTION 6.5 WITHHOLDING OF TAXES. The Corporation or any affiliate
shall have the right to deduct from any compensation or any other payment of any
kind (including withholding the issuance of shares of stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of the Option. In lieu of such deduction, the
Corporation or Grantor may require Grantee to make a cash payment to the
Corporation or an affiliate equal to the amount required to be withheld. If
Grantee does not make such payment when requested, the Grantor may refuse to
instruct the Corporation's Transfer Agent to transfer ownership of the purchased
shares until arrangements satisfactory to the Grantor for such payment have been
made.
SECTION 6.6 GRANTEE. Whenever the word "Grantee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word "Grantee" shall be deemed to include such
person.
SECTION 6.7 NONTRANSFERABILITY OF OPTION. The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution
and during the lifetime of Grantee, the Option may be exercised only by Grantee
or, during the period Grantee is under a legal disability, by Grantee's guardian
or legal representative. Except as provided above, the Option may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.
SECTION 6.8 ADJUSTMENTS; CORPORATE TRANSACTIONS. In the event of
changes in the common stock of the Corporation owned by the Grantor and subject
to this Option by reason of any stock dividend, split-up, recapitalization,
merger, consolidation, business combination or exchange of shares and the like,
the Grantor shall, in his discretion, make appropriate adjustments to the
number, kind and price of shares covered by the Option, and shall, in his
discretion and without the consent of the Grantee, make any other adjustments in
the Option, including but not limited to reducing the number of shares subject
to the Option or providing or mandating alternative settlement methods such as
settlement of the Option in cash or in shares of common stock or other
securities of the Corporation or of any other entity, or in any other matters
which relate to the Option as the Grantor shall, in his sole discretion,
determine to be necessary or appropriate.
-6-
<PAGE>
The Grantor, in his sole discretion and without consent of the Grantee,
may make any modifications to the Option, including but not limited to
cancellation, forfeiture, surrender or other termination of the Option in whole
or in part regardless of the vested status of the Option, in order to facilitate
any business combination that is authorized by the Board of the Corporation to
comply with requirements for treatment as a pooling of interests transaction for
accounting purposes under generally accepted accounting principles.
The Grantor is authorized to make, in his discretion and without the
consent of the Grantee, adjustments in the terms and conditions of the Option in
recognition of unusual or nonrecurring events affecting the Corporation, or the
financial statements of the Corporation or any subsidiary or affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever the
Grantor determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Option.
SECTION 6.9 INVESTMENT REPRESENTATIONS; LEGEND.
(a) Representations. The Grantee represents, warrants and covenants
that:
(1) Any shares purchased upon exercise of this Option shall be
acquired for the Grantee's account for investment only and not with a view to,
or for sale in connection with, any distribution of the shares in violation of
the Securities Act of 1933 (the "Securities Act") or any rule or regulation
under the Securities Act, and that he will not distribute the same in violation
of any state or federal law or regulation.
(2) The Grantee has had such opportunity as he has deemed
adequate to obtain from representatives of the Corporation such information as
is necessary to permit the Grantee to evaluate the merits and risks of his
investment in the Corporation.
(3) The Grantee is able to bear the economic risk of holding
shares acquired pursuant to the exercise of this Option for an indefinite
period.
(4) The Grantee understands that (A) the shares acquired
pursuant to the exercise of this Option will not be registered under the
Securities Act or under the securities laws of any state and are "restricted
securities" within the meaning of Rule 144 under the Securities Act; (B) such
shares cannot be sold, transferred or otherwise disposed of unless they are
subsequently registered under the Securities Act, and such registration or
qualification as may be necessary under the securities laws of any state, or an
exemption from registration is then available; (C) in any event, the exemption
from registration under Rule 144 will not be available for at least one (1) year
from date of exercise and even then will not be available unless a public market
then exists for the common stock of the Corporation, adequate information
concerning the Corporation is then available to the public and other terms and
conditions of Rule 144 are complied with; and (D) there is as of the date of
this Agreement no registration statement on file with the Securities and
Exchange Commission with respect to any stock of the Corporation and the neither
the Grantor nor the Corporation has any obligation or current
-7-
<PAGE>
intention to register any shares acquired pursuant to the exercise of this
Option under the Securities Act.
By making payment upon exercise of this Option, the Grantee shall be
deemed to have reaffirmed, as of the date of such payment, the representations
made in this Section 6.9.
(b) Legend on Stock Certificates. All stock certificates representing
shares of common stock of the Corporation transferred by the Grantor to the
Grantee upon exercise of this Option shall have affixed thereto a legend
substantially in the following form, in addition to any other legends required
by applicable state law:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares evidenced
by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Corporation to
the effect that registration under such Act is not required.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection by any shareholder of the Corporation at
the office of the Corporation upon appropriate request and without
charge."
SECTION 6.10 RESERVATION OF SHARES. The Grantor will reserve and set
apart and have at all times, free from preemptive rights, a number of shares of
common stock of the Corporation deliverable upon the exercise of this Option
sufficient to enable the Grantor at any time to fulfill all of his obligations
hereunder. In the event the Grantor desires to sell or otherwise transfer any
portion of these reserved shares to any party other than the Grantee, the
Grantor may unilaterally cancel the Option with respect to those shares. If the
Grantor cancels the Option (or a part of the Option), then the Grantor shall pay
to the Grantee an amount equal to the difference between the aggregate Exercise
Price under the Option with respect to the portion of the Option so cancelled
and the greater of either (i) the fair market value, as determined in good faith
by the Board of Directors of the Corporation, of such shares to be sold or
otherwise transferred by the Grantor, or (ii) such other consideration that the
Grantor receives upon such sale or transfer.
SECTION 6.11 NOTICES. All notices and other communications made or
given pursuant to the Agreement shall be in writing and shall be sufficiently
made or given if hand-delivered or mailed by certified mail, addressed to
Grantee at the address contained in the records of the Corporation, or addressed
to the Grantor, care of the Corporation or, if the receiving party consents in
advance, transmitted and received via telecopy or via such other electronic
transmission mechanism as may be available to the parties.
-8-
<PAGE>
SECTION 6.12 ENTIRE AGREEMENT; MODIFICATION. This Agreement contains
the entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in a written
document signed by each of the parties hereto. Any oral or written agreements,
representations, warranties, written inducements, or other communications made
prior to the execution of the Agreement shall be void and ineffective for all
purposes.
SECTION 6.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, other than the
conflict of laws principles thereof.
SECTION 6.14 HEADINGS. The headings in the Agreement are for reference
purposes only and shall not affect the meaning or interpretation of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WITNESS: EDWIN R. ADDISON
/s/ Ted S. Bagheri /s / Edwin R. Addison
- --------------------------- ------------------------------
WITNESS: ROBERT KAMINSKI
/s/ Ted S. Bagheri /s/ John Robert Kaminski
- --------------------------- ------------------------------
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<PAGE>
VESTING SCHEDULE
(ROBERT KAMINSKI 1/1/98 STOCK OPTION GRANT
BY EDWIN R. ADDISON)
<TABLE>
<CAPTION>
- --------------- ------------------ ------------- ------------------ ------------ -------------------
AGGREGATE AGGREGATE AGGREGATE
PERCENTAGE PERCENTAGE PERCENTAGE
VESTING OF VESTED VESTING OF VESTED VESTING OF VESTED
DATE SHARES DATE SHARES DATE SHARES
- --------------- ------------------ ------------- ------------------ ------------ -------------------
<S> <C> <C> <C> <C> <C>
2/1/98 2.778% 2/1/99 36.111% 2/1/00 69.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
3/1/98 5.556% 3/1/99 38.889% 3/1/00 72.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
4/1/98 8.333% 4/1/99 41.667% 4/1/00 75.000%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
5/1/98 11.111% 5/1/99 44.444% 5/1/00 77.778%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
6/1/98 13.889% 6/1/99 47.222% 6/1/00 80.556%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
7/1/98 16.667% 7/1/99 50.000% 7/1/00 83.333%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
8/1/98 19.444% 8/1/99 52.778% 8/1/00 86.111%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
9/1/98 22.222% 9/1/99 55.556% 9/1/00 88.889%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
10/1/98 25.000% 10/1/99 58.333% 10/1/00 91.667%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
11/1/98 27.778% 11/1/99 61.111% 11/1/00 94.444%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
12/1/98 30.556% 12/1/99 63.889% 12/1/00 97.222%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
1/1/99 33.333% 1/1/00 66.667% 1/1/01 100%
- --------------- ------------------ ------------- ------------------ ------------ -------------------
</TABLE>
The number of shares subject to the Option in which the Grantee shall be vested
as of a particular vesting date shall be rounded down to the nearest whole
share. However, vesting will be rounded up to the nearest whole share with
respect to the last vesting date reflected on this Vesting Schedule.
-10-
<PAGE>
EXERCISE NOTICE
Edwin R. Addison
c/o KnowledgeLink Interactive, Inc.
901 Elkridge Landing Road
Suite 350
Linthicum, Maryland 21090
Mr. Addison:
I, Robert Kaminski, hereby exercise the Option granted to me on January
1, 1998, by you, Edwin R. Addison (the "Grantor"), and notify you of my desire
to purchase ____________ shares of KnowledgeLink Interactive, Inc. (the
"Company") common stock at a price of $1.00 per share pursuant to the exercise
of said Option. This will confirm my understanding with respect to the shares to
be transferred to me by reason of this exercise of the Option (the shares to be
transferred pursuant hereto shall be collectively referred to hereinafter as the
"Shares") as follows:
(a) I am acquiring the Shares for my own account for
investment with no present intention of dividing my interest with others or of
reselling or otherwise disposing of any of the Shares.
(b) The Shares being transferred to me are not registered
under the Securities Act of 1933, as amended (the "Act"), in reliance upon one
or more exemptions contained in the Act, and such reliance is based in part on
the above representation.
(c) The certificates for the Shares will bear a legend
substantially as follows:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares evidenced
by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Corporation to
the effect that registration under such Act is not required.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection by any shareholder of the Corporation at
the office of the Corporation upon appropriate request and without
charge."
<PAGE>
Appropriate stop transfer instructions will be issued by the Company and the
Grantor to the Company's Transfer Agent.
(d) Since the Shares have not been registered under the Act,
they must be held indefinitely until an exemption from the registration
requirements of the Act is available or they are subsequently registered, in
which event the representation in Paragraph (a) hereof shall terminate. As a
condition to any transfer of the shares, I understand that the issuer will
require an opinion of counsel satisfactory to the issuer to the effect that such
transfer does not require registration under the Act or any state securities
law.
(e) The Company is not obligated to comply with the
registration requirements of the Act or with the requirements for an exemption
under Regulation A under the Act for my benefit.
(f) I am a party to a Shareholders' Agreement with the Company
and others, pursuant to which I have agreed to certain restrictions on the
transferability of the Shares and other matters relating thereto.
Total Amount Enclosed: $__________
Date:
------------------------------- -----------------------------------
Robert Kaminski
Received by Edwin R. Addison on
, 199_
--------------------------
--------------------------------
Edwin R. Addison
<PAGE>
EXHIBIT A
KNOWLEDGELINK INTERACTIVE, INC.
OPTIONEE/SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (this "Agreement"), dated as of
____________, ____, is made by and among KNOWLEDGELINK INTERACTIVE, INC., a
Delaware corporation (the "Company"), and the other parties now or hereafter
listed on Exhibit A hereto, as the same may be amended from time to time (all
Shareholders party to this Agreement shall be individually and collectively
referred to as the "Shareholder" or the "Shareholders", as applicable).
W I T N E S S E T H:
WHEREAS, the Shareholders are owners of shares of issued and
outstanding common stock of the Company (the "Shares"); and
WHEREAS, the Company and the Shareholders wish to enter into
appropriate agreements among themselves to assure continuity in the ownership
and management of the Company and to provide a market for the Shares upon the
occurrence of certain events which otherwise could be disruptive for the
Company.
NOW, THEREFORE, in consideration of the foregoing and the premises and
the mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
RESTRICTIONS ON TRANSFER;
VOLUNTARY TRANSFER; TRANSFER UPON DEATH
1.1 RESTRICTIONS ON TRANSFER.
(A) IN GENERAL. No Shareholder shall sell, transfer, give,
pledge, encumber or otherwise dispose of his Shares without the written consent
of the holders of two-thirds of the issued and outstanding Shares, except in
accordance with the terms of this Agreement, and any attempted transfer in
violation of this Agreement shall be null and void and not recognized for any
purpose.
(B) LIFETIME TRANSFER. Each of the Shareholders agrees that he
will not transfer any Shares now or hereafter owned by him except as hereinafter
provided. For purposes of this Agreement, the term "transfer" shall mean any
sale, assignment or other disposition, whether or not for value, and any pledge,
encumbrance or creation of any other security interest in the Shares.
(C) TRANSFER UPON DEATH. Notwithstanding anything herein to
the contrary, a Shareholder may transfer any of his Shares by will or the laws
of descent and distribution. Any Shares so transferred shall remain subject to
this Agreement, and all rights, obligations and provisions for purchase of such
Shares hereunder shall remain unaffected by such a transfer.
<PAGE>
1.2 LEGEND ON CERTIFICATES.
The Shareholders shall cause the following legend to be conspicuously
noted upon all certificates representing Shares of the Company now or hereafter
owned by each of them:
"Transfer of any interest in the securities represented by
this certificate is subject to a Shareholders' Agreement dated
__________, ____, by and among KnowledgeLink Interactive, Inc., a
Delaware corporation, and the Shareholders (as defined therein), and no
such transfer may be made without compliance with that Agreement. A
copy of that Agreement is available for inspection at the office of the
corporation upon appropriate request.
The Securities represented by this certificate have not been
registered under the Securities Act of 1933 or the applicable
securities act of any state but have been issued in reliance upon
exemptions from registration contained in said acts. No sale, offer to
sell or other transfer of the securities represented by this
certificate may be made unless a registration statement under said acts
is in effect with respect to the securities, or an exemption from the
registration provisions of such acts is then applicable."
An executed copy of this Agreement shall at all times be kept on file at the
office of the Company and shall be open for inspection by each Shareholder or
any person claiming any right or interest through a Shareholder in any Share
which is subject to this Agreement.
ARTICLE II
SHARE TRANSFERS
2.1 OPTION UPON VOLUNTARY TRANSFER. Except as otherwise provided in
Section 1.1 hereof, any Shareholder who receives a bona fide written offer from
a third party to purchase all or any portion of his Shares (an "Offer"), such
Shareholder (in this context, a "Transferring Shareholder") shall be obligated,
before accepting any such Offer, to first offer such Shares for purchase by the
Company as hereinafter provided.
(A) NOTICE OF TRANSFER. Prior to accepting any Offer, the
Transferring Shareholder shall give written notice (a "Notice of Offer") to the
Company stating the date the Notice of Offer is sent to the Company (the "Notice
Date"), the number of Shares to be transferred by the Transferring Shareholder
pursuant to the Offer (the "Transferable Shares"), the name and address of the
proposed transferee, the per-Share price offered by the proposed transferee and
the other terms of the Offer.
(B) COMPANY'S OPTION TO PURCHASE. The Company shall have the
right and option to purchase all or any of the Transferable Shares for the price
and upon the other terms hereinafter provided. Such option may be exercised only
by giving written notice to the Transferring Shareholder within thirty (30) days
after the Notice Date, stating the number of Shares which the Company desires to
purchase. Any purchase of Transferable Shares by the Company under this Section
2.1 shall be consummated within ninety (90) days after the Notice Date.
(C) SALE TO THIRD PARTY. If the Company fails to purchase all
of the Transferable Shares pursuant to subsection (b) of this Section 2.1, then
the Transferring Shareholder shall be entitled to sell the unpurchased Shares
for the price and upon the terms and conditions set forth in the Notice of
Offer, subject to the remaining provisions of this Agreement, including, without
limitation, the following:
-2-
<PAGE>
(I) The proposed transferee shall become a party to
this Agreement.
(II) If the transfer constitutes a Change of Control
as contemplated by Section 4.1 below, the Transferring Shareholder shall have
complied with the requirements of Section 4.1(a).
Notwithstanding anything in this Agreement to the contrary other than the
provisions of Section 2.2, the Shareholder shall not be entitled to make a
voluntary transfer of his Shares to a third party so long as the Shareholder is
employed by or in a service relationship with the Company or any of its
affiliates.
(D) REOFFER UPON FAILURE TO SELL OR MODIFICATION OF TERMS. If
the Transferring Shareholder fails to consummate a sale or transfer to the
proposed transferee within ninety (90) days after the Notice Date, or if the
proposed transferee modifies the material terms of the offer or makes a new
Offer, then no sale or transfer of the Transferable Shares may be made
thereafter to the proposed transferee or to any other transferee without again
complying in full with the provisions of this Section 2.1.
(E) OPINION OF COUNSEL. Notwithstanding the foregoing, the
Shareholders also agree that no permitted transfer will occur unless and until a
registration statement has been filed for the Shares permitting their transfer
under the Securities Act of 1933, as amended, and any applicable state
securities laws, or the Company has received an opinion of counsel that an
exemption is available and registration is not required under such laws.
2.2 OPTION UPON INVOLUNTARY TRANSFER. If other than by reason of a
Shareholder's death any Shares are transferred by operation of law to any person
other than the Company, or if (i) any Shareholder shall be adjudicated as
bankrupt or make an assignment for the benefit of creditors; (ii) bankruptcy
proceedings in which a Shareholder is alleged to be insolvent or unable to pay
his debts as they mature are instituted by or against that Shareholder and that
Shareholder consents thereto or admits in writing the material allegations of
the petitions filed in those proceedings; (iii) a Shareholder's Shares are
attached; (iv) any judgment is obtained in any legal or equitable proceeding
against a Shareholder and the sale of his Shares is contemplated or threatened
under legal process as a result of that judgment; (v) any execution process is
issued against a Shareholder's Shares; or (vi) any other form of legal
proceeding or process is instituted by which a Shareholder's Shares may be sold
or transferred voluntarily or involuntarily and the same remains undismissed for
sixty (60) days, then in each case, such transfer or event shall be deemed to be
the giving of a Notice of Offer and the Company shall have the right (but not
the obligation), exercisable in accordance with Sections 2.1(b) above, to
purchase any or all of that Shareholder's Shares for a Purchase Price equal to
the Fair Market Value (determined in accordance with Article V below) of such
Shares.
2.3 PURCHASE PRICE. The purchase price for any Share purchased by the
Company under this Article II shall be equal to the lesser of: (a) Fair Market
Value per Share (as described in Article V below); and (b) if the proposed
transfer is a sale, the per-Share price offered by the proposed purchaser and
identified in the Notice of Offer.
-3-
<PAGE>
ARTICLE III
PURCHASE OF SHARES UPON DEATH, PERMANENT DISABILITY OR TERMINATION OF
EMPLOYMENT OF A SHAREHOLDER
3.1 OPTION OF COMPANY TO PURCHASE SHARES. Upon: (a) the death or
permanent disability of any Shareholder as certified to the Company by the
Shareholder's physician or, if such disability is insured by the Company, as
determined in accordance with such disability insurance policy, or (b) the
termination of such Shareholder's employment by the Company (with or without
cause) or by the Shareholder for any reason, the Company shall have the right
and option to purchase, and such Shareholder or his personal representative,
estate, heirs or legatees, as the case may be, shall have the obligation to
sell, any or all of such Shareholder's Shares, which option may be exercised at
any time and from time to time by the Company by giving written notice to the
Shareholder or personal representative, estate, heirs or legatees, as the case
may be, stating the number of Shares to be purchased.
3.2 PURCHASE PRICE OF SHARES. The purchase price for any Shares sold
and purchased pursuant to this Article III shall be equal to their Fair Market
Value as determined under Article V of this Agreement. Notwithstanding the
immediately preceding sentence, in the event that the Shareholder's employment
is terminated by the Company for "cause", the purchase price for any Shares sold
and purchased pursuant to this Article III shall be equal to the exercise price
per Share tendered to the Company by the Shareholder upon exercise of the option
pursuant to which the Shares were acquired. For purposes of this Agreement, if
the Shareholder is a party to a written employment agreement with the Company or
an affiliate which contains a definition of "cause", "termination for cause" or
any other similar term or phrase, whether such Shareholder is terminated for
"cause" pursuant to this Article III shall be determined according to the terms
of and in a manner consistent with the provisions of such written employment
agreement. If the Shareholder is not party to such a written employment
agreement with the Company or an affiliate, then for purposes of this Article
III, "cause" shall mean willful misconduct in connection with the Shareholder's
duties or willful failure to perform his or her responsibilities in the best
interests of the Company (including, without limitation, breach by the
Shareholder of any provision of any employment, non-disclosure, non-competition
or other similar agreement between the Shareholder and the Company). The good
faith determination by the Board of Directors of the Company of whether the
Shareholder's employment was terminated by the Company for "cause" shall be
final and binding for all purposes hereunder.
ARTICLE IV
FUNDAMENTAL TRANSACTIONS
4.1 CHANGE OF CONTROL.
(A) Notwithstanding anything contained herein to the contrary,
if at any time a shareholder of the Company or group of shareholders (including
shareholders not party to this Agreement) owning a majority or more of the
voting capital stock proposes to enter into any transaction involving a Change
of Control (defined below) that involves the sale, assignment, tender or
transfer of voting capital stock, the Company and/or the transferring
shareholder(s) may require each Shareholder to participate in such Change of
Control transaction by giving such Shareholders written notice thereof at least
ten (10) days in advance of the date of the transaction or the date that tender
is required, as the case may be. Upon receipt of such notice, each Shareholder
shall tender the same proportionate amount of shares owned by him or her as the
transferring shareholder(s) propose to sell or tender of the Shares
-4-
<PAGE>
owned by them, at the same price and upon the same terms and conditions
applicable to the transferring shareholder(s) in the transaction. In addition,
if at any time the Company and/or any shareholder(s) propose to enter into any
Change of Control transaction, the Company and/or transferring shareholder(s)
may require each Shareholder to vote in favor of such transaction, where
approval of the Shareholders is required by law or otherwise sought, by giving
all of the Shareholders notice thereof within the time prescribed by law and the
Company's Certificate of Incorporation and By-Laws for giving notice of a
meeting of Shareholders called for the purpose of approving such transaction. If
the Company or transferring shareholder(s) requires such vote, each Shareholder
agrees that he or she will, if requested, deliver his or her proxy to the person
designated by the Company or such transferring shareholder(s) to vote his or her
shares in favor of such Change of Control transaction.
(B) For purposes of this Section 4.1, a "Change of Control"
shall mean (i) the sale of all or substantially all of the assets of the
Company; (ii) the sale of more than fifty percent (50%) of the outstanding
common stock of the Company in a non-public sale; (iii) any merger, share
exchange, consolidation or other reorganization or business combination of the
Company, if immediately after such transaction either (A) persons who were
directors of the Company immediately prior to such transaction do not constitute
at least a majority of the directors of the surviving entity, or (B) persons who
hold a majority of the voting capital stock of the surviving entity are not
persons who held a majority of the voting capital stock of the Company
immediately prior to such transaction; or (iv) the dissolution or liquidation of
the Company.
4.2 PUBLIC OFFERING. In the event that the Company enters into an
underwriting agreement to make an initial public offering of the common stock of
the Company, each Shareholder shall become a party to any stand-off or lock-up
agreement with respect to his or her Shares as the underwriter may request.
ARTICLE V
FAIR MARKET VALUE; INSURANCE PROCEEDS;
PAYMENT OF PURCHASE PRICE
5.1 IN GENERAL. For purposes of this Agreement, the fair market value
of Shares (the "Fair Market Value") shall be determined in good faith by the
Board of Directors. Fair Market Value shall mean that price at which a willing
buyer would pay a willing seller for the Shares, neither being under any
compulsion to buy or sell and both having reasonable knowledge of the relevant
facts. In making such determination, the Board of Directors may take into
account any valuation factors it deems appropriate or advisable in its sole
discretion, including, without limitation, profitability, financial position,
asset value or other factor relating to the value of the Company, as well as
discounts to account for minority interests and lack of marketability.
5.2 USE OF INSURANCE PROCEEDS. If the Company is required to purchase
the Shares of a deceased Shareholder pursuant to Section 3.1, and the Company is
the owner and beneficiary of any insurance policy on the life of the deceased
Shareholder, the Company may use the total death benefit payable to the
beneficiary under such policy to pay the purchase price for such deceased
Shareholder's Shares, and the excess, if any, of the insurance proceeds over the
purchase price of the Shares shall remain the property of the Company.
5.3 PAYMENT OF PURCHASE PRICE. In the event that the Company purchases
Shares pursuant to this Agreement, an amount equal to at least 25% of the
Purchase Price shall be payable by the
-5-
<PAGE>
Company in cash at settlement of the purchase and sale of the Shares. The
balance, if any, of the Purchase Price shall be payable according to the terms
of a three-year Promissory Note (the "Note") in such form as the Company may
specify from time to time. The Note shall reflect the payment of annual
installments of principal and interest, with an interest rate equal to the
applicable federal rate for debt instruments of similar term under Section
1274(d)(1) of the Internal Revenue Code of 1986, as amended, which is in effect
as of the date the Note is made. The Company shall not be obligated to make any
payment due the payee under the Note at a time when the Company does not have
sufficient legally available funds to make such payment or when the payment
would violate the provisions of a senior debt instrument of the Company.
5.4 LEGALLY AVAILABLE FUNDS. If, at the time the Company is obligated
or elects to purchase Shares from any Shareholder hereunder, the Company does
not have funds legally available for the purchase of those Shares, then (a) the
Company shall purchase that number of Shares which it legally may purchase, and
(b) the Company shall remain obligated to purchase any remaining Shares at such
time or times as it has funds legally available for such purpose.
ARTICLE VI
MISCELLANEOUS
6.1 TERMINATION.
This Agreement and all restrictions, obligations and rights hereunder
shall terminate upon the successful completion of any firm underwritten public
offering of equity securities of the Company or as otherwise determined by the
Board of Directors of the Company. The termination of this Agreement for any
reason shall not affect any right or remedy existing hereunder before the
effective date of its termination.
6.2 APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland.
6.3 NOTICES.
Any notice required hereunder or permitted to be given hereunder shall
be given in writing and shall be deemed to have been validly given when
delivered by hand or deposited with the U.S. Postal Service as first-class mail,
postage prepaid, (a) if to the Company, at its then executive office, and (b) if
to a Shareholder, at the address of that Shareholder as then shown on the
Company's records, or at such other address as such Shareholder may have
designated in writing to the Company.
6.4 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Shareholders, and their respective transferees, heirs, personal
representatives, successors and assigns. None of the Shareholders may assign
this Agreement or any of his rights or obligations hereunder. None of the
provisions of this Agreement shall be for the benefit of, or enforceable by, any
creditor of the Company.
-6-
<PAGE>
6.5 ENTIRE AGREEMENT; AMENDMENT.
This Agreement represents the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings related to the subject matter hereof. This
Agreement may not be amended or modified except by a writing executed by all of
the parties hereto.
6.6 SEVERABILITY.
If any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be effected or impaired thereby.
6.7 ARBITRATION.
The parties agree that any dispute arising under or in connection with
this Agreement shall be resolved by final and binding arbitration conducted in
Baltimore, Maryland in accordance with the Commercial Rules of the American
Arbitration Association.
6.8 CAPTIONS.
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provision hereof.
6.9 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which when taken together, shall constitute one
and the same instrument.
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.}
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date set forth opposite its or his name.
KNOWLEDGELINK INTERACTIVE, INC.
Date of Execution: By:
----------------- ---------------------------------
Name:
---------------------------------
(SEAL) Title:
---------------------------------
(SEAL)
---------------------------------
Shareholder
-8-
<PAGE>
[SIGNATURE PAGE FOR ADDITIONAL SHAREHOLDERS --
MAY BE DUPLICATED FOR ADDITIONAL
SIGNATURES, INCLUDING COUNTERPART
SIGNATURES, AS NECESSARY]
IN WITNESS WHEREOF, the parties have executed and delivered, and have agreed to
become bound by, the provisions of the Shareholders' Agreement by and among
KnowledgeLink Interactive, Inc. and the other parties listed on Exhibit A
thereto, as the same may be from time to time amended, modified or supplemented,
as of the date indicated below.
Date of Execution:
--------------------- ---------------------------------
Name:
Date of Execution:
--------------------- ---------------------------------
Name:
Date of Execution:
--------------------- ---------------------------------
Name:
Date of Execution:
--------------------- ---------------------------------
Name:
Date of Execution:
--------------------- ---------------------------------
Name:
Date of Execution:
--------------------- ---------------------------------
Name:
Date of Execution:
--------------------- ---------------------------------
Name:
Date of Execution:
--------------------- ---------------------------------
Name:
-9-
<PAGE>
EXHIBIT A
SHAREHOLDERS
-10-
EXHIBIT 10.15
May 19, 1999
Sevenson Environmental Services, Inc.
2749 Lockport
Niagra Falls, NY 14305
Attention: Michael Elia
Gentlemen:
This letter, when countersigned on behalf of Sevenson Environmental
Services, Inc. (the "Purchaser") and returned to Ryan & Lee as agent for
Powerize.com (the "Company") no later than the close of business on May 20,
1999, together with (a) an executed Registration Rights Agreement (the "Rights
Agreement") in the form of the attached Exhibit A and (b) completed and executed
subscription agreements and investor questionnaire (the "Subscriptions") in the
form of the attached Exhibit B, will constitute a binding agreement (the
"Agreement") between the Purchaser and the Company, as follows:
1. No later than the close of business on May 20, 1999, the Company will
have received from the Purchaser the Rights Agreement and completed
Subscriptions (in form and substance reasonably satisfactory to the Company) for
the purchase in the aggregate of 2,257,143 common shares of the Company as
described in the Subscriptions (the "Shares") for an aggregate purchase price
(the "Purchase Price") of $5,000,000 (which shall have been remitted to the
Company in cash) of which (a) 857,143 Shares shall have been purchased at a
price of $1.75 per Share and (b) 1,400,000 Shares shall have been purchased at
a price of $2.50 per Share.
2. No later than June 30, 1999, the Company's board of directors (the
"Board") will cause the bylaws of the Company (the "Bylaws") to be amended to
create a vacancy on the Company's Board, and will vote to designate the
Purchaser's nominee as a Class I member of the Board, as that term is defined
under the Bylaws. Absent removal for cause, the Board will cause the Purchaser's
designee to be nominated or renominated, as the case may be, for a successive
three year term as a Class I member of the Board upon the expiration of the
Purchaser's designee's initial term, and will continue to nominate the designee
for successive terms until the first to occur of (a) 18 months after the date of
the initial public offering by the Company ("IPO") (b) the Shares owned by the
Purchaser constituting less than five per cent (5%) of the Company's aggregate
outstanding shares of stock or (c) a sale or merger of the Company after which
the
<PAGE>
Sevenson Environmental Services, Inc.
May 19, 1999
Page 2
shareholders of the Company immediately before the transaction do not own or
control a majority of the outstanding shares of stock of, or equity interest in,
either the Company, the surviving entity or the Buyer.
3. If the Company (a) fails to complete an IPO by March 31, 2000 at a
price per Share of at least $5.00 (the "Minimum Price") and an aggregate
offering amount of not less than Five Million Dollars ($5,000,000) or (b) fails
to complete an IPO by April 30, 2000 of Shares which, in any consecutive 10 day
trading period up to April 30, 2000, do not reach an average closing price per
share of at least the Minimum Price, then the Company will issue the Purchaser
600,000 additional Shares (the "Additional Shares"); the Minimum Price and the
Additional Shares shall be appropriately adjusted for any reorganization,
recapitalization, stock split, stock dividend or other change in the capital
structure of the Company. The Company's obligations under this paragraph 3 shall
terminate upon any sale or merger of the Company after which the shareholders of
the Company immediately before the transaction do not own or control a majority
of the outstanding shares of stock of, or equity interest in, the Company, the
surviving entity or the Buyer.
Sincerely,
POWERIZE.COM
By:/s/ Edwin R. Addison
-------------------------
Name:
Title:
ACCEPTED:
SEVENSON ENVIRONMENTAL SERVICES, INC.
By:/s/ W.J. McDermott
------------------
EXHIBIT 10.16
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of May 19, 1999 by
and between Powerize.com (the "Company"), and Sevenson Environmental Services,
Inc. (the "Holder").
WHEREAS, the Holder has acquired shares of Common Stock in connection with
its purchase of Common Stock pursuant to the Subscriptions and Agreement; and
WHEREAS, the Company and the Holder wish to provide certain arrangements
with respect to the registration of shares of Common Stock under the Securities
Act.
NOW, THEREFORE, in consideration of the mutual promises and obligations
contained herein, the Holder and Company agree as follows:
1. CERTAIN DEFINITIONS. As used in this agreement, the following terms shall
have the following respective meanings:
"Agreement" means that certain letter agreement between the Company and
the Holder dated May 16, 1999.
"Additional Shares" has the meaning defined under the Agreement.
"Commission" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, no par value, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Registration Expenses" means the expenses described in Section 5.
"Registrable Shares" means the shares of Common Stock issued to the Holder
under the Agreement, including any Additional Shares issued to the Holder under
paragraph 3 of the Agreement, and any other shares of Common Stock issued in
respect of such shares because of stock splits, stock dividends,
reclassifications, recapitalization, or similar events. Registrable Shares shall
cease to be Registrable Shares (w) when a Registration Statement with respect to
the sale of such shares shall have become effective under the Securities Act (x)
when they shall have become eligible for resale pursuant to Rule 144(k)
following an initial public offering by the Company of unissued Common Stock or
(y) when the Holder shall have sold or otherwise transferred more than three
fourths (3/4) of the sum of (i) the Common Stock issued to the Holder under the
Agreement, excluding Additional Shares, plus (ii) other shares of Common
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Stock issued with respect of such shares because of stock splits, stock
dividends, reclassifications, recapitalization, or similar events or (z) upon a
sale or merger of the Company after which the shareholders of the Company
immediately before the transaction do not own or control a majority of the
outstanding shares of stock of, or equity interest in, either the Company, the
surviving entity or the buyer.
"Registration Statement" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (whether or not Registered Shares are included) for cash (other than a
registration statement on Form S-8 or Form S-4, or their successors, or any
other form for a limited purposes, or any registration statement covering only
securities proposed to be issued in exchange for securities or assets of another
corporation).
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Shares" means shares of the Common Stock.
"Subscriptions" has the meaning defined under the Agreement.
2. REQUIRED REGISTRATIONS.
2.1 Demand Registration. If the Company has not filed a Registration
Statement declared effective by the Commission on or before May 16, 2001, then
the Holder may request, in writing, that the Company effect a separate demand
registration of the Holder's Registrable Shares. The Company shall use best
efforts to effect the registration of all Registrable Shares that have been the
subject of the request under this paragraph and shall maintain the effectiveness
of such Registration Statement for a period of 90 days.
2.2 Limitations. The Company shall not be required to effect more than one
registration pursuant to Section 2.1 above. In addition, the Company shall not
be required to effect any registration within three months after the effective
date of any other Registration Statement of the Company.
2.3 Delay for Good Cause. If at the time of any request to register
Registrable Shares pursuant to this Section 2, the Company (i) is engaged or has
plans to engage within 180 days of the time of the request in a registered
public offering or (ii) is engaged in any other activity that in the good faith
determination of the Company's Board of Directors, would be materially adversely
affected by the requested registration, then the Company may at its option
direct that such request be delayed for a period not in excess of 90 days from
the effective date of such offering or activity, as the case may be. The Company
may not effect more than 2 delays under this Section 2.3.
3. INCIDENTAL REGISTRATION.
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3.1 Company Initiated Registration. Whenever the Company proposes to file
a Registration Statement to register Shares (other than a Registration Statement
to be filed pursuant to an initial public offering of unissued Shares), then
prior to the declaration of effectiveness of such Registration Statement, and as
promptly as practicable, it shall give written notice of the filing or the
intended filing to the Holder and, upon the written request of the Holder given
within 20 days after the Company provides such notice, the Company shall use
reasonable efforts to cause all Registrable Shares that the Holder has requested
to register to be included in the Registration Statement.
3.2 Limitations. In connection with any offering under this Section 3
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such underwriting unless the Holder accepts the terms of
the underwriting (including the terms of the underwriting agreement, which
agreement shall not contain terms inconsistent with the provisions of this
agreement) as agreed upon between the Company and the underwriters selected by
it. If in the opinion of the managing underwriter the registration of all, or
part of, the Registrable Shares that the Holder has requested to be included
would materially and adversely affect such public offering, then the Company
shall be required to include in the underwriting only that number of Registrable
Shares, if any, that the managing underwriter believes may be sold without
causing such adverse effect.
4. REGISTRATION PROCEDURES. If the Company is required by the provisions
of this agreement to use its reasonable or best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
4.1 Filing. File with the Commission a Registration Statement with respect
to such Registrable Shares and use reasonable efforts to cause that Registration
Statement to become and remain effective as herein provided.
4.2 Amendments and Supplements. Prepare and file with the Commission any
amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective for a period of not less than 90 days from the
effective date.
4.3 Copies of Prospectus. Furnish to each selling Holder such reasonable
numbers of copies of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as the Holder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Shares owned by the Holder.
4.4 Blue Sky Qualification. Use its reasonable efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the Holder shall reasonably
request, and do any and all other acts and things that may be necessary or
desirable to enable the Holder to consummate the public sale or other
disposition in such jurisdictions of the Registrable Shares owned by the selling
Holder, as the case may be; PROVIDED, HOWEVER, that the Company shall not
thereby be required to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction.
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4.5 Earnings Statement. Use its reasonable efforts to comply with all
applicable rules and regulations of the Commission and make available to its
security holders, as soon as reasonably practicable, an earnings statement of
the Company (in form complying with the provisions of Rule 158 promulgated under
the Securities Act) covering the period of at least 12 months beginning with the
first month following the effective date of the registration statement.
If the Company has delivered preliminary or final prospectuses to the
Holder and after having done so the prospectus is amended to comply with the
requirements of the Securities Act, the Company shall promptly notify the Holder
and, if requested, the Holder shall immediately cease making offers of
Registrable Shares and shall return all prospectuses to the Company. The Company
shall promptly provide Holder with revised prospectuses and, following receipt
of the revised prospectuses, the Holder shall be free to resume making offers of
the Registrable Shares.
The Holder shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may request
in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 4. In addition, the
Holder agrees to dispose of any Registrable Shares included in any registration
only in accordance with the plan of distribution described in the Registration
Statement.
5. ALLOCATION OF EXPENSES. The Company shall pay the Registration
Expenses for the registration pursuant to Section 2. For purposes of this
Section, the term "Registration Expenses" shall mean all expenses incurred by
the Company in complying with Section 2, including, without limitation, all
registration and filing fees, exchange or national market listing fee, all fees
and expenses of complying with securities or blue sky laws, all fees and
expenses associated with filings with the NASD, all printing expenses, fees and
disbursements of counsel for the Company and its independent public accountants,
and the expense of any special audits incident to or required by any such
registration.
6. Indemnification.
6.1 Company Indemnification. In the event of any registration of any of
the Registrable Shares under the Securities Act pursuant to this agreement, then
to the extent permitted by law the Company shall indemnify and hold harmless the
Holder against any losses, claims, damages, costs, expenses or liabilities,
joint or several (or action in respect thereof) to which such Holder may become
subject under the Securities Act, the Exchange Act, state securities laws or
otherwise, insofar as such losses, claims, damages, costs, expenses or
liabilities (or actions in respect thereof) arise our of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement or under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading; and the Company shall
reimburse the Holder for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such loss, claim, damage, cost,
expense, liability or action; PROVIDED, HOWEVER, that the Company shall not be
liable to the extent that any such loss, claim, damage, cost, expense or
liability arises out of or is based upon any untrue statement
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or omission made in such Registration Statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by or on
behalf of the Holder.
6.2 Holder Indemnification. In the event of any registration of any of
the Registrable Shares under the Securities Act pursuant to this agreement, then
to the extent permitted by law (but only in an amount not in excess of the net
proceeds to it of all Registrable Shares sold by the holder in the registration)
the Holder shall indemnify and hold harmless the Company, each of its directors
and officers and each person, if any, who controls the Company within the
meaning of the Securities Act, or the Exchange Act, against any losses, claims,
damages, costs, expenses or liabilities, joint or several, (or actions in
respect thereof) to which the Company, such directors and officers, or
controlling person may become subject under the Securities Act, Exchange Act,
state securities laws or otherwise, insofar as such losses, claims, damages,
costs, expenses, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement under which such Registrable Shares
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based upon any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading; if the statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of the Holder.
6.3 Notice of Claims, etc. Each party entitled to indemnification under
this Section 6 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought (provided that the delay or failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party from any obligation or liability except
to the extent that the Indemnifying Party has been actually prejudiced by such
delay or failure) and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided, that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party, whose approval shall not
be unreasonably withheld or delayed. The Indemnified Party may participate in
such defense at such party's expense; provided, however, that the Indemnifying
Party shall pay such expenses if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interest between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as a term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a general release from all liability in
respect of such claim or litigation, and no Indemnified Party shall consent to
entry of any judgment or settle such claim or litigation without the prior
written consent of the Indemnifying Party.
6.4 Contribution. If for any reason the foregoing indemnification is
not available, or is insufficient to hold harmless and Indemnified Party, other
than by reason of the exceptions provided herein, then the Indemnifying Party
shall contribute to the amount paid or payable by
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<PAGE>
the Indemnified Party as a result of such losses, claims, damages, costs,
expenses, or liabilities in such proportion as is appropriate to reflect the
relative fault of the Holder of Registrable Shares and the Company as well as
any other equitable considerations including the parties' relative knowledge and
access to information concerning the matter with respect to which any claim is
asserted and the opportunity to correct and prevent any such statement or
omission leading to such loss, claim, damage or liability (or actions in respect
thereof) but not including the relative benefits received by the Holder on the
one hand and the Company on the other; PROVIDED, HOWEVER, that in any case (i)
the Holder of Registrable Shares will not be required to contribute except to
the extent and under such circumstances as the Holder would be required to
provide indemnification hereunder and then only in an amount not in excess of
the net proceeds to it of all Registrable Shares sold in the registration, and
(ii) no person guilty or fraudulent misrepresentation, within the meaning of
Section 11(f) of the Securities Act, shall be entitled to contribution from any
person who is not so guilty.
7. MISCELLANEOUS
7.1 "Stand-Off" Agreement. In connection with any underwritten public
offering, if requested by the Company and the managing underwriter, the Holder
hereby agrees, other than with respect to any Registrable Shares included in
such offering, not to effect any public sale or distribution of any Registrable
Shares, nor engage in any transaction that would result in an public sale or
distribution of securities of the same class as the Registrable Shares for a
specified period of time (not to exceed 180 days) following the effective date
of a Registration Statement; PROVIDED, that all persons holding more than 5% of
the outstanding Common Stock (other than mutual funds or other institutional
shareholders) and all senior officers and directors of the Company enter into
similar agreements. Such agreement shall be in writing in a form reasonably
satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the Registrable Shares or other
securities subject to the foregoing restriction until the end of the stand-off
period.
7.2 Governing Law. This agreement shall be governed in all respects by the
laws of Maryland without giving effect to the conflict of laws principles.
7.3 Entire Agreement; Amendment and Waiver. This agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject matter hereof.
7.4 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given upon
personal delivery or five days after deposit with the United States Post Office,
by registered or certified mail, postage prepaid, addressed to the Company at
its principal office and to the Holder at its address on the records maintained
by the Company or at such other address as any party may designate by ten days'
prior written notice to the other party.
7.5 Separability. In case any provision of this agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
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7.6 Successors and Assigns. Neither this agreement nor any of the rights,
interests or obligations hereunder shall be assigned (whether by operation of
law or otherwise) by the Holder without the consent of the Company.
7.7 Titles. The titles of the Sections of this agreement are for
convenience of reference only and are not to be considered in construing this
agreement.
7.8 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute on agreement.
SEVENSON ENVIRONMENTAL
SERVICES, INC.
By: /s/ W.J. McDermott
------------------
POWERIZE.COM
By: /s/ Edwin R. Addison
--------------------
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EXHIBIT 10.17
ONLINE LICENSED MATERIALS DISTRIBUTION AGREEMENT
Agreement made this 21st day of May, 1999 by and between Powerize.com,
Inc., d/b/a powerize.com, inc., a Delaware corporation (hereinafter referred
to as "powerize"), with offices at 901 Elkridge Landing Rd, Suite 350,
Linthicum, MD 21090, and Bell & Howell Information and Learning Company, a
Delaware corporation (hereinafter referred to as "B&H"), with offices at 300
North Zeeb Road, Ann Arbor, MI 48103, USA.
WHEREAS, B&H is the owner and publisher of certain databases or has the
right to license various publications in electronic format and wishes to
distribute those Licensed Materials and publications electronically through
powerize; and
WHEREAS, powerize provides an online service to its customers to search
and retrieve information from electronic databases via its ad-driven
information service; and
WHEREAS, B&H and powerize wish to provide for the distribution of B&H's
databases and licensed publications through powerize's online Service, all
on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, powerize and B&H hereby agree
as follows:
1. Definitions.
1.1 "Abstract" means a summary of an article from the Licensed
Materials in ASCII full-text format.
1.2 "Article" means an individual article from the Licensed Materials.
An Article may be in ASCII full-text format or TIFF (Tagged Image
File Format) image format, as set forth on Schedule 1, which is
attached to and made a part of this Agreement.
1.3 "Backfile" means the version of the Licensed Materials that are
dated before the most current version as of the Effective Date.
The period of coverage of the Backfile shall be set forth in
Schedule 1.
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>
1.4 "Citation" means a bibliographical citation to an article from the
Licensed Materials in ASCII full-text format.
1.5 "Customer" means any individual, corporation, partnership,
institution, organization or other legal entity of any kind, who
is a registered business user of the Service.
1.6 "Licensed Materials" means the data records of Licensed Materials
available to powerize for distribution electronically as
identified in Schedule 1.
1.7 "Education Market" means all post-secondary educational
institutions including but not limited to private for profit trade
and degree-granting institutions, two-year, four-year and
community colleges and universities, public and private elementary
and secondary schools, their respective students, faculty,
administrations and libraries, and public and government
libraries.
.
1.8 "Net Advertising Revenue" means the price billed to powerize's
advertisers or distributors less (i) credits or refunds actually
paid by powerize, (ii) agency fees actually paid or deducted from
powerize's billings, and (iii) sales, use and similar taxes billed
by powerize to advertisers and required to be paid to the
appropriate taxing authorities by powerize.
1.9 "Page View(s) means an individual page identified by a unique
URL on the World Wide Web portion of the Internet.
1.10 "2nd Page View" means the Page View on which the listing of search
results appears.
1.11 "3rd Page View" means the Page View on which the Record from the
Licensed Materials appears.
1.12 "3rd Page View Net Revenue"[*]
"Publisher(s)" means the publisher(s) of the Licensed Materials.
1.14 "Publisher's Royalty"[*]
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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1.15 "Record" means a document consisting of a Citation and Abstract
and/or an Article that is contained in the Licensed Materials and
is accessed, displayed or printed by the Customer.
1.16 "Service" means powerize's business research service, currently
known as powerize.com, available on the World Wide Web and
featuring information from B&H and other content sources. The
Service is supported by paid advertising.
1.17 "End User Agreement " means the license agreement under which
powerize sublicenses access to the Licensed Materials, attached to
this Agreement as Schedule 3.
1.18 "Subscription Fees" [*]
1.19 "Territory" means worldwide.
2. License Grant.
2.1 For the term and subject to the provisions of this Agreement, B&H
hereby grants and powerize accepts a royalty-bearing, nonexclusive
and non-transferable license to reproduce, display, market and
distribute the Licensed Materials in connection with the Service,
in the Territory, to qualified business users of the World Wide
Web, [*]
2.2 powerize will make the Licensed Materials accessible through the
Service to qualified business users who have registered with
powerize. [*]
2.3 B&H reserves to itself (i) the right to create, produce, copy,
distribute, license, and sell any products of whatever kind
containing the Licensed Materials and (ii) all other rights with
respect to the Licensed Materials which are not expressly granted
to powerize in this Section 2.
2.4 No sublicensing or re-distribution rights are granted except
sublicensing to Customers for their own internal use. Customers
shall not be granted any right of reproduction or re-distribution
with respect to the Licensed Materials or the Records.
powerize.com shall have the ability to register users from another
web site or domain and provide access to Licensed Materials via a
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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web portal service, that forwards a search requested by a
registered user to powerize.com.
2.5 The License granted in the preceding Section is specific to the
Licensed Materials and does not include the right to combine the
Licensed Materials with other data or Licensed Materials unless
specifically authorized in writing by B&H. This does not limit
powerize.com from licensing material from other publishers or
distributors.
2.6 B&H grants powerize a nonexclusive, non-transferable license to
use B&H's company name and trademarks, including UMI(R),
ProQuest(R), and ProQuest Direct(R), as well as the names of the
databases contained in the Licensed Materials (the "Trademarks"),
in association with the Licensed Materials and will identify the
trademarks as the property of B&H.
3. Use Limitations and Other Obligations.
3.1 If B&H requests that certain portions of the Licensed Materials be
deleted, corrected or made inaccessible because such material
contains errors or could be subject to an adverse claim by a third
party, then powerize shall delete or correct the material or the
index reference to such material with the next regularly scheduled
correction or update of the Licensed Materials after receipt of
B&H's request, but not later than two (2) business days following
such request.
3.2 powerize will sublicense the use of the Licensed Materials to its
Customers by using the End User Agreement. powerize will not make
any changes to the End User Agreement which would materially
affect the rights and interests of B&H in the Licensed Materials
without B&H's prior written consent.
3.3 [*]
3.4 If powerize desires to obtain a license to distribute information
from newspapers and periodicals for which B&H has distribution
rights, powerize shall license such information from B&H on the
terms contained in this Agreement or on terms comparable as to
royalties and fees, timeliness, delivery formats, quality and
scope of license, provided B&H can provide
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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distribution rights and access to requested content within four
(4) weeks of notification from powerize.com.
4. Proprietary Rights.
4.1 powerize acknowledges that the Licensed Materials consist of
information gathered, selected, coordinated and arranged by B&H at
considerable expense, and by the application of methods, editorial
standards and judgment that is proprietary to B&H; and that the
Licensed Materials are valuable assets of B&H and that title and
ownership of the Licensed Materials remain exclusively with B&H
and its licensors.
4.2 powerize acknowledges that neither it nor its Customers is
acquiring any proprietary or copyright interest in the Licensed
Materials.
4.3 powerize will not use the Licensed Materials to create for itself
a data file which consists of data substantially or materially
similar to the Licensed Materials or create a derivative work from
the Licensed Materials.
4.4 powerize will take all reasonable security measures necessary to
prevent unauthorized duplication or distribution of the Licensed
Materials. Reasonable security measures shall include, by way of
example and not limitation, requiring users to possess and use a
valid username and password to access the Service.
5. Delivery and Format of the Licensed Materials.
5.1 On or before the delivery date agreed to by the parties, B&H will
deliver the Backfile and related documentation to powerize on
magnetic tape or via electronic transmission, if available. B&H
will deliver updates to the Licensed Materials via electronic
transmission (via FTP or other agreed-upon method), on a mutually
acceptable schedule. The Licensed Materials will be formatted as
described in Schedule 1. B&H will use its reasonable best efforts
to give powerize sixty (60) days advance notice of any change in
format of the electronic transmission of the Licensed Materials.
5.2 powerize will take such steps as may be required to convert,
invert, reformat and/or otherwise manipulate the Licensed
Materials in accordance with the specifications set forth in
Schedule 1, so that the Licensed Materials can be accessed by
Customers of the Service.
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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5.3 Each party will designate in writing at the time of execution of
this Agreement an individual who will act as a technical liaison
to the other and an individual who will act as administrative
liaison with the other. Such individual designations may be
changed from time to time by written notice.
5.4 powerize will provide to B&H prior to execution of this Agreement
a written explanation of the technical and customer service
support which it provides to its Customers, both domestic and
international.
5.5 powerize will use its best efforts to protect B&H's copyright with
respect to the Licensed Materials, including without limitation,
placing a prominent legend on all B&H-related screens, printouts
and other appropriate places (such as manuals and documentation)
stating:
(C) 199x Bell & Howell Information and Learning Company; All
Rights Reserved. (where 199x is the year of publication). Only
fair use as provided by the United States copyright law is
permitted. Bell & Howell Information and Learning Company MAKES NO
WARRANTY REGARDING THE ACCURCY, COMPLETENESS OR TIMELINESS OF THE
LICENSED MATERIALS OR ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AND SHALL NOT BE LIABLE FOR DAMAGES OF ANY KIND OR LOST
PROFITS OR OTHER CLAIMS RELATED TO THE LICENSED MATERIALS OR THEIR
USE.
5.6 powerize shall not alter or remove any copyright notices contained
in the Records and Licensed Materials.
6. Marketing and Training.
6.1 powerize will use its best efforts to market and sell advertising
for the Service utilizing print media, radio, Internet and other
means. powerize will also use its best efforts to establish
relationships with other information portals to provide linking to
and joint registrations for the Service.
6.2 Promotional materials prepared by or for powerize which mention
the Licensed Materials, B&H or use the Trademarks shall be
submitted to B&H for prior approval before they are published. B&H
shall review and approve
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>
or suggest changes to the materials within a reasonable time not
to exceed ten (10) business days after receipt. For promotional
material that does not materially differ from previously approved
promotional material, the prior approval requirement shall be
waived so long as powerize provides B&H with at least one copy of
the material within a reasonable time of its use in commerce. B&H
and powerize will create a list of Publishers who agree to have
their names and/or logos used in powerize advertising, and
powerize will be free to use those names/logos in advertising
without additional approval from B&H or Publishers.
6.3 If requested by B&H, powerize will provide reasonable training to
B&H in the use of the Service. Such reasonable training shall be
at no additional cost and subject to such reasonable limitations
in time, scope and attendance as agreed by the parties hereto.
7. Royalty and Payment Terms.
7.1 Subject to the terms and conditions of this Agreement, powerize
shall pay B&H as royalties the amounts set forth in Schedule 2.
7.2 Minimum guaranteed royalty payments are due on the dates specified
on Schedule 2. Fees generated from Net Advertising Revenue and
Subscription Fees are due on the schedule set forth in Schedule 2.
powerize shall send the fees due to B&H to the address indicated
at the beginning of this Agreement, ATTN: B&H Accounts Receivable
Manager. On or prior to the 30th of each month, powerize shall
provide B&H with a written statement in relation to the previous
month showing in reasonable detail a calculation of the amounts
payable to B&H in respect to such period, including any algorithm
used to determine the fee due to B&H. Each statement shall reflect
the detailed information for that period, as well as a
year-to-date summary. powerize will provide B&H with a sample
report prior to B&H's first delivery of the Licensed Materials to
powerize and shall provide to B&H the reports described in
Schedule 4 of this Agreement. powerize shall also provide B&H with
web access to review account activity online at any time.
7.3 In addition to the fees and royalties payable to B&H, and subject
to the permission of B&H Publishers for placement of advertising
on page views from their respective publications, powerize will
pay publishers the Publisher's Royalty to B&H as set forth in
Schedule 2. powerize will provide
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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links from Records to Publishers' preferred URL's and will display
Publishers' logos in a prominent location. B&H will provide the
logos and preferred URL for each Publisher.
7.4 In the event Powerize.com, Inc. completes an initial public
offering (an "IPO") of its common stock within the three (3) years
following execution of this Agreement, it shall immediately
thereafter issue B&H a warrant (the "Warrant") substantially in
the form attached hereto as Schedule 5 to purchase that number of
shares of common stock of Powerize.com, Inc. that shall be equal
to $1.25 million divided by the per share IPO price. The Warrant
shall be exercisable for a period of one (1) year following the
IPO and the exercise price per share shall be equal to the per
share IPO price. In the event that powerize offers stock
registration rights to other holders of Warrants following such
IPO, powerize shall offer B&H registration rights that are
comparable in form and substance to those offered to such other
Warrant holders.
7.5 powerize will collect demographic information for Customers and
will provide such information, excluding names, E-mail addresses
and other private information, to B&H and its Publishers. B&H and
its Publishers will use these data solely to promote current or
new publications and services. These demographic data may not be
distributed by B&H, except to its Publishers that participate in
this service, or to publishers that powerize requests B&H to
include in the service. Such information shall be included in the
reports described in Schedule 4.
7.6 powerize agrees to keep true and accurate records, files, and
books of account containing all the data reasonably required for
the full computation and verification of the royalties and fees to
be paid and the statements to be given pursuant to Sections 7.1,
7.2, 7.3 and 7.4. B&H shall have the right, to be exercised not
more than twice per calendar year and upon not less than fifteen
(15) days prior written notice to powerize, to examine the books,
records and accounts of powerize to verify powerize's compliance
with all the terms and conditions of this Agreement. All
information regarding powerize's business received in any such
examination shall be held in confidence, and B&H shall not
unreasonably interfere with powerize's business operations in
exercising its right of audit. The expenses of such audit shall be
borne by B&H unless the accounting reveals an error in excess of
five percent (5%), in which event the costs shall be borne by
powerize. This right of audit shall survive the
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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expiration or termination of this Agreement and shall continue in
effect until one (1) year from the end of any calendar year in
which any fees, royalties and other amounts become payable to B&H
under this Agreement.
8. Verification Access.
8.1 Prior to the first availability of the Licensed Materials on the
Service, powerize will provide B&H with access to the Service free
of charge for the purpose of verification, training and
demonstration.
9. Warranties and Disclaimers of Warranty.
9.1 Each of the parties to this Agreement represents and warrants that
it has all right, power and authority to enter into this Agreement
and that the performance of its obligations will not violate or
conflict with any other agreement to which it is a party.
9.2 B&H will replace or correct at no cost any copy of the Licensed
Materials delivered to powerize which, through no fault of
powerize, is defective or inoperable, provided that powerize
notifies B&H of such defect or inoperability within thirty (30)
days after delivery. Otherwise, replacement Licensed Materials
will be provided at a fee equal to B&H's cost.
9.3 B&H and its licensors make no warranty regarding the accuracy,
completeness or timeliness of the Records as they are delivered
through the Licensed Materials. NEITHER PARTY GIVES ANY EXPRESS
WARRANTIES EXCEPT AS SET FORTH IN THIS SECTION 9, AND EACH PARTY
DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
10. Limitation of Liability.
Neither party shall be liable to the other for special,
incidental, consequential or punitive damages of any nature, for
any reason, including, without limitation, the breach of this
Agreement or any termination of this Agreement, whether such
liability is asserted on the basis of contract, tort, or
otherwise, even if the other party has been warned of the
possibility of such damages. Except as otherwise provided, all
remedies shall be cumulative and not exclusive.
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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11. Indemnification.
11.1 Subject to powerize's compliance with Section 2, B&H will
indemnify and hold harmless powerize, its officers and directors
against any and all judgments, settlements, penalties, costs and
expenses (including reasonable attorney's fees) paid or incurred
in connection with any breach or alleged breach of B&H's
warranties and representations.
11.2 powerize will indemnify and hold harmless B&H, its officers,
directors, employees, agents, and distributors from and against
any and all judgments, settlements, penalties, costs and expenses
(including reasonable attorney's fees) paid or incurred in
connection with any breach or alleged breach of powerize's
warranties and representations, any claims attributable to any
hardware or software failure of powerize's computer systems used
to provide the Service or arising from any error in the Licensed
Materials caused by any act, omission or procedure of powerize.
12. Confidentiality.
12.1 Neither party shall, without the written consent of the other,
communicate confidential information of the other (designated in
writing or identified in this Agreement as such or otherwise
reasonably believed to be such) to any third party and shall
protect such information from disclosure to any third party in the
same manner that it protects its own confidential information.
Neither party shall use confidential information received by it
other than for the purpose of performing this Agreement.
12.2 The obligations contained in Section 12.1 shall not be applicable
to information: (i) which was in the possession of or communicated
to the receiving party free of any obligation of confidence or was
in the public domain at the time the furnishing party communicated
it to the receiving party, at no fault of the receiving party; or
(ii) which is disclosed to a third party by the receiving party
with the written approval of the furnishing party, provided that
the approval given pursuant to this clause shall have effect only
in the instance for which given.
13. Term and Termination.
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
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13.1 The term of this Agreement shall commence on the date first set
forth above and shall continue for fourteen months from that date,
terminating on July 1, 2000, unless earlier terminated as provided
in this Agreement.
13.2 This Agreement may be terminated by either party at any time by
written notice of termination upon material breach by the other
party, if such other party fails to cure such default within
thirty (30) days after written notice. The cure period shall not
apply where the party in breach has exhausted a cure period
specifically provided for the duty or obligation breached.
13.3 This Agreement may be terminated by powerize if by
October 31, 1999 it does not receive Seventeen Million Dollars
($17,000,000.00) in financing.[*]
13.4 This Agreement may be terminated by B&H at its sole discretion at
any time if the Service conflicts with B&H's sales efforts in the
Education Market, if revenues generated by this Agreement are
unacceptable, or if B&H Publishers express undue dissatisfaction
with the Service. In such event, B&H will refund advance fees paid
by powerize.com for services that otherwise would have been
rendered, excluding any non-refundable payments listed in Schedule
2.
13.5 This Agreement may be terminated by either party at any time by
written notice of termination upon the other party's insolvency,
failure to conduct its business in the normal course or
bankruptcy, voluntary or involuntary.
13.6 The license rights granted by B&H to powerize shall terminate upon
the expiration or termination of this Agreement at which time
powerize shall immediately cease all reproduction, display,
marketing and distribution of the Licensed Materials. powerize
shall promptly return or destroy any copies of the Licensed
Materials in its possession, as instructed B&H. powerize will
certify to B&H the return or destruction of such copies of the
Licensed Materials.
13.7 Upon termination or expiration of this Agreement, each party shall
promptly return to the other all confidential and
business-sensitive information in tangible form which is then in
the possession or control of such party and is held by such party
pursuant to this Agreement. powerize shall cease referring to the
Licensed Materials in its advertising and promotional materials
upon termination.
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.
11
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13.8 The obligation to make payments under Section 7 shall survive any
termination or expiration of this Agreement, as to all then
accrued amounts due and as to any additional amounts due which
shall accrue thereafter. In addition, the respective rights,
obligations, representations and warranties of the parties under
Sections 4, 7 and 9 through 12 shall survive any such termination
or expiration.
14. Force Majeure. Neither party shall be deemed in default if
performance of its obligations or attempts to cure any breach are
delayed or prevented by reason of any act of God, fire, natural
disaster, accident, act of government, labor difficulty, sabotage,
failure of suppliers or subcontractors or unavailability of
material or supplies or any other cause beyond the control of such
party ("Force Majeure"), provided that such party gives the other
party written notice within fifteen (15) days of discovering the
Force Majeure. In the event of a Force Majeure, the time for
performance or cure shall be extended for a period equal to the
duration of the Force Majeure, and if the duration of the Force
Majeure is in excess of six (6) months, the other party may
terminate this Agreement.
15. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and assigns.
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 . Each party will provide at
least ninety (90) days prior notice of such transaction.
Notwithstanding the previous sentences, if powerize merges with or
is purchased by an entity that B&H in its reasonable business
judgement views as a competitor or as potentially damaging to
B&H's Publisher relationships, B&H may elect to terminate this
Agreement upon ninety (90) days notice.
16. Notices. All notices shall be in writing and shall be sent by
courier service, registered or certified mail, return receipt
requested, to the addresses set forth above, or by facsimile to
the facsimile number provided by such party. Notices shall be
deemed given on the date of delivery shown on the return receipt
or upon receipt of an appropriate facsimile transmission
verification printed report.
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.
12
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17. Independent Contractors. The relationship between the parties
shall be that of independent contractors, and nothing in this
Agreement shall be deemed to create an employer-employee,
principal-agent, partnership or joint venture relationship.
18. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Michigan without
giving effect to conflict of law provisions.
19. U.S. Government Restricted Rights. The Licensed Materials include
materials that are commercial technical data and/or computer
Licensed Materials and/or commercial computer software, as
applicable, which were developed exclusively at private expense by
B&H Company and its licensors, 300 North Zeeb Road, Ann Arbor, MI
48103. U.S. Government rights to use, modify, reproduce, release,
perform, display, or disclose these technical data and/or computer
Licensed Materials and/or computer software are subject to the
limited rights restrictions of DFARS 252.227-7015(b)(2) (June
1995) and/or subject to the restrictions of DFARS 227.7202-1(a)
(June 1995) and 227.7202-3(a) (June 1995), as applicable for U.S.
Department of Defense procurements and the limited rights
restrictions of FAR 52.227-14 (June 1987) and/or subject to the
restricted rights provisions of FAR 52.227-14 (June 1987) and FAR
52.227-19 (June 1987), as applicable, and any applicable agency
FAR Supplements, for non-Department of Defense Federal
procurement. The restrictions under this section shall be
reflected in the End-User Agreement attached to this Agreement as
Schedule 3 where applicable.
20. Waiver. Any waiver of any right or default under this Agreement
shall be effective only in the instance given and shall not
operate as or imply a waiver of the same or any similar right or
default on any subsequent occasion.
21. Entire Agreement. This Agreement (inclusive of the attached
Schedules which are incorporated in and made a part of this
Agreement) constitutes the entire agreement between the parties
with respect to its subject matter and supersedes all prior and
contemporaneous agreements, negotiations and understandings, oral
or written, with respect to the same subject matter. This
Agreement may be modified only by an instrument in writing duly
executed by authorized representatives of both parties.
22. Captions. The captions to the sections of the Agreement are for
convenience only, are not part of this Agreement, and shall have
no force or effect in construing 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.
13
<PAGE>
Accepted and agreed to by the parties as of the date first set forth above.
Bell & Howell
Information and Learning Company Powerize.com, Inc.
By /s/ James P. Roemer By /s/ Edwin R. Addison
_______________________ _______________________
Title President & CEO Title CEO 5/21/99
_______________________ _______________________
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.
14
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ONLINE LICENSED MATERIALS DISTRIBUTION AGREEMENT
SCHEDULE 1
LICENSED MATERIALS: [*]
METHOD OF DELIVERY: FILE TRANSFER PROTOCOL
FORMAT: FULL TEXT
COVERAGE: 1998 AND ON GOING, OR AS OTHER AGREED BY THE PARTIES.
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.
15
<PAGE>
ONLINE LICENSED MATERIALS DISTRIBUTION AGREEMENT
SCHEDULE 2
FEE SCHEDULE
Subject to the Guaranteed Minimum Royalties set forth in Section 4 below,
powerize will pay B&H the following Royalties:
1.1 [*]
1.2 [*]
1.3 [*]
1.4 [*]
2. Page Views will be determined as follows:
2.1 [*]
2.1 No Royalty shall be due if a Customer view a document from another
(non-Licensed Materials) source. Where the 2nd Page View contains
search results form the Licensed Materials and from other
information providers, the Net Advertising Revenue for such page
shall be pro rated among such information providers. For example,
if the Licensed Materials represent 2/3 of the search results, 2/3
of the Net Advertising Revenue will be attributed to B&H.
2.3 B&H and powerize will review the methodology required within
technical bounds for tracking and reporting revenue by Page View
on pages served by powerize which include the Licensed Materials.
The parties will use their best efforts to agree on a reasonable
technical and revenue tracking and reporting process within thirty
(30) days following execution of this Agreement.
3. Payment terms: [*]
4. The Guaranteed Minimum Royalty shall be paid against the actual
Royalties set forth in section1 of this Schedule 2 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.
16
<PAGE>
Phase One -- Invoice Date 7/1/99 through 7/1/00
Non-refundable initiation fee invoiced upon execution of this
Agreement: [*]
Non-refundable fee invoiced on June 30, 1999: $[*]
Non-refundable fee invoiced on September 30, 1999: [*]
Fee invoiced on December 31, 1999: [*]
Fee invoiced on March 31, 2000: [*]
Fee invoiced on or before June 30, 2000: [*]
Phase Two - Fees payable upon achievement of Milestones in
addition to Phase One fees
Each Milestone: [*]
Additional Guaranteed Royalties
In the event powerize registers more than 250,000 Customers in
any calendar year, the guaranteed minimum royalty shall be [*]
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.
17
<PAGE>
ONLINE LICENSED MATERIALS DISTRIBUTION AGREEMENT
SCHEDULE 3
END USER AGREEMENT
[Powerize's End User Agreement that has been pre-approved by B&H.]
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.
18
<PAGE>
ONLINE LICENSED MATERIALS DISTRIBUTION AGREEMENT
SCHEDULE 4
REPORTS RELATING TO B&H ROYALTIES
1. In addition to the monthly royalty statements and to aid in B&H's
accounting of royalties to individual Publishers, powerize will
furnish monthly type reports in a mutually agreed upon format
(i.e. electronic and/or paper copy) for each of the following
Licensed Materials:
ABI/INFORM
BUSINESS DATELINE
SELECTED NEWSPAPERS AND PERIODICALS
(A) Such reports shall show the Net Advertising Revenue,
Subscription Fees and other data provided for provision of the
Licensed Materials to Customers via subscription pricing or free
Web access.
(B) Such reports will contain not less than the following
information alphabetically sorted: B&H publication code, the
publication title, and the actual number of page views.
(C) Such reports shall be subject to the following restrictions on
use.
1) All data are the property of powerize and are confidential;
2) All data shall be used for the determination of Publisher
royalties only;
3) All data shall be maintained in a secure place and shall
not be copied or reproduced in any way or communicated to
third parties; and
4) All data shall be destroyed (and so certified) or returned
to powerize upon termination, cancellation or expiration
of this Agreement.
2. Customer Usage Reports
For the Licensed Materials identified above, powerize will furnish B&H with a
confidential report in a mutually agreed electronic format which will include,
at a minimum, the following: File Number, SIC Code, Industry Name, Market (i.e.,
Academic, Public Library, Schools, Government, Corporate or Non-Profit Library),
Country of Users, Number of Users, Net Dollar Amount (of usage) and
subscribership to other information services. Such information shall be sorted
by Country of User so that international users can separately be identified from
U.S. users. This report shall be provided within sixty (60) days after the date
of this Agreement and thereafter during the term of this Agreement. Customer
usage reports shall be delivered along
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.
19
<PAGE>
with the monthly royalty reports provided to B&H by powerize hereunder. Customer
usage reports shall be used only to promote usage of Licensed Materials through
powerize's service and are subject to the provisions of Clause 1(C) of this
Schedule 4. Data shall not be used for customer identification with regard to
developing sales leads or marketing opportunities for CD-ROM products or online
versions of said Licensed Materials.
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.
20
DISTRIBUTION AGREEMENT
This Distribution 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., a
Delaware corporation with its principal place of business at 901 Elkridge
Landing Road, Suite 350 Linthicum, Maryland, 21090 ("Powerize").
RECITALS
A. Powerize offers its customers an advanced index and database of
business oriented content that can be searched and retrieved by its customers.
B. Inktomi provides search engine services to Web site customers
utilizing certain technology for indexing and searching the Web.
C. Powerize and Inktomi on the same date herewith entered into an
Information Services Agreement pursuant to which Powerize has retained Inktomi
to host its index on a dedicated search cluster.
D. Powerize and Inktomi desire to work together to solicit Inktomi
customers to become subscribers to the Powerize services.
NOW THEREFORE, in consideration of the foregoing and the mutual promises
contained herein the parties agree as follows:
AGREEMENT
1. Definitions. For purposes of this Agreement, the following terms will have
the indicated meanings:
1.1. "Information Services Agreement" means the Information Services
Agreement executed by and between Inktomi and Powerize dated May 14, 1999.
1.2. "Inktomi Customers" means all current and future search engine and
directory engine customers of Inktomi.
1.3. "Inktomi Data Center" means a location housing an Inktomi search
or directory engine.
1.4. "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.
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. "Powerize Database" means the compilation of business content that
is owned or licensed by Powerize.
1.6. "Powerize Dedicated Search Cluster" means the dedicated search
cluster service provided by Inktomi to Powerize in connection with the
Information Services Agreement that stores the Title Database.
1.7. "Powerize Data Engine" means the system of computer hardware and
software operated by Powerize that processes queries from the Title Database and
Powerize Database and produces the appropriate business information requested
from its users.
1.8. "Powerize Service" means the service of providing users the
ability to search and retrieve documents from the Title Database and the
Powerize Database as described on Exhibit A.
1.9. "Powerize Technology" means the Title Database, the Powerize
Database and the Powerize Data Engine and all other computer software,
technology and/or documentation supplied by Powerize in connection with this
Agreement, including without limitation all source code and object code therefor
and all algorithms, ideas and Intellectual Property Rights therein.
1.10. "Subscriber" means a person or entity that: (i) concurrently with
becoming an Inktomi Customer; or (ii) is or subsequently becomes an Inktomi
Customer that, becomes a subscriber of the Powerize Service.
1.11. "Term" shall have the meaning indicated in Article 9.
1.12. "Title Database" means the compilation of titles, URLs and
synopses of the business content contained in the Powerize Database that
includes pointers to the applicable content in the Powerize Database.
1.13. "Web" means the so-called World Wide Web, containing, inter alia,
pages written in hypertext markup language (HTML) and/or any similar successor
technology.
1.14. "Web page" means a document on the Web which may be viewed in its
entirety without leaving the applicable distinct URL address.
1.15. "Web site" means a collection of inter-related Web pages.
2. Offering/Promotion/Training and Support.
---------------------------------------
2.1. Offering. Powerize grants Inktomi a non-transferable,
non-exclusive worldwide license for Inktomi and/or Subscribers and their users
the ability to search, retrieve data from the Title Database using Inktomi
Technology and display such results on a Web page.
2
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>
2.2. Promotion. Inktomi shall use reasonable commercial efforts to
promote and market the Powerize Service to Inktomi Customers to encourage
Inktomi Customers to become Subscribers. Powerize acknowledges that nothing in
this Agreement shall constitute a promise, warranty or guarantee that Inktomi
will be able to convince any Inktomi Customers to become Subscribers.
2.3. Training and Support. Powerize shall, at its own expense, provide
Inktomi any and all assistance in connection with the promotion of the Powerize
Service which shall include: (i) providing Inktomi personnel training on the use
and operation of the Powerize Service; (ii) providing Inktomi any and all
marketing or other sales materials that would assist Inktomi in promoting the
Powerize Service ("Marketing Materials"); and (iii) providing Inktomi any and
all assistance reasonably requested by Inktomi.
2.4. Co-Marketing. Inktomi and Powerize shall work together to develop
a marketing plan for the Powerize Service that is acceptable to both parties.
Such marketing plan may include Powerize and Inktomi participation in the types
of activities set forth on Exhibit A.
2.5. Terms of Service. Inktomi shall require that any Inktomi Customer
that becomes a Subscriber to agree to abide by the terms and conditions set
forth on Exhibit B, and other terms and conditions that may be agreed upon by
Inktomi and Powerize. Inktomi shall require Subscribers to maintain textual
attribution as a condition of receiving the Powerize Service. Inktomi shall use
its commercially reasonable efforts to convince Subscribers to display a graphic
Powerize attribution.
3. Powerize Service.
-----------------
3.1. Powerize Service. Powerize shall use the Powerize Data Engine to
provide the Powerize Service, when and as requested by end users of Web sites
operated by Subscribers. Powerize shall provide the Powerize Service in a
professional manner and otherwise in accordance with the functionality
specifications and performance criteria set forth on Exhibit A. Powerize, at its
expense, shall provide all disk storage, server capacity and other hardware and
software required to run the Powerize Service and Powerize Data Engine and
perform the services. Powerize, at its expense, shall provide leased data
transmission capacity (bandwidth) to each Inktomi Data Center requested by
Inktomi within thirty (30) days following such request so as to receive the
Powerize Service requests and return the appropriate information. Inktomi shall
send requests to the Powerize Data Engine by redirecting them to the Powerize
Dedicated Search Cluster or to another location agreed upon by the parties.
Powerize shall, at its expense, provide such bandwidth as necessary to return
any and all data resulting from such request to Subscriber.
3.2. Support.
--------
(a) Powerize shall maintain the Title Database and Powerize Database as
set forth on Exhibit A.
(b) Powerize shall provide 24 x 7 support to Inktomi regarding the
operation of the Powerize Data Engine, and shall respond promptly to Inktomi and
resolve support cases in the time frames set forth on Exhibit C.
3
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>
(c) Powerize shall bear all responsibility for supporting Subscribers
and/or their users in connection with the use of the Powerize Service.
3.3. Technical Engineering Plan. Inktomi and Powerize shall work in
good faith to develop a technical engineering plan to implement the Powerize
Service ("Technical Engineering Plan"). Inktomi and Powerize shall work in good
faith to implement the Technical Engineering Plan within one-hundred twenty
(120) days of the Effective Date.
4. Intellectual Property Licenses/Ownership.
-----------------------------------------
4.1. Powerize Dedicated Search Cluster. Powerize grants Inktomi a
non-transferable, non-exclusive, world-wide, royalty-free license to directly
access and use the Powerize Dedicated Search Cluster solely in connection with
connecting Subscribers to the Powerize Service.
4.2. Marketing Materials. Powerize grants Inktomi a non-transferable,
non-exclusive, royalty-free license to reproduce, modify, use and incorporate
all or portions of the Marketing Materials solely in connection with the
exercise and/or fulfillment of Inktomi's marketing rights and/or obligations
under this Agreement.
4.3. Trademark Licenses. Inktomi hereby grants Powerize a
non-transferable, non-exclusive, royalty-free license to display the Inktomi
trademarks during the Term solely in connection with the exercise and/or
fulfillment of any and all marketing rights and/or obligations under this
Agreement. Powerize hereby grants to Inktomi a non-transferable, non-exclusive,
royalty-free license under Powerize's trademarks during the Term solely in
connection with the exercise and/or fulfillment of any and all marketing rights
and/or obligations under this Agreement, which shall include Inktomi's right to
advertise Powerize as an Inktomi customer. 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's 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 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.
5. Payments/Consideration.
----------------------
5.1. By Powerize. In consideration of the distribution services
provided by Inktomi under this Agreement:
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
(a) Powerize shall pay Inktomi a nonrefundable annual distribution fee
[*] ("Distribution Fee"). The Distribution Fee shall be paid by Powerize as
follows [*]. All subsequent Distribution Fees shall be paid monthly thereafter.
(b) Powerize shall pay Inktomi [*] of the Net Revenues derived from a
Subscriber's user's access of content contained or referenced in the Powerize
Database. "Net Revenues" shall mean as the gross revenues derived from a
Subscriber's user's access of content contained or referenced in the Powerize
Database less the cost of the content paid by Powerize to Powerize's suppliers
less charges applied for credit card (e.g. Visa/Mastercard/AMEX) processing and
other similar charges as mutually agreed upon by the parties.
(c) Powerize shall pay [*] of the net revenues received by Powerize
from Web pages originated by Powerize generated at the request of a Subscriber's
user.
(d) Powerize shall pay Inktomi will share up [*]of the net revenues
received by Powerize from Web pages originated by Powerize generated at the
request of a Subscriber's user ("Revenue"). To the extent that Inktomi is
obligated to pay a Subscriber less [*] of Revenue, Powerize shall pay Inktomi an
additional amount of Revenue equal [*]of the difference between [*] of Revenue
and the amount of Revenue actually owed to Subscriber by Inktomi. Inktomi shall
inform Company monthly of the percentage of Revenue owed by Subscribers to
Inktomi.
(e) Concurrently with the execution of this Agreement, Powerize shall
execute and deliver to Powerize a warrant to purchase shares of Powerize Common
Stock in the form attached hereto as Exhibit D.
5.2. By Inktomi. In consideration of the licenses granted under this
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Agreement:
(a) Inktomi shall pay Powerize a nonrefundable annual fee of: [*]
("License Fee"). The License Fee shall be paid by Inktomi as follows: [*] All
subsequent License Fees shall be paid monthly thereafter; and
(b) Inktomi shall pay Powerize the greater of: [*]for Web pages of
Subscribers containing content from the Title Database. Web pages: (x) displayed
for test or demonstration purposes; or (y) displaying no results from the Title
Database shall not be counted for purposes of calculating the fees in this
Section.
5.3. Payment. With regard to payments owed by one party to the other
pursuant to Sections 5.1(b), 5.1(c) and 5.2(b), each party [*] after the end of
each calendar month with respect to which the owing party owes the other party
any fees as set forth above, the owing party shall provide the other party with
a statement, together with payment for any amount shown thereby to be due to the
other party. The fee statement shall be based upon the calculations set forth
above during the month then ended, and shall contain information reasonably
sufficient to discern how the fees, if any, were computed. All statements and
all other accounts rendered by the owing party to the other party shall be
binding upon the other party and not subject to any objections by the other
party for any reason unless specific objection in writing, stating the basis
thereof, is received by the owing party within one (1) year from the date
rendered.
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
5.4. Records. Each party agrees to keep all proper records and books of
account and all proper entries therein relating to the fee calculations made
under Sections 5.1(b), 5.1(c) or 5.2(b) as the case may be. Such records and
books of account shall be maintained for a one (1) year period following the
year in which any payments pertaining to such revenue were due. Each party (as
the recipient) shall have the right to examine the other party's records and
books of account from time to time but no more than once every six (6) months to
verify statements rendered under Sections 5.1(b), 5.1(c) or 5.2(b). Such
examination shall be conducted at reasonable times during the audited party'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 the
audited party's business. If any such examination indicates that the audited
party has underpaid or overpaid the other party for any particular period, then
Powerize or Inktomi, as the case may be, shall promptly remit the difference to
the other party.
5.5. Taxes.
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(a) Powerize. All amounts to be paid by Powerize to Inktomi herein are
exclusive of any federal, state, municipal or other governmental taxes,
including franchise, sales, use, value added, property or similar tax, now or
hereafter imposed on Inktomi (excluding taxes on the net income of Inktomi).
Such charges shall be the responsibility of Powerize and may not be passed on to
Inktomi, unless they are owed solely as a result of entering into this Agreement
and are required to be collected from Inktomi by Powerize under applicable law.
Powerize takes full responsibility for all such taxes, including penalties,
interest and other additions thereon and agrees to indemnify, defend and hold
Inktomi harmless from any claims, causes of action, costs (including without
limitation reasonable attorneys fees), penalties, interest charges and other
liabilities of any nature whatsoever.
(b) Inktomi. All amounts to be paid by Inktomi to Powerize herein are
exclusive of any federal, state, municipal or other governmental taxes,
including franchise, sales, use, value added, property or similar tax, now or
hereafter imposed on Powerize (excluding taxes on the net income of Powerize).
Such charges shall be the responsibility of Inktomi and may not be passed on to
Powerize, unless they are owed solely as a result of entering into this
Agreement and are required to be collected from Powerize by Inktomi under
applicable law. Inktomi takes full responsibility for all such taxes, including
penalties, interest and other additions thereon and agrees to indemnify, defend
and hold Inktomi harmless from any claims, causes of action, costs (including
without limitation reasonable attorneys fees), penalties, interest charges and
other liabilities of any nature whatsoever.
5.6. Payment. All fees quoted and payments made hereunder shall be in
U.S. Dollars. Each party shall pay all amounts due under this Agreement to the
other party at the address indicated at the beginning of this Agreement or such
other location as designated by such party in writing.
6. Confidentiality.
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6.1. 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 and
confirmed in writing within ten (10) business days of its disclosure, shall be
deemed the "Confidential Information" of the disclosing party.
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
6.2. 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.
6.3. No Other Confidential Information. Neither party shall have any
obligation under this Article 6 for information of the other party which the
receiving party can substantiate with 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.
6.4. Independent Development. Each party, as a discloser of
Confidential Information, understands that the other party, as recipient, may
currently or in the future be developing information internally, or receiving
information from other parties that may be similar to the disclosing party's
information. Accordingly, nothing in this Agreement will be construed as a
representation or inference that a party as a receiving party will not develop
products or services, or have products or services developed or provided for it
that, without violation of this Agreement, compete with the products or services
contemplated by a disclosing party's Confidential Information.
6.5. Publicity. Powerize may not disclose to any third party any
investment position or warrant position held by Inktomi in Powerize, unless
Inktomi has consented to such disclosure in writing or unless such disclosure is
required by law (and in the case of the latter, only after Powerize has taken
all reasonable steps to narrow the disclosure or seek confidential treatment of
the information).
7. Warranties.
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7.1. By Powerize. Powerize represents and warrants that: (a) it has
full power and authority to enter into this Agreement and to grant the rights
and perform the Powerize Service set forth herein; (b) it has not previously and
will not grant any rights in the Powerize Technology or the Powerize Service to
any third party that are inconsistent with the rights granted to Inktomi
hereunder; (c) throughout the Term, the Powerize Technology and the Powerize
Service shall be free of material errors and defects and shall perform in strict
accordance with the functionality specifications and performance criteria set
forth on Exhibit A; provided, that, in the case of failure to perform in strict
accordance with any non-material functionality specifications or performance
criteria, if such failure is cured within ten days of notice to Powerize, such
failure shall not be deemed a breach of this warranty; and (d) the operation of
the Powerize Data Engine to provide the Powerize Service, the Powerize Service
and/or the Powerize Technology do not and will not infringe any copyright,
patent, trade secret, or other proprietary right held by any third party, and
Powerize has no knowledge of any allegations of any such infringement.
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
7.2. By Inktomi. Inktomi represents and warrants that it has full power
and authority to enter into this Agreement.
8. Indemnification.
8.1. By Powerize. Powerize shall, at its expense and Inktomi's request,
defend any third party claim or action brought against: (i) Inktomi, and
Inktomi's subsidiaries, affiliates, directors, officers, employees, agents and
independent contractors ("Inktomi Party"), which, if true, would constitute a
breach of any warranty, representation or covenant made by Powerize under this
Agreement, and (ii) the Inktomi Parties and/or Subscribers in connection with
any Powerize Service; and Powerize shall hold the Inktomi Parties and/or Inktomi
Customers ("Indemnified Party") (as the case may be) harmless from and against
any costs, damages and fees reasonably incurred by an Indemnified Party,
including but not limited to fees of attorneys and other professionals, that are
attributable to such claim. Inktomi shall provide Powerize: (a) reasonably
prompt notice in writing of any such claim or action and permit Powerize,
through counsel mutually acceptable to Inktomi and Powerize, to answer and
defend such claim or action; and (b) information, assistance and authority, at
Powerize's expense, to help Powerize to defend such claim or action. Powerize
will not be responsible for any settlement made by Inktomi without Powerize's
written permission, which permission will not be unreasonably withheld.
8.2. By Inktomi. Inktomi shall, at its expense and Powerize request,
defend any third party claim or action brought against Powerize, and Powerize
subsidiaries, affiliates, directors, officers, employees, agents and independent
contractors, which, if true, would constitute a breach of any warranty,
representation or covenant made by Inktomi under this Agreement, and Inktomi
will hold Powerize harmless from and against any costs, damages and fees
reasonably incurred by Powerize, including but not limited to fees of attorneys
and other professionals, that are attributable to such claim. Powerize shall
provide Inktomi: (i) reasonably prompt notice in writing of any such claim or
action and permit Inktomi, through counsel mutually acceptable to Powerize and
Inktomi, to answer and defend such claim or action; and (ii) information,
assistance and authority, at Inktomi's expense, to help Inktomi to defend such
claim or action. Inktomi will not be responsible for any settlement made by
Powerize without Inktomi's written permission, which permission will not be
unreasonably withheld.
8.3. Separate Counsel; Reimbursement. An indemnified party shall have
the right to employ separate counsel and participate in the defense of any claim
or action. The indemnifying party shall reimburse the indemnified party upon
demand for any payments made or loss suffered by it at any time after the date
hereof, based upon the judgment of any court of competent jurisdiction or
pursuant to a bona fide compromise or settlement of claims, demands, or actions,
in respect to any damages related to any claim or action under this Article 8.
8.4. Settlement. The indemnifying party may not settle any claim or
action under this Article 8 without first obtaining the indemnified party's
written permission, which permission will not be unreasonably withheld. In the
event Inktomi and Powerize agree to settle a claim or action, each party agrees
not to publicize the settlement without first obtaining the other's written
permission, which permission will not be unreasonably withheld.
8.5. Proprietary Rights Infringement. Without limiting any of Inktomi's
rights or remedies, in the event of any breach or alleged breach by Powerize of
Section 7.1(d), Powerize shall notify Inktomi
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
and shall at Powerize's expense (i) procure for Inktomi all rights necessary so
that Powerize shall not be in breach of Section 7.1(d), or (ii) modify the
pertinent item or infringing part thereof, or replace the infringing software
with other software having substantially the same or better capabilities. If
neither of the foregoing is commercially practicable to achieve within a
reasonable period of time, then, in addition to any other rights and remedies
available to Inktomi, Inktomi may immediately terminate this Agreement.
Commission
9. Term and Termination.
---------------------
9.1. 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
thereafter, unless earlier terminated as provided herein.
9.2. Termination by Inktomi. In addition to any other rights and/or
remedies that Inktomi may have under the circumstances, all of which are
expressly reserved, Inktomi may suspend performance and/or terminate this
Agreement immediately upon written notice at any time if: (a) Powerize is in
breach of any material warranty, term, condition or covenant of this Agreement,
other than those contained in Article 6, and fails to cure that breach within
thirty (30) days after written notice thereof; or (b) Powerize is in material
breach of Article 6; or (c) Powerize 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 any 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 part thereof; or
(d) Powerize and/or its stockholders enter into any agreement (including without
limitation any merger agreement, asset sale agreement, or stock purchase
agreement), the consummation of which would or could result in the transfer of
voting control or all or substantially all of its assets to any company that
provides, or that controls, is controlled by or is under common control with any
company that provides, Internet search engine services to other companies on an
OEM basis.
9.3. Termination by Powerize. In addition to any other rights and/or
remedies that Powerize may have under the circumstances, all of which are
expressly reserved, Powerize may suspend performance and/or terminate this
Agreement immediately upon written notice at any time if: (a) Inktomi is in
breach of any material warranty, term, condition or covenant of this Agreement,
other than those contained in Article 6, and fails to cure that breach within
thirty (30) days after written notice thereof; or (b) Inktomi is in material
breach of Article 6; or (c) Inktomi 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 any 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 part thereof.
9.4. Survival. In the event of any termination or expiration of this
Agreement for any reason, Articles and Sections 1, 5.3, 5.4, 5.5, 6, 8, 10, 11,
12 and this Section 9.4 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. Remedies.
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
10.1. Equitable Remedies. Each party acknowledges that its breach of
the confidentiality restrictions contained herein would 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
he other party may be legally be entitled, such party shall have the right to
seek 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.
10.2. No Termination. Except as expressly set forth in Section 9.3
above, no breach of this Agreement by Inktomi shall entitle Powerize to
terminate or rescind this Agreement or to injunctive or other equitable relief,
it being agreed that Inktomi's sole remedy, if any, in the event of such a
breach shall be an action for damages; provided, however, that such waiver shall
not prohibit Inktomi from seeking an injunction with respect to any violation of
Powerize's Intellectual Property Rights so long as such injunctive relief shall
not result in the limitation, restriction or termination of Inktomi's rights
hereunder or prevent the provision of an Inktomi service, including its search
functionality, in compliance with the terms of this Agreement by Inktomi or any
Inktomi Customer. Notwithstanding the foregoing, Powerize shall have the right
to suspend its provision of services under this Agreement if Inktomi fails to
pay any amounts due under Article 5.2(b) more than sixty (60) days after the
date such payment is owed. Upon payment of such invoice, Powerize shall
immediately resume providing the services under this Agreement.
11. Limitation of Liability. In no event shall either party be liable for any
indirect, incidental, special or consequential damages, or damages for loss of
profits, revenues, use or loss or corruption of data incurred by either party or
any third party, whether in an action in contract or tort, even if the other
party has been advised of the possibility of such damages.
12. Miscellaneous.
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12.1. Capacity. 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.
12.2. 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.
12.3. 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.
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
12.4. 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.
12.5. 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.
Excluding claims relating to Intellectual Property Rights, 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.
12.6. 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.
12.7. Force Majeure. Neither party shall be liable hereunder by reason
of any failure or delay in the performance of its obligations hereunder during
any event of FORCE MAJEURE.
12.8. 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.
12.9. 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.
12.10. 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.
12.11. 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.
12.12. 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.
12.13. 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.
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Distribution Agreement
to be signed by their duly authorized representatives.
INKTOMI CORPORATION POWERIZE, INC.
By: /s/ Edwin R. Addison By:/s/ Jerry Kennelly
--------------------- ------------------
Name:Edwin R. Addison Name:Jerry Kennelly
---------------- -----------------
Title:CEO Title:CFO
---------------- ---------------
5/4/99
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
EXHIBIT A
TO THE
DISTRIBUTION AGREEMENT
POWERIZE SERVICE
The Powerize Service is a service that allows users to search for business
content. The Powerize Service operates as follows: (i) the user types in a
query; (ii) in response to such query, a search of the Title Database is
conducted and the results from the Title Database (comprising of document titles
and/or synposes) are displayed to the user; (iv) upon presentation of results
from the Title Database, a user can select a result display an abstract of the
document; (v) the user may then request the full text of such document for a
fee; and (vi) such document is retrieved from the Powerize Database and
displayed.
CO-MARKETING ACTIVITIES
To be agreed upon by the parties within thirty (30) days of the Effective Date.
[PERFORMANCE CRITERIA]
1. Uptime. Uptime reliability of the Powerize Service must be [*]
rolling period. Uptime is defined as a state of operation during which Inktomi
can [*].
2. Response Time. The average time to return the results from an
Powerize Service must be equal to or less than 500 milliseconds, which such time
period does not include the retrieval of such Web page. This time is measured
starting from when Powerize receives the query, and ending when Powerize
transmits the results.
3. Availability. Powerize shall ensure that the Powerize Services are
accessible by Inktomi and Subscribers in a form and format acceptable to the
parties in accordance with the Technical Engineering Plan.
4. Other Attributes.
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Powerize shall ensure that all requests redirected to Powerize are
handled with the same efficiency, functionality and level of service (including
freshness of data) as such services are provided to other users of Powerize
customers as measured over three (3) day periods of time.
A-1
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
<PAGE>
EXHIBIT B
TO THE
DISTRIBUTION AGREEMENT
POWERIZE TERMS OF SERVICE
[TBD]
THE TERMS OF SERVICE WILL INCLUDE A STATEMENT THAT POWERIZE WILL HAVE THE
ABILITY TO SERVE ADS ON WEB PAGES BY POWERIZE THAT DISPLAY DATA FROM THE
POWERIZE DATABASE.
B-1
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
TO THE
DISTRIBUTION AGREEMENT
SUPPORT GUIDELINES
1. Definitions.
(a) Hours of Operation. Powerize will provide Inktomi with 7 x 24
support as set forth herein.
(b) Problem. Any error, bug, or malfunction that makes any feature
of the Powerize Data Engine perform unpredictably or to
otherwise become intermittently unavailable, or that causes
the Powerize Data Engine to have a material degradation in
response time performance.
(c) Severe Problem. Any error, bug, or malfunction that causes the
Powerize Data Engine to become inaccessible to Inktomi and its
Site end users, or that causes any feature of the Powerize
Data Engine to become continuously unavailable.
(d) Enhancement Request. A request by Inktomi to incorporate a new
feature or enhance an existing feature of the Powerize Data
Engine.
(e) Fix. A correction, fix, alteration or workaround that solves a
Problem or a Severe Problem.
2. Contact points.
(a) Inktomi Technical Support Personnel. Inktomi will designate no
more than three Inktomi employees as qualified to contact
Powerize for technical support.
(b) Powerize Technical Support Personnel. Powerize will ensure
that its Technical Support Personnel are adequately trained to
provide technical support to Inktomi. Powerize will provide
Inktomi with a web interface or an email address (the "Support
Address"), as well as an email pager address (the "Support
Pager") for contacting the Powerize Technical Support
Personnel no later than one week prior to initial availability
of the Powerize Service (the "Launch Date"). Powerize will
also provide Inktomi with contact information for executive
escalation personnel no later than one week prior to the
Launch Date. Powerize may change its designated Technical
Support Personnel and executive escalation personnel at its
discretion with reasonable notice to Inktomi.
3. Support procedures.
(a) All Problems reported by Inktomi Technical Support Personnel
to Powerize must be submitted via web site or email to the
Support Address.
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exhibit pursuant to a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
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(b) If Inktomi believes it is reporting a Severe Problem, Inktomi
will accompany its email request with a page via the Support
Pager.
(c) Upon receiving a report from Inktomi, Powerize will determine
whether the request is a Problem, a Severe Problem, or an
Enhancement Request. Powerize will respond to the request and
use reasonable commercial efforts to provide a Fix as
described in the support table set forth below.
(d) Powerize will use commercially reasonable efforts to inform
Inktomi Technical Support Personnel of Fixes.
4. Support levels.
(a) Powerize will provide the following technical support to
Inktomi 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 Inktomi
- ---------------------------------------------------------------------------------------------------------------------
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 Inktomi
- ---------------------------------------------------------------------------------------------------------------------
Commercially reasonable best efforts with
During other times Severe Problem [*] daily status reports to Inktomi
- ---------------------------------------------------------------------------------------------------------------------
During business hours or Enhancement
other times Requests [*] At Powerize's discretion
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
In the event Powerize does not respond to Inktomi within the target response
time from email receipt set forth above, then Inktomi may contact the following
Powerize executive escalation personnel in order:
[escalation personnel TBD]
C-2
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 D
TO THE
DISTRIBUTION AGREEMENT
FORM OF WARRANT
D-1
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.
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.
EXHIBIT 10.20
THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FOR NONPUBLIC OFFERINGS
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, THESE SECURITIES MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS, IN THE OPINION OF COUNSEL
FOR OR SATISFACTORY TO THE ISSUER, REGISTRATION UNDER THE APPLICABLE FEDERAL OR
STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH
REGISTRATION REQUIREMENTS.
No. ___ _____________, 1999
Right to Purchase 466,400 Shares
of Common Stock of Powerize.com, Inc.
POWERIZE.COM, INC.
COMMON STOCK PURCHASE WARRANT
Powerize.com, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Inktomi Corporation or its assigns (the
"Holder"), is entitled, subject to the vesting schedule and other terms set
forth below, to purchase from the Company at any time on or before 5:00 P.M.,
Eastern Time on the tenth anniversary of the date hereof, 466,400 fully paid and
non-assessable shares of Common Stock, par value $0.0001 per share, of the
Company (the "Common Stock"), at a price of $1.75 per share (the "Exercise
Price").
1. EXERCISE OF WARRANT.
1.1 VESTING. the Common Stock shall vest and the Warrant
shall become exercisable upon the achievement of the following:
<TABLE>
<S><C>
233,200 shares of Common Stock upon execution of the Agreement;
116,600 shares of Common Stock upon Inktomi achieving its first Design Win;
116,600 shares of Common Stock upon Inktomi achieving its second Design Win.
</TABLE>
A "Design Win" shall mean: [*]
- ---------
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>
1.2. FULL EXERCISE. Subject to SECTION 1.1, this Warrant may
be exercised in full by the holder hereof by surrender of this Warrant, with the
form of subscription at the end hereof duly executed by such holder, to the
Company at its principal office, accompanied by payment, in cash or by certified
or official bank check payable to the order of the Company, in the amount
obtained by multiplying the number of shares of Common Stock for which this
Warrant is then exercisable by the Exercise Price then in effect.
1.3. PARTIAL EXERCISE. Subject to SECTION 1.1, this Warrant
may be exercised in part by surrender of the Warrant in the manner and at the
place provided in SECTION 1.2 except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying (a) the number
of shares of Common Stock designated by the holder in the subscription at the
end hereof by (b) the Exercise Price then in effect. On any such partial
exercise, the Company at its expense will forthwith issue and deliver to or upon
the order of the holder hereof a new Warrant or Warrants of like tenor, in the
name of the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes) may request, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock for which such Warrant or
Warrants may still be exercised.
1.4 CASHLESS EXERCISE. Subject to SECTION 1.1 and in the
manner and place set forth in SECTION 1.2, except that the manner of payment
shall be in accordance with this Section, if the Fair Market Value (as defined
below) of one share of the Company's Common Stock is greater than the Exercise
Price (at the date of Calculation as set forth below), in lieu of exercising
this Warrant for cash, Inktomi may elect to receive shares equal to the value
(as determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
the properly endorsed Notice of Exercise in which event the Company shall issue
to Inktomi a number of shares of Common Stock computed using the following
formula:
X = Y(A-B)
-----------
A
where, X = the number of shares of Common Stock to be issued to the
holder;
Y =the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation);
A = the Fair Market Value of one share of the Company's Common
Stock (at the date of such calculation); and
B = Exercise Price (at the date of such calculation).
"Fair Market Value" of one share of Common Stock shall mean:
if the exercise right is being exercised in connection with a
transaction specified in Section 4.1 hereof, the value of the
consideration (determined, in the case of noncash
-2-
- ---------
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>
consideration, in good faith by the Board of Directors of the Company)
to be received pursuant to such transaction by the holder of one share
of Common Stock;
if the exercise right is being exercised in connection with the initial
public offering of the Company's Common Stock, the initial public
offering price (before deducting commissions, discounts or expenses) at
which the Common Stock is sold in such offering; or
if the exercise right is being exercised more than five (5) business
days after the occurrence of the initial public offering of the
Company's Common Stock:
if the Company's Common Stock is traded on an exchange or is quoted on
the Nasdaq National Market System, the average of the closing or last
sale price reported for the five (5) business days immediately
preceding the date that the Notice of Exercise is delivered to the
Company; and
in all other cases, the fair value as determined in good faith by the
Company's Board of Directors.
1.4 REPRESENTATION OF HOLDER. The Holder represents and
warrants to the Company that (a) it is an "accredited investor" within the
meaning of Rule 501 under the Securities Act of 1933 and was not organized for
the specific purpose of acquiring the Common Stock, (b) it has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of its investment in the Company and is able financially to
bear the risks thereof, (c) it has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management; (d)
any Common Stock purchased by it pursuant to this Warrant will be acquired for
its own account for the purpose of investment and not with a view to or for sale
in connection with any distribution thereof and (e) it understands that (i) the
Common Stock has not been registered under the Securities Act, (ii) the Common
Stock must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, (iii)
the Common Stock will bear a legend to such effect and (iv) the Company will
make a notation on its transfer books to such effect.
1.5 COMPANY ACKNOWLEDGMENT/REPRESENTATIONS. The Company will,
at the time of the exercise of the Warrant, upon the request of the holder
hereof acknowledge in writing its continuing obligation to afford to such holder
any rights to which such holder shall continue to be entitled after such
exercise in accordance with the provisions of this Warrant. If the holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder any such rights. The Company
hereby represents and warrants: (i) that all shares of Common Stock which may be
issued upon the exercise of this Warrant will, upon such exercise, be duly and
validly authorized and issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issuance thereof (other than liens or
charges created by or imposed upon the holder of the Common Stock); and (ii)
that it has full power and authority to issue this Warrant, including, without
limitation, from the Company's Board of Directors.
-3-
- ---------
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>
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
fifteen (15) days thereafter, the Company at its expense (including the payment
by it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and non-assessable shares of Common Stock to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share, together with any
other stock or other securities and property (including cash, where applicable)
to which such holder is entitled upon such exercise pursuant to SECTION 1 or
otherwise.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, RECLASSIFICATION.
In case at any time or from time to time, the holders of Common Stock shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in SECTION 5),
then and in each such case the holder of this Warrant, on the exercise hereof as
provided in SECTION 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this SECTION 3) which such holder would hold on the
date of such exercise if on the date hereof he had been the holder of record of
the number of shares of Common Stock called for on the face of this Warrant and
had thereafter, during the period from the date hereof to and including the date
of such exercise, retained such shares and all such other or additional stock
and other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this SECTION 3) receivable by him as aforesaid
during such period, giving effect to all adjustments called for during such
period by SECTIONS 4 and 5.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER.
4.1. GENERAL. In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, except as otherwise
provided in SECTION 4.3 hereof, the holder of this Warrant, on the exercise
hereof as provided in
-4-
- ---------
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>
SECTION 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of the Common Stock issuable on such exercise
prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in SECTIONS 3
and 5.
4.2. DISSOLUTION. Except as otherwise provided in SECTION 4.3
hereof, in the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the holders of the Warrants after the effective date of such dissolution
pursuant to this Section 4 to a bank or trust company, as trustee for the holder
or holders of the Warrants.
4.3. CONTINUATION OF TERMS. Except as otherwise hereinafter
provided, upon any reorganization, consolidation, merger or transfer (and any
dissolution following any transfer) referred to in this SECTION 4, this Warrant
shall continue in full force and effect and the terms hereof shall be applicable
to the shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant.
5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, or (iii) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Exercise Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Exercise Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Exercise Price then in effect.
The Exercise Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this SECTION 5. The holder of this Warrant shall thereafter, on the exercise
hereof as provided in SECTION 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock that
would otherwise (but for the provisions of this SECTION 5) be issuable on such
exercise by a fraction of which (i) the numerator is the Exercise Price which
would otherwise (but for the provisions of this SECTION 5) be in effect, and
(ii) the denominator is the Exercise Price in effect on the date of such
exercise.
-5-
- ---------
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>
6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Treasurer or Chief
Financial Officer to compute such adjustment or readjustment in accordance with
the terms of the Warrants and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock issued or sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Exercise Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to each holder of a Warrant, and
will, on the written request at any time of any holder of a Warrant, furnish to
such holder a like certificate setting forth the Exercise Price at the time in
effect and showing how it was calculated.
7. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of
any class or securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution,
or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of the
Company to or consolidation or merger of the Company with or into any
other person, or any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up, and (iii) the amount and character of any stock or other securities,
or rights or options with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made. Such notice shall be
mailed at least 20 days prior to the date specified in such notice on which any
such action is to be taken.
8. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the holder of this
Warrant.
-6-
- ---------
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>
9. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANTS. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrants, all shares of Common Stock from time to time
issuable on the exercise of the Warrants.
10. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. WARRANT AGENT. The Company may, by written notice to each holder of
a Warrant, appoint an agent for the purpose of issuing Common Stock on the
exercise of the Warrants pursuant to SECTION 1, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
12. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
13. NEGOTIABILITY, ETC. This Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof consents
and agrees:
(a) title to this Warrant may be transferred by endorsement
(by the holder hereof executing the form of assignment at the end
hereof) and delivery in the same manner as in the case of a negotiable
instrument transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed
is authorized to represent himself as absolute owner hereof and is
empowered to transfer absolute title hereto by endorsement and delivery
hereof to a bona fide purchaser hereof for value; each prior taker or
owner waives and renounces all of his equities or rights in this
Warrant in favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to all rights
represented hereby; and
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to
the contrary.
14. NOTICES, ETC. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
-7-
- ---------
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>
15. GOVERNING LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. This Warrant is
being executed as an instrument under seal. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision. This Warrant 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.
17. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M., Eastern Time, on the tenth anniversary of the date hereof.
powerize.com, INC.
a Delaware corporation
By: /s/ Edwin R. Addison
______________________________
Name: Edwin R. Addison
______________________________
Title: CEO
______________________________
5/14/99
INKTOMI CORPORATION,
a Delaware corporation
By: /s/ Jerry Kennelly
______________________________
Name: Jerry Kennelly
______________________________
Title: CFO
______________________________
1900 South Norfolk Street
Suite 310
San Mateo, CA 94403
Att: Corporate Secretary
(650) 653-2800
(650) 653-2801
-8-
- ---------
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>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: [ ]
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, _______ shares
of Common Stock of Powerize.com, Inc., and herewith makes payment of $_______
therefor, and requests that the certificate or certificates for such shares be
issued in the name of, and delivered to _________________, whose address is
_______________________________.
Dated: ____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _______________ the right represented by the within Warrant to
purchase ___________ shares of Common Stock of Powerize.com, Inc., to which the
within Warrant relates, and appoints __________________ Attorney to transfer
such right on the books of Powerize.com, Inc. with full power of substitution in
the premises.
Dated: ____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
Signed in the presence of:
_____________________________
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.
EXHIBIT 21.1
Subsidiaries of the Registrant
NONE
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, 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
June 3, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 10-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> MAR-17-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 DEC-31-1998
<CASH> 78,534 57,609
<SECURITIES> 0 0
<RECEIVABLES> 0 417,094
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<CURRENT-ASSETS> 99,884 494,742
<PP&E> 61,772 232,608
<DEPRECIATION> (10,865) (78,324)
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0 0
0 0
<COMMON> 488 651
<OTHER-SE> (13,169) (932,988)
<TOTAL-LIABILITY-AND-EQUITY> (12,681) (932,337)
<SALES> 24,458 330,660
<TOTAL-REVENUES> 24,458 330,660
<CGS> 2,868 520,219
<TOTAL-COSTS> 2,868 520,219
<OTHER-EXPENSES> 574,154 3,013,656
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (5,867) (31,278)
<INCOME-PRETAX> (558,431) (3,234,493)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (558,431) (31,278)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (558,431) (31,278)
<EPS-BASIC> (0.20) (0.68)
<EPS-DILUTED> (0.20) (0.68)
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